Gene therapy
is now
Annual report and accounts 2017
Oxford BioMedica in brief
Oxford BioMedica is a pioneer of gene and cell therapy with a leading
position in lentiviral vector and cell therapy research, development
and bioprocessing. Gene and cell therapy is the treatment of disease
by the delivery of therapeutic DNA into a patient’s cells. This can
be achieved either in vivo (referred to as gene therapy) or ex vivo
(referred to as cell therapy), the latter being where the patient's cells
are genetically modified outside the body before being re-infused.
Oxford BioMedica is focused on developing life changing
treatments for serious diseases. Oxford BioMedica and its subsidiaries
(the "Group") have built a sector leading lentiviral vector delivery
platform (LentiVector®), which the Group leverages to develop in vivo
and ex vivo products both in-house and with partners. The Group has
created a valuable proprietary portfolio of gene and cell therapy product
candidates in the areas of oncology, ophthalmology and CNS disorders.
The Group has also entered into a number of partnerships, including
with Novartis, Sanofi, GlaxoSmithKline, Bioverativ, Orchard Therapeutics,
GC LabCell and Immune Design, through which it has long-term
economic interests in other potential gene and cell therapy products.
Oxford BioMedica is based across several locations in Oxfordshire, UK
and employs more than 300 people.
Introducing
Oxford BioMedica
1 At the front and centre
3 Multi-billion $ market sector
3 Targeting unmet needs
4 Enabling new treatments
4 Sharing in success
8 Journey to profitability
8
Ideally placed
Sector and technology
overview
10 Gene and cell therapy sector
12 LentiVector® delivery platform
13 Products
Strategic report
16 Our business model
18 Operational highlights
19 Financial highlights
20 Chairman’s statement
23 Management team
24 Chief Executive’s statement
26 2017 performance review
30 Delivery of our 2017 objectives
31 Objectives for 2018
Financial review
32
38 Corporate responsibility
Corporate governance
44
Principal risks, uncertainties
and risk management
52 The Board of Directors
56 Corporate governance report
63 Directors’ remuneration report
84 Directors’ report
90
Independent auditors’ report
98
Group financial statements
Consolidated statement
of comprehensive income
99 Balance sheets
100 Statements of cash flows
101
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
102
Other matters
Glossary
133
136 Advisers and contact details
At the front and centre
Oxford BioMedica is a leading gene and cell therapy
company and our work is now beginning to deliver
life changing treatments.
It's an exciting time for science, our partners, shareholders,
and most of all the patients who are now benefiting from
marketed products – giving people suffering from some
of the world’s most serious diseases far more than hope.
We are at the front and centre of gene and cell therapy
and experiencing strong demand for our world-leading
proprietary LentiVector-Enabled™ technology.
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Oxford BioMedica plc | Annual report and accounts 2017
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Enabling 'one shot' treatments
LentiVector® studies suggest gene expression may
be maintained indefinitely (for more than six years),
offering patients the prospect of long-term
clinical benefit following a single administration.
Valuable research tool
The LentiVector® platform is also used
as a valuable research tool.
Oxford BioMedica plc | Annual report and accounts 2017
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Multi-billion $ market sector
The use of DNA to treat diseases is expected to grow
into a multi-billion $ sector over the next few years with
several products already approved in the US and Europe.
The large growth in lentiviral vector based clinical trials
shows ex vivo treatments are leading the way.
Read more about the gene and cell therapy
sector on page 10.
Targeting unmet needs
Oxford BioMedica's pipeline focuses on a diverse range of
cancers, Parkinson’s, central nervous system disorders, and
ocular conditions. However, our LentiVector® delivery system
could be used for many more diseases for which there are
currently unmet needs.
Our LentiVector® delivery platform is used in all of our own
gene and cell therapy products in development.
See our LentiVector® based product pipeline
on page 13 for more information.
>20 years
Gene and cell therapy expertise
The LentiVector® delivery system, built on more than
20 years of experience, has the potential to be used for
many unmet conditions and disease areas.
140 sites
Clinical trials
There are currently over 140 sites worldwide carrying
out clinical trials with lentiviral vectors.
Oxford BioMedica plc | Annual report and accounts 2017
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Enabling new treatments
LentiVector® is a key component of Novartis' Kymriah™
cell therapy treatment for blood cancer and the first lentiviral
enabled product to be approved in the USA.
We are the sole lentiviral vector manufacturer for this
product which was launched in the USA in September 2017.
Find out more about our commercial supply agreement
with Novartis and our new collaboration and licence agreement
with Bioverativ in the Chief Executive's statement on page 24
and the 2017 performance review on page 26.
Sharing in success
In addition, we have partnerships and collaborations
with Bioverativ, Orchard Therapeutics, GC LabCell and
Immune Design where we retain a potentially royalty
generating financial interest in their products in return
for expertise and bioprocessing work.
Oxford BioMedica also has products and IP licensed
to Sanofi and GSK.
1st approved
FDA approved advanced therapy
The Novartis Kymriah™ treatment for leukaemia that
uses Oxford BioMedica's LentiVector® technology is the
first FDA approved advanced therapy.
Oxford BioMedica plc | Annual report and accounts 2017
Running head
Running subhead
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First-in-class therapy
Novartis' Kymriah™ (CTL019) is a a novel treatment
approach for paediatric and young adult patients with
B-cell acute lymphoblastic leukaemia. Trials showed
an 83% overall remission rate in this patient population
which has limited treatment options and historically
poor outcomes.
Oxford BioMedica plc | Annual report and accounts 2017
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7 products
Oxford BioMedica pipeline
Our own product development programmes have
had seven regulatory approvals for clinical studies
in the USA and Europe in ocular indications and
Parkinson's disease.
Progressing our own pipeline
We are progressing towards approval to start Phase I/II
clinical trials of OXB-102 for Parkinson's disease.
OXB-102 genetically modifies cells to produce dopamine,
replacing that which is lost during the course of the
disease. Unlike current drug treatment options, which
loses efficacy with long-term use, OXB-102 is designed
to provide patient benefit for a number of years
following a single administration.
Read more about OXB-102 and our other product
candidates in the 2017 performance review on page 28.
models
thcare
Heal
Oxford BioMedica plc | Annual report and accounts 2017
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Developing our partners' products
We help partners by providing unrivalled lentiviral IP and technical
know-how such as our state-of-the-art laboratories and GMP clean
room suites.
The US FDA completed a pre-licence inspection of our facilities as part
of the Biologics License Application (BLA) review process for Novartis'
Kymriah™. The UK MHRA granted Oxford BioMedica a manufacturer/
importer licence for commercial production and supply of lentiviral
vectors following a successful inspection of our facilities.
200
Patients treated
With our own and partners products using our
LentiVector-Enabled™ delivery based therapy.
Download our latest 'Discover the facts' brochure
on lentiviral vector development, scale-up, analytics
and GMP bioprocessing from the Oxford BioMedica
website: www.oxfordbiomedica.co.uk
Glo
Oxford BioMedica plc | Annual report and accounts 2017
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Journey to profitability
Oxford BioMedica is now a business with rapidly growing
revenues from process development, bioprocessing and royalty
generating partnerships. Continued positive revenue growth
is driving us closer to profitability.
Understand more about our financial position
and how we are getting closer to our goal of becoming
a sustainable business in the financial review
on page 32.
Ideally placed
Our financial interest in a diverse range of products is growing
and we will continue to invest in technology and proprietary
gene and cell therapy concepts.
Gene therapy is now coming of age and we are ideally placed
to benefit from the growth in this valuable sector over the
coming years.
+$100m
Licence to supply LentiVector® to Novartis
In July 2017 we signed an agreement to supply
lentiviral vectors for CTL019 and other undisclosed
CAR-T products from Novartis, and could potentially
receive in excess of $100 million.
-2%
Debt restructuring
The new $55 million loan facility with Oaktree is on
much better terms than our previous Oberland
agreement. The cost of the loan including all related
fees will be around 13%, a significant reduction from
the 15% cost of the Oberland facility.
Oxford BioMedica plc | Annual report and accounts 2017
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Introducing
Oxford BioMedica
1 At the front and centre
3 Multi-billion $ market sector
3 Targeting unmet needs
4 Enabling new treatments
4 Sharing in success
8 Journey to profitability
8
Ideally placed
Sector and technology
overview
10 Gene and cell therapy sector
12 LentiVector® delivery platform
13 Products
Strategic report
16 Our business model
18 Operational highlights
19 Financial highlights
20 Chairman’s statement
23 Management team
24 Chief Executive’s statement
26 2017 performance review
30 Delivery of our 2017 objectives
31 Objectives for 2018
32
Financial review
38 Corporate responsibility
Corporate governance
44
Principal risks, uncertainties
and risk management
52 The Board of Directors
56 Corporate governance report
63 Directors’ remuneration report
84 Directors’ report
90
Independent auditors’ report
98
Group financial statements
Consolidated statement
of comprehensive income
99 Balance sheets
100 Statements of cash flows
101
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
102
Other matters
Glossary
133
136 Advisers and contact details
Oxford BioMedica plc | Annual report and accounts 2017
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Sector and technology overview
Gene and cell therapy sector
Great potential
Gene and cell therapy has the potential to transform
medicine, providing long term and potentially
curative treatment options for a wide range of
diseases. Indeed, several therapies, especially ex vivo
cell therapies such as GlaxoSmithKline’s Strimvelis™
(for immunodeficiency); Novartis’ Kymriah™
(for r/r paediatric ALL); Kite/Gilead’s Yescarta™
(for r/r B cell lymphoma), as well as Spark’s Luxturna™
(inherited retinal disease) have been recently
launched. We expect further products to be launched
over the next few years as several gene and cell
therapy products are in late stage development.
The sector holds significant promise, with the first
commercial products now launched and others rapidly
approaching the market. The gene and cell therapy
market has the potential to grow into a multi-billion
dollar sector and Oxford BioMedica has the expertise
with lentiviral vectors to benefit from this opportunity.
Gene and cell therapies use viral vectors to deliver
genetic payloads into patients’ cells. Cells can be treated
both in vivo and ex vivo. The two most commonly used
viral vector families are lentiviral vectors and adeno-
associated viruses (AAV). Lentiviral vectors have several
important advantages over other vector systems:
— Lentiviral vectors integrate into the DNA of target cells
so that the genetic payload will replicate as cells divide.
This is important for ex vivo therapies
— Lentiviral vectors can carry much larger genetic
payloads (up to 9 kb) so they can treat a wider range
of diseases and genetic disorders
— There is no pre-existing immunity for lentiviral vectors
Most of the clinical trials for gene and cell therapies
are for monogenic disorders (such as diabetes), ocular
disorders, neurological diseases and cancers. The cancer
field is especially busy with ex vivo CAR-T therapies.
Ex vivo therapies require integrating vectors and lentiviral
vectors are the preferred choice for much of the current
product development in the sector. There are 149 ex vivo
lentiviral vector clinical studies underway as described
in the Journal of Gene Medicine.
The first gene therapy approved in Europe back in 2012
was Glybera,™ an in vivo treatment for lipoprotein lipase
deficiency (LPLD), a rare inherited disorder which can
cause severe pancreatitis. In 2016, Strimvelis™ was also
approved in Europe, the first ex vivo stem cell gene
therapy to treat patients with a very rare disease called
ADA-SCID (Severe Combined Immunodeficiency due to
Adenosine Deaminase deficiency). It wasn’t until August
2017 that the US FDA approved the first gene therapy
product in the United States, a CAR-T therapy for the
treatment of blood cancers, Kymriah™ from Novartis.
This was the world’s first lentiviral enabled approved
product. In November 2017, Kite/Gilead’s Yescarta™
(a CAR-T therapy) and in December 2017, Spark’s Luxturna™
(an in vivo treatment of inherited retinal disease) were
approved by the US FDA.
Further information on the sector
can be found on the Group’s website
at www.oxfordbiomedica.co.uk
Oxford BioMedica plc | Annual report and accounts 2017
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30
25
20
15
10
5
0
350
300
250
200
150
100
50
0
2
3
0
1
5
1
3
9
1
1
1
5
4
1
1
1
4
7
1
3
7
7
6
3
6
8
1
1
1
4
8
1
9
1
4
2009
2010
2011
2012
2013
2014
2015
2016
Initiated lentiviral vector clinical trials
by year and phase
Phase
• Phase I
• Phase I/II
• Phase II
• Phase II/III
• Phase III
Source: Journal of Gene Medicine, April 2017
0
4
3
7
4
1
6
0
1
• AAV (light tints)
• Lentiviral (dark tints)
0
2
3
2
3
2
1
1
3
7
Total
Gene therapy clinical trials with AAV
or lentiviral vectors
Total number of clinical trials
Monogenic (AAV 102, Lenti 45)
Ocular (AAV 16, Lenti 4)
Neurological (AAV 18, Lenti 5)
Cancer (AAV 23, Lenti 83)
Cardiovascular (AAV 10, Lenti 1)
Infectious (AAV 4, Lenti 19)
Inflamatory (AAV 3, Lenti 0)
Others (AAV 6, Lenti 1)
Total (AAV 182, Lenti 158)
Source: Journal of Gene Medicine, April 2017
Oxford BioMedica plc | Annual report and accounts 2017
83% success
FDA approved
The trial for Novartis' Kymriah™ treated 63 children
and young adults. 83% had their cancers go into
remission within three months.
$10bn
Gene and cell therapy market potential
The gene and cell therapy market has the potential
to grow into a multi-billion dollar sector.
Source: Clive Glover, GE Healthcare “Sales of cell and gene therapy
will reach $10 billion by 2021”, October 2015
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Sector and technology overview
LentiVector® delivery platform
01 –02.
03.
®
World-leading LentiVector gene delivery platform
During 2017 Oxford BioMedica continued to make good
operational progress in developing and exploiting its
integrated LentiVector® gene delivery platform. The
platform is the product of over 20 years’ research and
development, and brings together a unique combination
of patents and know-how, world-class bioprocessing
facilities and an expert workforce. Indeed, in 2017 our
platform became the world’s first lentiviral vector enabled
product (Novartis' Kymriah™), to be approved by the
US FDA.
This world-leading position provides a foundation
for both Oxford BioMedica and its partners to discover
and develop novel gene and cell therapies, targeting
conditions without current treatments, or with a
significant unmet clinical need.
The Group’s LentiVector® platform provides a number
of important advantages over other gene delivery
systems. Notably, lentiviral vectors have a large payload
capacity and integrate into the nucleus of target cells,
allowing maintenance of the beneficial genetic payload
when the target cells divide. As a result, the rapidly
expanding cell therapy sector is increasingly recognising
the strengths of the LentiVector® platform, and the Group
has already established several partnerships with leading
companies in the field. These generate significant
revenues by providing collaborators access to Oxford
BioMedica’s intellectual property, process development
expertise and bioprocessing facilities. In addition, the
Group has used its LentiVector® platform to discover
and advance a number of pipeline products.
Example of in vivo gene therapy
CAR T-cell therapy for cancer (a Novartis product)
04 –05.
01. Oxford BioMedica produces GMP lentiviral vector encoding
CAR targeting CD19 which is expressed on B-cell cancers
02. T-cells isolated from patients
03. Lentiviral vector encoding CAR targeting CD19 used
to transduce expanded T-cells
T-cells harvested from a patient are transduced with the
lentiviral vector encoding the anti-CD19 chimeric antigen receptor.
The resulting CTL019 modified T-cells are expanded ex vivo prior
to infusion into the patient
04. The modified T-cells are infused back into the patient
05. Once inside the patient, the CTL019 cells multiply and target
‘hunt’ cancer cells and destroy them
The CTL019 cells destroy tumour cells expressing CD19 and persist
in the body to guard against residual or recurring disease
To see other examples of how our LentiVector®
delivery system works see our website:
www.oxfordbiomedica.co.uk/lentivector
Oxford BioMedica plc | Annual report and accounts 2017
Sector and technology overview
Products
Product pipeline
We are working on several internal product candidates and have interests in an expanding range
of partner programmes.
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Phase I
Phase I/II
Phase II
Phase III
Approved
Product/programme
Research/
pre-clinical
Oxford BioMedica proprietary products
To be spun-out or out-licensed
OXB-102
Parkinson’s disease (Central Nervous System)
OXB-202
Corneal graft rejection (Ophthalmology)
OXB-302
Cancer multiple (Oncology)
OXB-201
Wet age related macular degeneration (Ophthalmology)
Oxford BioMedica partnered products
Development milestones and royalties
SAR422459
Stargardt disease (Ophthalmology)
SAR421869
Usher syndrome type 1B (Ophthalmology)
Partners' products
Process development and bioprocessing revenues, and royalties
CTL019
Cancer r/r ALL (Oncology)
CTL019
Cancer r/r DLBCL (Oncology)
Undisclosed CAR-T
Cancer (Oncology)
CMB305
Advanced (Relapsed or metastatic sarcoma)
LV305
Cancer multiple (Oncology)
ADA-SCID
Metabolic disorder (ADA severe combined immunoeficiency)
MP S IIIA
Sanfilippo syndrome (Mucopolysaccharidosis type III)
Undisclosed
Undisclosed
Factor VIII
Haemophilia A
Factor IX
Haemophilia B
Oxford BioMedica plc | Annual report and accounts 2017
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Introducing
Oxford BioMedica
1 At the front and centre
3 Multi-billion $ market sector
3 Targeting unmet needs
4 Enabling new treatments
4 Sharing in success
8 Journey to profitability
8
Ideally placed
Sector and technology
overview
10 Gene and cell therapy sector
12 LentiVector® delivery platform
13 Products
Strategic report
16 Our business model
18 Operational highlights
19 Financial highlights
20 Chairman’s statement
23 Management team
24 Chief Executive’s statement
26 2017 performance review
30 Delivery of our 2017 objectives
31 Objectives for 2018
32
Financial review
38 Corporate responsibility
Corporate governance
44
Principal risks, uncertainties
and risk management
52 The Board of Directors
56 Corporate governance report
63 Directors’ remuneration report
84 Directors’ report
90
Independent auditors’ report
98
Group financial statements
Consolidated statement
of comprehensive income
99 Balance sheets
100 Statements of cash flows
101
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
102
Other matters
Glossary
133
136 Advisers and contact details
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Our business model
Partners' programmes
Multiple income streams
Process development fees | process development
incentives | bioprocessing revenues | royalties
Oxford BioMedica products
Via spin-out or out-license
Development milestones | royalties |
bioprocessing revenues
Bioprocessing
Process
Development
Spin-out
or out-license
R&D investment
Technical developments
R&D investment
Early stage/pre-clinical
LentiVector® platform
Patents and know-how | facilities | expertise | quality systems
Oxford BioMedica plc | Annual report and accounts 2017
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Our business model and strategy
Our business model, built on our world-leading
LentiVector® gene delivery platform is the result of over
20 years of pioneering science and process development
using lentiviral vectors, initially for in vivo therapies.
Oxford BioMedica was the first organisation globally
to use lentiviral vectors in an in vivo setting and
therefore we had to design and develop vectors and
manufacturing processes which would be both safe
and effective. This work was the foundation of our
unique combination of skills, patents and know-how
which, together with our GMP clean room and laboratory
facilities, combine to form our LentiVector® gene
delivery platform.
Lentiviral vectors are key components of many
promising new gene and cell therapies, and so our
LentiVector-Enabled™ platform provides us with
opportunities to generate short- and longer-term
value through:
In-house development
We have our own portfolio of LentiVector-Enabled™
platform gene and cell therapy product candidates.
We decided that clinical studies of these candidates
will be developed with third party finance, using either
out-licensing or by spinning out the programmes into
one or more special purpose vehicles (SPVs). This will
significantly reduce the cost and risk associated with
clinical development, while providing us with potential
equity stakes in the SPVs, and/or potential upfront,
milestone and royalty payments, as well as bioprocessing
and process development revenues. We will however
continue to invest in early stage product concept
development and pre-clinical studies, with a view
to building a pipeline of candidates ready for
clinical studies.
Partnering
We can provide our bioprocessing and process
development expertise and facilities to third parties
who want to accelerate the development of their own
lentiviral vector programmes. In return for which, we
receive short and medium term revenues, and longer
term royalties based on licences to our extensive
know-how and patents.
Freedom-to-operate licensing
We can provide other organisations with licences
to use our important patents relating to lentiviral vector
safety features and manufacturing efficiencies.
The graphic opposite illustrates our business model.
The foundation is our world-leading LentiVector®
platform, and our goal is to exploit this by gaining
interests in a diverse range of gene and cell therapy
products which can be both internally generated
and as a result of our relationship with partners
and collaborators.
The platform technology is still some way from being
fully mature so we are continuing to invest R&D funds
in improving the technology to retain our leading
position, as this is what attracts other companies
to work with us.
Principal risks facing the business
The principal risks facing the business, including how
they are managed and mitigated, are set out in detail
on pages 44 to 51. The main risks are:
— Risks associated with pharmaceutical product
development including product safety issues, lack
of efficacy, and failure to obtain regulatory approval
— Risks to our bioprocessing revenue from failure to
manufacture lentiviral vector to the required standard
— Exposure to one or more of our partners ceasing
to develop their products and thereby no longer
requiring our services
— Failure to comply with the terms of the Oaktree
loan facility
— Failure to out-licence or spin-out the Group’s
priority product development candidates so that
development stops
— Inability to attract and/or retain highly skilled employees
Oxford BioMedica plc | Annual report and accounts 2017
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Delivered in 2017
Operational highlights
®
Leading LentiVector delivery platform for gene and cell therapy partnerships
— Major commercial supply agreement signed with Novartis for the lentiviral vector
to produce CTL019 and additional CAR-T products; over $100 million revenue
potential over three years
— $105 million collaboration and licence agreement completed with Bioverativ post
year-end to access Oxford BioMedica’s LentiVector® platform and manufacturing
technologies for haemophilia gene therapies
— Lentiviral vector demand is increasing and the Group is in several discussions
regarding a range of additional collaborations
Novartis' Kymriah (tisagenlecleucel) (CTL019); the path to royalties
— First ever LentiVector-Enabled™ product approval for Novartis' Kymriah™
™
(tisagenlecleucel) in children and young adults with r/r B-cell acute lymphoblastic
leukaemia (ALL) in the US
— Tisagenlecleucel (CTL019) sBLA submitted in the US by Novartis in r/r diffuse large
B-cell lymphoma (DLBCL) in adults; product undergoing expedited review under
breakthrough designation
— CTL019 European Marketing Authorisation (EMA) application filed by Novartis for
r/r B-cell ALL in children and young adults and for r/r DLBCL in adults
— Primary analysis of results from the pivotal JULIET trial demonstrating that Kymriah™
(tisagenlecleucel) sustained complete responses at six months in adults with
r/r DLBCL, a difficult-to-treat cancer
Progress with proprietary product development
— Partnering discussions ongoing for Oxford BioMedica’s in-house priority
development programmes, with a planned spin-out legal structure ready
to be put in place for our ocular products
— The Group continued to invest modestly in programmes to maintain momentum
and to continue to enhance their value
— Phase I/II clinical study to be initiated shortly for lead in-house programme
OXB-102 in Parkinson’s disease to further enhance product value
Preparing to service the expected lentiviral vector demand
— Successful facilities inspections completed by US and UK regulators;
FDA and MHRA approval granted for lentiviral vector commercial manufacture
and supply
— Additional premises identified in Oxford for new bioprocessing facility comprising
four GMP manufacturing suites, fill/finish facilities and warehousing
— £2 million Innovate UK collaboration established to further enhance LentiVector®
suspension technology
— £3 million grant awarded by Innovate UK to support the UK’s efforts to produce
viral vectors and ensure adequate supply to meet future demand
Oxford BioMedica plc | Annual report and accounts 2017
Delivered in 2017
Financial highlights
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+28%
£2.0m
Gross income 1
Gross income increased by 28% to £39.4 million
(2016: £30.8 million).
Capital expenditure
Capital expenditure £2.0 million
(2016: £6.5 million).
–12%
$55m
Operating expenses 2
Operating expenses excluding depreciation and
amortisation and share based payments decreased
by 12% to £22.9 million (2016: £26.1 million).
Debt refinanced
Debt refinanced on significantly improved terms
with $55 million Oaktree Capital facility.
£1.9m
EBITDA 3 loss (year)
EBITDA loss reduced to £1.9 million
(2016: £7.1 million).
£14.3m
Cash
Cash of £14.3 million
(31 December 2016: £15.3 million).
£5.7m
£20.5m
Operating loss
Operating loss for the year reduced
50% to £5.7 million (2016: £11.3 million).
Equity placing in March 2018
Successful £20.5 million equity placing to fund
further expansion of bioprocessing capacity.
£1.0m
Cash inflow
Cash outflow before financing activities
reduced from an outflow of £8.3 million
in 2016 to an inflow of £1.0 million.
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
5
0
–5
–10
–15
–20
–25
–30
0
–2
–4
–6
–8
–10
–12
–14
Cash outflow before financing activities
£m
EBITDA loss
£m
Key financial indicator definitions (non-GAAP Alternative Performance Measures)
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2
3
Gross Income is the aggregate of revenue (£37.6 million) and other operating income (£1.8 million) (2016: £27.8 million and £3.0 million respectively) (p34)
Operating expenses is Research, Development and Bioprocessing costs plus Administrative costs less Depreciation, Amortisation and share based payments (p34)
EBITDA is Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and share based payment (p34)
Oxford BioMedica plc | Annual report and accounts 2017
0 Strategic report
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Chairman’s statement
" The gene and cell therapy market is
rapidly transforming into a multi-billion
dollar opportunity and the Group's
strategy is delivering significant
shareholder value – we expect this
to continue."
Dr. Lorenzo Tallarigo
Chairman
Strategic progress
During 2017 Oxford BioMedica made impressive
progress, and this momentum is continuing in the
current year. With the gene and cell therapy market
rapidly transforming into a multi-billion dollar
opportunity, the Group’s refined strategy that I laid
out in last year’s Annual report is delivering significant
shareholder value and we expect this to continue.
Oxford BioMedica’s world-class LentiVector® platform
enables the development of revolutionary gene and cell
therapy products, both for partners and as the foundations
of the Group’s in-house priority programmes. Providing
partners with access to Oxford BioMedica’s world-class
technologies, intellectual property and know-how
generates upfront licensing fees, complemented by
long-term economic interests, including royalties
on sales of partners’ products.
This strategic approach balances the risks and rewards
associated with bringing next generation therapies to
market, while allowing the Group to invest in its platform,
and develop new product concepts for future clinical
development. In addition, providing partners with access
to the Group’s state-of-the-art bioprocessing facilities
generates significant ongoing income from process
development and lentiviral vector production. Following
the approval of Novartis’ potential blockbuster CAR-T
product, Kymriah™ (tisagenlecleucel; formerly CTL019),
the Group now generates revenues as the sole
commercial manufacturer of the lentiviral vector
that encodes the product, as well as receiving
sales-based royalties.
The approval of Novartis’ Kymriah™ represents a strategic
milestone for the Group, with its LentiVector® platform
being used commercially in order to treat patients. The
widely acknowledged success of this first LentiVector-
Enabled™ product has facilitated additional partnering
opportunities, with the Group in discussion with several
potential partners. Capitalising on this momentum
Oxford BioMedica recently established a major strategic
collaboration with Bioverativ in haemophilia gene therapy,
and has attracted a number of additional potential
partners for its in-house development programmes.
Operational delivery
Underpinning the Group’s strategic progress is the
day-to-day operational delivery of the Oxford BioMedica
team. The team made important contributions to Novartis’
tisagenlecleucel regulatory filings, preparing Chemistry,
Manufacturing and Control elements of the dossiers and
successfully navigating inspections from the UK MHRA
and the US FDA. In parallel, the team continued to make
good progress in its work with the Group’s other partners,
including Orchard Therapeutics, Immune Design
and GC LabCell.
Oxford BioMedica plc | Annual report and accounts 2017
1.
1. World-class platform
The LentiVector® platform enables the development
of revolutionary gene and cell therapy products, both
for partners and as the foundations of the Group’s
in-house priority programmes.
$105m
Bioverativ partnership
Our recently signed partnership with Bioverativ
has the potential to generate in excess of $105 million
across two haemophilia programmes, in addition
to royalties on product sales.
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The Group’s operational progress extends to its
in-house priority development programmes, OXB-102
(for Parkinson's disease), OXB-202 (for corneal graft
rejection) and OXB-302 (for cancer). The Group is in
final preparations for the OXB-102 programme to move
into clinical studies. Additionally, it is poised to establish
a legal structure to facilitate the spin-out of its ocular
products while retaining a financial interest in their
potential upside. The Group has continued to invest
modestly in programmes to maintain momentum
and to continue to enhance their value. The lead priority
programme, OXB-102, has the greatest potential value
to the Group as indicated by expressions of interest
in this asset, and therefore the Board has authorised the
initiation of the product’s first-in-human clinical study.
This decision reflects Oxford BioMedica’s increasing
financial strength and the potential upside value
created by future clinical progress.
Facilities development
The Group completed a major facilities expansion
programme in 2016, providing additional state-of-the-art
production suites and laboratories. These have enabled
Oxford BioMedica to meet the needs of its partners,
while also providing capacity to further develop the
LentiVector® platform, as evidenced by the Innovate
UK collaboration that is working to enhance the Group’s
proprietary suspension technology. With recognition
of Oxford BioMedica’s leading position in the design,
development and production of lentiviral vectors
continuing to grow, the Board recently authorised
a further expansion of the Group’s capacity. This is
designed to accommodate additional partners and
support ongoing technology development. The new
expansion is advancing at pace, with additional premises
close to being secured nearby to the Group’s Oxford
headquarters, and facilities design underway, together
with catalytic grant funding from Innovate UK.
Financial progress
Oxford BioMedica is building a strong commercial
business and is in good financial health. With the
ongoing success of the collaboration with Novartis,
and the Group’s wider portfolio of strategic partnerships,
the Board is able to maximise shareholder value
by targeting our investment across the Group –
the platform, our facilities, and modestly in our products.
Following the launch of Kymriah™ in September 2017,
the Group will now be adding sales-based royalty
payments to its revenue streams. These are
complemented by commercial production revenue
under a new Novartis commercial supply agreement,
which has the potential to deliver over $100 million
in the coming three years, excluding sales-related
royalties due to the Group.
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Chairman’s statement
In February 2018 the Group continued building on
this progress, adding a further major agreement to its
portfolio. This new partnership with Bioverativ also has
the potential to generate in excess of $105 million across
two haemophilia programmes, in addition to royalties
on product sales.
With its business strengthening significantly throughout
2017, the Group took measures to leverage its increasing
financial strength. In June, the Group refinanced its debt
facility on greatly improved terms. Recently, it completed
a £20.5 million equity placing with leading financial
institutions to fund further facilities expansion in order
to cater for the rapidly growing demand for Oxford
BioMedica’s unique capabilities involving lentiviral vector
development, scale-up, analytics, access to intellectual
property and commercial GMP bioprocessing capabilities.
Organisation and Board
I am pleased to welcome Dr. Heather Preston to the
Group’s Board as a non-executive director. Heather is a
highly experienced advisor, investor and board member
at many life science companies, both in the US and
Europe. She is currently a partner and Managing Director
of TPG Biotech and has previously worked at JP Morgan
Partners. Prior to that she led the pharmaceutical and
medical products consulting practice at McKinsey & Co.
in New York.
Peter Nolan is retiring from his role as Chief Business
Officer having worked with the Group since 1996. Peter
will step down from the Board, which he joined in 2002,
after the Group’s Annual General Meeting in 2018. I would
like to thank Peter for his services to Oxford BioMedica
since 1996, and I am pleased to say that he will continue
to be a consultant to the Group.
Finally, I would like to thank Tim Watts, who retired as
Chief Financial Officer in September having made a
significant contribution to the business over the past five
years. At the same time we warmly welcome his successor,
Stuart Paynter, who brings extensive experience of the
biotechnology and pharmaceutical industry, most
recently from his time at Shire Pharmaceuticals.
The past year has been a period of intense activity for
the Group, and I wish to thank the whole team for their
dedication and hard work. The recent transition to
commercial supply under the new Novartis agreement,
and the addition of further partners, has led to significant
growth in the quality and production teams, and a further
increase in headcount is anticipated as part of the
ongoing facilities expansion programme. To support the
increased activities of the Group, the Senior Management
Team has been augmented with the appointment of
Lisa Giles as Chief Project & Development Officer, Helen
Stephenson-Ellis as Chief People Officer and Nick Page
as Chief Operations Officer. All the new personnel
will be in place by 3 April. I would also like to take the
opportunity to welcome the new apprentices who joined
Oxford BioMedica in January 2018. This apprenticeship
programme is part of the Group’s collaboration with the
Government and other life science organisations to help
develop the sector’s next generation of workers.
Outlook
2017 has been a period of significant progress for
Oxford BioMedica. The Group’s strategy is delivering
significant shareholder value and the Board has
confidence in the coming year. With further approvals
anticipated for Novartis’ tisagenlecleucel, and the roll out
of the product in Europe and the US, Oxford BioMedica
is well positioned to drive revenue growth from its sole
supply of the product’s lentiviral vector in addition to
sales-based royalties. Additionally, I expect continued
progress in the Group’s wider portfolio of collaborations,
including with new partner Bioverativ, and I look forward
to the spin-out or out-licensing of in-house priority
programmes. I believe 2018 will be another important
year for Oxford BioMedica, as the Group continues
to strengthen its position as one the world’s leading
gene and cell therapy companies.
Dr. Lorenzo Tallarigo
Chairman
Oxford BioMedica plc | Annual report and accounts 2017
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1. John Dawson
4. Kyriacos Mitrophanous
Chief Scientific Officer
Dr. Mitrophanous joined Oxford BioMedica
in 1997. He has over 20 years of lentiviral
vector experience covering a range
of technical disciplines, including the
development of gene and cell therapies,
delivery platform technologies, bioprocessing
and analytics. He is a recognised world-class
expert in the field, a named inventor on
numerous lentiviral vector patents and an
author of a number of key papers, which
have been published in The Lancet and
Human Gene Therapy. In his current role
he is responsible for the development of
Oxford BioMedica’s new product candidates
and LentiVector® platform. He holds a PhD
in Molecular Biology from University College
London and has conducted post-doctoral
research at the University of Oxford. He is
a director of the UK BioIndustry Association.
5. James Miskin
Chief Technical Officer
Dr. Miskin joined Oxford BioMedica in 2000.
He has 15 years of experience in GxP assay
development, analytical testing, lentiviral
based vector bioprocessing development
and cGMP production. In his current role,
he has overall responsibility for Oxford
BioMedica’s biomanufacturing and supply
activities, as well as its process development
work. He is also a named inventor on several
patents in the field. He holds a Bachelor
of Science degree and PhD in Molecular
Biology from the University of Leeds and
subsequently conducted post-doctoral
research at The Pirbright Institute for a
number of years. He is a member of the
UK BioIndustry Association Manufacturing
Advisory Committee.
Chief Executive Officer
John Dawson joined Oxford BioMedica’s
Board as non-executive director in August
2008 and he was appointed Chief Executive
Officer in October 2008. Previously, he held
senior management positions in the
European operations of Cephalon Inc.,
including Chief Financial Officer and Head
of Business Development Europe. While at
Cephalon he led many deals building the
European business to over 1,000 people,
and to a turnover of several hundred million
US dollars and in 2005 led the $360 million
acquisition of Zeneus by Cephalon. Prior
to this time at Cephalon he was Director
of Finance and Administration of Serono
Laboratories (UK) Limited. He is currently
a non-executive director of Paion AG.
2. Stuart Paynter
Chief Financial Officer
Stuart Paynter joined Oxford BioMedica
and the Board in August 2017. He has
16 years’ experience in the pharmaceutical
and healthcare sectors. He qualified as
a chartered accountant with Haines Watts
before moving to EDS. He subsequently
joined Steris, and worked in a variety of
roles within the healthcare and life sciences
divisions prior to becoming the European
Finance Director. He then moved to Shire
Pharmaceuticals where he became the
senior director of finance business partnering
for all business outside of the US. He then
moved to a corporate finance role before
becoming the global head of internal audit.
Prior to joining Oxford BioMedica he was
head of finance business partnering at
De La Rue plc. He is a member of the
Institute of Chartered Accountants
in England and Wales.
3. Peter Nolan
Chief Business Officer
Peter Nolan was appointed to Oxford
BioMedica’s Board in May 2002 having
been a senior leader at the Company since
it was founded in 1996. Prior to joining
Oxford BioMedica he served as Head of the
Biotechnology Unit at the UK Department
of Trade and Industry for eight years, where
he was responsible for collaborative research
programmes between industry and the
research councils. Previously he held
senior positions in the Laboratory of
the Government Chemist and also the
Metropolitan Police Laboratory where
he was a senior forensic scientist.
He has held a number of senior posts in
industry organisations, including director
of the UK BioIndustry Association and
Chairman of the Oxfordshire Bioscience
Network.
Strategic report
Management team
4.
5.
1.
2.
3.
Full biographies for the Board of Directors
can be found on pages 54 to 55.
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Chief Executive’s statement
" The Group has played a crucial role
in enabling revolutionary gene and cell
therapies to become a reality. As a world
leader in this space, Oxford BioMedica
is now in a strong position to deliver value
to both patients and shareholders."
John Dawson
Chief Executive Officer
Delivering on our promise
Oxford BioMedica has been resolutely focused on
developing revolutionary gene and cell therapies to
benefit patients around the world. Pioneering a new
field of medicine is challenging, but the promise of
life-changing treatments for serious diseases, potentially
from a single administration, has sustained Oxford
BioMedica and given birth to a highly-innovative new
sector of the life sciences industry. The Group has played
a crucial role in enabling this new generation of therapies
to become a reality. As a world leader in this space,
it is now in a strong position to deliver value to both
patients and shareholders.
Oxford BioMedica was the first organisation ever
to administer an in vivo lentiviral vector into patients.
In September 2017 the first ever product featuring
our LentiVector-Enabled™ technology was launched
following the FDA’s approval of our partner Novartis’
Kymriah™ (tisagenlecleucel). With a series of subsequent
filings in an additional oncology indication in the US,
and for both indications in Europe, this breakthrough
product is demonstrating the potential of this new
class of therapies. This ongoing success is highlighting
the value of Oxford BioMedica’s world-leading
LentiVector® technology, and its role in enabling
these revolutionary products.
Building a successful gene and cell therapy business
With gene and cell therapies built on vectors specifically
designed to encode and deliver their therapeutic payload,
Oxford BioMedica’s lentiviral vector technology is
becoming increasingly recognised as the industry leader.
As we outlined in our 2016 Annual report, our business
is built on three strategic pillars, each leveraging our
LentiVector® platform:
— Partnering: by providing strategic partners access to
our unique lentiviral vector design, development and
production capabilities we generate immediate and
ongoing revenues, as well as longer-term royalties
on future product sales.
— In-house development: we are progressing an
in-house portfolio of LentiVector-Enabled™ gene
and cell therapy candidates prior to out-licensing
or spin-out. This enables us to reduce the risk and cost
associated with later stage clinical development, while
retaining significant economic interest in the products
and the potential to generate process development
and production revenues.
— Technology licensing: by providing partners access
to our proprietary lentiviral vector technologies,
such as patented safety features and manufacturing
efficiency processes, we generate licensing fees
and royalties on future product sales.
Oxford BioMedica plc | Annual report and accounts 2017
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As a result of the industry’s growing recognition of
our lentiviral vector design, development and production
expertise, we are rapidly filling the capacity in our current
facilities. Consequently, we are progressing to lease
a large vacant facility near our Windrush Court
headquarters to allow further expansion. Over the
coming 18 months we intend to fit out four GMP
200 litre production suites, a fill/finish facility and
warehouse, effectively doubling our existing facilities.
To fund this expansion plan that will service the rapidly
growing global demand for lentiviral vectors, we recently
raised £20.5 million (gross) through an equity placing
with a number of leading institutional investors.
An exciting future
The past year has been a period of great transformation
for Oxford BioMedica. The first LentiVector-Enabled™
product came to market, our revenues are growing
strongly and the business is transitioning towards
profitability. With the success of our Novartis partnership
and the signing of the Bioverativ agreement validating
our technology and wider capabilities, 2018 promises
to be another exciting year of progress. We look forward
to further approvals and launches of Novartis’
tisagenlecleucel, as well as initiating work under our
new Bioverativ partnership and advancing our ongoing
collaborations with Orchard Therapeutics, GC LabCell
and Immune Design. With demand growing for our
proprietary lentiviral vector technology, we plan to further
expand our portfolio of strategic collaborations, and
conclude discussions with potential partners for our
in-house development programmes. Our position in
the sector is now firmly established, and we look forward
to expanding our role as a world-leading gene and cell
therapy business, both for patients and our shareholders.
John Dawson
Chief Executive Officer
A year of progress
During the last year we made good progress in each
area of our business. Our work with partner Novartis
has continued to drive strong revenue growth, both
from our substantial contributions to Kymriah™’s
regulatory filings and from our commercial-scale
bioprocessing for the product’s launch. During 2017,
the FDA and MHRA undertook inspections of our
facilities, and we subsequently received formal approval
for lentiviral vector commercial supply, underpinning
our role as sole supplier of the vector encoding for
Kymriah™, and supporting our work with other partners.
With our state-of-the-art laboratories and bioprocessing
suites fully operational throughout 2017, and at near
capacity for much of the year, our gross income
increased significantly to £39.4 million, growing 28%
compared with 2016, itself a record year. This high level
of utilisation reflects the increasing level of activity from
our growing roster of partners, as well as our ongoing
technology development work to retain our lead in the
gene and cell therapy field. During the year both areas
achieved notable successes. On 14 February 2018 we
completed a major partnership agreement with
Bioverativ to advance lentiviral vector-based haemophilia
gene therapies. In addition to an upfront technology
access payment of $5 million, the partnership has the
potential to generate over $100 million in milestone
payments, as well as process development and
bioprocessing revenues and a royalty on net sales of
products. In August we established a £2 million two-year
collaboration co-funded by the UK government’s
innovation agency, Innovate UK. The partnership
will apply novel technologies to further enhance our
bioreactor suspension production process. In addition,
on 23 January 2018, we received a £3 million grant from
Innovate UK to help address the current and predicted
shortfall in the UK to produce viral vectors.
Our in-house programmes also progressed during
the year. We completed preparations for OXB-102 to
move into the clinic, and are in active discussions with
a number of third-parties to out-license or spin-out the
products. This will allow us to focus on developing new
candidates for partnering while reducing the risk and
cost of later-stage development. As part of this strategy
we have taken the step to move our lead programme,
OXB-102 for Parkinson’s disease, into initial clinical
development. This relatively modest investment
leverages the growing financial strength of the
business, while adding significant additional value
to the product as it progresses towards the clinic.
Oxford BioMedica plc | Annual report and accounts 2017
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2017 performance review
Novartis partnership
In August 2017 Oxford BioMedica’s lead partnership
achieved a major milestone when Novartis’ chimeric
antigen receptor T cell (CAR-T) therapy Kymriah™
(tisagenlecleucel; formerly CTL-019) received the
first ever approval for a LentiVector-Enabled™ product.
Analysts believe the breakthrough cell therapy has
blockbuster potential, with predicted peak sales of
at least $1.4 billion per annum (source: Global Data
Consensus Forecast Jan 2018).
Regulatory progress
In early 2017 Novartis filed a Biologics License
Application (BLA) for tisagenlecleucel with the United
States Food and Drug Administration (FDA) for the
treatment of paediatric and young adult patients with
relapsed or refractory (r/r) B-cell acute lymphoblastic
leukaemia (ALL). At the end of August and earlier than
expected, the FDA approved the product following
a unanimous positive vote by its Oncologic Drugs
Advisory Committee.
Tisagenlecleucel has continued to make rapid progress,
and at the end of October Novartis filed a supplemental
BLA for the treatment of adults with relapsed or refractory
diffuse large B-cell lymphoma (DLBCL) who are ineligible
for autologous stem cell transplant (ASCT). The filing was
based on positive results achieved in the global, multi-
centre Phase II JULIET trial, and in December the study
investigators presented follow-up data showing complete
responses were sustained six months after treatment in
this difficult to treat cancer. Earlier in the year, Kymriah™
received breakthrough designation which will expedite
the FDA review process. As a result, approval of the
product’s second indication is anticipated in the
coming weeks.
Novartis plans to roll out the product beyond the
United States, and a week after its second filing with
the FDA, it submitted a Marketing Authorisation
Application to the European Medicines Agency.
The application covers the treatment of both r/r B-cell
ALL in children and young adults, and r/r DLBCL in adults
ineligible for ASCT. In January 2018, Novartis received
US FDA Priority Review for Kymriah™ for adults with
r/r DLBCL and also received from the EMA accelerated
assessment for children, young adults with r/r B-cell ALL
and adult patients with r/r DLBCL. Novartis plans further
regulatory filings in a number of additional countries
in 2018.
As the sole manufacturer of the lentiviral vector that
encodes tisagenlecleucel, Oxford BioMedica played
a key role in the US and European filings. Oxford
BioMedica made significant contributions to the
Chemistry, Manufacturing and Controls (CMC)
components of the regulatory dossiers, in addition
to manufacturing the validation batches required
for regulatory approval.
Commercial supply agreement
Under the 2014 collaboration and licensing agreement
with Novartis, Oxford BioMedica successfully supplied the
investigational lentiviral vector encoding tisagenlecleucel
during the product’s development. In anticipation of
approval and launch, the companies established a major
commercial supply agreement in July 2017. Under the
terms of the three-year agreement, which is extendable
for a further two years, Oxford BioMedica has the
potential to receive over $100 million. This includes
a $10 million upfront payment, and revenues for
development services and the supply of lentiviral
vectors used to generate tisagenlecleucel and a second
CAR-T product currently in development. In addition,
Oxford BioMedica will receive royalty payments
on commercial sales of all CAR-T related products
in the Novartis pipeline.
Bioverativ partnership
The ongoing success of our partnership with Novartis,
culminating in the first ever approval of a CAR-T therapy,
has significantly raised the profile of Oxford BioMedica’s
LentiVector® platform. Building on this momentum, we
completed a collaboration and licence agreement with
haemophilia specialist, Bioverativ in February 2018.
The agreement provides Bioverativ with access to
Oxford BioMedica’s lentiviral vector technology and
covers the development and manufacturing of lentiviral
vectors for use in the treatment of haemophilia A and B.
Under the terms of the agreement Oxford BioMedica has
the potential to receive over $100 million, including
a $5 million upfront payment and royalties on future
product sales.
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1. Raised profile
The ongoing success of our partnership with
Novartis, culminating in the first ever approval of
a CAR-T therapy, has significantly raised the profile
of Oxford BioMedica’s LentiVector® platform.
2. In-house clinical development
During the year we initiated discussions with a number
of third-parties to advance our priority in-house
product candidates into clinical development.
Partnership portfolio
During the year we also made progress in our wider
portfolio of partnerships:
— Orchard Therapeutics: we established our
collaboration with Orchard Therapeutics in November
2016, focusing on the development of autologous
ex vivo lentiviral gene therapies for primary immune
deficiencies and inherited metabolic disorders.
Orchard Therapeutics is responsible for the clinical
development and commercialisation of the products.
During 2017 we advanced the development of
lentiviral vectors designed to encode the gene
therapies for ADA-SCID (OTL-101) and MPS-IIIA
(OTL-201). It is anticipated that Orchard will file
a BLA for OTL-101 during the second half of 2018.
— Immune Design: we continue to progress our
expanded collaboration with Immune Design, which
is focused on the use of lentiviral vector-based gene
therapies for the treatment and prevention of cancer.
The lead programme targeting soft tissue sarcoma
and other NY-ESO-1 expressing tumours is currently
progressing towards Phase III clinical testing.
— GC LabCell: our collaboration brings together
Oxford BioMedica’s proven LentiVector® platform with
GC LabCell’s natural killer (NK) cell technology as part
of our strategy to develop a pipeline of next generation
product candidates. The 50:50 partnership is focused
on the discovery and early-stage development of
gene modified NK cell-based therapies targeting
life-threatening diseases, such as cancer, and during
the year we advanced a number of product concepts.
In-house product development
Following the Group’s refined product development
strategy laid out in its 2016 Annual report, we initiated
discussions with a number of third-parties to advance
our priority in-house product candidates into clinical
development. By out-licensing or spinning-out the
products into special purpose vehicles, Oxford BioMedica
has the potential to benefit from upfront fees or equity
stakes, vector development and bioprocessing revenues,
milestone payments and sales-based royalties,
while reducing the risk and cost of in-house
clinical development.
Oxford BioMedica plc | Annual report and accounts 2017
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2017 performance review
— Next generation bioprocessing: we recently began the
transition from manual, labour-intensive cell factory
bioprocessing to our next generation single-use
bioreactor system at 200L scale for lentiviral vector
supply. This represents a production step change,
providing major increases in capacity and efficiency
and significantly reducing cost of goods. In parallel we
introduced the use of our proprietary TRiP system,
which significantly enhances production yields for a
range of vectors, including those based on lentiviruses.
These novel systems are now established at
development scale for use in partners’ and internal
programmes. Additionally, our TRiP system has
significant licensing potential as the gene and cell
therapy field continues to expand.
— Innovate UK collaboration: in August 2017 we
established a £2 million collaboration with a number
of partners, partly funded by the UK government
innovation agency, Innovate UK. The two-year
collaboration will apply novel control and operating
technologies to Oxford BioMedica’s industrial-scale
bioreactor production system to further enhance
productivity. In January 2018 we received a grant
award of £3 million from Innovate UK to support
the UK’s efforts to produce viral vectors and ensure
adequate supply to meet future demand.
— Facilities expansion: with the ongoing success of our
collaboration with Novartis, our expanding portfolio of
partnerships and our in-house platform development
activities, the facilities expansion we completed in 2016
is now running close to full capacity. As global demand
for lentiviral vectors, and for our expertise, continues
to increase, we recently took the decision to initiate
a programme of further expansion to ensure sufficient
future capacity. We are planning to lease an 80,000ft2
(7,400m2) site on the Oxford Business Park close to
our Windrush Court headquarters. Initially, we plan
to fit out and bring 25,000ft2 (2,300m2) on line by the
second half of 2019, with the option to further develop
the site. This first stage of expansion will include two
GMP suites each containing a 200 litre bioreactor
(upgradable to larger bioreactors when required),
complemented by a fill / finish facility and
warehousing. In addition to meeting future capacity
requirements, the new site will eliminate the need
for external warehousing.
We modestly invested in our most advanced in-house
programme by progressing OXB-102 for Parkinson’s
disease towards the clinic. During 2017 we completed
manufacture of clinical trial materials for the study, and
started working on preparing trial centres in Cambridge
and London. The first patient is likely to receive the novel
gene therapy in the first half of 2018 and we anticipate
data from the first cohort of the study within one year.
The modest investment required to conduct this Phase I/II
study leverages the significant preparations already in
place, and Oxford BioMedica’s growing financial strength.
Following earlier encouraging proof-of-concept results,
we anticipate that clinical progress will add significantly
to the programme’s value.
To facilitate the spin-out of our in-house ocular assets,
we are looking to establish a dedicated legal structure
in the first half of 2018. This will encompass our priority
programme OXB-202, which targets corneal graft
rejection, as well as OXB-201 for wet age-related macular
degeneration. We are currently in discussions to launch
the spin-out, and are exploring a number of sources of
potential financing including venture capital funding.
The Group will continue to invest in the identification
and early stage development of novel gene and cell
therapy products based on the LentiVector® gene delivery
platform. This approach is designed to provide an ongoing
pipeline of next generation product candidates while
also building new intellectual property to maintain
Oxford BioMedica’s leadership position in the gene
and cell therapy field. Where appropriate the Group
would also consider in-licensing suitable targets
and technologies.
®
LentiVector platform development
Oxford BioMedica’s business is underpinned by its
world-leading lentiviral vector technology, development
expertise, manufacturing capabilities and intellectual
property. Together, these comprise the LentiVector®
platform. During the year we continued to refine
and enhance the platform as part of the continuous
development programme designed to retain our leading
position in the field of LentiVector-Enabled™ gene
and cell therapy:
— Regulatory approvals: during the first half of 2017 the
FDA completed a pre-licence inspection of our facilities
and systems as part of the BLA review process for
Novartis’ Kymriah™. In the second half of the year, the
UK regulatory authority, the MHRA, granted Oxford
BioMedica a Manufacturer / Importer Licence for the
commercial production and supply of lentiviral vectors
following a successful inspection of our facilities.
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Organisational development
During 2017, Oxford BioMedica continued to develop
its organisation in line with its expanding partnership
activities and in-house development work. As part of
the transition to commercial lentiviral vector production
and supply, and significant contributions to Novartis’
tisagenlecleucel regulatory filings, the organisation
maintained a strong focus on its quality processes,
and expanded both its quality and regulatory teams.
During the year we also introduced a new apprentice
scheme. Working with Government and other life
sciences organisations, the scheme is designed to train
and develop the next generation of workers, further
expanding the sector’s skills base. Our first apprentices
joined the Group in January 2018, and we anticipate
expanding the programme in the coming years.
Promising outlook
The past year has been a period of major
accomplishments for Oxford BioMedica and
we look forward to continuing this progress in 2018.
The launch of tisagenlecleucel anticipated in Europe,
and in a further indication in the US, we look forward
to delivering under our commercial supply agreement
with Novartis, growing our production revenues,
and generating sales-based royalties. As the sector
increasingly recognises our LentiVector® platform as
the world leader, we intend to leverage this position to
further develop our business. With discussions ongoing
with a number of organisations, we hope to add to our
strategic collaborations and to progress our in-house
ocular and cancer programmes into the clinic with
third-party funding. We also look forward to adding
value to our in-house Parkinson’s disease therapy
as we move towards a Phase I/II study.
Our business is truly LentiVector-Enabled™. Our unique
platform of lentiviral vector technologies, expertise,
intellectual property and facilities, is enabling the
development of revolutionary therapies for patients
with devastating diseases. With our strategic partnerships
underpinning our business, and our in-house
development work enhancing our capabilities,
Oxford BioMedica is poised to leverage its position
as a patient-focused, world-class gene and cell
therapy business.
1.
2.
1. Next generation bioprocessing
We recently began the transition from manual,
labour-intensive cell factory bioprocessing to our
next generation single-use bioreactor system
at 200L scale for lentiviral vector supply.
2. Leveraging LentiVector®
The the sector is increasingly recognising our
LentiVector® platform as the world leader and we
intend to leverage this position to further develop
our business.
Oxford BioMedica plc | Annual report and accounts 2017
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Delivery of our 2017 objectives
2017 objectives
Objective 1
Performance against priorities
®
Developing the LentiVector platform
The LentiVector® platform is the fundamental base
of our business and we therefore plan to continue
to develop it to maintain the leadership position it gives
us. Targets for 2017 include the use of our new 200 litre
bioreactor process to manufacture viral vector for our
partners, to secure regulatory approval, to manufacture
viral vector for commercial use, and several confidential
process improvement targets.
These goals have been met. We successfully validated
the use of our new 200 litre bioreactor process to
manufacture viral vector for our partners, and also
secured regulatory approval from both the FDA and
MHRA to manufacture viral vector for commercial
use for Novartis' Kymriah™ product. In addition,
we also successfully achieved several confidential
process improvement targets.
Objective 2
Product development
Although the LentiVector® platform is the fundamental
base of our business, ultimately the most value is derived
from products. As we have previously announced,
our intention is to reduce the financial risk of clinical
stage product development while retaining significant
financial interest in our priority programmes by
out-licensing or spinning them out into SPVs funded
by third parties. Our goal is to achieve this during 2017
for OXB-102, OXB-202 and OXB-302.
In 2017, although we were close to spinning out the ocular
progammes into a SPV and were in detailed discussions
regarding partnering OXB-102 (Parkinson’s disease), these
transactions were not completed by the year-end.
Objective 3
Business development
In 2016 we increased our product partners from one
(Novartis) to three, with new and extended relationships
with Orchard Therapeutics and Immune Design. We
also established a R&D collaboration with Green Cross
LabCell. In 2017 we intend to secure further revenue
and royalty generating partnership relationships,
and build further on those we already have.
During 2017 and early in 2018 we increased our product
partners from three to four with a new collaboration
and licence agreement with Bioverativ. In June 2017
we also secured a $100 million commercial and clinical
supply agreement with Novartis. During 2018 we
intend to secure further revenue and royalty generating
partnership relationships, and build further on those
we already have.
Objective 4
Corporate and organisational
The Board has set the management team certain
confidential targets relating to the Group’s financial
performance and further organisational improvement
objectives.
Re-financing of the debt on significantly improved terms
with Oaktree in June 2017 has helped to improve the
financial position of the Group. In addition, we have been
able to reduce the cash burn of the Group which along
with increased revenues, have put the Group on firmer
financial footing.
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Objectives for 2018
Objectives set for 2018
Objective 1
Support partner portfolio advancement
Targets for 2018 include supporting our partners
in order to gain approval and launch key products
in both the US and EU, support the progress
of programmes into the clinic, and also deliver
on our commitments to partners.
Objective 2
Progress action on implementing strategy for products
Our goals for 2018 include achieving the successful
progression of key programmes against plan, to deliver
new pre-clinical products to the Group, and also,
as previously announced, to reduce the financial risk
of clinical stage product development (while retaining
significant financial interest) by partnering or spin-out
of OXB-102 and the ocular programmes.
Objective 3
Business development
In 2018 we intend to secure further revenue and royalty
generating partnership relationships, and to build further
on those we already have.
Objective 4
Corporate and organisational
The Board has set management certain confidential
targets relating to the Group’s financial performance,
as well as further organisational improvement objectives.
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Financial review
" The Group expects that gross
income and EBITDA will continue
to grow strongly in 2018."
Stuart Paynter
Chief Financial Officer
Financial transformation
2017 has continued the financial transformation of the
Group discussed in the 2015 & 2016 financial reviews.
Selected highlights are as follows:
— Gross income increased by 28% over 2016 and
has now increased by 168% since 2014
— The journey towards profitability continued with
EBITDA losses pared back from £7.1 million in 2016
to £1.9 million in 2017
— “EBIDA” losses (EBITDA adjusted by the R&D tax credit)
were reduced from £3.4 million to a profit of
£0.8 million in 2017
— The Platform segment made an EBITDA profit of
£2.9 million and an operating profit of £0.2 million
The growth in gross income was driven by increased
bioprocessing clinical batch orders for Novartis and
Orchard Therapeutics. Our new bioprocessing and
laboratory facilities came online during 2016, driving
volume and revenue growth. This growth continued
during 2017 with two out of the three bioprocessing
facilities running continuously during the year and the
third increasing production over 2016. The chart opposite
shows the growth in output since 2013.
Whilst gross income grew by 28%, our operating costs,
including Cost of Sales, grew by only 12% and by only
9% when depreciation, amortisation and share option
payments are excluded. Manpower, materials and
subcontracted costs have increased to meet increasing
demand and future plans for growth. Headcount rose
from 256 at December 2016 to 321 at the end of 2017.
Revenue growth to date has been largely driven by our
relationship with Novartis. The 2018 deal with Bioverativ,
as well as the continued growth of business with new
and existing customers (such as Orchard Therapeutics),
is expected to be the key growth driver for the Group
in the short to medium term.
We are continuing our stated strategy of developing our
proprietary products whilst minimising our expenditure
and risk by seeking partnerships for later stage clinical
studies. We will continue to assess the financial risk/
reward profile of these projects and will seek to provide
maximal returns to shareholders accordingly.
In June the Group was able to re-finance its existing
Oberland loan facility with a new $55 million facility
with Oaktree Capital Management. The new facility
provides for increased funding together with a lower
financing cost. $50 million of the facility was drawn
down in June and the remaining $5 million was
drawn down in July 2017.
Oxford BioMedica plc | Annual report and accounts 2017
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
44
40
36
32
28
24
20
16
12
8
4
0
2013
2014
2015
2016
2017
Bioprocessing volumes
Licence, milestones and grants
(light tints)
Bioprocessing and process
development (dark tints)
2013
2014
2015
2016
2017
Gross income1
£m
3
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2017
2016
2015
2014
32.6
6.8
39.4
(1.9)
0.8
(5.7)
1.5
2.0
9.8
3.0
24.0
6.8
30.8
12.4
6.4
18.8
7.2
7.5
14.7
(7.1)
(3.4)
(11.3)
(12.1)
(8.1)
(14.1)
(9.3)
(7.2)
(10.6)
5.9
6.5
11.5
11.5
14.3
36.9
15.3
34.4
321
295
256
247
14.9
16.7
29.8
29.8
9.4
27.3
231
196
7.4
5.6
11.6
11.6
14.2
1.0
134
113
Key Financial Indicators
£m
Gross income1
Bioprocessing/commercial
development
Licences, incentives, grants
Operations
EBITDA2
EBIDA3
Operating loss
Cash flow
Cash used in operations
Capex
Cash burn
Normalised cash burn4
Financing
Cash
Loan
Headcount
Year-end
Average
1
2
3
4
Gross income is the aggregate of revenue and other operating income.
EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and
Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow
as it excludes from operating profit or loss all non-cash items, including the charge for share options.
EBIDA is an internal measure used by the Group, defined as EBITDA with the R&D tax credit included.
The Board refers to EBIDA periodically as the R&D tax credit is, in essence, a subsidy or grant which
offsets the Group's R&D expenditure.
Cash burn after excluding accrued interest and early repayment charges paid due to extinguishment
of Oberland facility.
The Group evaluates its performance by making use
of a number of alternative performance measures as part
of its Key Financial Indicators (refer table above). These
are non-GAAP measures which the Group believes
provide the most accurate reflection of the Group’s
performance over time.
Gross income
Gross income increased to £39.4 million providing
28% growth as compared to 2016 (£30.8 million).
Revenues generated from bioprocessing/commercial
development increased by 36% to £32.6 million
(from £24 million in 2016), and is up 353% since 2014.
The main contributor to growth has been the revenues
generated from increased bioprocessing clinical batch
orders for Novartis and Orchard Therapeutics.
The £6.8 million income generated from licence
upfront payments, performance incentives and grants
has remained broadly constant over the past four years
(2016 £6.8 million) despite comprising individual items
which are lumpy by nature.
Oxford BioMedica plc | Annual report and accounts 2017
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Financial review
The chart on page 33 shows the revenue evolution
over the past five years.
Although a substantial portion of our gross income
continues to be derived from our relationship with
Novartis, revenue generated from partnerships with
Orchard Therapeutics as well as other customers, are
growing substantially as a portion of the overall total.
£m
Raw materials, consumables and
other external bioprocessing costs
Manpower-related
External R&D expenditure
Other costs
Total expenses
2017
2016
2015
13.2
19.3
1.7
7.1
41.3
9.3
17.4
2.8
8.4
37.9
6.1
13.6
3.0
8.2
30.9
£m
Revenue
Other operating income
Gross income
EBITDA/EBIDA
£m
Gross income
Cost of sales
Operating expenses1
Total expenses
EBITDA2
Depreciation, amortisation, share
option charge and gain on
revaluation of investments
Operating loss
2017
37.6
1.8
39.4
2017
39.4
(18.4)
(22.9)
(41.3)
(1.9)
2016
27.8
3.0
30.8
2016
30.8
(11.8)
(26.1)
(37.9)
(7.1)
2015
15.9
2.9
18.8
2015
18.8
(5.8)
(25.1)
(30.9)
(12.1)
2014
13.6
1.1
14.7
2014
14.7
(4.4)
(19.6)
(24.0)
(9.3)
(3.8)
(5.7)
(4.2)
(11.3)
(2.0)
(14.1)
(1.3)
(10.6)
1
2
Research, development, bioprocessing and administrative expenses excluding depreciation,
amortisation and share option charge.
EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and
Share Based Payments) is a non-GAAP measure often used as a surrogate for operational cash flow
as it excludes from operating profit or loss all non-cash items, including the charge for share options.
The 36% increase in income generated from
bioprocessing/commercial development was only
partly offset by a 9% growth in our cost base from
£37.9 million in 2016 to £41.3 million in 2017. These two
factors led to great progress being made in reducing
the EBITDA loss from £7.1 million in 2016 to £1.9 million
in 2017.
— Raw materials, consumables and other external
bioprocessing costs have increased as a result
of the increase in bioprocessing and commercial
development revenues,
— The increase in manpower-related costs is due
to the increase in the average headcount from
247 in 2016 to 295 in 2017. Again, this is as a result
of the increased bioprocessing and commercial
development activities. The chart opposite shows
the growth in year-end headcount numbers,
— External R&D expenditure decreased with the strategy
of only developing our proprietary products and
minimising our expenditure on clinical stage projects,
— Other costs decreased as we exited the Medawar
laboratories at the end of October 2016 with the costs
of running that facility not incurred in 2017.
EBITDA
R&D tax credit
EBIDA3
2017
(1.9)
2.7
0.8
2016
(7.1)
3.7
(3.4)
2015
(12.1)
4.0
(8.1)
2014
(9.3)
2.1
(7.2)
3
EBIDA is an internal measure used by the Group, defined as EBITDA with the R&D tax credit included.
The Board refers to EBIDA periodically as the R&D tax credit is, in essence, a subsidy or grant which
offsets the Group's R&D expenditure.
Due to the reduction in EBITDA losses, EBIDA has
improved from a loss of £3.4 million in 2016 to profit
of £0.8 million in 2017.
Operating loss and net loss
£m
EBITDA
Depreciation, amortisation and
share option charge
Revaluation of investments
Operating loss
Interest
R&D tax credit
Foreign exchange revaluation
(non-cash)
Net loss
2017
(1.9)
2016
(7.1)
2015
(12.1)
(6.1)
2.3
(5.7)
(9.3)
2.7
3.3
(9.0)
(4.2)
(2.0)
–
(11.3)
(4.9)
3.7
(4.1)
(16.6)
–
(14.1)
(1.9)
4.0
(1.0)
(13.0)
2014
(9.3)
(1.3)
–
(10.6)
(0.2)
2.1
–
(8.7)
Oxford BioMedica plc | Annual report and accounts 2017
350
280
210
140
70
0
2013
2014
2015
2016
2017
Year-end headcount
Admin and corporate (light tint)
Development (mid tint)
Production related (dark tint)
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The operating loss in 2017 was £5.7 million, compared
with £11.3 million in 2016. 2017 saw a higher charge for
depreciation, amortisation and share option charge
(£6.1 million in 2017 compared with £4.2 million in 2016).
During 2016 the new facilities entered operation thereby
triggering the start of the depreciation charge on much
of the £26 million capacity expansion programme that
took place between October 2014 and June 2016. In 2017
we saw the full year impact of this depreciation.
The £2.3 million gain on revaluation of investments has
arisen from the revaluation of the equity investment in
Orchard Therapeutics which was acquired as an upfront
receipt at the time the license agreement was signed
in 2016.
Amortisation in 2017 includes a £1.0 million impairment
charge to account for the write down of the Prime Boost
technology and poxvirus patent intangible asset after
Bavarian Nordic’s Prostvac product failed its phase III study.
The interest charge on our $ loan facility was significantly
higher at £9.3 million in 2017 compared with £4.9 million
in 2016 due to a combination of the cost of termination
of the Oberland facility, and the higher interest charge
on the increased value of the new Oaktree facility.
The R&D tax credit in 2017 was lower than 2016 due
to a lower level of qualifying R&D expenditure. The tax
credit results from a UK Government scheme which
supports R&D expenditure in the UK.
The net loss in 2017 benefitted from the revaluation in
sterling of the $ denominated Oaktree loan caused by
the improvement in sterling against the $ across the year.
This is in contrast to the losses suffered in 2016 as a result
of Brexit. To some extent the Group expects to have
a currency hedge against this liability as a significant
portion of its anticipated future revenues are likely to
be $ denominated, such as the royalty stream arising
from Novartis’ sales to Kymriah™ patients.
Segmental analysis
During 2017 a change was made to the business segments
disclosed in the 2017 Annual report to better reflect the
way the business is being managed by the Senior
Executive Team. Internal technology projects to develop
new potentially saleable technology, improve our current
processes and bring development and manufacturing
costs down is now included within the newly named
‘Platform’ segment (previously ‘Partnering’) along with
the revenue generating bioprocessing and process
development activities for third parties. The other
segment, “Product“ (previously R&D), includes the costs
of researching and developing new product candidates.
Prior year figures have been adjusted to reflect
the change.
Oxford BioMedica plc | Annual report and accounts 2017
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2017
Gross income
EBITDA
Operating profit/(loss)
2016
Gross income
EBITDA
Operating loss
Platform
£m
Product
£m
38,6
2.9
0.2
29.8
(2.4)
(6.2)
0.8
(4.8)
(5.9)
1.0
(4.7)
(5.1)
Total
£m
39.4
(1.9)
(5.7)
30.8
(7.1)
(11.3)
The Platform segment in 2017 saw an increase in gross
income of 30% from £29.8 million to £38.6 million due
to the increase in bioprocessing revenues. The additional
volumes and revenues have enabled this segment to
advance from EBITDA losses in 2016 to an EBITDA profit
of £2.9 million this year, an improvement of £5.3 million.
The segment also generated an operating profit of
£0.2 million in 2017. As bioprocessing volumes and
royalty payments from partners continue to grow
this segment will increase its profitability.
The Product segment has seen grant income come
down slightly as the OXB-202 grant ended during the
first quarter of 2017. Costs and therefore EBITDA have
remained broadly the same with the operating loss
increasing due to the increase in depreciation and
share option charges.
Cash flow
The Group held £14.3 million cash at 31 December 2017,
having begun the year with £15.3 million. Significant
movements across the year are explained below.
— The operating loss improved by £5.6 million as
a result of the higher revenues from increased batch
manufacturing volumes
— This improvement flowed through to EBITDA which
at a loss of £1.9 million, is significantly better than
the £7.1 million loss in 2016
— A slightly favourable working capital movement
of £0.4 million in 2017 resulted in the cash used
in operations being in line with the EBITDA loss
at £1.9 million
— Net cash generated from operations during 2017
at £3.0 million was helped by a £4.5 million R&D
tax receipt, up £0.4 million from the prior year
— Interest paid during the year was £10.8 million, up
£7.5 million from the prior year due to the cost of
repayment of the Oberland loan facility as well as the
accrued interest covering the period since initial
drawdown of the loan
— Purchases of property, plant and equipment decreased
from £6.5 million to £2.0 million as our three year
major capacity expansion programme concluded in
the first half of 2016 with subsequent spend dropping
back down to normal ongoing levels in 2017
— Cash burn, the aggregate of these items, was therefore
reduced from £11.5 million in 2016 to £9.8 million in
2017, and drops down even further to £3.0 million if we
exclude the accrued interest and early repayment
charges of extinguishing the Oberland facility
— The net proceeds from financing during 2017 were
£8.8 million, consisting almost entirely of additional
funds received from the refinancing of the Oberland
facility with the enlarged Oaktree facility. In 2016,
£17.5 million net of fees was received as a result
of share issues during the year
— The result of the above movements is a net decrease
in cash of £1 million from £15.3 million to £14.3 million
Cash flow movements
Operating loss
Non-cash items included in operating loss
EBITDA loss
Working capital movement
Cash used in operations
R&D tax credit received
Net cash generated from/(used in) operations
Interest paid, less received
Capex
Cash burn
Net proceeds from financing
Movement in year
2017
(5.7)
3.8
(1.9)
0.4
(1.5)
4.5
3.0
(10.8)
(2.0)
(9.8)
8.8
(1.0)
2016
(11.3)
4.2
(7.1)
1.2
(5.9)
4.1
(1.8)
(3.3)
(6.4)
(11.5)
17.5
6.0
2015
(14.1)
2.0
(12.1)
(2.8)
(14.9)
3.2
(11.7)
(1.5)
(16.6)
(29.8)
25.0
(4.8)
Loans
On 29 June 2017 the Group was able to re-finance its
existing $50 million loan facility with Oberland Capital
Healthcare with a new $55 million facility with Oaktree
Capital Management. The new facility provides for
increased funding together with a lower interest rate
of 9.0% plus US$ three month LIBOR. Under the agreement
the Company has issued 134,351,226 warrants to Oaktree.
The loan is secured over the assets of the Group and the
terms also include covenants covering revenue targets
and a requirement to hold a minimum of $5 million cash.
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The most notable items on the balance sheet, including
changes from 31 December 2016, are as follows:
— Intangible assets decreased from £1.3 million to
£0.1 million as a result of amortisation and a
£1.0 million impairment charge as a result of the write
down of the Prime Boost technology and poxvirus
patent intangible asset after Bavarian Nordic’s Prostvac
product failed its phase III study
— Investments increased by £2.3 million from a gain
arising from the revaluation of the equity investment
in Orchard Therapeutics which was acquired as an
upfront receipt at the time the license agreement
was signed in 2016
— Property, plant and equipment has decreased by
£2.1 million to £25.4 million as the depreciation
of £4.1 million was only partially offset by additions
of £2.0 million
— Inventories have increased from £2.2 million
to £3.3 million due to work in progress balances
increasing as a result of ongoing bioprocessing
commitments across 2017 and into 2018
— Trade and other receivables increased from
£6.9 million to £17.1 million, due predominantly to the
timing of process development milestones achieved
and manufacturing orders placed at year-end
— Trade and other payables increased from £6.0 million
to £8.7 million, due to increased operational activities
as compared to the end of 2016
— Deferred income increased from £3.3 million
at the end of 2016 to £13.1 million at the end of 2017
due to income received in advance in relation to
manufacturing orders placed and manufacturing
slots reserved
— The loan balance has increased from £34.4 million
to £36.9 million as a result of the refinancing of the
Oberland facility with the enlarged Oaktree facility
net of expenses incurred in the refinancing
Financial outlook
The Group expects its financial performance to continue
to improve in 2018. Our relationship with Novartis
continues to go from strength to strength as evidenced
by the new supply agreement signed in July and the
commercial launch of Kymriah™ in August. Orchard
therapeutics continues to move its pipeline forward,
increasing its activities, and growing as a percentage
of our gross income. Lastly, we have recently signed
a $105 million contract with BioVerativ which diversifies
our customer base and strengthens our revenue
forecasts and future prospects. We are confident
in our ability to continue to establish new commercial
relationships in 2018 to further diversify our customer
base and continue our journey towards profitability.
Our stated plan, to continue the development of our
proprietary products and pre-clinical pipeline whilst
seeking to spinout or out-license those candidates at
an appropriate time prior to large clinical expenditures,
will mean that the cost of the proprietary programmes
of OXB-102, OXB -201, OXB-202 and OXB-302 will be low.
We will continue to invest in early stage concepts and
pre-clinical studies, and also in our key LentiVector®
technology platform. We will continue to monitor
our cost base carefully and adjust spend to meet
our financial targets.
Going concern
The Group held £14.3 million of cash at the end of 2017
and £16.4 million at 28 February 2018. In March 2018,
the Company completed a £19.3 million (net) equity
placing in order to fund further facilities expansion.
During 2017 the cash burn was significantly reduced
as a result of improved cash flow from operations
and reduced capital expenditure and the Directors
expect further progress in 2018. Taking this into account,
in conjunction with currently known and probable cash
flows, the Directors consider that the Group has sufficient
cash resources and cash inflows to continue its activities
for not less than twelve months from the date of these
financial statements and have therefore prepared
the financial statements on a going concern basis.
Stuart Paynter
Chief Financial Officer
Oxford BioMedica plc | Annual report and accounts 2017
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Strategic report
Corporate responsibility
Oxford BioMedica is committed to its role as a responsible
business and we have a range of policies in place to
ensure we meet this objective. We focus our corporate
responsibility efforts on a number of main areas:
People
We are resolutely focused on the health, safety and the
welfare of our employees, their engagement and job
satisfaction, and ensuring equality of opportunity and
respect for diversity. We are equally focused on the safety
of patients in our clinical studies, and of our neighbours
in the wider community.
It is group policy to give full and fair consideration
to job applications from disabled people, to provide
opportunities for their training, career development
and promotion, and to continue wherever possible
to employ staff who become disabled.
Community
We focus on the wellbeing of the community around
our facilities, conducting our business in a responsible
manner. We comply with local laws and regulations
and control our emissions and waste.
Environment
We monitor our facilities’ carbon emissions, use of
water, electricity and gas as well as waste production
and disposal.
Integrity and Ethics
The Group is committed to the highest standards of
ethical conduct and integrity in its business activities
in the UK and overseas.
Values
Our commitment to corporate responsibility is governed
by our Group values which include “Have Integrity”,
“Be Inspiring” and “Deliver Innovation”. Consequently,
we aim to treat others as we would expect to be treated
ourselves, acting with integrity in every area of our
business. We respect the rights of all whose lives we
touch and celebrate the diversity and differences that
bring us new perspectives.
People
Safety
The health, safety and welfare of our employees,
visitors and contractors at our business is our first priority.
The safety of all employees is important, and those
working in our bioprocessing, engineering and laboratory
facilities face additional risks which we endeavor
to manage through maintaining our facilities and
equipment to the highest standards and through specific
and detailed training. Our Health and Safety Management
System covers all work activities, such as working with
biological and chemical materials and the operation
of laboratory equipment. The Health and Safety
Management System is reviewed and updated to ensure
continuous improvement, and to adapt to variations
in scientific work and reflect changes in legislation.
Oxford BioMedica continues to have a first-class safety
record. Health and Safety issues are a standing item
on the Board’s agenda and the Group is committed
to meet both the letter and spirit of all health and safety
regulation and best practice.
Diversity
The Board and senior management are fully committed
to providing equal opportunities to all employees,
irrespective of race, gender, religion, national origin,
disability or any other personal characteristics, and
we embrace diversity in all forms.
The table below shows the gender split across our
organisation as at 31 December 2017:
Board including
non-executive directors
Senior managers
All other employees
Total
Male Female
Total
%
Male
%
Female
7
15
124
146
0
7
169
176
7
22
293
322
100%
68%
42%
45%
0%
32%
58%
55%
Oxford BioMedica plc | Annual report and accounts 2017
1.
2.
1. Integrity
We aim to treat others as we would expect to be
treated ourselves, acting with integrity in every area
of our business.
2. Training
Bioprocessing, laboratory and clinical processes are
complex and highly regulated and our training helps
us to achieve the outcomes, compliance and
productivity we need to succeed as a business.
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Remuneration
With the continued growth in employee numbers
to 321 at year-end, we have invested in strong internal
procedures to ensure that we are well placed to attract
and retain high quality employees. As a result, we have
a well-established and structured management system
and provide the appropriate levels of financial and
non-financial remuneration for each level within our
structure. We have modern share option plans to allow
all employees to participate, and we provide medical
insurance for all staff, along with a pension facility
to enable employees to take a more flexible and
personalised approach to pension planning.
Training
Firstly training is essential for the safety and wellbeing
of our employees and others we interact with, as
discussed above. Secondly, our bioprocessing, laboratory
and clinical processes are complex and highly regulated
and our training helps us to achieve the outcomes,
compliance and productivity we need to succeed as a
business. Finally, we provide training to our line managers
to ensure that they are well prepared to manage,
develop, support and motivate their teams.
Communication
We acknowledge the importance of communication
and consultation across our business. Group-wide
briefings, R&D seminars and informal all-staff meetings
are held to keep employees informed of general business
issues and other matters of interest, and to ensure the
views of employees can be taken into account in making
decisions that are likely to affect their interests. The
circulation of press announcements, internal newsletters
and access to work-related social media keep employees
informed of business and employee activities, and
enhance understanding of the financial and economic
factors affecting the Group's performance.
Community
We recognise the value of being a good local citizen
in the Oxford community. We endeavour to achieve
this by delivering positive benefits for the community,
such as creating new high quality jobs, establishing an
apprenticeship scheme and by establishing links with
schools and other local educational establishments.
We seek to behave as a responsible neighbour,
complying with national and local laws and regulations,
particularly with regard to emissions and waste, property
planning and the traffic impact caused by our employees.
We have a well-established Cycle-To-Work scheme
and interest-free season ticket loans to help minimise
our traffic impact on the local area.
Oxford BioMedica plc | Annual report and accounts 2017
0 Strategic report
4
Corporate responsibility
Environment
1.
Environmental policies & initiatives
We fully recognise our responsibility to protect the
environment and we have a strong environmental policy,
objectives and guidelines in place which we review and
update regularly. The Group complies with all regulations
covering the processing and disposal of laboratory waste,
and uses qualified licensed contractors for the collection
and disposal of chemical waste and decontaminated
biological materials. No laboratory waste goes to landfill
sites. We make every effort to keep our neighbours in
the local community safe from any potential harm
caused by our activities by closely managing our
emissions and waste.
Greenhouse gas emissions report
The tables below show our usage in 2017 and 2016 of
energy and water at our sites in Oxford, UK. We have also
estimated our total CO2 emissions and have indicated our
“environmental intensity” on a per employee basis, an
important indicator of our activity.
2.
2017
Electricity
Gas
Water supply
Other activities
(estimated) including
waste disposal and
travel
Total
2016
Electricity
Gas
Water supply
Other activities
(estimated) including
waste disposal and
travel
Total
Unit
MW hours
MW hours
Cubic
metres
Usage
per
employee
14.7
11.1
CO2
emission
(tonnes)
1,450
573
Usage
4,124
3,108
4,947
17.6
2
4471
2,472
Unit
MW hours
MW hours
Cubic
metres
Usage
per
employee
12.7
10.2
CO2
emission
(tonnes)
1,295
463
Usage
3,139
2,517
1. Biological materials
The Group complies with all regulations covering the
processing and disposal of laboratory waste, and uses
qualified licensed contractors for the collection and
disposal of chemical waste and decontaminated
biological materials.
5,628
22.9
2
2. Patient safety
Our clinical studies are designed with patient safety
as a paramount concern.
1,055
2,815
1
Reduction due to large waste reduction and slight reduction in travel
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Energy efficiency
We are committed to energy efficiency and have a
number of policies to decrease energy usage where
possible. For instance, when existing lighting needs
replacing we switch to LED lights which are significantly
more energy efficient than traditional lighting systems.
In our refurbished Windrush laboratories we have passive
infrared light sensors in all areas to ensure lighting is
extinguished in areas that are not currently in use.
Waste management
We continue to review our waste management systems
to manage waste more effectively. This includes:
— Recycling all paper and cardboard waste, aluminum
cans, glass, plastics and printer toner/cartridges
— Use of different waste streams to increase
processing efficiency
Clinical trials
We instil transparency, safety and ethics in all aspects
of our business, including the design and conduct of our
clinical trials. Our clinical studies are designed with patient
safety as a paramount concern and the protocols are
agreed with the relevant national regulatory authorities,
as well as local ethics committees and institutional review
boards at clinical trial sites, before any patients are treated.
We also have standard operating procedures in place
under a controlled Quality Management System to ensure
compliance with appropriate guidelines and legislation.
We are also committed to transparency, and our website
(www.oxfordbiomedica.co.uk) provides information
on ongoing clinical trials. Relevant trials in the EU and
EEA are automatically posted on the EU Clinical Trials
Register (www.clinicaltrialsregister.eu) and we also
disclose our trials on a US government-sponsored
website (www.clinicaltrials.gov).
Integrity and Ethics
The Group is committed to the highest standards of
ethical conduct and integrity in its business activities
in the UK and overseas.
Anti-bribery
Oxford BioMedica’s policy on preventing and prohibiting
bribery is in full accordance with the UK Bribery Act 2010
as well as other relevant overseas legislation. The Group
does not tolerate any form of bribery by, or of, its
employees, agents or consultants or any person or body
acting on its behalf. Senior management is committed
to implementing effective measures to prevent, monitor
and eliminate bribery.
Whistleblowing
Oxford BioMedica’s compliance activities include the
prevention and detection of misconduct through policy
implementation, training and monitoring. As part of this
effort, the Group’s employees are encouraged to report
suspected cases of misconduct in confidence and
without fear of retaliation. Concerns and allegations are
thoroughly investigated with disciplinary action taken
where necessary, up to and including dismissal and
reporting to relevant authorities.
Human rights and anti-slavery
The Group fully respects human rights and we conduct
our business in accordance with the letter and spirit of
UK Human Rights legislation and the UK Modern Slavery
Act 2015. Oxford BioMedica’s Board of Directors has
approved a Modern Slavery Transparency Statement
in compliance with section 54 of the Act which can
be found on our website. Our facilities are all located
in the UK, where our policies accord with human rights
regulations and our supply chain operates in territories
with strong commitments to human rights safeguarding.
Animal testing
It is a regulatory requirement that all new therapeutic
products must be appropriately tested for safety before
they are administered to patients, and there is currently
no alternative to using animal models as part of this
process. We are committed to following the principles
of the three “Rs” in safety testing: replacement, refinement
and reduction of animal testing. These principles ensure
that animal testing is only employed when necessary and
where there are no alternatives. The Group minimises
the use of animal models by cross-referring LentiVector®
platform data packages for regulatory authorities.
The Strategic report on pages 16 to 41 was approved
by the Board of Directors on 15 March 2018 and was
signed on its behalf by:
John Dawson
Chief Executive Officer
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Introducing
Oxford BioMedica
1 At the front and centre
3 Multi-billion $ market sector
3 Targeting unmet needs
4 Enabling new treatments
4 Sharing in success
8 Journey to profitability
8
Ideally placed
Sector and technology
overview
10 Gene and cell therapy sector
12 LentiVector® delivery platform
13 Products
Strategic report
16 Our business model
18 Operational highlights
19 Financial highlights
20 Chairman’s statement
23 Management team
24 Chief Executive’s statement
26 2017 performance review
30 Delivery of our 2017 objectives
31 Objectives for 2018
32
Financial review
38 Corporate responsibility
Corporate governance
44
Principal risks, uncertainties
and risk management
52 The Board of Directors
56 Corporate governance report
63 Directors’ remuneration report
84 Directors’ report
90
Independent auditors’ report
98
Group financial statements
Consolidated statement
of comprehensive income
99 Balance sheets
100 Statements of cash flows
101
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
102
Other matters
Glossary
133
136 Advisers and contact details
Oxford BioMedica plc | Annual report and accounts 2017
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4
Principal risks, uncertainties and risk management
Oxford BioMedica operates in the gene and cell therapy biotechnology sector which, by its nature,
is relatively high risk compared with other industry sectors. Very few gene and cell therapy products have
yet been approved for commercial use so there are significant financial and development risks in the sector,
and the regulatory authorities have shown caution in their regulation of such products. Risk assessment
and evaluation is therefore an integral and well-established part of Oxford BioMedica’s management processes.
The Group is exposed to a range of risks. Some of them are specific to Oxford BioMedica’s current operations,
others are common to all development-stage biopharmaceutical companies. The directors have carried
out a robust assessment of the risks facing the Group, including those which could threaten its business
model and future performance.
Risk management framework
The Group’s risk management framework is as follows:
— Board of Directors – the Board has overall responsibility for risk management, determining the Group’s risk
tolerance and for ensuring the maintenance of a sound system of internal control. The Board reviews key risks
within the Group at each of its formal meetings, of which there at least six annually. The risk management processes
are the responsibility of the Senior Executive Team, but the Audit Committee monitors the processes and their
implementation, as well as reviewing the Group’s internal financial controls and the internal control systems.
The Audit Committee also monitors the integrity of the financial statements of Oxford BioMedica and any formal
announcements relating to the Group’s financial performance, reviewing significant financial reporting judgements
contained in them.
— Senior Executive Team – the SET generally meets twice monthly to discuss current business issues
and considers relevant risks on each occasion. At least twice a year the SET meets with representatives from
the Risk Management Group to consider the operational risk management processes and risks identified.
— Key management committees – the Group has four key management sub-committees which meet monthly
and through which much of the day-to-day business is managed. These are the Quality and Manufacturing
Operations Committee, the Product Development Committee, the Business Development Committee and the
Technical Development Committee. SET members attend these meetings and risk management is a key feature
of each sub-committee.
— Risk Management Group – Oxford BioMedica has established a Risk Management Group comprising senior
managers from each area of the business and chaired by the Director of Corporate Activities & Strategy.
This group meets quarterly with a remit to identify and assess risks in the business, and to consider mitigation
and risk management steps that can be taken. The risk register is regularly reviewed by SET and key risks are
highlighted to the Board at each formal meeting.
— Standard Operating Procedures – all areas of the business have well established Standard Operating Procedures
(SOPs) which are required to be followed in order to minimise the risks inherent in the business operations.
Where these are required for GMP, GCP and GLP any deviations from the SOPs must be identified and investigated.
Compliance with such SOPs are routinely subject to audit by the relevant regulators and customers. Other SOPs,
such as financial processes, are also subject to audits.
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Key risks specific to Oxford BioMedica’s current operations
Pharmaceutical product development risks
To develop a pharmaceutical product it is necessary to conduct pre-clinical studies and human clinical trials
for product candidates to demonstrate safety and efficacy. The number of pre-clinical studies and clinical trials
that will be required varies depending on the product candidate, the indication being evaluated, the trial results
and the regulations applicable to the particular product candidate. In addition, the Group or its partners will
need to obtain regulatory approvals to conduct clinical trials and bioprocess drugs before they can be marketed.
This development process takes many years. The Group may fail to develop successfully a product candidate
for many reasons, including:
— failure to demonstrate long-term safety;
— failure to demonstrate efficacy;
— failure to develop technical solutions to achieve necessary dosing levels or acceptable delivery mechanisms;
— failure to establish robust bioprocessing processes;
— failure to obtain regulatory approvals to conduct clinical studies or, ultimately, to market the product; and
— failure to recruit sufficient patients into clinical studies.
The failure of the Group to develop successfully a product candidate could adversely affect the future profitability
of the Group. There is a risk that the failure of any one product candidate could have a significant and sustained
adverse impact on the Group’s share price. There is also the risk that the failure of one product candidate in clinical
development could have an adverse effect on the development of other product candidates, or on the Group’s
ability to enter into collaborations in respect of product candidates.
(i) Safety risks
Safety issues may arise at any stage of the drug development process. An independent drug safety monitoring board
(DSMB), the relevant regulatory authorities or the Group itself may suspend or terminate clinical trials at any time.
There can be no assurances that any of the Group’s product candidates will ultimately prove to be safe for human
use. Adverse or inconclusive results from pre-clinical testing or clinical trials may substantially delay, or halt, the
development of product candidates, consequently affecting the Group’s timeline for profitability. The continuation
of a particular study after review by the DSMB or review body does not necessarily indicate that all clinical trials will
ultimately be successfully completed.
(ii) Efficacy risks
Human clinical studies are required to demonstrate efficacy in humans when compared against placebo and/
or existing alternative therapies. The results of pre-clinical studies and initial clinical trials of the Group’s product
candidates do not necessarily predict the results of later stage clinical trials. Unapproved product candidates in later
stages of clinical trials may fail to show the desired efficacy despite having progressed through initial clinical trials.
There can be no assurance that the efficacy data collected from the pre-clinical studies and clinical trials of the
Group’s product candidates will be sufficient to satisfy the relevant regulatory authorities that the product should
be given a marketing authorisation.
(iii) Technical risks
During the course of a product’s development, further technical development may be required to improve
the product candidates characteristics such as the delivery mechanism or the bioprocessing process.
There is no certainty that such technical improvements or solutions can be identified.
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Principal risks, uncertainties and risk management
(iv) Bioprocessing process risk
There can be no assurance that the Group’s product candidates will be capable of being produced in commercial
quantities at acceptable cost. The Group’s LentiVector® platform product candidates use specialised bioprocessing
processes for which there are only a few suitable bioprocessors including the Group itself. There can be no assurance
that the Group will be able to bioprocess the Group’s product candidates at economic cost or that contractors who
are currently able to bioprocess the Group’s product candidates will continue to make capacity available at economic
prices, or that suitable new contractors will enter the market. Bioprocessing processes that are effective and practical
at the small scale required by the early stages of clinical development may not be appropriate at the larger scale
required for later stages of clinical development or for commercial supply. There can be no assurance that the Group
will be able to adapt current processes or develop new processes suitable for the scale required by later stages of
clinical development or commercial supply in a timely or cost-effective manner, nor that contract bioprocessors
will be able to provide sufficient bioprocessing capacity when required.
(v) Regulatory risk
The clinical development and marketing approval of the Group’s product candidates, and the Group’s bioprocessing
facility, are regulated by healthcare regulatory agencies, such as the FDA (USA), EMA (Europe), and MHRA (UK).
During the development stage, regulatory reviews of clinical trial applications or amendments can prolong
development timelines. Similarly, there can be no assurance of gaining the necessary marketing approvals to
commercialise products in development. Regulatory authorities may impose restrictions on a product candidates
use or may require additional data before granting approval. If regulatory approval is obtained, the product candidate
and bioprocessor will be subject to continual review and there can be no assurance that such an approval will not
be withdrawn or restricted. The Group’s laboratories, bioprocessing facility and conduct of clinical studies are also
subject to regular audits by the MHRA to ensure that they comply with GMP, GCP and GLP standards. Failure to meet
such standards could result in the laboratories or the bioprocessing site being closed or the clinical studies suspended
until corrective actions have been implemented and accepted by the regulator.
(vi) Failure to recruit sufficient patients into clinical studies
Clinical trials are established under specific protocols which specify how the trials should be conducted. Protocols
specify the number of patients to be recruited into the study and the characteristics of patients who can and cannot
be accepted into the study. The risk exists that it proves difficult in practice to recruit the number of patients with the
specified characteristics, potentially causing delays or even abandonment of the clinical study. This could be caused
by a variety of reasons, such as the specified characteristics being too tightly defined, resulting in a very small
population of suitable patients, or the emergence of a competing drug, either one that is approved or another
drug in the clinical stage of development.
The threats from the above product development risks are inherent in the pharmaceutical industry and have not
changed fundamentally over the last year. The Group aims to mitigate these risks by employing experienced staff
and other external parties, such as Contract Research Organisations to plan, implement and monitor its product
development activities and to review progress regularly in the Group’s Product Development Committee.
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Bioprocessing revenue risk
The Group receives significant revenues from bioprocessing lentiviral vectors for third parties, and in particular
for Novartis. Bioprocessing of lentiviral vectors is complex and bioprocessing batches may fail to meet the required
specification due to contamination or inadequate yield. Failure to deliver batches to the required specification may
lead to loss of revenues. Furthermore, the Group relies on third parties, in some cases sole suppliers, for the supply
of raw materials and certain out-sourced services. If such suppliers perform in an unsatisfactory manner it could
harm the Group’s business. The Group’s bioprocessing and analytical facilities are subject to regular inspection
and approval by regulators and customers. Failure to comply with the standards required could result in production
operations being suspended until the issues are rectified, with the potential for loss of revenue.
As the Group’s revenues from bioprocessing are growing the risk to the Group has increased in the last twelve
months. The Group mitigates the risk of failing to meet required specifications by investing in high quality facilities,
equipment and employees and, in particular, in quality management processes. The Group is also endeavouring
to mitigate the risk of being overly reliant on Novartis by seeking bioprocessing contracts with other parties.
Collaborator and partner risk
The Group has entered into several collaborations and partnerships involving the development of product
candidates by partners in which the Group has a financial interest through IP licences. Failure of the partners
to continue to develop the relevant product candidates for any reason could result in the Group losing
potential revenues.
Financial position
The Group has incurred significant losses since incorporation and continues to incur significant costs as it builds
an integrated platform gene delivery company and develops its portfolio of development products. The Directors
have considered the cash position in the context of going concern and their conclusions are set out in the Financial
review (page 37), the Directors’ report (page 86) and in Note 1 to the consolidated financial statements (page 102).
Loan facility
The Group has a $55 million loan facility provided by Oaktree Capital Management, secured on the Group’s assets.
Failure to comply with the terms of the loan agreement could potentially place the Group in default, which could
adversely affect the Group’s business operations, financial position and prospects.
Oxford BioMedica plc | Annual report and accounts 2017
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Principal risks, uncertainties and risk management
Business development
The Group is seeking to out-licence or spin out into externally funded vehicles its in-house product development
programmes, and may seek to develop strategic partnerships for developing certain of the Group’s other product
candidates. The Group may not be successful in its efforts to build these third party relationships which may cause
the development of the products to be delayed or curtailed.
The Group is building a revenue generating business by providing its LentiVector® platform to third parties
in return for revenues derived from process development, bioprocessing and future royalties. The Group may
be unsuccessful in building this business for reasons including a) failing to maintain a leadership position in lentiviral
vector technology, b) becoming uncompetitive from a pricing perspective, c) failure to provide an adequate service
to business partners and collaborators. The Group is continuing to invest in LentiVector® technology in order to
reduce this risk, and it also takes extremely seriously customer relationship management to ensure that customers
and partners receive the service they expect.
Recruitment and retention
The Group depends on recruiting and retaining highly skilled employees to deliver its objectives and meet its
customers’ needs. The market for such employees is becoming increasingly competitive and failure to recruit
or to retain staff with the required skills and experience could adversely affect the Group’s performance. The Group
mitigates this risk by creating an attractive working environment and ensuring that the remuneration package
offered to employees is comparable with competing employers.
Broader business risks which are applicable to Oxford BioMedica
Gene and cell therapy risk
The Group’s commercial success, both from its own product development and from supporting other companies
in the sector, will depend on the acceptance of gene and cell therapy by the wider medical community and the
public for the prevention and/or treatment of diseases. To date only a limited number of gene therapy products have
been approved in Europe, and only three in the USA. Furthermore, specific regulatory requirements, over and above
those imposed on other products, apply to gene and cell therapies and there can be no assurance that additional
requirements will not be imposed in the future. This may increase the cost and time required for successful
development of gene and cell therapy products.
Rapid technical change
The gene and cell therapy sector is characterised by rapidly changing technologies and significant competition.
Advances in other technologies in the sector could undermine the Group’s commercial prospects.
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Longer-term commercialisation risks
In the longer term, the success of the Group’s product candidates and those of its partners will depend on the
regulatory and commercial environment several years into the future. Future commercialisation risks include:
— The emergence of new and/or unexpected competitor products or technologies. The biotechnology and
pharmaceutical industries are subject to rapid technological change which could affect the success of the
Group’s product candidates or make them obsolete;
— Regulatory authorities becoming increasingly demanding regarding efficacy standards or risk averse
regarding safety;
— Governments or other payers being unwilling to pay for/reimburse gene therapy products at a level which would
justify the investment. Based on clinical studies to date, the Group’s LentiVector® platform product candidates have
the unique potential to provide permanent therapeutic benefit from a single administration. The pricing of these
therapies will depend on assessments of their cost-benefit and cost effectiveness; and
— The willingness of physicians and/or healthcare systems to adopt new treatment regimes.
Any or all of these risks could result in the Group’s future profitability being adversely affected as future royalties
and milestones from commercial partners could be reduced.
Intellectual property and patent protection risk
The Group’s success depends, amongst other things, on maintaining proprietary rights to its products and
technologies and the Board gives high priority to the strategic management of the Group’s intellectual property
portfolio. However, there can be no guarantee that the Group’s product candidates and technologies are adequately
protected by intellectual property. Furthermore, if the Group’s patents are challenged, the defence of such rights
could involve substantial costs and an uncertain outcome.
Third party patents may emerge containing claims that impact the Group’s freedom to operate. There can be no
assurance that the Group will be able to obtain licences to these patents at reasonable cost, if at all, or be able to
develop or obtain alternative technology. Where copyright, design right and/or “know how” protect the Group’s
product candidates or technology, there can be no assurance that a competitor or potential competitor will not
independently develop the same or similar product candidates or technology.
Rights of ownership over, and rights to licence and use, intellectual property depend on a number of factors,
including the circumstances under which the intellectual property was created and the provisions of any
agreements covering such intellectual property. There can be no assurance that changes to the terms within
licence agreements will not affect the entitlement of the Group to the relevant intellectual property or to license
the relevant intellectual property from others.
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Corporate governance
Principal risks, uncertainties and risk management
Financial risks
(a) Product liability and insurance risk
In carrying out its activities the Group potentially faces contractual and statutory claims, or other types of claim
from customers, suppliers and/or investors. In addition, the Group is exposed to potential product liability risks that
are inherent in the research, pre-clinical and clinical evaluation, bioprocessing, marketing and use of pharmaceutical
products. While the Group is currently able to obtain insurance cover, there can be no assurance that any future
necessary insurance cover will be available to the Group at an acceptable cost, if at all, or that, in the event of any
claim, the level of insurance carried by the Group now or in the future will be adequate, or that a product liability or
other claim would not have a material and adverse effect on the Group’s future profitability and financial condition.
(b) Foreign currency exposure
The Group records its transactions and prepares its financial statements in pounds sterling. Some of the Group’s
income from collaborative agreements and patent licences is received in US dollars, and the Group incurs
a proportion of its expenditure in US dollars and the Euro. The Group’s cash balances are predominantly held
in pounds sterling although the Group’s Treasury Policy permits cash balances to be held in other currencies
in order to hedge foreseen foreign currency expenses. The Group also has a US dollar loan facility provided by
Oaktree Capital Management. Under that facility the Group is required to maintain $5 million in a ring fenced bank
account. To the extent that the Group’s foreign currency assets and liabilities in the longer term are not matched,
fluctuations in exchange rates between pounds sterling, the US dollar and the Euro may result in realised and
unrealised gains and losses on translation of the underlying currency into pounds sterling. This may increase
or decrease the Group’s results of operations and may adversely affect the Group’s financial condition, each
stated in pounds sterling. In addition, if the currencies in which the Group earns its revenues and/or holds
its cash balances weaken against the currencies in which it incurs its expenses, this could adversely affect
the Group’s future profitability.
(c) Interest rate exposure
The Group is exposed to interest rate movements, primarily arising on the Oaktree loan facility. The interest rate
is 9.0% plus US$ three month LIBOR, subject to a minimum of 1%. As three month LIBOR rises, the Group’s interest
payments will increase.
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UK departure from European Union (“Brexit”)
The impact of the UK’s decision to leave the European Union is not yet clear but it may significantly affect the fiscal,
monetary and regulatory landscape in the UK, and could have a material impact on its economy and the future
growth of its industries, including the pharmaceutical and biotechnology industries. Depending on the exit terms
negotiated between EU Member States and the UK following Brexit, the UK could lose access to the single European
Union market and to the global trade deals negotiated by the European Union on behalf of its members. Although
it is not possible at this point in time to predict fully the effects of an exit of the UK from the European Union, it could
have a material adverse effect on the Group’s business, financial condition and results of operations. In addition,
it may impact the Group’s ability to comply with the extensive government regulation to which it is subject,
and impact the regulatory approval processes for its product candidates.
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Corporate governance
The Board of Directors
Oxford BioMedica plc | Annual report and accounts 2017
Left to right:
Peter Nolan, Lorenzo Tallarigo, Stuart Henderson, Martin Diggle,
Andrew Heath, John Dawson, Stuart Paynter
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Oxford BioMedica plc | Annual report and accounts 2017
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Corporate governance
The Board of Directors
Dr. Lorenzo Tallarigo (67)
Dr. Andrew Heath (69)
Chairman
Dr. Lorenzo Tallarigo was appointed as non-executive
Chairman of Oxford BioMedica in February 2016. He
was previously Chairman of Intercept Pharmaceuticals
where he led the company’s successful IPO. He was
also Chief Executive Officer and remains a Board member
of Genextra, a holding company focused on identifying
life science research to create successful businesses that
develop novel treatments and technologies. Previously,
he worked at Eli Lilly, where he held various positions
of increasing seniority in a number of areas including
clinical research, product management, marketing
and general management, and ultimately as President
of International Operations. He has a Doctor of Medicine
degree from the University of Pisa (Italy) and a PMD
from Harvard Business School.
Appointment:
— Appointed as non-executive
director and Chairman
in February 2016
Committee membership:
— Nomination Committee
Deputy Chairman and Senior Independent Director
Dr. Andrew Heath was appointed to Oxford BioMedica’s
Board in January 2010 and became Deputy Chairman
and Senior Independent Director in May 2011. Previously
he was Chief Executive Officer of Protherics plc where he
managed the company’s significant growth and eventual
acquisition by BTG for £220 million. Previously, he held
senior positions at Astra AB and Astra USA, including
Vice President Marketing & Sales, and at Glaxo Sweden
as Associate Medical Director. He is currently Chairman
of Shield Therapeutics plc, and a non-executive director
of Novacyt SA and IHT Partners, LLC. He was previously
a director of the UK BioIndustry Association.
Appointment:
— Appointed a director in January 2010
and became Deputy Chairman
and Senior Independent Director
in May 2011
Committee membership:
— Audit Committee
— Remuneration Committee
— Nomination Committee
John Dawson (58)
Stuart Paynter (45)
Chief Executive Officer
John Dawson joined Oxford BioMedica’s Board as
a non-executive director in August 2008, and was
appointed Chief Executive Officer in October 2008.
Previously he held senior management positions in the
European operations of Cephalon Inc., including Chief
Financial Officer and Head of Business Development
Europe. While at Cephalon he led many deals building
the European business to over 1,000 people, and to a
turnover of several hundred million US dollars and in
2005 led the $360 million acquisition of Zeneus by
Cephalon. Prior to his time at Cephalon he was director
of Finance and Administration of Serono Laboratories
(UK) Limited. He is currently a non-executive
director of Paion AG.
Appointment:
— Appointed a director in August 2008
and became Chief Executive Officer
in October 2008
Committee membership:
— None
Chief Financial Officer
Stuart Paynter joined Oxford BioMedica and the
Board in August 2017. He has 16 years’ experience in
the pharmaceutical and healthcare sectors. He qualified
as a chartered accountant with Haines Watts before
moving to EDS. He subsequently joined Steris, and
worked in a variety of roles within the healthcare and
life sciences divisions prior to becoming the European
Finance Director. He then moved to Shire Pharmaceuticals
where he became the senior director of finance business
partnering for all business outside of the US. He then
moved to a corporate finance role before becoming
the global head of internal audit. Prior to joining
Oxford BioMedica he was head of finance business
partnering at De La Rue plc. He is a member of the
Institute of Chartered Accountants in England
and Wales.
Appointment:
— Appointed a director and
Chief Financial Officer in August 2017
Committee membership:
— None
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Martin Diggle (55)
Stuart Henderson (59)
Non-executive director
Martin Diggle was appointed to Oxford BioMedica’s
Board in October 2012. He is a founder of Vulpes
Investment Management which manages a number
of funds, including the Vulpes Life Sciences Fund,
Oxford BioMedica’s largest shareholder. He has over
30 years’ experience in investment banking and fund
management, and has been an investor in life sciences
and biotech for nearly 20 years. He is also an expert in
emerging markets and Russia, in particular, where he
was previously a partner and director of UBS Brunswick.
He holds a Master’s Degree in Philosophy, Politics
and Economics from University of Oxford.
Appointment:
— Appointed a director
in October 2012
Committee membership:
— None
Independent non-executive director
Stuart Henderson was appointed a non-executive
director and Chair of the Audit Committee in June 2016.
Previously, he was a partner at Deloitte, where he
was Head of European Healthcare and Life Sciences.
Prior to this he was a partner at Arthur Andersen,
where he was Head of Emerging Biotechnology.
He has extensive audit and transaction experience
and has worked with life sciences businesses ranging
from start-ups to multinationals, as well as acting as
reporting accountant on numerous IPO and Class 1
transactions. As Audit Partner, he has reported to the
audit committees of publicly quoted companies for
over 20 years. He is a former director of the Babraham
Institute and currently sits as a non-executive director
on the Boards of OneNucleus (the Life Sciences trade
body for Cambridge and London) and the Cell Therapy
Catapult Limited.
Appointment:
— Appointed a director
in June 2016
Committee membership:
— Audit Committee
— Remuneration Committee
— Nomination Committee
Peter Nolan (65)
Chief Business Officer
Peter Nolan was appointed to Oxford BioMedica’s Board
in May 2002 having been a senior leader at the Company
since it was founded in 1996. Prior to joining Oxford
BioMedica he served as Head of the Biotechnology
Unit at the UK Department of Trade and Industry for
eight years, where he was responsible for collaborative
research programmes between industry and the research
councils. Previously he held senior positions in the
Laboratory of the Government Chemist and also the
Metropolitan Police Laboratory where he was a senior
forensic scientist. He has held a number of senior posts
in industry organisations, including as a director of the
UK BioIndustry Association, and Chairman of the
Oxfordshire Bioscience Network.
Appointment:
— Appointed a director in May 2002
Committee membership:
— None
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Corporate governance
Corporate governance report
Dear Shareholder
I am pleased to present Oxford BioMedica’s Corporate Governance Report for 2017.
Good governance is essential for the long term success of the business and this is ultimately the responsibility
of the Board and its committees. The Board comprises both non-executive and executive directors and provides
the forum for external and independent review and challenge to the management of the business.
There have been two changes to the Board during 2017. In August Stuart Paynter joined the Group as Chief Financial
Officer, and the Board as an executive director. Tim Watts retired as a Board member executive director at the end
of September. I wish to thank Tim for all his hard work for the Group over five years as Chief Financial Officer.
He leaves the Group in a great position for the future.
The Group continued to make impressive progress in 2017, with the momentum continuing into 2018. With gene and
cell therapy rapidly transforming into a multi-billion dollar opportunity, the Group’s strategy is delivering significant
shareholder value and we expect this to continue. With our state-of-the art laboratories and bioprocessing suites fully
operational throughout the year, our bioprocessing activities during 2017 increased substantially compared to 2016.
Our work with partner Novartis has continued to drive this revenue growth, both from our contributions to Kymriah’s
regulatory filing and subsequent approval, and bioprocessing for the products' commercial launch. We have also
been carrying out feasibility studies for other potential partners and were able to recently announce a partnership
with Bioverativ. With this amount of change and activity the Board has paid particular attention to ensuring that the
Group’s strategy remains appropriate and that management is focused on delivering the Group’s key priorities and
managing the key risks facing the Group.
I am in the process of conducting a review of the board’s performance during 2017. The review process will comprise
the completion of a questionnaire covering the various aspects of board activities and private discussions with each
director individually. The key areas to improve were then be discussed at the forthcoming 2018 board meeting.
The following pages set out in more detail the activities and major matters considered by the Board in 2017.
Lorenzo Tallarigo
Chairman
Lorenzo Tallarigo was appointed
as non-executive director and Chairman
in February 2016
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Compliance with the UK Corporate Governance Code (UKCGC)
The table below sets out how the Group has applied the main principles in the UKCGC.
UKCGC
reference
Main Principle
A.1
A.2
A.3
A.4
B.1
B.2
B.3
B.4
B.5
B.6
B.7
C.1
C.2
C.3
D.1
D.2
E.1
E.2
Every company should be headed by an effective board which is collectively
responsible for the long-term success of the Company.
There should be a clear division of responsibilities at the head of the Company
between the running of the board and the executive responsibility for the running
of the Company’s business. No one individual should have unfettered powers of
decision.
The chairman is responsible for leadership of the board and ensuring its effectiveness
on all aspects of its role.
Application
The Company’s board comprises both non-executive directors and executive
directors. The board met eight times during 2017 for regular board meetings as well
as several other times for specific ad hoc matters.
There is a clear division of responsibilities between the Chairman and
Chief Executive Officer.
The Chairman provides leadership to the Board and is responsible for setting
the agenda for its meetings and for ensuring there is adequate time allowed
for discussion.
As part of their role as members of a unitary board, non-executive directors should
constructively challenge and help develop proposals on strategy.
All of the non-executive directors participate at all Board meetings and also are
involved in periodic strategic reviews.
The board and its committees should have the appropriate balance of skills,
experience, independence and knowledge of the Company to enable them to
discharge their respective duties and responsibilities effectively.
There should be a formal, rigorous and transparent procedure for the appointment
of new directors to the board.
All directors should be able to allocate sufficient time to the Company to discharge
their responsibilities effectively.
All directors should receive induction on joining the board and should regularly
update and refresh their skills and knowledge.
The board should be supplied in a timely manner with information in a form and
of a quality appropriate to enable it to discharge its duties.
The board should undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual directors.
All directors should be submitted for re-election at regular intervals, subject to
continued satisfactory performance.
The board should present a fair, balanced and understandable assessment of the
Company’s position and prospects.
The board is responsible for determining the nature and extent of the principal risks
it is willing to take in achieving its strategic objectives. The board should maintain
sound risk management and internal control. systems.
The board should establish formal and transparent arrangements for considering
how they should apply the corporate reporting risk management, internal control
principles, and for maintaining an appropriate relationship with the Company’s
auditor.
Executive directors’ remuneration should be designed to promote the long-term
success of the Company. Performance-related elements should be transparent,
stretching and rigorously applied.
There should be a formal and transparent procedure for developing policy on
executive remuneration and for fixing the remuneration packages of individual
directors. No director should be involved in deciding his or her own remuneration.
There should be a dialogue with shareholders based on the mutual understanding
of objectives. The board as a whole has responsibility for ensuring that a satisfactory
dialogue with shareholders takes place.
The current board members have a broad mix of experience including the
Pharmaceutical industry, financing and investment, and UK corporate governance.
The Audit and Remuneration Committees are comprised solely of independent
non-executive directors.
The process to appoint Stuart Paynter was led by the Chairman. A search firm was
employed to help identify potential candidates. Short-listed candidates met most of
the directors as part of the selection process. The final selection decision was made by
the non-executive directors in consultation with the Chief Executive Officer.
All directors have been able to participate at the majority of meetings held in 2017.
Stuart Paynter received induction during the year including meetings with investors,
the Company’s auditors, lawyers, financial and other advisers and senior managers
in the business.
The board meets formally at least six times per annum. The Chairman sets the agenda
in consultation with the Chief Executive Officer and Company Secretary. Relevant
papers are circulated to all board members several days prior to each meeting.
The board conducts a performance evaluation annually. The most recent completed
evaluation took place during December 2016/January 2017. 2017/2018 Board
performance review currently ongoing.
All new directors are required by the Company’s Articles of Association to submit
themselves for election at the first Annual General Meeting after their appointment.
The Articles also require that one-third of the directors submit themselves for
re-election by rotation each year.
The directors formally review the Annual report each year and make a statement
in the report confirming that they consider the report to be fair, balanced
and understandable.
The board’s remit includes risk management which is an agenda item at every formal
meeting. A system of risk management has been established in the Company and this
is monitored by the Audit Committee. The Audit Committee also reviews the internal
control systems.
Corporate reporting, internal controls and relations with the Company’s auditors are
the responsibility of the Audit Committee which provides feedback to the full board
following Audit Committee meetings.
Executive directors’ remuneration is set in accordance with the remuneration policy
which was approved by shareholders at the 2015 AGM.
The remuneration policy was designed by the Remuneration Committee with
advice from the compensation and benefits practice of Deloitte LLP. The current
recommended policy was approved by shareholders at the 2015 Annual General
Meeting. A new policy will be put to shareholders at the 2018 AGM to approve.
No director is involved with setting his own remuneration.
Vulpes Life Sciences Fund, the Company’s largest shareholder is represented on the
board by Martin Diggle which provides a clear line of communication. The Chairman,
Chief Executive Officer and Chief Financial Officer meet periodically with the
Company’s other large shareholders.
The board should use the general meetings to communicate with investors and
to encourage their participation.
All board members endeavour to attend the Annual General Meeting in person and
sufficient time is allowed for questioning by shareholders who attend the meeting.
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Corporate governance
Corporate governance report
The Board considers that it has complied throughout the year with the UK Corporate Governance Code
(the “Code” or “UKCGC”).
Corporate Governance Framework
Oxford BioMedica’s governance framework comprises the Board, the Senior Executive Team and their respective
sub-committees:
The Board
Chair – Lorenzo Tallarigo
SET
CEO – John Dawson
Audit Committee
Chair – Stuart Henderson
Remuneration Committee
Chair – Andrew Heath
Nomination Committee
Chair – Lorenzo Tallarigo
PDC
TDC
QMOC
BDC
RMG
– Senior Executive Team
– Product Development Committee
– Technical Development Committee
SET
PDC
TDC
QMOC – Quality and Manufacturing Operations Committee
BDC
RMG – Risk Management Group
– Business Development Committee
The Board
The Board is collectively responsible for promoting the success of the Group by directing and supervising the
Group’s activities to create shareholder value. In doing so it ensures that there are robust corporate governance
and risk management processes in place. Following the changes in the second half of 2017 the Board comprises
four non-executive directors and three executive directors. The Chairman and Martin Diggle are considered not
to be independent.
The Board’s powers and responsibilities are set out in the Company’s articles of association and it has a formal
schedule of matters reserved for the Board’s approval which include:
— The Group’s strategy
— The financial statements and accounting policies
— Acquisitions, disposals and capital expenditure
— Financing and capital structure
— Corporate governance
— Internal control and risk management
— Board membership and remuneration
— Appointment and remuneration of auditors
The Board takes a close interest in Quality, Health, Safety & Environment and Risk Management and has these as
standing items on its meeting agendas.
The Chairman sets the agenda for the board meeting in consultation with the Chief Executive Officer and the
Company Secretary. Board papers covering the agenda items are circulated several days ahead of each meeting.
Regular board papers cover Product and Technical Development, Production, Business Development, Finance,
Investor Relations, HR, Quality, Health , Safety & Environment and Risk Management.
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There is a clear division of responsibilities between the Chairman and Chief Executive Officer.
Certain responsibilities are delegated to three board committees – the Audit, Nomination and Remuneration
Committees. These Committees operate under clearly defined terms of reference which are disclosed on the
Group’s website. Reports from the Audit and Nomination Committees are included in this section and the Directors’
remuneration report is on pages 63 to 83 incorporating the Remuneration Committee report.
The current Board members are set out on pages 52 to 55.
— Lorenzo Tallarigo is the non-executive chairman. Dr. Tallarigo met the independence criteria recommended
by the UKCGC at the time of his appointment.
— Andrew Heath, the Senior Independent Director, is considered to be independent.
— Stuart Henderson is the chairman of the Audit Committee. He is considered to be independent.
— Martin Diggle is a founder of Vulpes Investment Management which, through its Vulpes Life Sciences Fund,
is the Group’s largest investor and as such he is not considered independent under the Code.
— The Group therefore has been in compliance with provision B.1.2 of the Code which recommends that a small
company, defined as one which is not in the FTSE350, should have at least two independent non-executive
directors excluding the Chairman.
Each director is provided with an appropriate induction on appointment.
All Directors, and the Board and its committees have access to the advice and services of the Company Secretary,
and also to external professional advisers as required. The appointment and removal of the Company Secretary
is a matter for the Board as a whole to consider.
Board meetings
The Board meets regularly, with meeting dates agreed for each year in advance. During 2017 there were eight regular
Board meetings. The attendance of individual directors at Board and Committee meetings was as follows:
John Dawson
Martin Diggle
Andrew Heath
Stuart Henderson
Peter Nolan
Stuart Paynter
Lorenzo Tallarigo
Tim Watts
Regular Board
Attended
8
8
8
8
8
2
8
7
Possible
8
8
8
8
8
2
8
7
Audit Committee
Attended
Possible
Remuneration Committee
Attended
Possible
Nominations Committee
Attended
Possible
5
5
4
5
6
6
6
6
1
1
1
1
1
1
In addition to the above regular meetings, the Board (or an appointed sub-committee of the Board) met
on a number of other occasions to consider specific ad hoc matters including the approval of the 2016 financial
statements and the interim 2017 financial results.
The Chairman holds meetings from time to time with non-executive directors without the executive directors
in attendance.
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Corporate governance
Corporate governance report
Board activity during 2017
Board matters during 2017 included:
— Routinely recurring items such as the approvals of the 2017 financial budget and objectives,
the 2016 preliminary results and Annual report, and the 2017 interim results announcement
— A review of the Group’s strategy, conducted during the first few months of the year
— Monitoring the progress of the Group’s priority product development programmes
— Reviewing business development opportunities including partnering and collaboration transactions
— The appointment of Stuart Paynter as a director
— Ongoing reviews of the Group’s risk management processes and key risks
Review of performance
Lorenzo Tallarigo is in the process of conducting a review of the board’s performance during 2017. The review
process will comprise the completion by each director of a comprehensive questionnaire covering all aspects
of the Board’s performance. The completed questionnaires will be sent to Dr. Tallarigo for his confidential review
which he will then summarise for discussion at a 2018 board meeting.
Retirement of directors
In accordance with the articles of association, at each annual meeting any director who was appointed after the
last annual general meeting or has served for three years, and one third of the other directors (or if their number
is not a multiple of three the number nearest to but not exceeding one third) retire from office by rotation.
At the 2018 annual general meeting Stuart Paynter, Heather Preston, Stuart Henderson and John Dawson will
retire from the Board and stand for re-election in accordance with Articles 33 and 38 of the Company’s Articles
of Association.
Communication with shareholders
The Board recognises the importance of effective communication with shareholders and potential investors. The primary
points of contact are the Chief Executive Officer and Chief Financial Officer, but the Chairman and Senior Independent
Director are also available for meetings with investors if required. Vulpes Life Sciences Fund (“VLSF”), the Company’s
largest investor, is represented on the Board by Martin Diggle ensuring a clear channel of communication with VLSF.
The Group has engaged with shareholders and potential investors through the various channels below:
2017 Annual General Meeting
Meetings with potential investors
Results announcements and presentations
2016 Annual report
Website
Investor relations
Social media
The 2017 AGM was held in London on 23 May 2017. Shareholders were invited to attend this
meeting which lasted for about 2 hours and which, as well as the formal business, included a
presentation by the Chief Executive Officer followed by a Q&A session and a chance to meet
directors after the meeting closed.
The CEO and CFO regularly make presentations and meet potential investors on a one-to-one
basis at investor conferences in Europe and the USA. The Company also conducts investor
roadshows periodically which provide further opportunities to meet potential investors.
The Group announced its 2016 full year performance and financial results in March 2017, and
its 2017 half year interim results in August 2017 through RNS announcements accompanied by
analyst conference calls which are accessible to all shareholders, and recordings of which are
made available on the Group’s website.
The Group published its 2016 Annual report in April 2017.
The Group’s website www.oxfordbiomedica.co.uk contains details of the Group’s activities as
well as copies of regulatory announcements and press releases, copies of the Group’s financial
statements, and terms of reference for the Board Committees. Investors and others can
subscribe to an e-mail alert service which provides notifications of announcements.
The Group also endeavours to respond to all enquiries from shareholders and potential
investors received through its enquiry inbox: enquiries@oxfordbiomedica.co.uk
The Group also uses Twitter to alert followers to sector news which is relevant to the Group.
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The Senior Executive Team (SET) and its committees
Operational management is conducted by the executive directors who, together with Kyriacos Mitrophanous
and James Miskin, form the Senior Executive Team (SET). The Chief Executive Officer is John Dawson. The SET
meets approximately every two weeks and its agenda covers the full range of activities of the Group, including
financial performance, organisational and employment matters, risk management and Health, Safety & Environment.
There are three SET sub-committees covering the major business operational areas. These committees
meet monthly and are attended by SET members and other relevant senior managers from the business.
These sub-committees are:
— Product Development Committee (PDC) – covering the development of new gene and cell therapy products
from initial concept through to clinical development
— Technical Development Committee (TDC) – covering the development of new and improved assays and
production and other processes, including cell and vector engineering
— Quality and Manufacturing Operations Committee (QMOC) – covering the Group’s bioprocessing activities
Within their area of responsibility these committees cover objective and target setting, monitoring performance
against targets, ensuring compliance with GxP and other relevant requirements, monitoring expenditure against
budget, and risk management.
There are two other important committees:
— Business Development Committee (BDC) – which covers the external opportunities to out-licence and
in-licence technology or product candidates, and also to generate partnership opportunities for bioprocessing
and product development
— Risk Management Group (RMG) – this group comprises senior managers from all parts of the business.
The Group meets at least quarterly to identify and assess risks facing the business, and to propose risk mitigation
and management actions
Important matters from all of these committees are referred to the SET.
Risk management
The Board is responsible for determining the nature and extent of the risks it is willing to take in achieving the
objectives of the Group and it reviews current key risks at every Board meeting. The Audit Committee monitors
the conduct of the risk management processes within the Group whilst the SET is accountable for those processes,
identifying the risks facing the Group and formulating risk mitigation plans. The active involvement of the executive
directors in the management sub-committees allows them to monitor and assess significant business, operational,
financial, compliance and other risks.
Board committee reports
Audit Committee report
The Audit Committee comprises Stuart Henderson and Andrew Heath.
Mr. Henderson and Dr. Heath both have relevant experience which qualifies them for membership of the
Audit Committee and, in Mr. Henderson’s case, to be Chair of the Committee. Their experience is set out
in their brief biographies on pages 54 and 55.
The primary duties of the Audit Committee, as set out in its written terms of reference which is available
on the Group’s website, are to:
— Keep under review the Group’s reporting and internal control policies and procedures
— Oversee the relationship with the external auditors including their appointment, subject to approval
by shareholders at the AGM, remuneration, independence, and the provision of non-audit services
— Review and recommend to the Board the financial statements and associated announcements
Oxford BioMedica plc | Annual report and accounts 2017
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Corporate governance
Corporate governance report
Provision C.3.5 of the Code states that the Audit Committee should review the effectiveness of the Group’s internal
audit function. The Audit Committee considers that, given the size of the Group, it is unnecessary for it to have an
internal audit function. However, the Committee annually reviews this at its meetings with the external auditors.
The Audit Committee met five times in 2017:
— 9 March 2017 – to review the audit process at that time. No major concerns had arisen in respect of the key audit
risks identified. Revenues from the Novartis contract had been recognised consistently with the methodology
previously agreed. The auditors concurred with the accounting for the Oberland loan facility and the depreciation
rates appointed for asset lives. The auditors had also reviewed the going concern statement and disclosure in the
Annual report. No significant audit adjustments had been identified by the auditors, and there were no material
observations regarding the financial internal control procedures
— 21 July 2017 – to review the specified procedures undertaken by PwC on the six months’ financial results to
30 June 2017. The main items which were discussed related to the accounting treatment of the Oaktree loan
and warrants and the revaluation of the Orchard Therapeutics investment
— 3 August 2017 – to review progress to date for the six months’ financial results to 30 June 2017 and identify any
issues that require further attention. Recognition of Novartis revenues, and Orchard milestone payments were
discussed, along with the valuation of the Oaktree loan and warrants
— 16 August 2017 – to approve the six months’ financial results to 30 June 2017. The Audit Committee approved
the interim results for 2017, and the related RNS announcement
— 13 December 2017 – to review the 2017 audit strategy and audit fees, discuss auditor rotation and the audit tender
process and recommendation for 2018 audit. The Committee accepted the 2017 audit strategy proposed by PwC.
The audit fees for 2017 were approved. The current PwC partner is due to rotate off the Oxford BioMedica audit
after the 2017 audit completes. Noted that new auditor independence rules came into effect in 2017. The 2018
audit will now be conducted by new auditors. Oxford BioMedica completed an audit tender process in late 2017.
Merits and detractions of all the audit tender candidates were discussed and KPMG was selected as the audit
candidate to replace PwC as our auditors going forward. This will be put to the shareholders at the 2018 AGM
The effectiveness of the Audit Committee is being considered as part of the Board performance review carried
out during December 2017 and January 2018, and will be discussed at the forthcoming Board meeting.
Internal control
The Directors are responsible for Oxford BioMedica’s system of internal control, and for reviewing its effectiveness.
The system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can
only provide reasonable, and not absolute, assurance against material misstatement or loss. The Audit Committee
annually reviews the effectiveness of all significant aspects of internal control, including financial, operational and
compliance controls and risk management. The review for 2017 was prepared by the Chief Financial Officer and the
Group Financial Controller, and was reviewed at the March 2018 Audit Committee meeting.
The main features of the internal control and risk management processes which apply to the Group’s financial
reporting processes include clear separation of duties within the financial processes such as approval of purchase
orders, payroll and disbursements, and an organisation of the finance function such that monthly management
results and externally reported financial statements are subject to thorough review by the Group Financial Controller
and Chief Financial Officer. The financial results are also reviewed by the Senior Executive Team and the Board.
Nomination Committee report
The Nomination Committee leads the process for making appointments to the Board, and comprises the
non-executive directors.
The Nomination Committee met several times in 2017 on an ad hoc basis to consider the recruitment process and
ultimately, the appointment of Stuart Paynter as a Chief Financial Officer and member of the Board.
Share capital
The information about the share capital required by the Takeover Directive is in the Directors’ report on page 85.
Oxford BioMedica plc | Annual report and accounts 2017
Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
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Introduction
This report is on the activities of the Remuneration Committee. It is prepared in accordance with Schedule 8 to the Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). The report contains:
— The annual statement from the Remuneration Committee chair
— The annual report on remuneration showing payments and awards made to the directors and explaining the link
between company performance and remuneration for the 2017 financial year
— The Directors’ remuneration policy (the "policy"), setting out the policy which is subject to shareholder approval at
the 2018 Annual General Meeting (AGM), and shall take binding effect from the close of that meeting
The annual statement and the annual report on remuneration are subject to an advisory vote at the Company’s 2018 AGM.
The Companies Act 2006 requires the auditors to report to the shareholders on certain parts of the Directors’
remuneration report and to state whether, in their opinion, those parts of the report have been properly prepared in
accordance with the relevant regulations. The parts of the report that are subject to audit are indicated. The statement
from the chair of the Remuneration Committee and the policy report are not subject to audit.
Annual statement from the Remuneration Committee chair
(not subject to audit)
Dear Shareholder
I am pleased to introduce our remuneration report for the 2017 financial year. The report is divided into two sections:
the Directors’ remuneration policy, followed by the annual report on remuneration.
The policy sets out our forward looking policy for Directors’ remuneration and is a replacement for the policy approved
in 2015. The annual report on remuneration provides details of the amounts earned in respect of the 2017 financial year,
and the impact of the new policy which will be implemented in 2018, subject to its approval by shareholders.
Approach to the new policy
During 2017, the Committee reviewed the policy approved by shareholders at the 2015 AGM in connection with the
requirement to seek shareholder approval for the new policy at the 2018 AGM. The Committee’s conclusion was that
the policy remained appropriate, and effectively supported the Group’s strategic aims. Accordingly, the new policy is
broadly the same as the old policy, but with changes to aid its administration and operation, including that a company
car or car allowance may be provided to executive directors, reflecting the intention to introduce such a benefit more
widely within the Group. Further, that appropriate benefits may be provided to non-executive directors, reflecting that
HMRC may view some benefits commonly provided in connection with the performance of duties as being taxable.
The only change to quantum in the policy is with regards to the maximum award which can be made under the
LTIP for the CEO. This is explained on page 65.
Oxford BioMedica plc | Annual report and accounts 2017
4 Corporate governance
6
Directors’ remuneration report
for the year ended 31 December 2017
2017 business performance and incentive impact
In February 2018 the Committee met to consider the achievement of 2017 objectives and the annual bonus
award for 2017.
The performance of the business in 2017 is set out in detail in the Strategic report from pages 26 to 30 and the
performance against corporate objectives is set out on page 69 of this Remuneration report. Taking all of these
factors into account the Committee decided to award John Dawson a bonus of 106% of base salary Peter Nolan
a bonus of 110% of salary, Tim Watts a bonus of 110% of salary, which has been pro-rated to reflect his service
in the year to the date of cessation of employment, and Stuart Paynter a bonus of 106% of salary, also prorated
for his period of service in the year. The 2017 bonuses earned by John Dawson, Stuart Paynter and Peter Nolan will
be paid 50% in cash and 50% in deferred share awards. Reflecting his retirement from the business, Tim Watt’s bonus
will be paid fully in cash. Further details are provided on page 69 with regards to how performance under the annual
bonus targets translated into bonus payment.
Vesting of the 2014 LTIP award
LTIP awards were granted on 20 June 2014 to John Dawson, Peter Nolan and Tim Watts when the share price
was 2.38p; the vesting conditions were as follows:
Share price at 20 June 2017
Less than 5p
5p – 7.5p
7.5p and above
Percentage of the options granted that will vest
0%
Calculated on a straight line basis between 25% and 100%
100%
The awards vested in 2017. As reported in previous Annual reports, the awards contained a provision for “banking”
part of the awards based on interim share price performance which resulted in 25% of the awards being “banked”
in June 2015. No further banking occurred in 2016 and the share price in 2017 was such that only the banked
25% vested, with the balance of the awards lapsing. Details are provided on page 70.
Board changes
Tim Watts resigned from the Board and retired from the Company on 29 September 2017. The remuneration
arrangements in relation to Tim’s retirement from the Board have been determined in accordance with the
shareholder approved Directors’ remuneration policy; further information is set out on page 72.
Stuart Paynter was appointed as CFO with effect from 29 August 2017. His salary was set at £207,500. Details
of Stuart’s remuneration received during the year are set out in the single figure table on page 68.
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Proposed approach to executive remuneration for 2018
Due to the financial constraints under which the Company operates, it is pivotal that remuneration for Directors’
and senior management is heavily performance driven. However the Committee also wishes to recognise the
performance of John Dawson as CEO. John’s experience and strong leadership has steered the business to one
of growth and stability over recent years, with business changing contracts which have been reflected in the share
price and underlying performance. The proposed changes to his remuneration acknowledge the extent of this
performance, while remaining in line with market practice.
Stuart Paynter will receive a pay increase of 3% which is in line with the wider Oxford BioMedica workforce.
When Stuart was appointed to the Board as CFO in August 2017 his salary was set at £207,500 which was below
that of Tim Watts our exiting CFO. Peter Nolan is retiring from the Board in 2018 and as such, was not awarded
a pay increase; the treatment of Peter's receivable remuneration will be determined in due course and disclosed
in the 2018 Directors' remuneration report.
The Committee has increased John Dawson’s salary by 8.5% from £350,000 to £380,000. This reflects
the increase in John’s experience and the strong performance he has shown in role and also the growth in
responsibilities as the operational size of the business has grown substantially over recent years. Pay increases
for John have been in line with, or less than, those awarded to the wider workforce over the past three years
and prior to that were nil in 2013 and 2014.
Under the existing policy the maximum bonus opportunity is 125% of salary. No change is proposed under the new
policy. 50% of the bonus is paid in cash, 50% is paid in shares which vest in equal tranches from one to three years
following the grant of the award. Performance measures will continue to be set based on key strategic measures,
and will be disclosed retrospectively as with the 2017 bonus on page 69.
The Committee is proposing to increase the maximum award for the CEO under the LTIP to 125% of salary.
However the amount which John could earn at threshold will not change i.e. it will still be 25% of salary
(or 20% of the total award). The additional 25% would therefore only be earned on performance above threshold.
The maximum LTIP award for the other executive directors will remain at 100% of salary, with 25% of the award
vesting at threshold as currently.
The Committee has always taken a prudent approach to LTIP awards – in 2017 the awards were scaled back
to 90% of salary, reflecting the share price at that time, and taking into account both the dilutive impact on
shareholders, and to avoid the opportunity for windfall gains. If the current share price is maintained to the point
of grant in 2018 the Committee is anticipating that there would be no scale back of LTIP for the 2018 award.
The Company has historically used share price growth as its primary measure for LTIP awards and it is the
Committee’s view that share price growth remains the most appropriate performance measure for determining LTIP
vesting, ensuring that awards are only made where significant value is delivered to shareholders and recognising that,
at this stage, financial measures are not appropriate given the nature of our business. However, the Committee will
be keeping the LTIP measures under review as the business grows in revenue and earnings potential. The proposed
2018 share price growth targets are 10% CAGR for threshold performance and 17.5% for maximum performance.
There will be a performance underpin, such that the awards would only vest to the extent that the Committee
considers that the overall performance of the business across the period justifies it. Share price will also be averaged
across a three month period to avoid rewarding for short term spikes in performance.
Oxford BioMedica plc | Annual report and accounts 2017
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Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Summary of changes to executive remuneration for 2018
Under the remuneration policy executive directors’ base salaries are normally reviewed annually. The Remuneration
Committee has carried out this review in February 2018 and has awarded the following base salary increases:
John Dawson
Peter Nolan
Stuart Paynter
Current salary
£350,240
£216,430
£207,500
Percentage increase
8.5%
0.0%
3.0%
Total of increase
£29,760
Nil
£6,225
New salary
£380,000
£216,430
£213,725
Performance objectives for the Group have been agreed by the Board and the extent to which executive directors’
bonuses for 2018 are earned will be determined by the Remuneration Committee early in 2019 in the light of
performance against those objectives and in line with the remuneration policy. The performance measures are
based on the Company’s strategic priorities, and further information is given on page 31.
The Committee also intends to grant LTIP options to the executive directors during 2018 up to 125% of salary in the
case of the CEO and 100% in the case of other executive directors in accordance with the approved remuneration
policy. The awards will be subject to performance measures which will be set at the time of grant but which are likely
to be related to share price performance.
Non-executive director fees
Non-executive director fees have been increased as follows:
Stuart Henderson
Andrew Heath
Current fee
£52,500
£45,500
Total of increase
£12,500
£19,500
New fee
£65,000
£65,000
Non-executive director fees were increased to reflect the increased size of the Group and prevailing market rates.
Other matters
The Committee recognises the expectations of our shareholders on executive pay and we were pleased that the
2016 Directors’ remuneration report received votes in favour in excess of 99% at the 2017 AGM. Shareholders will be
invited to approve the 2017 annual remuneration report and the Directors’ remuneration policy at the 2018 AGM.
Andrew Heath
Chair, Remuneration Committee
Annual report on remuneration (subject to audit except where indicated)
Andrew Heath was appointed a director
in January 2010 and became Deputy Chairman
and Senior Independent Director in May 2011
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Remuneration Committee role and members
The responsibilities of the Remuneration Committee are set out in its terms of reference which are available
on the Group’s website and include:
— Recommending to the Board the policy and framework for the remuneration of the executive directors
and senior management. The remuneration of the non-executive directors is a matter for the Chairman
— Approval of individual remuneration packages for executive directors
— Approval of annual performance incentive plans and bonuses payable
— Approval of the Group’s Long Term Incentive Plan (LTIP) for executive directors and senior management,
and awards granted under the plan
— Approval of options granted to all employees under the Group’s share option plan
The Remuneration Committee members are currently Andrew Heath (Chairman) and Stuart Henderson. Martin Diggle
was a member of the Committee until 31 December 2016 but, as he is not considered to be independent for reasons
explained in the Corporate Governance Report (page 59), he has stepped down from formal membership of the
Committee. He retains “observer” status and therefore continues to receive all papers, and has a standing invitation
to attend all meetings. Other directors are invited to attend meetings on an agenda driven basis.
Remuneration Committee activities during 2017
During 2017 the Committee met six times. The main activities and decisions were as follows:
— 10 February 2017 – the Committee considered whether or not bonuses should be paid to the executive directors
in respect of 2016 in light of the performance against the Group’s 2016 objectives, and also whether there should
be salary increases for 2017. The outcome of these discussions was reported in the 2016 Annual report
— 20 June 2017 – the Committee considered the extent to which the share price performance conditions for the
June 2014 LTIP grant of options had been met. The outcome was that 25% of the options granted in 2014 would
vest and the remaining 75% will lapse. The Committee also approved the vesting of Deferred Bonus Plan options
granted in 2014, 2015 and 2016. DBP options vest in three equal instalments on the first, second and third
anniversaries of the grant
— 13 July 2017 – the Committee considered the granting of options to employees under the Group’s Long Term
Incentive Plan, Deferred Bonus Plan and Employee Share Option Scheme. The Committee approved the granting
of the share options
— 5 September 2017 and 13 October 2017 – in September the Committee approved an invitation to all employees
to participate in the 2017 offer under the Company’s ShareSave Plan. In October the Committee approved the
grant of options under this offer
— 13 December 2017 – the Committee reviewed the proposed draft 2018 corporate objectives, and to extend the
window of completion of events for executive directors’ remuneration. It was decided that the draft 2018 corporate
objectives would be amended following further discussion, and will be presented to the Board in January 2018 for
approval. It was agreed to extend the window for completion of events to allow qualification for 2017 executive
directors’ remuneration
Oxford BioMedica plc | Annual report and accounts 2017
8 Corporate governance
6
Directors’ remuneration report
for the year ended 31 December 2017
Single total figure of remuneration
The following tables show a single total figure of remuneration for 2017 for each director and comparative
figures for 2016.
2017
John Dawson
Stuart Paynter 4
Peter Nolan
Tim Watts 5
Total
2016
John Dawson
Paul Blake 6
Peter Nolan
Tim Watts
Total
Salary
£’000
350
71
216
169
806
Salary
£’000
342
167
211
219
939
Benefits 1
£’000
1
–
1
1
3
Benefits 1
£’000
1
17
1
–
19
Bonus
£’000
372
76
238
185
871
Bonus
£’000
211
–
144
151
506
LTIP 2
£’000
35
–
19
22
76
LTIP
£’000
47
–
25
29
101
Pension 3
£’000
53
11
32
25
121
Pension 3
£’000
52
22
35
29
138
Total
£’000
811
158
506
402
1,877
Total
£’000
653
206
416
428
1,703
1. Benefits comprise medical insurance
2.
This comprises the LTIP awards granted in 2014 which vested in June 2017. The relevant performance criteria and the performance against them are set out on page 64.
The values are calculated by reference to the share average price of 2.78p over the 3 months to 20 June 2014.
Pension contributions are made into the Group’s defined contribution scheme or at the election of the director as a cash allowance in lieu of a company pension contribution –
Paul Blake and Tim Watts had elected to receive such a cash allowance.
3.
4. Stuart Paynter was appointed CFO with effect from 29 August 2017. His 2017 remuneration is in respect of the period from his appointment to the Board.
5. Tim Watts stepped down from the Board on 29 September 2017. His 2017 remuneration is in respect of the period to his retirement from the Board, including his 2017 bonus.
6. Paul Blake stepped down from the Board at the AGM on 7 June 2016 and his employment contract expired on 31 August 2016.
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In February 2018 the Committee met to consider the achievement of the 2017 objectives and the annual bonus
award for 2017. The performance of the business in 2017 is set out in detail in the Strategic report from pages 16 to 41.
Performance against the Group objectives for 2017, on which the executives’ bonuses are based, was as follows:
Objective
Weighting
Performance assessed
Assessment
against objective
% of bonus awarded
Met in full
40%
Developing the
LentiVector® platform
The LentiVector® platform
is the base of our business.
Targets include the use of our
new 200L bioreactor process
for our partners, secure regulatory
approval and manufacture for
commercial use.
Product development
Look to out-licence or spin-out
our key products and formulate
a process for discovery
pre-clinical projects
Business development
Secure further revenue and
royalty generating relationships
and build further on those
we already have.
Financial objectives
Confidential financial targets
were set, including ref-financing
of the debt.
Corporate objectives
Further organisational
improvement objectives
were set.
40%
25%
10%
15%
10%
Major new commercial supply agreement signed
with Novartis. Supported Novartis in their sBLA
submission for DLBCL; supported EMA marketing
authorisation submission for ALL; and achieved
milestone for successful scale up of the suspension
bioprocessing process for CTL019. Successful FDA
and MHRA facilities’ inspections completed with
manufacturing licences awarded.
Agreed that the process and criteria for discovery
pre-clinical projects and timelines for 2017 was met.
However, the spin-out,out-licence and clinical trials
related to OXB-102, plus out-licence for OXB-302
were not achieved.
Partially met
10%
Completed negotiations for the $105 million licence
andcollaboration agreement signed with Bioverativ
in February 2018.
Met in full
10%
Gross income growth of 28% achieved whilst
EBITDA loss decreased from £7.1 million to £1.9 million.
Oberland loan refinanced with $55 million Oaktree
facility at improved financial terms.
Met in full
15%
Succession plans put in place to mitigate the risk
of key employees leaving the business.
Met in full
10%
John Dawson’s bonus is entirely linked to the achievement of the corporate objectives. Bonuses for Peter Nolan,
Stuart Paynter and Tim Watts are 80% linked to corporate objectives and 20% linked to personal objectives. Mr. Nolan,
Mr. Paynter and Mr. Watts were awarded 100% of their personal targets.
Accordingly, bonuses earned by the executive directors in respect of 2017 were:
— John Dawson: £372,000 (106% of salary);
— Peter Nolan: £238,000 (110% of salary);
— Stuart Paynter: £76,000 (110% of salary); and
— Tim Watts: £185,000 (110% of salary, after pro-rating to reflect his period of service in the year).
The 2017 bonuses for John Dawson, Stuart Paynter and Peter Nolan will be paid 50% in cash and 50% in deferred share
awards. The deferred share awards are not subject to further performance targets and will vest in three equal instalments
on the first three anniversary dates after the award date provided that the relevant participant remains employed at the
first anniversary of the award. Reflecting his retirement from the business, Tim Watts' bonus will be paid fully in cash.
Oxford BioMedica plc | Annual report and accounts 2017
0 Corporate governance
7
Directors’ remuneration report
for the year ended 31 December 2017
The single total figures of remuneration for non-executive directors are shown in the table below:
Fees
Lorenzo Tallarigo
Andrew Heath
Stuart Henderson
Nick Rodgers
Total
Martin Diggle has elected to receive no fees for his services as a director.
Aggregate directors’ emoluments
Salaries
Benefits
Pension /cash alternative
LTIP
Bonuses
Non-executive directors fees
Total
2017
£’000
150
46
53
–
249
2017
£’000
806
3
121
76
871
249
2,126
2016
£’000
138
46
31
25
240
2016
£’000
939
19
138
101
506
240
1,943
LTIPs vesting during 2017
LTIP awards were granted on 20 June 2014 to John Dawson, Peter Nolan and Tim Watts when the share price
was 2.38p, the vesting conditions were as follows:
Share price at 20 June 2017
Less than 5p
5p – 7.5p
7.5p and above
Percentage of the options granted that will vest
0%
Calculated on a straight line basis between 25% and 100%
100%
As reported in previous Annual Reports, the awards contained a provision for “banking” part of the awards based
on interim share price performance which resulted in 25% of the awards being “banked” in June 2015. No further
banking occurred in 2016 and the share price in 2017 was such that only the banked 25% vested, with the balance
of the awards lapsing.
The value of the awards vesting during 2017 are detailed below:
John Dawson
Peter Nolan
Tim Watts
1 The values are calculated by reference to the share price of 5.36p on 20 June 2017.
Number of awards
granted that vested
1,257,300
699,383
800,101
Share price at the date on
which the shares vest
5.36p
5.36p
5.36p
Value of awards on
vesting1
£67,391
£37,487
£42,855
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LTIPs awarded during 2017
On 13 July and 25 September 2017, the executive directors were awarded the following options under the Group’s
LTIP scheme:
John Dawson (awarded 13 July 2017)
Peter Nolan (awarded 13 July 2017)
Stuart Paynter (awarded 25 September 2017)
Number of options
granted
3,173,741
1,961,197
2,894,003
Face value
of grant
£314,200
£194,159
£248,884
The number of options awarded in July 2017 and September 2017 was calculated by reference to 90% of salary
divided by the average share price in the five business days preceding the relevant award (July 2017: 9.9p,
September 2017: 8.6p).
Stuart Paynter was granted an LTIP award over 2,894,003 shares representing 120% of salary, as part of his
recruitment package, and in order to align senior management longer term interests with those of the Group.
The awards are nil cost options and are subject to a three year vesting period. They are exercisable from the third
anniversary of the award, subject to the achievement of the performance condition set out below:
Average annual compound share price growth over the
three year period starting with the date of grant*
Less than 10%
10% (i.e. 33% over 3 years)
Between 10% and 20%
20% or more (i.e. 73% over 3 years)
Percentage of the options granted that will vest
0%
25%
Calculated on a straight line basis between 25% and 100%
100%
*
The starting share price for July 2017 and September 2017 is 9.9p and 8.6p respectively, being the average share price over the five business days preceding the date
of grant. The end share price shall be calculated as the average of the closing price for the three months period prior to 13 July 2020 and 25 September 2020.
There will also be a performance underpin, such that the awards will only vest to the extent that the Remuneration
Committee considers that the overall performance of the business across the period justifies it.
Statement of directors’ shareholding and share interests
The executive directors are encouraged to build up a shareholding, but there is no specific required target level.
The interests in shares of the directors who served during the year as at 31 December 2017 (or, if earlier, the date
of their retirement) were as follows:
Executive directors
John Dawson
Peter Nolan
Tim Watts 1
Stuart Paynter
Non-executive directors
Lorenzo Tallarigo
Martin Diggle 2
Andrew Heath
Stuart Henderson
Shares held outright
2016
3,925,685
1,668,634
7,395,124
–
2017
3,925,685
1,918,321
17,181,767
–
Vested but
unexercised options
2016
12,302,989
5,967,406
8,864,136
–
2017
15,279,313
7,681,944
–
–
Unvested deferred
bonus plan
2016
3,242,816
2,024,806
2,089,348
–
2017
2,588,639
1,737,078
1,759,534
–
Unvested LTIP awards
subject to
performance conditions
2016
10,498,062
6,165,349
6,710,697
–
2017
8,721,803
5,373,071
3,560,697
2,894,003
2,173,087
581,008,834
1,607,086
333,833
1,784,122
580,765,333
1,500,000
333,833
1. Tim Watts stepped down from the Board on 29 September 2017. Shareholding and share interests are as at the date of stepping down from the board.
2.
Includes the interest of Vulpes Life Science Fund, Vulpes Testudo Fund and other parties connected to Martin Diggle.
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Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
During 2017 the following options have vested and lapsed:
LTIP
John Dawson
Stuart Paynter
Peter Nolan
Tim Watts
Deferred bonus
John Dawson
Peter Nolan
Tim Watts
Unvested at
1 January 2017
10,498,062
-
6,165,349
6,710,697
Vested during
2017
1,257,300
–
699,383
800,101
Unvested at
1 January 2017
3,242,816
2,024,806
2,089,348
Lapsed during
2017
3,692,700
–
2,054,092
2,349,899
Vested during
2017
1,719,024
1,087,781
1,015,155
Awarded during
2017
3,173,741
2,894,003
1,961,197
–
Unvested at
31 December 2017
8,721,803
2,894,003
5,373,071
3,560,697
Awarded during
2017
1,064,847
727,427
757,967
Unvested at
31 December 2017
2,588,639
1,737,078
1,759,534
On 10 June 2018 the performance criteria for the LTIP awards granted on 10 June 2015 will be assessed. The average
share price for the five business days preceding 10 June 2015 was 9.7p and vesting conditions were set as follows:
Average annual compound share price growth over
the three year period starting with the date of grant
Less than 15%
15% (i.e. 52.1% over 3 years)
Between 15% and 25%
25% or more (i.e. 95.3% over 3 years)
Percentage of the options granted that will vest
0%
25%
Calculated on a straight line basis between 25% and 100%
100%
Payment to past directors and payments for loss of office
Tim Watts stepped down from the Board and retired from the Company on 29 September 2017. His remuneration
earned to that date and the bonus he has earned in respect of 2017 is included in the single figure table of
remuneration on page 68. He will not receive any payment for loss of office or any other payments in relation to the
cessation of his employment. Consistent with the terms of the Company’s remuneration policy and the rules of the
LTIP, he will retain the unvested share awards made under the LTIP granted in 2015 and 2016, which will vest on their
normal vesting dates, subject to the performance conditions. The awards made in 2016 will be prorated such that
two thirds of the original award will vest, (subject to the performance conditions). Tim will also retain the deferred
bonus shares earned but not yet vested, in respect of 2014, 2015 and 2016 bonuses. These will vest at the usual time.
As disclosed in the 2016 Directors’ Remuneration Report, on his retirement from the Group in August 2016, Paul Blake
retained his LTIP award granted in 2014, which remained subject to its original performance conditions.
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Performance graph and comparison with CEO’s remuneration
(not subject to audit)
The chart below illustrates the Company’s TSR performance since January 2009 relative to the FTSE all-share index
and the FTSE techMARK MediScience index. The FTSE all-share index has been selected because it represents a
broad-based measure of investment return from equities. The FTSE techMARK mediScience index, comprising
biotech companies, provides a second benchmark that is a more specific comparator.
600
Key:
Oxford BioMedica plc
FTSE all-share index
FTSE techMARK mediscience index
NASDAQ Biotech index
500
400
300
200
100
0
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
CEO’s remuneration in last nine years
(not subject to audit)
Year
CEO’s total single figure
of remuneration
LTIP vesting
Annual bonus
£’000
% of maximum
% of maximum
2009
2010
2011
2012
2013
2014
2015
2016
2017
8171
0%
80%
450
0%
42%
413
0%
0%
401
40%
17%
468
0%
30%
680
0%
75%
732
100%
42%
653
50%
50%
914
25%
85%
1
On 1 September 2009 1,500,000 new Ordinary Shares were allotted to John Dawson. The shares were fully paid, and were a one-off share based bonus payment,
in accordance with his contract of employment, for successful achievement of certain transactions with Sanofi in April 2009. The value of the shares at the closing mid-market
price on the trading day immediately prior to issue was £172,500 and the Company bore an additional cost of £120,000 required to gross up the value of the shares for income
tax and National Insurance. Mr. Dawson also received a regular bonus of 80% of maximum.
Percentage change in CEO’s remuneration
(not subject to audit)
The table below shows how the percentage change in the CEO’s salary, benefits and bonus between 2016 and 2017
compares with the equivalent changes in those components for a group of employees. As 2016 and 2017 have seen
significant changes in headcount numbers, the Committee has chosen as the comparator group all those employees
other than the CEO who were employed throughout the whole of both 2016 and 2017.
Salary
Benefits
Bonus
Year
John Dawson
Comparator
employee group
2017
350
2016 % increase
2.5%
342
6,800
6,292
8.1%
2017
1
80
2016 % increase
0%
1
85
(6.3%)
2017
372
863
2016 % increase
76.3%
211
594
45.4%
Oxford BioMedica plc | Annual report and accounts 2017
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7
Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Relative importance of spend on pay
(not subject to audit)
The chart below illustrates the spend on employee remuneration compared with the Group’s key cash measures.
Since the Group does not make dividend or other distributions, these have not been included in the table.
40
35
30
25
m
£
20
15
10
5
0
2015
2016
2017
Staff pay
Non-payroll costs
Net cash used in
operating activities
Net cash burn
Cash revenues
Statement of voting at AGM
(not subject to audit)
At the 2016 AGM, the 2015 Directors’ Remuneration Report was approved by shareholders as follows:
Resolution
Approval of the Directors’
remuneration report
Votes for
(including
discretionary)
% for
Votes against
% against
Total votes cast
(excluding votes
withheld)
Votes withheld
(abstentions)
1,482,856,907
99.9%
1,251,449
0.1%
1,484,108,356
7,772,168
At the 2017 AGM, the 2016 Directors’ remuneration report was approved by shareholders as follows:
Resolution
Approval of the Directors’
remuneration report
Votes for
(including
discretionary)
% for
Votes against
% against
Total votes cast
(excluding votes
withheld)
Votes withheld
(abstentions)
1,609,806,952
99.7%
4,701,911
0.3%
1,614,508,863
282,721,528
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Advisers to the Committee
(not subject to audit)
Deloitte LLP acted as adviser to the Committee during 2017. Deloitte is a founding member of the Remuneration
Consultants Group and adheres to its Code of Conduct in relation to executive remuneration consulting in the UK.
Deloitte’s fee for advice to the Committee during 2017 were £4,550 plus VAT.
The Committee reviewed the potential conflicts of interest and the safeguards against them and is satisfied that
Deloitte does not have any such interests or connections with the Group that may impair independence.
Andrew Heath
Chair, Remuneration Committee
15 March 2018
Directors’ remuneration policy
(not subject to audit)
The Company’s Directors’ remuneration policy set out in the 2014 Annual report was approved by shareholders
at the 2015 AGM and took effect from the close of that meeting. In accordance with the applicable legislation,
the Company is required to seek approval for a new Directors' remuneration policy at the 2018 AGM. In the
Committee’s view, that policy continues to support the execution of the Group’s strategy and, accordingly, a radical
overhaul of it is not proposed. The only change proposed to the maximum variable remuneration opportunities
is to increase the maximum award under the LTIP to the CEO to 125%. The executive directors will remain
at 100%. There is no change to the overall structure of the variable remuneration. Other, minor changes
are proposed to the policy, as summarised in the statement by the Chairman of the Committee on pages
63 and 65.
Approach to executive directors’ remuneration
(not subject to audit)
The ethos underlying the executive directors’ remuneration structure is to:
— Promote the long term success of the Group, with transparent and stretching performance conditions which
are rigorously applied
— Provide appropriate alignment between the Group’s strategic goals, shareholder returns and executive reward
— Have a competitive mix of base salary and short and long term incentives, with an appropriate proportion of the
package determined by stretch targets linked to the Group’s performance
Our policy reflects this ethos.
The following sections of this Directors’ remuneration report set out the Directors’ remuneration policy for which
shareholder approval will be sought at the 2018 AGM. Subject to shareholder approval, the policy will apply with
effect from the close of that meeting.
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Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Policy table
Component and purpose
Operation
Maximum potential and payment at threshold
Performance targets and metrics
Executive directors
Base salary
To provide a base
salary which is sufficient
to attract and retain
executives of a suitable
calibre.
Base salaries are initially set by
reference to market information at the
time of appointment and taking into
account the experience and previous
package of the new director.
While there is no maximum salary,
increases will normally be line with the
level of salary increase awarded (in
percentage of salary terms) to other
employees in the Group.
While no formal performance conditions
apply, an individual’s performance in role
is taken into account in determining any
salary increase.
Base salaries are normally reviewed
annually taking into account a number
of factors which may include (but are
not limited to):
− underlying Group performance;
role, experience and individual
−
performance;
competitive salary levels and market
forces; and
pay and conditions elsewhere
in the Group.
−
−
Any changes are normally effective
from 1 January.
Benefits
To provide benefits
on a market competitive
basis.
Retirement benefits
To provide funding
for retirement.
Share ownership
guidelines
To align Executives
with Shareholders and
provide an ongoing
incentive for continued
performance.
Benefits are provided in line with market
practice and may include medical
insurance, life assurance, permanent
health insurance, provision of a
company car or a car allowance and
other appropriate benefits determined
by the Committee. Additional benefits
may be provided based on individual
circumstances. These may include, for
example, travel expenses.
The Group operates a defined
contribution scheme for all employees
including executive directors.
In appropriate circumstances, such as
where contributions exceed the annual
or lifetime allowance. Executive
directors may be permitted to take a
cash supplement instead of some or all
of the contributions to a pension plan.
Shares which are fully owned with
no outstanding vesting criteria count
towards the shareholding guideline
together with deferred annual bonus
shares (on a net of tax basis).
Executive directors will be required
to retain half of any post-tax awards
which vest under the long-term
incentive plans, and deferred shares
under the annual bonus, until the share
ownership guideline has been satisfied.
Salary increases above this level may be
awarded in certain circumstances, such
as, but not limited to:
−
where an executive director has
been promoted or has had a change
in scope or responsibility;
an individual’s development or
performance in role (e.g. to align a
newly appointed executive director’s
salary with the market over time);
where there has been a change in
market practice; or
where there has been a change in
size and/or complexity of the
business.
−
−
−
Such increases may be implemented
over such time period as the
Committee deems appropriate.
There is no predetermined maximum
but the totals are reviewed annually
by the Remuneration Committee.
Not applicable.
15% of base salary.
Not applicable.
Executive directors are required to build
and maintain 150% of salary minimum
level of shareholding.
Not applicable.
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Component and purpose
Operation
Maximum potential and payment at threshold
Performance targets and metrics
Participation limits and the level
of discount permitted in setting the
exercise price are those set by the
UK tax authorities from time to time.
Not subject to performance measures
in line with HMRC practice.
Executive directors are entitled to
participate in a tax qualifying all
employee Sharesave Scheme under
which they may make monthly savings
contributions over a period of three or
five years linked to the grant of an
option over the Company’s shares with
an option price which can be at a
discount of up to 20% to the market
value of shares at grant (or such other
discount as may be permitted by the
applicable legislation from time to time).
Annual bonuses are determined
by the Committee.
The maximum bonus opportunity
will not exceed 125% of base salary.
The performance metrics and targets
are decided annually by the Committee
taking into account the strategic needs
of the business.
Given the nature of the business, these
objectives and metrics may change
significantly each year.
There is no minimum bonus earned
if threshold performance is not met.
Sharesave Scheme
To create alignment
with the Group
and promote a sense
of ownership.
Annual bonus
To incentivise and
reward delivery of the
Group’s objectives.
Delivery of 50% of any
bonus payment via
deferred shares aligns
the incentive package
with shareholders’
interests.
Long Term Incentive
Plan (LTIP)
To augment shareholder
alignment by providing
executive directors
with longer term
interests in shares whilst
requiring challenging
performance before
LTIP awards vest.
50% of the bonus is delivered as cash.
50% of the bonus is delivered through
deferred shares which ordinarily vest
in three equal instalments on the first,
second and third anniversaries of the
award. The deferred shares are not
subject to further performance targets.
Deferred share awards may be made
under an HMRC EMI plan where
appropriate. Bonus awards are
discretionary and can be removed or
adjusted at the Committee’s discretion.
Dividend equivalents may be attached
to the deferred shares over the deferral
period. These dividend equivalents may
be delivered in cash or shares and may
assume the reinvestment of dividends
into shares on a cumulative basis.
Recovery provisions apply as
summarised at the foot of this table.
At the discretion of the Committee,
annual grants of conditional nominal
cost share options which vest subject
to the achievement of specified
performance targets, typically assessed
over a three year performance period.
Awards granted under the LTIP may
include dividend equivalents earned
between the grant and vesting date.
These dividend equivalents may be
delivered in cash or shares and may
assume the reinvestment of dividends
into shares on a cumulative basis.
Awards have been made under an
HMRC EMI plan where appropriate.
Recovery provisions apply as
summarised in the notes to the policy
table on the next page.
The normal maximum award is 100%
of base salary in respect of a financial
year for executive directors, other than
the CEO for whom the maximum award
is 125% of base salary. Under the share
plan rules the overall maximum
opportunity that may be granted in
respect of a financial year is 200%
of base salary. The normal maximum
award limit will only be exceeded in
exceptional circumstances such as the
recruitment of an executive director.
Performance conditions will be
determined in advance of grant of awards
and will be based on financial measures
or the achievement of strategic objectives.
Financial measures may include (but are
not limited to) share price and revenue
measures. For the achievement of growth
performance in respect of a financial
measure, no more than 25% of the award
will vest for threshold performance and
100% of the award will vest for maximum
performance; for below threshold
performance, none of the award will vest.
For strategic measures, vesting will
be determined between 0% and 100%
depending upon the Committee’s
assessment of the extent to which
the measure has been achieved.
Oxford BioMedica plc | Annual report and accounts 2017
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Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Notes to the policy table
Recovery provisions
The annual bonus and LTIP are subject to malus and clawback provisions as follows:
Annual bonus:
For up to two years following the payment of an annual bonus award the Committee may require the repayment
of some or all of the cash award in the relevant circumstances (clawback). Unvested deferred bonus awards may
be cancelled or reduced in the relevant circumstances (malus). For up to one year following the vesting of the first
instalment of deferred shares the Committee may require the repayment of some or all of the deferred shares
in the relevant circumstances (clawback).
LTIP:
The Committee has the right to reduce, cancel or impose further conditions on unvested awards in the relevant
circumstances (malus). For up to two years following the vesting of a LTIP award the Committee may require
the repayment of some or all of the award in the relevant circumstances (clawback).
Malus may be applied in the event of:
— A material misstatement of the Group’s financial results;
— An error in the information or assumptions on which the award was granted or vests including
an error in assessing any applicable performance conditions;
— A material failure of risk management by the Group;
— Serious reputational damage to the Group; or
— Material misconduct on the part of the participant.
Clawback may be applied in the event of:
— A material misstatement of the Group’s financial results;
— An error in the information or assumptions on which the award was granted or vests including
an error in assessing any applicable performance conditions; or
— Material misconduct on the part of the participant.
Performance targets and metrics
Performance targets for the annual bonus are set by the Committee after taking into account the strategic needs
of the business. A key component of the Group’s strategy is to develop gene and cell therapy products from
pre-clinical proof of concept through to the end of Phase I or Phase II clinical studies before partnering or
out-licensing. Targets for a particular year are therefore likely to include specific product development targets
depending on the stage of development of each opportunity. The annual objectives are also likely to include
targets related to generating recurring revenues such as manufacturing or development services to third parties.
The performance metrics for the LTIP are determined to ensure that the most appropriate targets are set for
the Group’s situation at the time; awards to be granted in 2018 will be subject to measures based on share
price growth and revenue.
The Committee retains the ability to adjust or set different performance measures if events occur (such as
a change in strategy, a material acquisition and/or a divestment of a Group business, or a change in prevailing
market conditions) which cause the Committee to determine that the measures are no longer appropriate
and that amendment is required so that they achieve their original purpose.
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Operation of share plans
Awards and options may be adjusted in the event of a variation of share capital or other relevant amendment in
accordance with the rules of the Share Option Scheme, LTIP and Deferred Bonus Plan. The Company’s share plans
may be operated in accordance with their terms, including that awards may be granted as cash based awards
over a notional number of shares, and that share awards may be settled in cash at the election of the Committee;
the Committee would only use these cash provisions for operational flexibility, for example if a regulatory restriction
in any territory prevented the Company from offering shares to an executive director.
Differences in remuneration policy for all employees
All employees receive a base salary and are entitled to participate in benefits, including the Group’s defined
contribution pension scheme to which the Group contributes.
Executive directors, senior managers and certain other staff receive annual bonuses. The maximum bonus potentially
receivable varies between the participating employees. 50% of the bonuses of the executive directors’ and senior
management are delivered by deferred shares, whereas all other staff receive 100% of their bonuses in cash.
Senior Executive Team members participate in the LTIP but not the Employee Share Option Scheme. All other staff
are eligible to participate in the Employee Share Option Scheme.
Consideration of employment conditions elsewhere in the Group
The Chief Executive Officer determines any salary increases and bonuses for all employees other than the executive
directors. The Group participates in an annual benchmarking exercise across the UK Biotech sector which covers the
majority of staff and which informs the decision making process. The Chief Executive Officer discusses the overall
increase in payroll cost and the total amount to be paid in bonuses with the Chair of the Committee before
implementing the salary increases and bonuses.
While the Committee has not consulted with other employees when preparing the policy for Directors’
remuneration, the Committee considers the pay and employment conditions of all other employees when setting
and implementing the policy for Directors’ remuneration, and as noted above, the level of salary increase for the
wider workforce is taken into account when determining any salary increase for executive directors.
Component and purpose
Operation
Maximum potential and payment
at threshold
Performance targets and metrics
Non-executive directors
Non-executive directors’ fees
To compensate non-executive
directors for their services to
the Group.
Not applicable.
Non-executive directors’ fees are
determined by the Group’s
Chairman at the time of
appointment of a director. The
Chairman’s fees are set by the
other non-executive directors.
Non-executive directors may be
eligible to receive benefits such as
the use of secretarial support,
travel costs or other benefits that
may be appropriate.
There is no overall maximum,
but fees are set taking into account
the responsibilities of the role
and expected time commitment.
Non-executive directors may
receive a base fee and a
supplementary fee for additional
responsibilities such as chairing
a Board committee.
Fees would normally be reviewed
at the start of each three year
period of appointment. However,
increases in non-executive
directors’ fees may be made
at other times.
Oxford BioMedica plc | Annual report and accounts 2017
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8
Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Total remuneration opportunity
The total remuneration for John Dawson and Stuart Paynter that could result from the proposed remuneration
policy in 2018 under three different performance levels is shown below. A chart has not been prepared in respect
of Peter Nolan, recognising that he will retire from the Board in 2018.
Component and purpose
Minimum performance
Fixed pay
Annual Bonus (including any amount
deferred under the DBP)
LTIP
Fixed elements of remuneration
only:
No bonus.
No LTIP vesting.
– base salary – being the
proposed salary for 2018
– pension contribution or salary
supplement – assuming a
contribution/supplement rate of
15% applied to the assumed
salary; and
– benefits – benefits for 2017 as
stated in the single figure table
on page 68.
On-target performance
As above.
62.5% of salary awarded for
achieving target performance.
Award equivalent to 25%
of salary vesting for achieving
target performance.
Maximum performance
As above.
125% of salary awarded for
achieving maximum performance.
100% of maximum award vesting
(equivalent to 125% of salary for
the CEO and 100% of salary for
other directors) for achieving
maximum performance.
1,600
1,400
1,200
1,000
800
600
400
200
0
Minimum performance
1
2
On-target performance
3 Maximum performance
LTIP
Annual bonus
Base salary, benefits and pension
800
700
600
500
400
300
200
100
0
Minimum performance
1
2
On-target performance
3 Maximum performance
LTIP
Annual bonus
Base salary, benefits and pension
1
2
3
John Dawson
Total remuneration (£000)
1
2
3
Stuart Paynter
Total remuneration (£000)
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Approach to recruitment remuneration
Should it become necessary to recruit a new executive director, the Committee would ordinarily negotiate the
remuneration package of the new director from the same elements described in the policy table as are applied to
existing directors. The Committee would determine the individual components and overall package in the light
of prevailing market conditions, remuneration of other executive directors, the calibre of the new director and the
previous package of the new director. The remuneration package of the new director will be subject to the principles
and limits referred to below:
— Base salary will be set at a level appropriate to the role and the experience of the director being appointed.
This may include agreement on future increases up to a market rate, in line with increased experience and/or
responsibilities, subject to good performance, where it is considered appropriate
— Retirement and other benefits will be provided in line with the policy
— The Committee will not offer non-performance related incentive payments (for example a “guaranteed
sign-on bonus”)
— Others elements may be included in the following circumstances:
— an interim appointment being made to fill a director role on a short-term basis
— if exceptional circumstances require that the Chairman or a non-executive director takes on an executive
function on a short-term basis
— if a director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term
incentive award for that year as there would not be sufficient time to assess performance. Subject to the limit
on variable remuneration set out below, the quantum in respect of the months employed during the year
may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis
— if the director will be required to relocate in order to take up the position, it is the Group’s policy to allow
reasonable relocation, travel and subsistence payments. Any such payments will be at the discretion
of the Committee
— The Committee may also alter the performance measures, performance period and vesting period of the annual
bonus, Deferred Bonus Plan or LTIP if the Committee determines that the circumstances of the recruitment merit
such alteration. The rationale will be clearly explained in the following Directors’ remuneration report
— The maximum level of variable remuneration which may be granted (excluding “buyout” awards as referred
to below) is 325% of salary
Any share awards referred to in this section will be granted as far as possible under the Group’s existing share plans.
If necessary, and subject to the limits referred to above, recruitment awards may be granted outside of these plans
as permitted under the Listing Rules which allow for the grant of awards to facilitate, in unusual circumstances,
the recruitment of an executive director.
Compensation for the forfeit of any award under arrangements with a previous employer would be considered
on a case-by-case basis. The Committee will generally seek to structure such “buyout” awards or payments on a like
for like basis to the remuneration arrangements forfeited. Any such payments or awards are limited to the expected
value of the forfeited awards. Where considered appropriate, such special recruitment awards will be liable to
forfeiture or “malus” and/or “clawback” on early departure.
Where a position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall
be allowed to continue according to the original terms.
Fees for new non-executive directors will be determined by reference to market rates for non-executive director fees
for similar companies or groups.
Oxford BioMedica plc | Annual report and accounts 2017
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8
Corporate governance
Directors’ remuneration report
for the year ended 31 December 2017
Service contracts and policy on payment for loss of office
Executive directors’ service contracts are subject to 12 months’ notice from both the Group and from the director.
Directors may be required to work during the notice period or be paid in lieu of notice if not required to work for the
full notice period.
The details of service contracts and letters of appointment of those who served as directors during the year are:
Service contracts
John Dawson
Peter Nolan
Tim Watts
Stuart Paynter
Letters of appointment
Lorenzo Tallarigo
Martin Diggle
Andrew Heath
Stuart Henderson
Contract date
10 October 2008
1 May 2002
9 February 2012
29 August 2017
Date of appointment
1 February 2016
4 October 2015
1 January 2016
1 June 2016
Unexpired term at
31 December 2017
N/A
N/A
N/A
N/A
Unexpired term at
31 December 2017
13 months
9 months
12 months
17 months
Notice period
12 months
12 months
12 months
12 months
Notice period
3 months
3 months
3 months
3 months
All directors are subject to election by shareholders at the first opportunity after their appointment, and thereafter
to re-election at intervals of not more than three years.
The principles on which the determination of payments for loss of office will be approached are set out below:
Payment in lieu of notice
Contractual termination payments may not exceed the director’s current salary and benefits (including pension
contributions and any applicable salary supplement) for the notice period.
Policy
Annual Bonus
This will be at the discretion of the Committee on an individual basis and the decision as to whether or not
to award a bonus in full or in part will be dependent on a number of factors, including the circumstances of the
individual’s departure and their contribution to the business during the bonus period in question. Any bonus
amounts paid will typically be pro-rated for time in service during the bonus period and will, subject to
performance, be paid at the usual time (although the Committee retains discretion to pay the bonus earlier
in appropriate circumstances). The Committee has discretion to pay the whole of any bonus earned for the
year of departure and preceding year in cash.
Deferred Bonus Plan
The extent to which any unvested award will vest will be determined in accordance with the rules of the Deferred
Bonus Plan.
Unvested awards will normally lapse on cessation of employment. However, if a participant leaves due to death,
ill-health, injury, disability, the sale of his employer or any other reason, at the discretion of the Committee, the
Committee shall determine whether the award will vest at cessation or at the normal vesting date. In either case,
the extent of vesting will be determined by the Committee, taking into account, unless the Committee determines
otherwise, the period of time elapsed from the date of grant to the date of cessation relative to the deferral period.
Awards may then be exercised during such period as the Committee determines. Awards which have already
vested at the date of cessation may be exercised for such period as the Committee determines.
LTIP
The extent to which any unvested award will vest will be determined in accordance with the rules of the LTIP.
Unvested awards will normally lapse on cessation of employment. However, if a participant leaves due to
death, ill-health, injury, disability, the sale of his employer or any other reason at the discretion of the Committee,
the Committee shall determine whether the award will vest at cessation or at the normal vesting date. In either
case, the extent of vesting will be determined by the Committee taking into account the extent to which the
performance condition is satisfied and, unless the Committee determines otherwise, the period of time elapsed
from the date of grant to the date of cessation relative to the performance period. Awards may then be exercised
during such period as the Committee determines. Awards which have already vested at the date of cessation
may be exercised for such period as the Committee determines.
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Change of control
The extent to which unvested awards under the Deferred Bonus Plan and LTIP will vest will be determined
in accordance with the rules of the relevant plan.
Other payments
Awards under the Deferred Bonus Plan will vest in full in the event of a takeover, merger or other relevant
corporate event.
Awards under the LTIP will vest early on a takeover, merger or other relevant corporate event. The Committee
will determine the level of vesting taking into account the extent to which the performance condition is satisfied
and, unless the Committee determines otherwise, the period of time elapsed from the date of grant to the date
of the relevant corporate event relative to the performance period.
Payments may be made either in the event of a loss of office or a change of control under the Sharesave Scheme,
which is governed by its rules and the legislation relating to such tax qualifying plans. There is no discretionary
treatment for leavers or on a change of control under this scheme.
In appropriate circumstances, payments may also be made in respect of accrued holiday, outplacement
and legal fees.
The Committee retains discretion to make additional exit payments where such payments are made in good
faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by
way of settlement or compromise of any claim arising in connection with the termination of a director’s office
or employment.
Existing contractual arrangements
The Committee retains discretion to make any remuneration payment or payment for loss of office outside the
policy in this report:
— where the terms of the payment were agreed before the policy came into effect (provided that, in the case of
any payment agreed after the Company’s 2015 Annual General Meeting, they are in line with the policy approved
at that meeting);
— where the terms of the payment were agreed at a time when the relevant individual was not a director of the
Group and, in the opinion of the Committee, the payment was not in consideration of the individual becoming
a director of the Group; and
— to satisfy contractual commitments under legacy remuneration arrangements.
For these purposes, “payments” includes the satisfaction of awards of variable remuneration and, in relation
to an award over shares, the terms of the payment are agreed at the time the award is granted.
Statement of consideration of shareholder views
The Committee takes into account views of shareholders with regard to directors’ remuneration. Martin Diggle,
a founder of Vulpes Life Sciences Fund (“Vulpes”), the Company’s largest investor, is observer of the Committee
and is able to communicate the views of Vulpes on this matter. The Senior Independent Director also consults from
time to time with the Company’s other major investors.
By order of the Board
Andrew Heath
Chair, Remuneration Committee
15 March 2018
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Corporate governance
Directors’ report
for the year ended 31 December 2017
The directors present their Annual report and audited consolidated financial statements for the year ended
31 December 2017 as set out on pages 98 to 132. This report should be read in conjunction with the corporate
governance report on pages 44 to 51.
Discussions regarding financial information contained in this Annual report may contain forward-looking statements
with respect to certain of the plans, current goals and expectations relating to the future financial condition, business
performance and results of the Group and Company. By their nature, all forward looking statements involve risk and
uncertainty because they relate to future events and circumstances that are beyond the control of the Group and
Company. Readers are cautioned that, as a result, the actual future financial condition, business performance and
results of the Group may differ materially from the plans, goals and expectations expressed or implied in such forward
looking statements.
Strategic report
The Strategic report including the outlook for 2018 on page 22, is on pages 16 to 41. The directors consider that
the Annual report and accounts, taken as a whole, are fair, balanced and understandable. In reaching this conclusion,
the Audit Committee initially discussed the requirements with the Group’s auditors when discussing the strategy
for the 2017 audit, and the full Board reviewed the contents of the report at its 5 March 2018 meeting. Since the Board
met eight times for routine meetings in 2017 the directors consider that they are sufficiently well informed to be able
to make this judgement.
Key financial performance indicators (KPIs)
Key financial performance indicators are outlined in the Chief Financial Officer’s review on pages 32 to 37.
Corporate governance
The Group’s statement on corporate governance is included in the corporate governance report on pages 56 to 62.
Risk management
The Group’s exposure to risks is set out on pages 44 to 51 (principal risks and uncertainties) and on page 112
(Note 3: financial risk management).
Dividends
The directors do not recommend payment of a dividend (2016: £nil).
Directors
Details of the directors of the Company who were in office during the year and up to the date of signing the financial
statements are detailed on pages 54 to 55 and on page 64. The contracts of employment of the executive directors
are subject to a twelve months’ notice period. The directors’ remuneration and their interests in the share capital of
the Company at 31 December 2017 are disclosed in the Directors’ remuneration report on pages 63 to 83.
Subsequent event
Please refer to note 34 of the financial statements on page 132 where details of subsequent events are outlined.
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Appointment and replacement of directors
Directors may be appointed by an ordinary resolution at any general meeting of shareholders, or may be appointed
by the existing directors, provided that any director so appointed shall retire at the next annual general meeting
(AGM) and may offer himself for re-election. At each AGM any director who has served for three years, and one
third of the other directors must retire, and may offer themselves for re-election. A director may be removed in
the following ways: by an ordinary resolution at a general meeting; if he is prohibited by law from being a director;
in the event of bankruptcy; if he is suffering from specified mental disorders; if he is absent without consent for
more than six months; or by request in writing by all the other directors. Any director may appoint another director
or another person approved by the other directors as an alternate director.
Directors’ third party indemnity provision
The Group maintains a qualifying third party indemnity insurance policy to provide cover for legal action against
its directors. This was in force throughout 2017 and at the date of approval of the financial statements.
Share capital
Structure of the Company’s capital
The Company’s share capital comprises a single class of 1p ordinary shares, each carrying one vote and all ranking
equally with each other. Following the adoption of new articles of association in 2010, the authorised share capital
of the Company is unlimited. At 31 December 2017 the Company had 3,107,704,224 shares in issue, all allotted
and fully paid. There are no restrictions on the transfer of shares in the Company or on voting rights. All shares
are admitted to trading on the London Stock Exchange.
Rights to issue and buy back shares
Each year at the AGM the directors seek rights to allot shares. The authority, when granted lasts for 15 months
or until the conclusion of the next AGM if sooner. At the last AGM held on 23 May 2017, authority was given to
allot up to 1,029,437,800 shares (that number being one third of total issued share capital of the Company at the time),
subject to the normal pre-emption rights reserved to shareholders contained in the Companies Act 2006, and to allot
up to a further 1,029,437,800 shares, solely in a rights issue. Authority was also given, subject to certain conditions,
to waive pre-emption rights over up to 308,831,200 shares, being 10% of the shares then in issue. No rights have
been granted to the directors to buy back shares.
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6 Corporate governance
8
Directors’ report
for the year ended 31 December 2017
Substantial shareholdings
At 15 February 2018, the latest practical date prior to approval of the Directors’ report, the Company had been notified
of the following shareholdings amounting to 3% or more of the ordinary share capital of the Company.
Shareholder
Vulpes Investment Management
M&G Investments
Aviva Investors
Hargreaves Lansdown Asset Management
Mr. S Shah
Interactive Investor Sharedealing
Number of ordinary shares
581,008,834
558,825,646
213,412,908
173,689,397
137,188,596
124,454,986
Percentage of issued share capital
18.7%
18.0%
7.2%
5.6%
4.4%
4.0%
No other person has reported an interest in the ordinary shares of the Company required to be notified
to the Company. No person holds shares carrying special rights with regard to control of the Company.
Employees
The Group communicates and consults regularly with employees throughout the year. Employees’ involvement
in the Group’s performance is encouraged, with all employees eligible to participate in the share option scheme
or the LTIP. Certain employees participate in discretionary bonus schemes.
The Group’s aim for all members of staff and applicants for employment is to fit the qualifications, aptitude
and ability of each individual to the appropriate job, and to provide equal opportunity regardless of sex, religion
or ethnic origin. The Group does all that is practicable to meet its responsibility towards the employment and
training of disabled people.
Further details on employees, health and safety, environmental matters and corporate social responsibility
are in the corporate responsibility statement on pages 38 to 41.
Employee share schemes
The Group has established an Employee Benefit Trust (EBT) to hold shares purchased in order to settle shares
awarded to executive directors and other senior managers under the Deferred Bonus Plan. The EBT currently holds
5,836,218 shares on which all the related options have vested. See Note 25 of the consolidated financial statements
for further information.
Agreements that take effect, alter, or terminate because of a takeover bid or on change of control
There are no such agreements that the directors consider are material. There are no agreements providing for
compensation for loss of office for directors or employees in the event of a takeover bid.
Going concern
The Group held £14.3 million of cash at the end of 2017 and £16.4 million at 28 February 2018. In March 2018,
the Company completed a £19.3 million (net) equity placing in order to fund further facilities expansion. During
2017 the cash burn was significantly reduced as a result of improved cash flow from operations and reduced capital
expenditure and the Directors expect further progress in 2018. Taking this into account, in conjunction with currently
known and probable cash flows, the Directors consider that the Group has sufficient cash resources and cash inflows
to continue its activities for not less than twelve months from the date of these financial statements and have
therefore prepared the financial statements on a going concern basis.
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Viability statement
Assessment of prospects
In accordance with provision C.2.2 of the UK Corporate Governance Code, the directors have assessed the prospects
of the Group over the three years to December 2020. They believe three years to be appropriate due to the inherent
significant uncertainties of forecasting beyond this time horizon given the nature of the business sector in which the
Group operates. The assessment has been informed by the strategy adopted by the Board in 2016 and the evolution
of the business over the last twelve months.
The Group’s strategy is to exploit its LentiVector® platform to develop gene and cell therapy products in its own
portfolio and to support the development of other companies’ products. The Group is generating growing revenues
and other operating income from licensing its platform technology, generating upfront receipts and royalties, and
from fees for providing process development and bioprocessing services to other companies. Over the three years to
December 2020 the directors believe that revenues from licensing its technology to third parties and from providing
process development and bioprocessing services to its partners will be sufficient to create a sustainable company.
Assessment of viability
The main area of risk to the viability of the Group within the three-year period to December 2020 is that the Group
fails to generate enough revenue from the process development and bioprocessing services it provides to third
parties and, in particular, that the requirements from Novartis, the Group’s current major customer, fall substantially
short of current expectations. The Group is seeking to mitigate this risk by continuing to develop its technology so as
to retain a leadership position and by seeking additional customers so as to diversify its exposure to Novartis. This is
evidenced by the 2018 $105 million collaboration with Bioverativ to develop and bioprocess their haemophilia
product candidates, and also the growing importance of Orchard Therapeutics as a customer of the Group.
The directors anticipate that the Group has reasonable prospects for attracting further new customers and
generating additional revenues in line with the increased revenues across the past four years. The Group’s financial
forecasts developed reflect these assumptions and therefore the directors have concluded that there is a reasonable
expectation, although not a certainty, that the Group will be able to continue in operation and meet its liabilities
as they fall due over the three-year period to December 2020. If additional revenues were to fall below the director’s
expectations, the Group might need to secure alternative sources of financing to continue to fund its operations.
Amendment of the Company’s articles of association
Amendment of the Company’s articles may be made by special resolution at a general meeting of shareholders.
Compliance with Listing Rule 9.8.4R
The directors have reviewed the requirements of LR 9.8.4R. The majority of these do not apply to the Group
but the following are applicable.
Listing Rule
LR 9.8.4 (5) and (6)
LR 9.8.4 (7) and (8)
Information required
Response
Arrangement under which
a director has waived current
or future emoluments.
Allotment of shares other than to
existing shareholders in proportion
to holdings.
Martin Diggle has elected to receive no fees for his services as director (page 69).
Allotment of shares on exercise of options by employees under approved
share schemes (Note 23, page 125).
Oxford BioMedica plc | Annual report and accounts 2017
8 Corporate governance
8
Directors’ report
for the year ended 31 December 2017
Statement of directors’ responsibilities in respect of the financial statement
The directors are responsible for preparing the Annual report and the financial statements in accordance
with applicable law and regulation.
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 parent company financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 company and of the profit or loss of the Group and company
for that period. In preparing the financial statements, the directors are required to:
— Select suitable accounting policies and then apply them consistently
— State whether applicable IFRSs as adopted by the European Union have been followed for the Group financial
statements and IFRSs as adopted by the European Union have been followed for the Company financial
statements, subject to any material departures disclosed and explained in the financial statements
— Make judgements and accounting estimates that are reasonable and prudent
— Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
and company will continue in business
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group and company's transactions and disclose with reasonable accuracy at any time the financial position
of the Group and company 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.
The directors are also responsible for safeguarding the assets of the Group and company 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 Group and 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 the Group and company’s performance,
business model and strategy.
Each of the directors, whose names and functions are listed in The Board of Directors confirm that, to the best
of their knowledge:
— the parent company 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 loss of the Company;
— 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 loss 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 and company, together with a description of the principal risks and uncertainties that it faces.
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Statement as to disclosure of information to auditors
In accordance with s418 of the Companies Act 2006, so far as each director is aware, there is no relevant audit
information of which the Group and Company’s auditors are unaware, and each director has taken all the steps
that he ought to have taken as a director in order to make himself aware of any relevant audit information
and to establish that the Group and Company’s auditors are aware of that information.
Independent auditors
During 2017 a tender process was completed with KPMG LLP being appointed as independent auditors.
PricewaterhouseCoopers LLP will continue in office until the release of the 2017 financial statements.
Greenhouse gas emissions report
Details on greenhouse gas emissions are set out in the corporate social responsibility section on page 40.
Annual General Meeting
The Annual General Meeting will be held at 11:00 a.m. on Tuesday 29 May 2017 at the London offices
of Covington & Burling LLP.
By order of the Board
Stuart Paynter
Company Secretary
15 March 2018
Stuart Paynter was appointed
a director and Chief Financial Officer
in August 2017
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Corporate governance
Independent auditors’ report
to the members of Oxford BioMedica plc
Report on the audit of the financial statements
Opinion
In our opinion, Oxford BioMedica plc’s Group financial statements and company financial statements
(the “financial statements”):
— Give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2017
and of the Group’s loss and the Group’s and the Company’s cash flows for the year then ended
— Have been properly prepared in accordance with IFRSs as adopted by the European Union and,
as regards the Company’s financial statements, as applied in accordance with the provisions of the
Companies Act 2006
— Have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation
We have audited the financial statements, included within the Annual report and accounts 2017 (the “Annual report”),
which comprise: the Group and company balance sheets as at 31 December 2017; the consolidated statement of
comprehensive income, the Group and company statements of cash flows, and the Group and company statements
of changes in equity attributable to owners of the parent for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Company.
Other than those disclosed in note 7 to the financial statements, we have provided no non-audit services to the
Group or the Company in the period from 1 January 2017 to 31 December 2017.
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Our audit approach
Overview
Materiality
— Overall Group materiality: £760,000 (2016: £700,000), based on 5% of 4 year average of loss before tax
— Overall Company materiality: £723,000 (2016: £714,000), based on 1% of total assets
Audit scope
— Our work, which was conducted at the Group’s head office in Oxford, included an audit of the complete financial
information of the trading subsidiary, Oxford BioMedica (UK) Limited, as this entity accounted for all of the Group’s
revenue and 99.9% of its assets
— We also conducted site visits of the Group’s manufacturing and process development facilities, primarily to obtain
evidence over the year-end inventory balance
Key audit matters
— Contract accounting and revenue recognition
— Loan refinancing
— Going concern
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry
in which it operates, and considered the risk of acts by the Group which were contrary to applicable laws and
regulations, including fraud. We designed audit procedures at Group and significant component level to respond
to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise
to a material misstatement in the Group and company financial statements, including, but not limited to, the
Companies Act 2006, the Listing Rules, UK tax legislation and MHRA and FDA licensing regulations. Our tests
included, but were not limited to, review of correspondence with the regulators, enquiries of management.
There are inherent limitations in the audit procedures described above and the further removed non-compliance
with laws and regulations is from the events and transactions reflected in the financial statements, the less likely
we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also
addressed the risk of management override of internal controls, including testing journals and evaluating whether
there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
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Corporate governance
Independent auditors’ report
to the members of Oxford BioMedica plc
Key audit matter
How our audit addressed the key audit matter
Contract accounting and revenue recognition
Refer to Notes 1-2 to the financial statements for the directors’ disclosures
of the related accounting policies, judgements and estimates.
A significant proportion of the revenue generated in the year arose from
bioprocessing activities under the Group’s collaboration agreements with
Novartis. Amounts also arose from process development activities under
these arrangements, including certain more judgemental elements
dependent upon development activity or milestones.
Revenue also includes up-front fees recognised over a period of time
relating to capacity reservation of the Group’s manufacturing facilities.
Our consideration of revenue recognition focuses on the following key
judgements made by management:
— The appropriateness of revenue recognised for capacity reservation
fees based on batch production volumes
— The appropriateness of revenue recognised for clinical support where
final sign off from the customer was not been received by the end
of the year
— The appropriateness of revenue recognised where percentage
of completion accounting has been applied on unfinished batches
Loan refinancing
Refer to Notes 1-2 to the financial statements for the directors’ disclosures
of the related accounting policies, judgements and estimates.
During the year the Group agreed a new $55m debt facility with
Oaktree Capital Management and extinguished its previous loan with
Oberland Management.
Management has prepared a valuation of the elements of the debt facility
on inception. We have focused on the following key areas of judgement
in respect of the new facility:
— Classification of each element of the arrangement as either
a financial liability or equity
— Determination of the initial fair value of the facility
Going concern
The directors have concluded (see Note 1 to the financial statements) that
the Group has sufficient cash resources and cash inflows to continue its
activities for not less than twelve months from the date of these financial
statements and have therefore prepared the financial statements on a
going concern basis.
The Group had cash and cash equivalents of £14.3 million at 31 December
2017 but continued in 2017 to consume cash. As a result there are
a number of judgements inherent in assessing the Group’s cash flows.
Management prepared a set of cash flow forecasts from Board approved
plans as well as a downside case. On 9 March 2018 the Group announced
it had placed shares raising approximately £19m net of expenses to
support the expansion of bioprocessing facilities.
For capacity reservation fees we obtained supporting evidence
of the number of batches completed during the year as a percentage
of the total minimum batch requirement, and evidence that the
minimum capacity requirement was met. We have also confirmed
that the reservation fee was allocated appropriately based on the
number of batches completed.
For clinical support revenues we obtained third party supporting
evidence that procedures were completed and submitted to the
customer prior to the year end, and that approval of the support
was obtained subsequent to the year end.
For unfinished manufacturing batches we held discussions with
employees outside of the finance function and examined related
documentation to understand the stage of completion of such batches
at the balance sheet date.
We concluded that management’s revenue recognition was supported
and consistent with the Group’s policy and existing practice.
We read the relevant underlying contractual agreements and assessed
the classification of each element based on the requirements of the
relevant standards.
We have recalculated the valuation of each element of the agreement
either by verifying and using the data utilised by management, or using
available alternative data. We have also benchmarked the fair value
of the financial instrument.
We have also considered management’s estimates in relation to the
initial fair value of the financial instrument and where relevant agreed
this to supporting evidence.
From the evidence obtained we found the assumptions and
methodology used to classify and value the various elements
of the debt facility and associated warrants to be appropriate.
We assessed the reasonableness and support for the judgements
underpinning management’s forecast, as well as the sensitivity of the
projections to these judgements. We have obtained confirmation of the
funds received from the recent placing.
We considered the reasonableness of the assumptions within
management’s downside case and also performed our own sensitivities
to these cash flow forecasts. We reviewed the Group’s finance
agreements and considered the status of any covenant requirements.
Our conclusion on management’s use of the going concern basis of
accounting is included in the going concern section of the report below.
We determined that there were no key audit matters applicable to the Company to communicate in our report.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, the accounting
processes and controls, and the industry in which they operate.
Our work, which was conducted at the Group’s head office in Oxford, included an audit of the complete financial
information of the trading subsidiary, Oxford BioMedica (UK) Limited, as this entity accounted for all of the Group’s
revenue and 99.9% of its assets.
We also conducted site visits of the Group’s manufacturing and process development facilities, primarily to obtain
evidence over the year-end inventory balance.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£760,000 (2016: £700,000)
Group financial statements
Company financial statements
£723,000 (2016: £714,000)
How we determined it
5% of 4 year average of loss before tax
1% of total assets
Rationale for benchmark applied
Loss before tax is the metric that, we believe, is most
commonly used by the shareholders as a body in
assessing the Group’s performance. Consistent with
the prior year, we use an average of the loss over the
last 4 years as the results of the Group are subject to
fluctuation arising from the contractual nature of the
business and, in particular, upfront and milestone
payments, which mean that results from one year
may not be a fair representation of the activities of
the business.
Total assets is the metric that we believe is most
commonly used by the shareholders as a body in
assessing the parent company's performance as it does
not trade and as such is not profit driven.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The materiality allocated to the significant component was £632,000. This is the local statutory audit
materiality, which is also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£38,000 (Group audit) (2016: £35,000) and £36,000 (Company audit) (2016: £36,000) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or
draw attention to in respect of the directors’ statement in the financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the financial
statements and the directors’ identification of any material uncertainties
to the Group’s and the Company’s ability to continue as a going concern
over a period of at least twelve months from the date of approval
of the financial statements.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and company’s ability
to continue as a going concern.
We are required to report if the directors’ statement relating to Going
Concern in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.
We have nothing to report.
Oxford BioMedica plc | Annual report and accounts 2017
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Corporate governance
Independent auditors’ report
to the members of Oxford BioMedica plc
Reporting on other information
The other information comprises all of the information in the Annual report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except
to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform procedures to conclude whether there is
a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required
by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies
Act 2006, (CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report
certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report for the year
ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors’ report. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks
that would threaten the solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
— The directors’ confirmation on page 44 of the Annual report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
— The disclosures in the Annual report that describe those risks and explain how they are being managed or mitigated.
— The directors’ explanation on page 87 of the Annual report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal risks
facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with
the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the
knowledge and understanding of the Group and company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
— The statement given by the directors, on page 84, that they consider the Annual report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and company’s position and performance,
business model and strategy is materially inconsistent with our knowledge of the Group and company obtained in the course of performing
our audit.
— The section of the Annual report on page 61 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
— The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision
of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. (CA06)
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Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities in respect of the financial statements set
out on page 88, the directors are responsible for the preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible
for such internal control as they determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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
— Certain disclosures of directors’ remuneration specified by law are not made; or
— The Company financial statements and the part of the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records and returns
We have no exceptions to report arising from this responsibility
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members in 1996 to audit the
financial statements for the period ended 29 October 1996 and subsequent financial periods. The period of total
uninterrupted engagement is 22 years, covering the years ended 29 October 1996 to 31 December 2017.
Stuart Newman (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors, Reading
15 March 2018
Oxford BioMedica plc | Annual report and accounts 2017
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Introducing
Oxford BioMedica
1 At the front and centre
3 Multi-billion $ market sector
3 Targeting unmet needs
4 Enabling new treatments
4 Sharing in success
8 Journey to profitability
8
Ideally placed
Sector and technology
overview
10 Gene and cell therapy sector
12 LentiVector® delivery platform
13 Products
Strategic report
16 Our business model
18 Operational highlights
19 Financial highlights
20 Chairman’s statement
23 Management team
24 Chief Executive’s statement
26 2017 performance review
30 Delivery of our 2017 objectives
31 Objectives for 2018
32
Financial review
38 Corporate responsibility
Corporate governance
44
Principal risks, uncertainties
and risk management
52 The Board of Directors
56 Corporate governance report
63 Directors’ remuneration report
84 Directors’ report
90
Independent auditors’ report
98
Group financial statements
Consolidated statement
of comprehensive income
99 Balance sheets
100 Statements of cash flows
101
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
102
Other matters
Glossary
133
136 Advisers and contact details
Oxford BioMedica plc | Annual report and accounts 2017
8 Group financial statements
9
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Continuing operations
Revenue
Cost of sales
Gross profit
Research, development and
bioprocessing costs
Administrative expenses
Other operating income
Other gains
Operating loss
Finance income
Finance costs
Loss before tax
Taxation
Loss and total comprehensive
expense for the year
Basic loss and diluted loss per
ordinary share
Note
4
4
13
4
6
6
8
27
9
There was no other comprehensive income or loss.
The loss for the year is attributable to the owners of the parent.
2017
£’000
37,590
(18,442)
19,148
(21,611)
(7,276)
1,774
2,297
(5,668)
38
(6,131)
(11,761)
2,744
2016
£’000
27,776
(11,835)
15,941
(24,299)
(5,957)
3,002
–
(11,313)
34
(9,028)
(20,307)
3,666
(9,017)
(16,641)
(0.29p)
(0.60p)
Oxford BioMedica plc | Annual report and accounts 2017
Group financial statements
Balance sheets
as at 31 December 2017
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred income
Net current assets/(liabilities)
Non-current liabilities
Loans
Provisions
Net assets
Equity attributable to owners
of the parent
Ordinary shares
Share premium account
Other reserves
Accumulated losses
Total equity
Note
11
12
13
14
15
8
16
17
18
19
20
23
24
28
27
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Group
2017
£’000
97
25,370
2,954
28,421
3,332
17,088
2,232
14,329
36,981
8,690
13,072
21,762
15,219
36,864
630
37,494
6,146
2016
£’000
1,330
27,514
657
29,501
2,202
6,904
3,000
15,335
27,441
6,003
3,313
9,316
18,125
34,389
622
35,011
12,615
Company
2017
£’000
2016
£’000
–
–
72,350
72,350
–
9
–
31
40
81
–
81
(41)
–
–
–
72,309
–
–
65,808
65,808
–
3
–
5,529
5,532
176
–
176
5,356
–
–
–
71,164
31,076
154,224
3,509
(182,663)
6,146
30,879
154,036
2,189
(174,489)
12,615
31,076
154,224
9,599
(122,590)
72,309
30,879
154,036
7,632
(121,383)
71,164
The Company’s registered number is 03252665.
The Company made a loss for the year of £1,207,000 (2016: £1,781,000).
The financial statements on pages 98 to 132 were approved by the Board of Directors on 15 March 2018
and were signed on its behalf by:
John Dawson
Chief Executive Officer
Oxford BioMedica plc | Annual report and accounts 2017
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0 Group financial statements
Statements of cash flows
for the year ended 31 December 2017
Cash flows
from operating activities
Cash used in operations
Tax credit received
Overseas tax paid
Net cash generated from/(used in)
operating activities
Cash flows
from investing activities
Loan to subsidiary
Purchases of property, plant
and equipment
Interest received
Net cash used in investing activities
Cash flows
from financing activities
Proceeds from issue of
ordinary share capital
Costs of share issues
Interest paid
Loans received
Loans repaid
Net cash (used in)/generated from
financing activities
Net (decrease) / increase in
cash and cash equivalents
Cash and cash equivalents
at 1 January
Cash and cash equivalents
at 31 December
Note
29
12
23, 24
24
19
Group
2017
£’000
2016
£’000
Company
2017
£’000
2016
£’000
(1,533)
4,530
(18)
(5,929)
4,131
(50)
(1,308)
–
–
(1,623)
–
–
2,979
(1,848)
(1,308)
(1,623)
–
–
(4,575)
(10,346)
(1,969)
38
(1,931)
(6,458)
47
(6,411)
–
–
(4,575)
–
–
(10,346)
385
–
(10,800)
38,897
(30,536)
19,622
(2,125)
(3,258)
–
–
(2,054)
14,239
385
–
–
–
–
385
19,622
(2,125)
–
–
–
17,497
(1,006)
5,980
(5,498)
5,528
15,335
9,355
5,529
1
16
14,329
15,335
31
5,529
Oxford BioMedica plc | Annual report and accounts 2017
Group financial statements
Statements of changes in equity attributable to owners of the parent
for the year ended 31 December 2017
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Group
At 1 January 2016
Year ended 31 December 2016:
Loss for the year
Total comprehensive expense for the year
Transactions with owners:
Share options
–
–
–
–
Proceeds from shares issued
Value of employee services
Issue of shares excluding options
Cost of share issues
At 31 December 2016
23, 24
27
23, 24
24
20
–
5,118
–
30,879
39
–
14,445
(2,125)
154,036
Notes
Ordinary
shares
£’000
25,741
Share
premium
account
£’000
141,677
Reserves
Merger
£’000
2,291
Treasury
£’000
(102)
Warrant
£’000
–
Accumulated
losses
£’000
(158,713)
Total
equity
£’000
10,894
–
–
–
–
–
–
2,291
–
–
–
–
–
–
2,291
–
–
–
–
–
–
(102)
–
–
–
–
–
102
–
–
–
–
–
–
–
–
–
–
(16,641)
(16,641)
(16,641)
(16,641)
–
865
–
–
(174,489)
59
865
19,563
(2,125)
12,615
(9,017)
(9,017)
(9,017)
(9,017)
–
–
1,218
–
1,218
–
945
–
(102)
(182,663)
385
945
1,218
–
6,146
–
–
–
–
197
–
–
–
31,076
188
–
–
–
154,224
Ordinary
shares
£’000
25,741
Share
premium
account
£’000
141,677
Reserves
Merger
£’000
1,580
Warrant
£’000
–
Accumulated
losses
£’000
(119,602)
Other
£’000
5,552
Total
equity
£’000
54,948
–
–
20
–
–
39
–
5,118
–
30,879
–
14,445
(2,125)
154,036
–
–
–
–
197
188
–
–
31,076
–
–
154,224
–
–
–
–
–
–
1,580
–
–
–
–
–
1,580
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,781)
(1,781)
(1,781)
(1,781)
–
59
500
–
–
6,052
–
–
–
(121,383)
500
19,563
(2,125)
71,164
–
–
–
(1,207)
(1,207)
(1,207)
(1,207)
–
385
–
1,218
1,218
749
–
6,801
–
–
(122,590)
749
1,218
72,309
Year ended 31 December 2017:
Loss for the year
Total comprehensive expense for the year
Transactions with owners:
Share options
Proceeds from shares issued
Value of employee services
Issue of warrants
Vesting of deferred share award
At 31 December 2017
Company
At 1 January 2016
Year ended 31 December 2016:
Loss for the year
Total comprehensive expense for the year
Transactions with owners:
Share options
Proceeds from shares issued
Credit in relation to employee
share schemes
Issue of shares excluding options
Cost of share issues
At 31 December 2016
Year ended 31 December 2017:
Loss for the year
Total comprehensive expense for the year
Share options
Proceeds from shares issued
Credit in relation to
employee share schemes
Issue of warrants
At 31 December 2017
23, 24
27
28
27
Notes
10
23, 24
26, 28
23, 24
24
10
23, 24
26, 28
28
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
1, Accounting policies
Oxford BioMedica plc (the Company) is a public company limited by shares, incorporated and domiciled in England,
and listed on the London Stock Exchange. The consolidated financial statements for the year ended 31 December
2017 comprise the results of the Company and its subsidiary undertakings (together referred to as the Group).
The Company’s principal subsidiary is Oxford BioMedica (UK) Limited.
The Group is a gene and cell therapy research and development business which is also building a revenue-generating
business providing bioprocessing and process development services to third parties. The Group currently has no
marketed pharmaceutical products.
Basis of preparation
The principal accounting policies adopted in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the financial years presented, unless otherwise stated.
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and
IFRS Interpretations Committee ('IFRS IC') interpretations as adopted by the European Union and with the Companies Act
2006 as applicable to companies reporting under IFRS. The financial statements have been prepared under the historic
cost convention as modified by the revaluation of financial assets at fair value through profit and loss.
As more fully explained in the Directors’ report on pages 84 to 89 and below, the going concern basis has been
adopted in preparing the financial statements.
A summary of the more important Group accounting policies are set out below.
The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are
significant to the financial statements, are disclosed in Note 2.
Going concern
The Group held £14.3 million of cash at the end of 2017 and £16.4 million at 28 February 2018. In March 2018, the
Company completed a £19.3 million (net) equity placing in order to fund further facilities expansion. During 2017
the cash burn was significantly reduced as a result of improved cash flow from operations and reduced capital
expenditure and the Directors expect further progress in 2018. Taking this into account, in conjunction with currently
known and probable cash flows, the Directors consider that the Group has sufficient cash resources and cash inflows
to continue its activities for not less than twelve months from the date of these financial statements and have
therefore prepared the financial statements on a going concern basis.
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Accounting developments
The new standards, new interpretations and amendments to standards and interpretations listed below have been,
issued but are not effective for the financial year beginning 1 January 2017 and have not been adopted early.
— IFRS 15, ‘Revenue from contracts with customers’
— Amendment to IFRS 15, ‘Revenue from contracts with customers’
— IFRS 16, ‘Leases’ (endorsed by the EU)
The following standards are not expected to have a significant impact on the Group:
— Amendments to IFRS 2, ‘Share based payments’ on clarifying how to account for certain types of share-based payment
transactions (not yet endorsed by the EU)
— IFRS 9, ‘Financial instruments’
— Amendment to IFRS 9, ‘Financial instruments’, on prepayment features with negative compensation (not yet
endorsed by the EU)
— Amendments to IAS 28, (not yet endorsed by the EU)
— Amendments to IFRS 4, ‘Insurance contracts’ regarding the implementation of IFRS 9, ‘Financial instruments’
— Amendments to IAS 40, ‘Investment property’ relating to transfer of investment property (not yet endorsed
by the EU)
— Annual improvements 2014–2016, (not yet endorsed by the EU)
— IFRS 17, ‘Insurance contracts’ (not yet endorsed by the EU)
— IFRIC 22, ‘Foreign currency transactions and advance consideration’ (not yet endorsed by the EU)
— IFRIC 23, ‘Uncertainty over income tax treatments’
Basis of consolidation
The consolidated financial statements comprise the Company and its subsidiary undertakings for the year to
31 December each year. Subsidiaries are entities that are directly or indirectly controlled by the Group. Subsidiaries are
consolidated from the date at which control is transferred to the Group. Control exists where the Group has the power
to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The Group does
not currently have any associates.
All intragroup transactions and balances are eliminated on consolidation.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the fair value of the assets transferred, equity instruments issued, and liabilities incurred or assumed at the date
of exchange.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Any excess of the
cost of the acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference
is recognised directly in the statement of comprehensive income. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring accounting policies used into line with those of the Group.
The Group and Company have elected not to apply IFRS 3 ‘Business combinations’ retrospectively to business
combinations which took place prior to 1 January 2004, namely the acquisition in 1996 of 100% of the issued share
capital of Oxford BioMedica (UK) Limited that has been accounted for by the merger accounting method.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Foreign currencies
Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the transaction date.
Assets and liabilities in foreign currencies are retranslated into sterling at the rates of exchange ruling at the balance
sheet date. Differences arising due to exchange rate fluctuations are taken to the statement of comprehensive
income in the period in which they arise.
Revenue
Revenue comprises income derived from bioprocessing of clinical product for partners, fees charged for providing
development services to partners, product and technology licence transactions, and funded research and
development programmes.
Bioprocessing of clinical product for partners is recognised under IAS18, Revenue, with revenues recognised on a
‘percentage of completion’ basis dependent on the stage of completion of the contract. The gross amount due from
customers on all partnerships in progress for which costs incurred plus recognised profits exceed progress billings
is presented as an asset separately on the balance sheet. Consideration received in excess of the stage of completion
will be deferred until such time as it is appropriate to recognise the revenue.
Revenues for providing process development activities to partners are recognised during the period in which
the service is rendered on a percentage of completion basis.
Incentive receivables relating to bioprocessing or process development activities are determined by specific conditions
stipulated in the relevant agreements or contracts. Incentives related to the achievement of specific deliverables are
recognised on a probability adjusted basis once most of the work or identifiable deliverables have been completed
and when there is a high probability that the incentive will be received. Incentives related to the provision of support
services are recognised on a percentage of completion basis, but taking into account the likelihood of achievement
of the deliverable.
Product and technology licence transactions typically have an initial upfront non-refundable payment on execution
of the licence, and the potential for further payments conditional on achieving specific milestones, plus royalties
on product sales. Where the initial amount received is non-refundable and there are no ongoing commitments
from the Group and the licence has no fixed end date, the Group recognises the amount received up front
as a payment in consideration of the granting of the licence on execution of the contract.
Amounts receivable in respect of milestone payments are recognised as revenue when the specific conditions
stipulated in the licence agreement have been met. Payments linked to “success” such as regulatory filing or approval,
or achievement of specified sales volumes, are recognised in full when the relevant event has occurred. Otherwise,
amounts receivable are recognised in the period in which related costs are incurred, or over the estimated period
to completion of the relevant phase of development or associated clinical trials.
Research and development funding is recognised as revenue over a period that corresponds with the performance
of the funded research and development activities.
Non-cash revenues are recognised at fair value through profit and loss.
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Cost of sales
Cost of sales comprises the cost of bioprocessing clinical product for partners and royalties arising
on partners’ licences.
The cost of bioprocessing clinical product for partners includes the raw materials, labour costs, overheads and
other directly attributable costs. Costs are recognised on a percentage of completion basis dependent on the
stage of completion of the contract. Costs incurred in excess of the stage of completion are recognised as work
in progress until such time as it is appropriate to recognise the cost.
The Group’s products and technologies include technology elements that are licensed from third parties.
Royalties arising from such partners’ licences are treated as cost of sales. Where royalties due have not been
paid they are included in accruals. Where revenue is spread over a number of accounting periods, the royalty
attributable to the deferred revenue is included in prepayments.
Research, development and bioprocessing
Research, development and bioprocessing expenditure is charged to the statement of comprehensive income
in the period in which it is incurred.
Expenditure incurred on development projects is recognised as an intangible asset when it is probable that the
project will generate future economic benefit, considering factors including its commercial and technological
feasibility, status of regulatory approval, and the ability to measure costs reliably. Development expenditure which
has been capitalised and has a finite useful life is amortised from the commencement of the commercial production
of the product on a straight-line basis over the period of its expected benefit. No such costs have been capitalised
to date. Other development expenditure is recognised as an expense when incurred.
Employee benefit costs
Employee benefit costs, notably holiday pay and contributions to the Group’s defined contribution pension plan,
are charged to the statement of comprehensive income on an accruals basis. The assets of the pension scheme are
held separately from those of the Group in independently administered funds. The Group does not offer any other
post-retirement benefits.
Share based payments
The Group’s employee share option schemes, long term incentive plans, save as you earn scheme and deferred
bonus plans allow group employees to acquire shares of the Company subject to certain criteria. The fair value
of options granted is recognised as an expense of employment in the statement of comprehensive income with
a corresponding increase in equity. The fair value is measured at the date of grant and spread over the period during
which the employees become unconditionally entitled to the options. The fair value of options granted under the
share option schemes and share save scheme is measured using the Black-Scholes model. The fair value of options
granted under the LTIP schemes, which includes market condition performance criteria, is measured using a Monte
Carlo model taking into account the performance conditions under which the options were granted. The fair value
of options granted under the deferred bonus plan is based on the market value at the date of grant of these options.
At each financial year end, the Group revises its estimate of the number of options that are expected to become
exercisable based on forfeiture such that at the end of the vesting period the cumulative charge reflects the actual
options that have vested, with no charge for those options which were forfeit prior to vesting. When share options
are exercised the proceeds received are credited to equity.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. No leases have been classified as finance leases. All other leases are classified as operating
leases. Costs in respect of operating leases are charged to the statement of comprehensive income on a straight-line
basis over the lease term.
Grants
Income from government and other grants is recognised over the period necessary to match them with the related costs
which they are intended to compensate. Grant income is included as other operating income within the statement of
comprehensive income, and the related costs are included within research, development and bioprocessing costs, and
administrative expenses. Where grant income received exceeds grant income recognised, it is included within deferred
income on the balance sheet, whilst where grant income recognised exceeds grant income received, it is included within
accrued income on the balance sheet.
Partially funded research and development
Where research and development programmes are partially funded by external parties, and the Group retains certain
rights to any intellectual property and patents created by these programmes, this income is included as other operating
income within the statement of comprehensive income and the related costs are included within research, development
and bioprocessing costs.
Revaluation of equity instruments
Gains and losses on the revaluation of equity instruments are recognised at fair value in the statement of
comprehensive income.
Finance income and costs
Finance income and costs comprise interest income and interest payable during the year, calculated using the effective
interest rate method. It also includes the revaluation of external loans denominated in a foreign currency.
Taxation
The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure.
The credit is paid in arrears once tax returns have been filed and agreed. The tax credit earned in the period, based on
an assessment of likely receipt, is recognised in the statement of comprehensive income with the corresponding asset
included within current assets in the balance sheet until such time as it is received.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted, or substantially enacted, by the balance sheet date.
Deferred tax is calculated in respect of all temporary differences identified at the balance sheet date. Temporary
differences are differences between the carrying amount of the Group’s assets and liabilities and their tax base.
Deferred tax liabilities may be offset against deferred tax assets within the same taxable entity or qualifying local tax
group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be
regarded as probable that there will be suitable taxable profits within the same jurisdiction in the foreseeable future
against which the deductible temporary difference can be utilised.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the asset is realised
or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date.
Measurement of deferred tax liabilities and assets reflects the tax consequence expected to fall from the manner in which
the asset or liability is recovered or settled.
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Intangible assets
Initial recognition
Intellectual property and in-process research and development acquired through business combinations are
recognised as intangible assets at fair value. Other acquired intangible assets are initially recognised at cost.
Amortisation
Where the intangible asset has a finite life amortisation is charged on a straight-line basis over the remaining useful
economic life from the time they become available for use. Where the useful life of the intangible asset cannot
be determined, the asset is carried at cost but tested annually for impairment. Intangible assets are amortised
over the length of the patent life; current lives range from 5 to 19 years.
Impairment
The carrying value of non-financial assets is reviewed annually for impairment or earlier if an indication of impairment
occurs and provision made where appropriate. Charges or credits for impairment are passed through the statement
of comprehensive income.
For the purposes of assessing impairments, assets are grouped at the lowest levels for which there are separately
identifiable cash flows or cash-generating units. Impairment losses are recognised for the amount by which each
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. Where the asset is no longer being developed by the Group fair value less costs
of disposal is used as the recoverable amount. Value in use is calculated using estimated discounted future cash flows.
Key assumptions in the discounted cash flow calculations are whether:
— The product is developed by a collaborative partner who funds all future development costs
and markets the product
— The Group receives an initial licence fee, milestone payments and royalties on sales
— The cash flow projections include estimates for selling price, royalty rates, population growth,
disease incidence and market penetration
— The resulting cash receipts are discounted at an appropriate discount rate
— The cash flow projections are a long-term view, based on the expected patent life. Due to the length
of the development cycle for innovative medicines, this period is significantly longer than five years
The key assumptions are management estimates, based where possible on available information for similar products.
Due to the novelty and early stage of development of the Group’s products, it is not possible to benchmark these
assumptions against past experience.
Impairment and amortisation charges are included within research, development and bioprocessing costs
in the statement of comprehensive income.
Intellectual property rights comprise third party patent rights that have been purchased by the Group.
No in-house research and development or patent costs are included in intangible assets.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Property, plant and equipment
Property, plant and equipment are carried at cost, together with any incidental expenses of acquisition, less
depreciation. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset
to its working condition for its intended use.
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values
on a straight-line basis over the expected useful economic lives of the assets concerned. Depreciation of an asset
begins when it is available for use. The principal annual rates used for this purpose are:
Freehold property
Leasehold improvements
Office equipment and computers
Bioprocessing and laboratory equipment
10%
10%
(or the remaining lease term if shorter)
20 – 33%
20%
The assets’ residual values and useful lives are reviewed annually.
The bioprocessing plants are reviewed annually for impairment triggers and, where necessary, a full impairment
review is performed.
Financial assets: investments in subsidiaries
Investments are carried at cost less any provision made for impairment. Options over the Company’s shares
have been awarded to employees of subsidiary companies. In accordance with IFRS2, the Company treats the value
of these awards as a capital contribution to the subsidiaries, resulting in an increase in the cost of investment.
Investments in subsidiary undertakings, including shares and loans, are carried at cost less any impairment provision.
Such investments are subject to review, and any impairment is charged to the statement of comprehensive income.
At each year end the directors review the carrying value of the Company’s investment in subsidiaries. Where there
is a material and sustained shortfall in the market capitalisation, or a significant and sustained change in the business
resulting in a decrease in market capitalisation, the directors consider this to be a trigger of an impairment review as set
out in IAS 36, and the carrying value of the Company’s investments in subsidiaries is adjusted. The directors consider that
reference to the market capitalisation of the Group is an appropriate external measure of the value of the Company's
subsidiaries for this purpose.
At year end the directors will assess the requirement to write back a portion or all of any impairment previously
recognised on its investment in subsidiaries. Factors which will be taken into account with regards to this decision
will be the Groups track record of improved financial results across the last three to four years, as well as the expectation
of future impairments being required after a write back was accounted for.
Financial assets: available for sale investments
Investments
Other investments held by the Group are classified as fair value through profit and loss.
Bank deposits
Bank deposits with original maturities between three months and twelve months are included in current assets
and are classified as available for sale financial assets. After initial recognition, available for sale investments
are measured at their fair value.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average
method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs
and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable
value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
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Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A provision for impairment of trade receivables is established
when there is evidence that the Group will not be able to collect all amounts due according to the original terms
of the receivables.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank deposits repayable on demand, and other short term highly liquid
investments with original maturities of three months or less.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method. Trade payables are classified as current liabilities if payment is due within one year or less. If not,
they are presented as non-current liabilities.
Deferred income
Deferred income is the excess of cash received under license transactions, grants, funded research and development,
revenue for activities provided to partners, and commercial bioprocessing of clinical product for partners, over the
amounts recognised as revenue.
Financial Liability: loans
On initial recognition, external loans are measured at fair value plus directly attributable transaction costs.
On subsequent measurement, external loans are measured at amortised cost under the effective interest rate
method. The effective interest rate method is a method of calculating the amortised cost of a financial liability
and allocating the interest expense over the relevant period. The calculation of the effective interest rate takes
into account the estimated cash flows which consider all the contractual terms of the financial instrument,
including any embedded derivatives which are not subject to separation.
If the Group assesses that a loan has elements of both a liability and an equity component, the Group will account
for the loan as a compound financial instrument separating out the individual elements into financial liabilities or
equity instruments. The liability and the equity components should be presented separately on the balance sheet.
On initial recognition, the issuer of a compound instrument first measures the liability component at its fair value.
The equity component is measured as the residual amount that results from deducting the fair value of the liability
component from the initial carrying amount of the instrument as a whole. This method is consistent with the
requirements for initial measurement of a financial liability in IAS 39, and the definitions in IAS 32, and the framework
of an equity instrument as a residual interest.
Provisions
Provisions for dilapidation costs and other potential liabilities are recognised when the Group has a present legal or
constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated.
Provisions are not recognised for future operating losses. Provisions are measured at the present value of the
expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current
market assessments of the time value of money and the risks specific to the obligations. The increase in the
provision due to the passage of time is recognised as finance cost.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Share capital
Ordinary shares are classified as equity. Costs of share issues are charged to the share premium account.
Merger reserve
A merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes
the issue of new shares by the Company, thereby attracting merger relief under s612 and s613 of the Companies Act 2006.
Warrant reserve
The warrant reserve comprises warrants exercisable on the enlarged Group’s share capital which have been fair
valued and are exercisable over a period of time.
2, Critical accounting judgements and estimates
In applying the Group’s accounting policies, management is required to make judgements and assumptions concerning
the future in a number of areas. Actual results may be different from those estimated using these judgements and
assumptions. The key sources of estimation uncertainty and the critical accounting judgements 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.
IFRS 15
The Group is required to implement a new accounting standard, IFRS 15 ‘Revenue from contracts with customers’,
from 1 January 2018.
The new standard provides a single principles-based approach to the recognition of revenue from all contracts with
customers and requires revenue to be recognised when or as performance obligations in a contract are reformed.
In its financial statements for 2018, the Group will adopt IFRS 15 applying the modified retrospective approach.
In accordance with the requirements of the standard where the modified retrospective approach is adopted, prior
year results will not be restated.
In application of the standard the Group has identified two key areas of judgement within the existing collaboration
agreements, firstly in relation to the number of distinct performance obligations contained within each collaboration
agreement, which include a licence and bioprocessing and process development activities within a single contract,
secondly the appropriate allocation of revenue to each performance obligation to represent the fair value of the
obligation. The sales royalties contained within the collaboration agreements qualify for the royalty exemption
available under IFRS 15 and will continue to be recognised as the underlying sales are made.
As part of the revenue analysis performed, the Group is planning to recognise partially funded research and
development incomes, currently recognised within Other income in the statement of comprehensive income,
within Revenue in this statement, in line with the development of this service within the business. In 2017,
the Group recognised £0.8 million of this type of income. There are not expected to be any other material impacts
on reported revenue.
Revenue recognition
Under the 2017 Novartis contract an up-front fee of $10 million was due for a three year minimum capacity
reservation covering the period from 2017 to 2019. The Group have determined that this revenue should be
recognised over the capacity reservation term based on the number of batches completed per year, capped at the
minimum capacity requirement per year per the contract. In 2017 the Group have therefore recognised revenues
of £2 million with regards to this item.
The Group has recognised a contractually agreed milestone for $1.8 million for the provision of support to Novartis
in preparation of their suspension process clinical submission. Although the milestone was formally agreed by
Novartis in January, the Group concluded that the criteria for revenue recognition had been met on the basis that
they had completed the procedures and the submission had been through the first levels of review with Novartis.
Accordingly, a total of $1.8 million (£1.3 million) was recognised as revenue in 2017.
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The Group has a contractually agreed step milestone based on the increased scale-up of their suspension process.
Dependent on productivity the Group can be awarded up to $4 million. $250,000 was recognised in 2016. During
2017 the Group achieved the target scale up and submitted documents supporting this. This was formally accepted
by Novartis in January 2018. The Group concluded that the criteria for revenue recognition had been met on the
basis that they had achieved the scale up, and the submission had been through the first levels of review with
Novartis. Accordingly, the remaining $3.8 million (£2.8 million) of revenue was recognised in 2017.
At the end of 2016, under the October 2014 contract with Novartis, management judged that $1.2 million of a
$2 million incentive payment for provision of source documentation to support a proposed BLA submission by
Novartis should be recognised on the basis that, based on the level of work performed, it is certain that the economic
benefits of the transaction will flow to the entity, and the revenue and related costs can be measured reliably.
In 2016 the Group received £1.4 million in one-off payments related to IP licences. Since these payments are non-
refundable and there are no ongoing commitments from the Group, the amounts received have been recognised
as revenue in the year. £657,000 of these items were received in the form of shares in a partner company. These have
been recognised at fair value.
IFRS 9
The Group is required to implement a new accounting standard, IFRS 9 ‘Financial instruments, from 1 January 2018.
The Group does not expect there to be any material impacts on reported balances within the financial statements,
specifically trade receivables, trade payables, investments and the loan and warrant balances.
Loan valuation
On 29 June 2017 the Group completed a new $55 million debt facility with Oaktree Capital Management ("Oaktree").
The facility has been used to redeem the debt facility with Oberland Capital Healthcare. The Oaktree loan is repayable
no later than 29 June 2020 although it may be repaid, at the Group's discretion, at any time subject to early
prepayment fees and an exit fee. The loan carries an interest rate of 9.0% plus US$ three month LIBOR, subject to a
minimum of 1%. Upon achievement of certain conditions, the interest rate could reduce by 0.25% in the second year
and a further 0.25% in the third year. The loan was issued at an original discount of 2.5%, and under the agreement
the Company has issued 134,351,226 warrants to Oaktree (note 28).
On initial recognition, the Oaktree loan, net of the expenses incurred in the refinancing which are treated as prepaid
expenses, was fair valued at £37.7 million using an implied market interest rate of 13%. We have assessed that 13%
presents a market interest rate which would be offered if no warrants were issued as part of the refinancing. The
warrants are therefore calculated as being the residual amount of £1.2 million after subtracting the fair value of the
loan from the initial carrying amount of the instrument of £38.9 million. The warrants of £1.2 million are accounted
for as equity within the balance sheet.
Intangible asset impairment
The Group has intangible assets arising from purchases of intellectual property rights and in-process R&D. Amortisation
is charged over the assets’ patent life on a straight-line basis from the date that the asset becomes available for use.
When there is an indicator of a significant and permanent reduction in the value of intangible assets, an impairment
review is carried out. The impairment analysis is principally based on estimated discounted future cash flows. Actual
outcomes could vary significantly from such estimates of discounted future cash flows due to the sensitivity of the
assessment to the assumptions used. The determination of the assumptions is subjective and requires the exercise
of considerable judgement. Any changes in key assumptions about the Group’s business and prospects, or changes in
market conditions affecting the Group or its development partners, could materially affect whether impairment exists.
During the year, the Group wrote off the value of the PrimeBoost technology and poxvirus patent following the
failure of Bavarian Nordics Prostvac in phase 3. As at 31 December 2017 the remaining book value of intangible assets
was £0.1 million.
Revaluation of equity investments
On 29 November 2016, as part of a strategic alliance with Orchard Therapeutics, the Group received a 1.95 % equity
stake in Orchard Therapeutics. A revaluation of this investment has been carried out and a gain of £2.3 million
recognised during the year. As Orchard Therapeutics is a private company the investment has not been valued based
on observable market data, but rather the value of the latest placing of shares by Orchard Therapeutics.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Going concern
Management and the directors have had to make estimates and important judgements when assessing the going
concern status of the Group. The conclusions of these estimates and judgements are reported in several places in this
annual report including the Directors Report (page 86) and Note 1 to the financial statements (page 102).
3, Financial risk management
Financial risk factors
The Group has a simple corporate structure with the Company and its only operating subsidiary both being UK
domiciled. Monitoring of financial risk is part of the Board’s ongoing risk management, the effectiveness of which is
reviewed annually. The Group’s agreed policies are implemented by the Chief Financial Officer, who submits reports
at each board meeting. The Group does not use financial derivatives, and it is the Group’s policy not to undertake
any trading in financial instruments.
(a) Foreign exchange risk
In 2017 the Group’s revenues were mostly receivable in Sterling and US Dollars, and certain of its expenditures
were payable in Euros and US Dollars. The majority of operating costs are denominated in Sterling but most of the
finance costs and any related future repayment of capital will be in Dollars (please refer to Interest rate risk for further
details with regards to the Oaktree loan). A 10% difference in the £/$ exchange rate would have had an impact of
approximately £336,000 (2016: £98,000) on net costs over the year and would lead to an unrealised foreign exchange
gain/loss of £3.3 million on the outstanding loan balance.
The Group also has exposure to the £/€ exchange rate due to the need to fund expenditure denominated in Euros.
Had the pound been 10% weaker in relation to the Euro, the increased cost in 2017 would have been approximately
£37,000 (2016: £57,000). The Group’s policy is to hold the majority of its funds in Sterling and US Dollars. No other
hedging of foreign currency cash flows is undertaken.
(b) Interest rate risk
On 1 May 2015 the Group established a $50 million loan facility with Oberland Capital Healthcare which was used
to finance the capacity expansion programme between late 2014 and mid-2016.
On 29 June 2017 the Group was able to re-finance this loan facility with a new $55 million facility with Oaktree
Capital Management. $50 million of the facility was drawn down as at 30 June 2017 while the remaining
$5 million of the loan facility was drawn down in July 2017. The fair value of the loan net of capitalised legal
and associated finance costs has been accounted for as a £37.7 million balance within loans, and the fair value
of the warrants of £1.2 million is accounted for as equity.
The Group’s policy is to maximise interest receivable on deposits, subject to maintaining access to sufficient liquid
funds to meet day to day operational requirements and preserving the security of invested funds. With the current
low level of bank interest rates, interest receivable on bank deposits in 2017 was just £38,000 (2016: £34,000).
If interest rates had been 1% higher in 2017 the impact on cash interest paid would have been £403,000
(2016: £295,000).
With regards to the Oberland facility, interest payable as disclosed in the consolidated statement of comprehensive
income would not be affected by a 1% increase in interest rates as the charge to income is determined by the
required 15% rate of return to Oberland. All interest on the Oaktree facility is paid on a quarterly basis so there
would be no difference between cash interest paid and interest payable.
(c) Credit risks
Cash balances are mainly held on short and medium-term deposits with financial institutions with a credit rating
of at least A, in line with the Group’s policy to minimise the risk of loss.
Trade debtors are monitored to minimise the risk of loss (note 15).
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Derivative financial instruments and hedging
There were no material derivatives at 31 December 2017 or 31 December 2016 which have required separation,
and hedge accounting has not been used.
Fair value estimates
The fair value of short term deposits with a maturity of one year or less is assumed to be the book value.
Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns to shareholders and benefits for other stakeholders, and to maintain an optimal capital
structure to minimise the cost of capital. There have been no covenant breaches in relation to the loan agreements
in place during the year.
Group
Net debt
Equity
Debt/equity%
4, Segmental analysis
2017
£’000
22,535
6,695
337%
2016
£’000
19,054
12,615
181%
Segmental reporting
The chief operating decision-maker has been identified as the Senior Executive Team (SET), comprising the executive
directors, Chief Scientific Officer and Chief Technical Officer. The SET monitors the performance of the Group in two
business segments:
(i) Platform – this segment consists of the revenue generating bioprocessing and process development activities
undertaken for third parties. It also includes internal technology developments and technical intellectual property.
(ii) Product – this segment consists of the clinical and preclinical development of in vivo and ex vivo gene and cell
therapy products which are owned by the Group.
During 2017 a change was made to the business segments monitored by SET to better reflect the way the business is
being managed by the Senior Executive Team. Internal technology projects to develop new potentially saleable
technology, improve our current processes and bring development & manufacturing costs down is now included
within the newly named ‘Platform’ segment (previously ‘Partnering’), rather than forming part of the “Product“
segment (previously ‘R&D’).
Revenues, other operating income and operating loss by segment
EBITDA and Operating loss represent our measures of segment profit & loss as they are a primary measure used
for the purpose of making decisions about allocating resources and assessing performance of segments.
2017
Gross income1
EBITDA2
Operating loss
2016
Gross income1
EBITDA2
Operating loss
Platform
£’000
38,537
2,917
179
Platform
£’000
29,789
(2,340)
(6,239)
Product
£’000
827
(4,786)
(5,847)
Product
£’000
989
(4,720)
(5,074)
Total
£’000
39,364
(1,869)
(5,668)
Total
£’000
30,778
(7,060)
(11,313)
1. Gross income is the aggregate of revenue and other operating income.
2.
EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and Share Based Payments) is a non-GAAP measure often used
as a surrogate for operational cash flow as it excludes from operating profit or loss all non-cash items, including the charge for share options.
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Gross income includes grant income of £1.0 million (2016: £1.6 million). Grant income of £0.8 million from Innovate UK
to fund clinical and pre-clinical development is included within the Product segment whilst grant income of £0.2 million
from AMSCI (UK Government’s Advanced Manufacturing Supply Chain Initiative) to develop our supply chain capabilities
is included within Platform. Process development income is included within the Platform segment.
Costs are allocated to the segments on a specific basis as far as possible. Costs which cannot readily be allocated
specifically are apportioned between the segments using relevant metrics such as headcount or direct costs.
A geographical split of operating loss is not provided because this information is not received or reviewed
by the chief operating decision-maker and the origin of all revenues is the United Kingdom.
A segmental or geographical split of assets and liabilities is not provided because this information is not received
or reviewed by the chief operating decision-maker. All assets are located within the United Kingdom.
Revenue by geographical location
The Group’s revenue derives wholly from assets located in the United Kingdom. Analysed by location of customers,
revenue derives predominantly from Europe.
Revenue by customer location
Europe
Rest of world
Total revenue
2017
£’000
36,398
1,192
37,590
2016
£’000
26,442
1,334
27,776
5, Employees and directors
The monthly average number of persons (including executive directors) employed by the Group during the year was:
By activity
Office and management
Research, development
and bioprocessing
Total
Employee benefit costs
Wages and salaries
Social security costs
Other pension costs (note 30)
Share based payments (note 26)
Total employee benefit costs
Key management compensation
Wages and salaries
Social security costs
Other pension costs
Share based payments
Total
2017
Number
24
2016
Number
26
271
295
2017
£’000
14,771
1,616
958
749
18,094
2017
£’000
2,334
395
158
420
3,307
221
247
2016
£’000
13,484
1,465
748
500
16,197
2016
£’000
2,409
313
85
290
3,097
The key management figures above include executive and non-executive directors and the other members of the
Senior Executive Team. Further information about the remuneration of individual directors, including the highest paid
director, is provided in the audited part of the Directors’ remuneration report on page 68 which forms part of these
financial statements.
The Company had no employees during the year (2016: zero).
Oxford BioMedica plc | Annual report and accounts 2017
6, Finance income and costs
Group
Finance income:
Bank interest receivable
Total finance income
Finance costs:
Unwinding of discount in provisions (note 20)
Revaluation of liabilities in
foreign currency
Interest payable
Total finance costs
Net finance income
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£’000
2016
£’000
38
38
(8)
3,291
(9,414)
(6,131)
(6,093)
34
34
(5)
(4,104)
(4,919)
(9,028)
(8,994)
Up to 29 June 2017, interest payable consisted of the cash interest paid on the Oberland loan facility at 10.5%,
as well as the remaining 4.5% previously accrued to provide a return of 15% per annum to Oberland. The Group
also incurred a loss on early extinguishment of the Oberland facility of £3.9 million included within interest payable
of £9.4 million. For the remainder of 2017, interest payable consisted of interest paid at 9% plus 3-month US$ LIBOR
on the $55 million Oaktree facility.
7, Expenses by nature
Employee benefit costs
Depreciation of property, plant
and equipment
Amortisation
Impairment of intangible assets
Raw materials and consumables
used in bioprocessing
Operating lease payments
Net loss on foreign exchange
Notes
5
12
11
11
Group
2017
£’000
18,094
4,113
262
971
7,833
143
287
2016
£’000
16,197
3,340
335
78
4,200
610
132
Company
2017
£’000
280
2016
£’000
267
–
–
–
–
–
–
–
–
–
–
–
–
Company employee benefit costs of £280,000 (2016: £267,000) relates to non-executive costs paid by Oxford
BioMedica UK Ltd and recharged to the Company.
Depreciation is charged to research, development and bioprocessing costs in the statement of comprehensive income.
During the year the Group (including its subsidiaries) obtained services from the Group’s auditors and their associates
as detailed below:
Services provided
by the Group’s auditors
Fees payable for the audit of the parent company and consolidated financial statements
Fees payable for other services:
The audit of the Company’s subsidiaries
Additional fees relating to prior year audit
Other services
Tax advisory services
Tax compliance services
Services relating to company finance and business development transactions
Total
Group
2017
£’000
25
120
15
35
–
5
–
200
2016
£’000
25
102
20
18
19
15
264
463
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
8, Taxation
The Group is entitled to claim tax credits in the United Kingdom for certain research and development expenditure.
The amount included in the statement of comprehensive income for the year ended 31 December 2017 comprises
the credit receivable by the Group for the year less overseas tax paid in the year. The United Kingdom corporation
tax research and development credit is paid in arrears once tax returns have been filed and agreed. The tax credit
recognised in the financial statements but not yet received is included in current tax assets in the balance sheet.
The amounts for 2017 have not yet been agreed with the relevant tax authorities.
Current tax
United Kingdom corporation tax research and development credit
Overseas taxation
Adjustments in respect of prior periods:
United Kingdom corporation tax research and development credit
Taxation credit
Group
2017
£’000
(2,232)
18
(2,214)
(530)
(2,744)
2016
£’000
(3,000)
50
(2,950)
(716)
(3,666)
The Company has no tax liability, nor is it entitled to tax credits (2016: £nil).
The tax credit for the year is higher (2016: lower) than the standard rate of corporation tax in the UK. The differences
are explained below:
Loss on ordinary activities before tax
Loss on ordinary activities before tax multiplied
by the standard rate of corporation tax in the UK of 19.25% (2016: 20.25%)
Effects of:
Tax depreciation and other timing differences
Expenses not deductible for tax purposes
R&D relief mark-up on expenses
Income not taxable
Tax deduction for share options less than share option accounting charge
Overseas tax
Tax losses carried forward to future periods
Adjustments in respect of prior periods
Total tax credit for the year
Group
2017
£’000
(11,761)
2016
£’000
(20,307)
Company
2017
£’000
(1 ,207)
2016
£’000
(1,781)
(2,264)
(4,061)
(232)
(356)
645
(1,333)
(442)
(134)
14
1,326
(556)
(2,744)
317
(1,056)
–
115
50
1,707
(738)
(3,666)
–
–
–
–
–
232
–
–
–
–
–
–
–
356
–
–
At 31 December 2017, the Group had tax losses to be carried forward of approximately £96.3 million
(2016: £90.9 million). Of the Group tax losses, £96.3 million (2016: £90.9 million) arose in the United Kingdom.
There is no deferred tax recognised (see note 22).
Oxford BioMedica plc | Annual report and accounts 2017
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9, Basic loss and diluted loss per ordinary share
The basic loss per share of 0.29p (2016: 0.60p) has been calculated by dividing the loss for the year by the weighted
average number of shares in issue during the year ended 31 December 2017 of 3,095,667,161; (2016: 2,778,182,534).
As the Group is loss-making, there were no potentially dilutive options in either year. There is therefore no difference
between the basic loss per ordinary share and the diluted loss per ordinary share.
10, Loss for the financial year
As permitted by section 408 of the Companies Act 2006, the Company’s statement of comprehensive income has
not been included in these financial statements. The Company’s loss for the year was £1,207,000 (2016: £1,781,000).
11, Intangible assets
Intangible assets comprise intellectual property rights.
Cost at 1 January and 31 December
Accumulated amortisation and impairment
At 1 January
Amortisation charge for the year
Impairment charge for the year
At 31 December
Net book amount at 31 December
2017
£’000
5,591
4,261
262
971
5,494
97
2016
£’000
5,591
3,848
335
78
4,261
1,330
During the year, there was a write down of the Prime Boost technology and poxvirus patent intangible asset after
Bavarian Nordic’s Prostvac product failed in its phase III study.
For intangible assets regarded as having a finite useful life amortisation commences when products underpinned
by the intellectual property rights become available for use. Amortisation is calculated on a straight-line basis
over the remaining patent life of the asset. Amortisation of £262,000 (2016: £335,000) is included in ‘Research,
development and bioprocessing costs’ in the statement of comprehensive income.
An intangible asset is regarded as having an indefinite useful life when, based on an analysis of all of the relevant
factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows
for the entity. There are currently no assets with indefinite useful lives.
The Company had no intangibles at 31 December 2017 or 31 December 2016.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
12, Property, plant and equipment
Cost
At 1 January 2017
Additions at cost
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Net book amount at 31 December 2017
Freehold
property
£’000
Leasehold
improvements
£’000
Office
equipment and
computers
£’000
Bioprocessing
and Laboratory
equipment
£’000
20,902
269
–
21,171
2,306
2,000
–
4,306
16,865
6,970
9
(2,290)
4,689
2,798
470
(2,290)
978
3,711
1,651
1,528
–
3,179
877
985
–
1,862
1,317
6,488
163
_
6,651
2,516
658
_
3,174
3,477
Freehold
property
£’000
Leasehold
improve-ments
£’000
Office
equipment and
computers
£’000
Bioprocessing
and Laboratory
equipment
£’000
Assets under
Construction1
£’000
Cost
At 1 January 2016
Additions at cost
Reclassification
Disposals
At 31 December 2016
Accumulated depreciation
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
6,938
–
13,964
–
20,902
921
1,385
–
2,306
7,397
206
–
(633)
6,970
2,909
522
(633)
2,798
1,374
506
–
(229)
1,651
753
353
(229)
877
7,574
1,526
–
(2,612)
6,488
4,048
1,080
(2,612)
2,516
Net book amount at 31 December
2016
18,596
4,172
774
3,972
9,744
4,220
(13,964)
–
–
–
–
–
–
–
Total
£’000
36,011
1,969
(2,290)
35,690
8,497
4,113
(2,290)
10,320
25,370
Total
£’000
33,027
6,458
–
(3,474)
36,011
8,631
3,340
(3,474)
8,497
27,514
1 Assets under construction represents the capitalisation of construction works at the Harrow House and Yarnton manufacturing facilities and the Windrush Court laboratories.
The Company had no property, plant and equipment at 31 December 2017 or 31 December 2016.
Oxford BioMedica plc | Annual report and accounts 2017
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13, Investments
Investments: Group
On 29 November 2016, as part of a strategic alliance with Orchard Therapeutics, the Group received a 1.95 % equity
stake in Orchard Therapeutics. A revaluation of this investment has been carried out and a gain of £2.3 million
recognised during the year. As Orchard Therapeutics is a private company the investment has not been valued
based on observable market data.
The aggregate fair value of the equity investment in Orchard Therapeutics is £3.0 million (2016: £0.7 million).
At 1 January
Recognition of milestones/upfronts
Revaluation of investments
At 31 December
Investments: Company
Shares in group undertakings
At 1 January and 31 December
Loans to group undertakings
At 1 January
Loan advanced in the year
At 31 December
Total investments in shares and loans to group undertakings
Accumulated impairment
At 1 January and 31 December
Net book amount at 31 December
Capital contribution in respect of employee share schemes
At 1 January
Additions in the year (note 26)
At 31 December
Total investments
2017
£’000
657
–
2,297
2,954
2016
£’000
–
657
–
657
2017
£’000
2016
£’000
15,182
15,182
170,639
5,793
176,432
191,614
160,293
10,346
170,639
185,821
126,065
65,549
126,065
59,756
6,052
749
6,801
5,552
500
6,052
72,350
65,808
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Interests in subsidiary undertakings
Country of
incorporation
Description of
shares held
Proportion of nominal value
of issued shares held by the
Group and Company
Oxford BioMedica (UK) Limited
Great Britain
1p ordinary shares
Oxxon Therapeutics Limited
Great Britain
1p ordinary shares
100%
100%
Nature of business
Gene therapy research
and development
Dormant
The registered office of both subsidiaries is Windrush Court, Transport Way, Oxford, OX4 6LT.
In addition, during 2014, the Group set up the Oxford BioMedica Employee Benefit Trust (EBT) to hold market-purchased
shares to settle the 2013 deferred bonus share awards made to executive directors and employees (Note 25).
All of the above subsidiaries have been consolidated in these financial statements.
At each year end the directors review the carrying value of the Company’s investment in subsidiaries. Where there
is a material and sustained shortfall in the market capitalisation, or a significant and sustained change in the business
resulting in a decrease in market capitalisation, the directors consider this to be a trigger of an impairment review
as set out in IAS 36, and the carrying value of the Company’s investments in subsidiaries is adjusted. The directors
consider that reference to the market capitalisation of the Group is an appropriate external measure of the value
of the Group for this purpose. Following an impairment review at 31 December 2017 no impairment charge was
assessed to be required. Cumulative impairment of £126.0 million has been recognised up to 31 December 2017.
14, Inventories
Group
Raw Materials
Work-in-progress
Total inventory
2017
£’000
1,895
1,437
3,332
2016
£’000
2,120
82
2,202
Inventories constitute raw materials held for commercial bioprocessing purposes, and work-in-progress inventory
related to contractual bioprocessing obligations.
During 2017, the Group wrote down £53,000 (2016: £29,000) of inventory which is not expected to be used in
production or sold onwards. The Company holds no inventories.
15, Trade and other receivables
Trade receivables
Accrued income
Other receivables
Other tax receivable
Prepayments
Total trade and other receivables
Group
2017
£’000
5,705
8,681
23
1,288
1,391
17,088
2016
£’000
1,969
2,919
238
1,330
448
6,904
Company
2017
£’000
–
–
–
–
9
9
2016
£’000
–
–
–
–
3
3
The fair value of trade and other receivables are the current book values.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £65,000 (2016: £47,000)
which were past due at the reporting date, all of which have since been received.
Oxford BioMedica plc | Annual report and accounts 2017
Ageing of past due but not impaired trade receivables:
0 – 30 days
30 – 60 days
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£’000
65
–
65
2016
£’000
5
42
47
Accrued income of £8.7 million (2016: £2.9 million) arises where work has been undertaken which is recoverable
from third parties, but which has not yet been invoiced. The balance mainly relates to commercial development
milestones which have been accrued as the specific conditions stipulated in the license agreement have been met,
and commercial development work orders accrued on a percentage complete basis which will be invoiced as the
related work package completes.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
US Dollar
2017
£’000
16,684
404
17,088
2016
£’000
6,893
11
6,904
The Company’s receivables are all denominated in Sterling.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable above.
The Group does not hold any collateral as security.
16, Cash and cash equivalents
The Group is required under the Oaktree Facility to maintain cash and cash equivalents of not less than $5.0 million
(£3.7 million) while the Oaktree Facility is outstanding.
17, Trade and other payables
Trade payables
Other taxation and social security
Accruals
Total trade and other payables
Group
2017
£’000
3,682
579
4,429
8,690
2016
£’000
1,576
442
3,985
6,003
Company
2017
£’000
–
–
81
81
2016
£’000
–
–
176
176
18, Deferred income
Deferred income arises when the Group has received payment for services in excess of the stage of completion
of the services being provided.
The Company had no deferred income in 2017 or 2016.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
19, Loans
On 29 June 2017 the Group completed a new $55 million debt facility with Oaktree Capital Management ("Oaktree").
The facility has been used to redeem the debt facility with Oberland Capital Healthcare.
The Oaktree loan is repayable no later than 29 June 2020 although it may be repaid, at the Group's discretion, at any
time subject to early prepayment fees and an exit fee. The loan carries an interest rate of 9.0% plus US$ three month
LIBOR, subject to a minimum of 1%. Subject to achieving certain conditions, the interest rate could reduce by 0.25%
in the second year and a further 0.25% in the third year. The loan was issued at an original discount of 2.5%, and
under the agreement the Company has issued 134,351,226 warrants to Oaktree (note 28). The loan is secured over
all assets of the Group including intellectual property. The terms also include financial covenants relating to the
achievement of revenue targets and a requirement to hold a minimum of $5 million cash at all times.
On initial recognition, the Oaktree loan, net of the expenses incurred in the refinancing which are treated as prepaid
expenses, was fair valued at £37.7 million.
In May 2015, the Group entered into a $50 million loan facility with Oberland. The Group drew down $40 million
(£26.1 million) of the facility to finance the Group’s expansion of its bioprocessing and laboratory capacity in order
to enable it to deliver on commitments under its bioprocessing agreement with Novartis. Over the course of the loan
term, cash interest was payable quarterly at an annual interest rate of 9.5% plus the greater of 1% and three-month
LIBOR. The loan was issued at an original discount of 2.5%, and a repayment fee was also due on repayment. In addition
to interest, the Group would also have been required to pay an additional amount of 0.35% of its annual worldwide
net revenue from 1 April 2017 to 31 December 2025 for each $5 million of loan drawn down over $30 million.
As the loan was repaid after the second anniversary, under the terms of the agreement, there was a true-up
payment payable to ensure that Oberland received an aggregate return of 15% per annum over the period of the
loan. The Group was also required to maintain a cash balance of not less than $10 million in a ring-fenced account
whilst the Oberland Facility was outstanding.
The Oberland Facility was fully repaid on 29 June 2017 at a cost of £36.3 million including the accrued interest and
loss on early extinguishment of £5.3 million.
20, Provisions
Group
At 1 January
Unwinding of discount
Utilisation of provision
Additional provision recognised
At 31 December
Current
Non-current
Total provisions
2017
£’000
622
8
–
–
630
2017
£’000
–
630
630
2016
£’000
1,371
5
(833)
79
622
2016
£’000
–
622
622
The dilapidations provisions relate to anticipated costs of restoring the leasehold Medawar and Yarnton properties
in Oxford, UK to their original condition at the end of the lease terms in 2016 and 2024 respectively, discounted using
the rate per the Bank of England nominal yield curve. The equivalent rate was used in 2016. The provisions will be
utilised at the end of the leases if they are not renewed, and for that reason, the provision in respect of the Medawar
Centre was released in 2016 at the end of the lease.
The Company had no provisions at 31 December 2017 or 31 December 2016.
Oxford BioMedica plc | Annual report and accounts 2017
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21, Financial instruments
The Group and Company’s financial instruments comprise cash and cash equivalents, trade and other receivables,
loans, and trade and other payables. Additional disclosures are set out in the corporate governance statement
and in note 3 relating to risk management.
The Group had the following financial instruments at 31 December each year:
Cash and cash equivalents (note 16)
Trade receivables and other
receivables (note 15)
Investments (note 13)
Trade and other payables excluding
tax (note 17)
Loans (note 19)
Financial assets at fair
value through profit & loss
2016
£’000
–
2017
£’000
–
Loans &
receivables
2017
£’000
14,329
–
2,954
–
–
2,954
–
657
–
–
657
14,409
–
–
–
28,738
Amortised costs, loans
& other liabilities
2016
£’000
15,335
5,126
–
–
–
20,461
2017
£’000
–
–
–
8,111
36,864
44,975
2016
£’000
–
–
–
5,561
34,389
39,950
Floating rate instant access deposits earned interest at prevailing bank rates.
Sterling
US Dollars
2017
2016
Year average Year average
Weighted
average rate
0.46%
0.26%
Weighted
average rate
0.49%
0.66%
In accordance with IAS 39 ‘Financial instruments: Recognition and measurement’ the Group has reviewed all
contracts for embedded derivatives that are required to be separately accounted for if they meet certain requirements
set out in the standard. There were no such derivatives identified at 31 December 2017 or 31 December 2016.
Fair value
The directors consider that the fair values of the Group’s financial instruments do not differ significantly from their
book values.
The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:
Sterling
US Dollar
2017
£’000
3,843
10,486
14,329
2016
£’000
7,076
8,259
15,335
Financial liabilities classified as level 3 in hierarchy
The investment in Orchard Therapeutics is classified as at fair value through profit and loss. Please refer to note 13
for further information.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Maturity analysis of the Group’s financial liabilities
The following table analyses the contractual undiscounted cash flows payable, as well as the carrying value and
fair value of Group borrowings at the date of the statement of financial position. Contractual cash flows in respect
of interest payments are calculated using interest rates applicable at the date of the statement of financial position.
The Group also has short-term receivables and payables that arise in the normal course of business and these
are not included in the following table. Any cash flows based on floating interest rates are based on interest rates
prevailing at 31 December 2017:
Oaktree Capital Management
Interest
Capital
Due
within
1 year
£’000
Due
between 1
and 2 years
£’000
Due
between 2
and 3 years
£’000
Total
payments to
maturity
£’000
4,144
–
4,144
4,043
–
4,043
1,996
41,494
43,490
10,183
41,494
51,677
Carrying
value
£’000
–
36,864
36,864
All contractual payments are in US dollars. Interest payments are floating rate payments whilst the capital repayment
at the end of the term is fixed.
Reconciliation in liabilities from financing activities
At 1 January 2017
Interest payable
Foreign exchange movement
Cash interest paid
Oberland loan repayment
Oaktree facility drawn down
Warrants recognised separately (note 28)
At 31 December 2017 (note 19)
2017
£’000
34,389
9,414
(3,283)
(10,800)
(30,536)
38,897
(1,218)
36,864
22, Deferred taxation
Neither the Company nor the Group had any recognised deferred tax assets or liabilities at 31 December 2017
(2016: £nil). In light of the Group’s continuing losses, recovery of the deferred tax asset is not sufficiently certain,
and therefore no asset has been recognised.
The main rate of corporation tax in the UK reduced from 20% to 19% with effect from 1 April 2017 and will reduce
further to 17% with effect from 1 April 2020.
Group
Deferred tax (assets)/liabilities – not recognised
At 1 January 2017
Origination and reversal of temporary differences
At 31 December 2017
At 1 January 2016
Origination and reversal of temporary differences
At 31 December 2016
Tax
depreciation
£’000
Provisions
£’000
Tax losses
£’000
Share options
£’000
(1,281)
210
(1,071)
(972)
(309)
(1,281)
(255)
122
(133)
(270)
15
(255)
(16,025)
(353)
(16,378)
(17,869)
1,844
(16,025)
(288)
140
(148)
(192)
(96)
(288)
Total
£’000
(17,849)
119
(17,730)
(19,303)
1,454
(17,849)
Oxford BioMedica plc | Annual report and accounts 2017
23, Ordinary shares
Group and Company
Issued and fully paid
Ordinary shares of 1p each
At 1 January – 3,088,047,310 (2016: 2,574,252,580) shares
Allotted for cash in placing and subscription – nil (2016: 511,755,188) shares
Allotted on exercise of share options – 19,656,914 (2016: 2,039,537) shares
At 31 December – 3,107,704,224 (2016: 3,088,047,310) shares
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2017
£’000
30,879
–
197
31,076
2016
£’000
25,741
5,118
20
30,879
In February 2016 the Company raised £8.1 million gross proceeds by way of a placing of 128,383,528 ordinary
shares at a price of 6.3 pence per share. Net proceeds after expenses were £7.5 million.
In September 2016 the Company raised £11.5 million gross proceeds by way of a placing of and subscription
for 383,371,665 ordinary shares at a price of 3.0 pence per share. Net proceeds after expenses were £10.0 million.
24, Share premium account
Group and Company
At 1 January
Premium on shares issued for cash in placing and subscription
Premium on exercise of share options
Costs associated with the issue of shares
At 31 December
2017
£’000
154,036
–
188
–
154,224
2016
£’000
141,677
14,445
39
(2,125)
154,036
25, Options over shares of Oxford BioMedica plc
The Company has outstanding share options that were issued under the following schemes:
— The 2007 Share Option Scheme (approved February 2007)
— The 2015 Executive Share Option Scheme (approved May 2015)
— The 2007 Long Term Incentive Plan (LTIP) (approved February 2007)
— The 2015 Long Term Incentive Plan (LTIP) (approved May 2015)
— The 2013 Deferred Bonus Plan (approved February 2014)
— The 2015 Deferred Bonus Plan (approved May 2015)
— The 2015 Save As You Earn Scheme (approved May 2015)
Share options are granted to executive directors and selected senior managers under the Company’s Long Term
Incentive Plans (LTIP) and to other employees under the Share Option Schemes. All option grants are at the discretion
of the Remuneration Committee.
Options granted under the 2007 and 2015 LTIPs to directors and other senior managers are subject to market condition
performance criteria and will vest only if, at the third anniversary of the grant, the performance criteria have been met.
Failure to meet the minimum performance criteria by the third anniversary results in all the granted options lapsing.
The performance criteria are described in the Directors’ remuneration report. LTIP awards made to date are exercisable
at either par or a nil cost on the third anniversary of the date of grant, and lapse 10 years after being granted.
Options granted under the 2007 Share Option Scheme have fixed exercise prices based on the market price at the
date of grant. They are not subject to market condition performance criteria and the lives of the options are ten years,
after which the options expire. Options granted prior to 2012 cannot normally be exercised before the third
anniversary of the date of grant. Options granted under the 2007 Scheme during 2012 to 2014, with one exception,
vest in tranches of 25% from the first to fourth anniversaries of the grant dates.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
Options granted under the 2015 Executive Share Option Scheme have fixed exercise prices based on the market
price at the date of grant. They are not subject to market condition performance criteria and the lives of the options
are ten years, after which the options expire. Options granted under the 2015 Scheme cannot normally be exercised
before the third anniversary of the date of grant.
Options granted under the 2015 Save As You Earn Scheme have fixed exercise prices based on the market price
at the date of grant. They are not subject to market condition performance criteria and the lives of the options are ten
years, after which the options expire. Options cannot be exercised before the third anniversary of the date of grant.
Share options outstanding at 31 December 2017 have the following expiry date and exercise prices:
Options granted to employees under the Oxford BioMedica 2007 and 2015 Share Option Schemes
2017 Number of shares
300,000
102,527
1,156,967
1,906,324
3,271,308
4,015,401
8,792,9342
11,805,2412
18,955,5162
50,306,218
2016 Number of shares
425,000
151,877
1,545,983
2,822,5371
5,164,1331
5,475,2691
9,172,8812
13,576,6732
–
38,334,353
Exercise price per share
5.8p
6.1p
5.4p to 5.8p
2.3p to 3.1p
1.6p to 2.8p
2.0p to 4.0p
9.8p
5.5p
9.9p
Date from which exercisable
Vested
Vested
Vested
Vested
22/05/14 to 19/11/141
03/06/15 to 17/10/151
13/03/18 to 01/06/18
16/05/19 to 13/10/19
13/07/20
Expiry date
13/10/18
25/03/19
15/03/21 to 04/10/21
08/05/22 to 21/12/22
22/05/23 to 19/11/23
03/06/24 to 17/10/24
13/03/25 to 10/06/25
16/05/26 to 13/10/26
13/07/27
Note 1 – With one exception, options granted in 2012, 2013 and 2014 vest in 25% tranches on the first to fourth anniversaries of the grant date. The date from which exercisable
shows the date on which the first 25% vests
Note 2 – Options granted under the 2015 Executive share option scheme
Options granted to employees under the Oxford BioMedica 2015 Save As You Earn Scheme
2017 Number of shares
3,351,096
7,602,679
4,000,051
14,953,826
2016 Number of shares
4,214,046
8,293,338
–
12,507,384
Exercise price per share
6.2p
2.9p
6.6p
Date from which exercisable
01/10/18
13/10/19
12/10/20
Expiry date
01/10/25
13/10/26
12/10/27
Options granted under the Oxford BioMedica 2007 and 2015 Long Term Incentive Plans
2017 Number of shares
1,000,000
10,880,000
6,358,508
5,366,942
10,545,7541,2
8,945,532 1,2
11,201,2331,2
54,297,969
Date from which exercisable
Vested
Vested
Vested
Vested
10/01/18
16/05/19
17/07/20 to 25/09/20
2016 Number of shares
1,000,000
20,480,000
8,975,127
20,879,7401
10,545,7541,2
8,945,5321,2
–
70,826,153
Exercise price per share
1p
1p
1p
1p
0p
0p
0p
119,558,013
121,667,890
Note 1 – These LTIP awards will vest provided that performance conditions specified in the Directors’ remuneration report are met
Note 2 – Options granted under the 2015 LTIP
Expiry date
13/10/18
30/06/22
12/06/23
20/6/24 to 17/10/24
10/01/25
16/05/26
17/07/27 to 25/09/27
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Deferred Share Awards
The executive directors and certain other senior managers have been awarded deferred bonuses in the form
of share options. These options will vest provided that the managers are still employed by the Group on certain
specified future dates and are exercisable at nil p on either the first three anniversaries of the grant or the third
anniversary of the grant dependent on the option conditions. Options with a value of £314,000 vested during
2017 (2016: £365,000).
The options granted under the 2013 Deferred Bonus Plan will be satisfied by market-purchased shares held
by the Oxford BioMedica Employee Benefit Trust (EBT). As at 31 December 2017, all shares held by the EBT
had vested. The EBT is consolidated at year end with the shares held in trust accounted for as part of the treasury
reserve within equity (Note 28). During the year 1,325,035 shares from the EBT were exercised.
The options granted under the 2015 Deferred Bonus Plan will be satisfied by new issue shares at the time of exercise.
Certain options granted to UK employees could give rise to a national insurance (NI) liability on exercise. A provision
of £168,000 (2016: £80,000) is included in accruals for the potential NI liability accrued to 31 December on
exercisable options that were above water, based on the year-end share price of 8.85p (2016: 4.07p) per share.
26, Share based payments
The fair values of options granted during the year were calculated using the following assumptions:
Share options (Model used: Black Scholes)
Share price at grant date
Exercise price
Vesting period (years)
Total number of shares under option
Expected volatility (weighted average)
Expected life (years)
Risk free rate (weighted average)
Fair value per option
Save As You Earn scheme awards (Model used: Black Scholes)
Share price at grant date
Exercise price
Vesting period (years)
Total number of shares under option
Expected volatility (weighted average)
Expected life (years)
Risk free rate (weighted average)
Fair value per option
LTIP awards (Model used: Monte Carlo)
Share price at grant date
Exercise price
Vesting period (years)
Total number of shares under option
Expected volatility (weighted average)
Expected life (years)
Risk free rate (weighted average)
Fair value per option
Options awarded
13 July 2017
8.85p
9.93p
3
20,905,921
63%
3
0.37%
3.4p
Options awarded
12 October 2017
9.00p
6.56p
3
4,000,051
63%
3
0.55%
4.6p
LTIPs awarded 13 July 2017
and 25 September 2017
8.85p and 8.75p
0.0p
3
8,307,230 and 2,894,003
62% and 63%
3
0.37% and 0.50%
5.13p and 5.14p
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
The tables below show the movements in the Share Option Scheme, Save As You Earn Scheme and the LTIP during
the year, together with the related weighted average exercise prices.
Excluding the LTIP awards which are exercisable at par/nil value, the weighted average exercise price for options
granted during the year was 9.4p (2016: 4.5p).
19,656,914 options were exercised in 2017 (2016: 2,039,537), including 1,490,755 of deferred bonus options (2016: nil).
The total charge for the year relating to employee share-based payment plans was £749,000 (2016: £500,000),
all of which related to equity-settled share based payment transactions.
Share options excluding LTIP
Outstanding at 1 January
Granted
Forfeited
Exercised
Cancelled
Outstanding at 31 December
Exercisable at 31 December
Exercisable and where market price exceeds
exercise price at 31 December
Number
50,841,737
24,120,663
(4,202,453)
(4,439,429)
(1,060,474)
65,260,044
9,478,677
9,478,677
LTIP awards (options exercisable at par value 1p or nil cost)
Outstanding at 1 January
Granted
Expired
Exercised
Outstanding at 31 December
Exercisable at 31 December
Number
33,077,086
22,602,217
(2,348,886)
(1,186,440)
(1,302,240)
50,841,737
10,109,530
7,986,670
2017
Weighted average
exercise price
5.1p
9.4p
6.7p
2.8p
5.0p
6.7p
3.0p
3.0p
2017
Number
70,826,153
11,201,233
(14,002,687)
(13,726,730)
54,297,969
23,605,450
2017
Weighted
average
remaining
life (years)
Contractual
2016
Weighted average
exercise price
5.5p
4.6p
6.0p
2.5p
6.2p
5.1p
3.1p
2.4p
2016
Number
72,407,302
8,945,532
(9,750,907)
(775,774)
70,826,153
30,455,127
2016
Weighted
average
remaining
life (years)
Contractual
7.1
8.3
6.3
8.7
8.4
Weighted
average
exercise price
Number
of shares
Weighted
average
exercise price
Number
of shares
0.4p
54,297,969
2.5p
3.5p
5.8p
9.9p
13,513,532
3,282,180
20,715,882
27,748,450
119,558,013
7.0
7.5
5.4
8.1
8.9
0.7p
70,826,153
2.5p
3.5p
5.7p
9.8p
17,137,416
4,617,911
19,913,529
9,172,881
121,667,890
Range of exercise prices
LTIP:
Exercisable at par or at nil cost
Options:
1p to 3p
3p to 5p
5p to 7p
7p +
Oxford BioMedica plc | Annual report and accounts 2017
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27, Accumulated losses
At 1 January
Loss for the year
Share based payments
Vesting of deferred share award
At 31 December
Group
2017
£’000
(174,489)
(9,017)
9451
(102)
(182,663)
2016
£’000
(158,713)
(16,641)
865 1
–
(174,489)
Company
2017
£’000
(121,383)
(1,207)
–
–
(122,590)
2016
£’000
(119,602)
(1,781)
–
–
(121,383)
Note 1 – The credit to accumulated losses is made up out of the charge for the year relating to employee share-based payment plans of £749,000 (2016: £500,000) (note 26),£314,000
(2016: £365,000) related to the vesting of deferred share awards made to executive directors and senior managers, less £118,000 (2016: nil) in relation to the exercise of 1,325,035
of these deferred share awards (note 25).
Neither the Company nor its subsidiary undertakings had reserves available for distribution at 31 December 2017
or 31 December 2016.
28, Other reserves
Group
At 1 January 2017
Issue of warrants
At 31 December 2017
At 1 January and 31 December 2016
Warrant
reserve
£’000
Merger
reserve
£’000
Treasury
reserve
£’000
–
1,218
1,218
–
2,291
–
2,291
2,291
(102)
102
–
(102)
Total
£’000
2,189
1,320
3,509
2,189
The Group merger reserve at 31 December 2017 and 2016 comprised £711,000 arising from the consolidation
of Oxford BioMedica (UK) Ltd using the merger method of accounting in 1996, and £1,580,000 from the application
of merger relief to the purchase of Oxxon Therapeutics Limited in 2007.
All shares previously held in the treasury reserve have now vested leaving a balance of nil (2016: 4,053,751) (Note 25).
Under the Oaktree loan agreement the Company has issued 134,351,226 warrants to Oaktree, equivalent to
4.4% of the enlarged Group's share capital. The warrants are exercisable at the nominal share price of 1p and may
be exercised at any time over the next ten years. The warrants have been fair valued at £1.2 million net of related
expenses and this amount has been credited to the warrant reserve.
Company
At 1 January 2017
Credit in relation to employee share schemes
Issue of warrants
At 31 December 2017
At 1 January 2016
Credit in relation to employee share schemes
At 31 December 2016
Warrant
reserve
£’000
–
–
1,218
1,218
–
–
–
Merger
reserve
£’000
1,580
–
–
1,580
1,580
–
1,580
Share
Scheme
Reserve
£’000
6,052
749
–
6,801
5,552
500
6,052
Total
£’000
7,632
749
1,218
9,599
7,132
500
7,632
Options over the Company’s shares have been awarded to employees of subsidiary companies. In accordance
with IFRS 2 ‘Share-based Payment’ the expense in respect of these awards is recognised in the subsidiaries’ financial
statements (see note 26). In accordance with IFRS 2 the Company has treated the awards as a capital contribution
to the subsidiaries, resulting in an increase in the cost of investment of £749,000 (2016: £500,000) (see note 13)
and a corresponding credit to reserves.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
29, Cash flows from operating activities
Reconciliation of loss before tax to net cash used in operations:
Continuing operations
Operating loss
Adjustment for:
Depreciation
Amortisation of intangible assets
Charge for impairment
Charge in relation to employee share schemes
Non-cash gains
Changes in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in deferred income
Increase/(decrease) in provisions
(Increase)/decrease in inventory
Net cash used in operations
Group
2017
£’000
2016
£’000
Company
2017
£’000
2016
£’000
(5,668)
(11,313)
(1,207)
(1,781)
4,113
262
971
945
(2,297)
(11,183)
2,687
9,759
8
(1,130)
(1,533)
3,340
335
78
865
(657)
4,683
(3,283)
268
(749)
504
(5,929)
–
–
–
–
–
(6)
(95)
–
–
–
(1,308)
–
–
–
–
–
8
150
–
–
–
(1,623)
30, Pension commitments
The Group operates a defined contribution pension scheme for its directors and employees. The assets of the
scheme are held in independently administered funds. The pension cost charge of £958,000 (2016: £748,000)
represents amounts payable by the Group to the scheme. Contributions of £138,000 (2016: £109,000),
included in accruals, were payable to the scheme at the year-end.
31, Operating lease commitments – minimum lease payments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Group
Not later than one year
Later than one year and not later than five years
Over five years
Total lease commitments
2017
£’000
94
330
144
568
2016
£’000
104
339
226
669
The Group leases equipment under non-cancellable operating lease agreements. The Group also leased its Medawar
Centre laboratories and offices up until 2016, and continues to lease the manufacturing site at Yarnton, Oxford under
a non-cancellable operating lease agreement. The leases have various terms, escalation clauses and renewal rights.
The Company had no operating lease commitments during the year (2016: none).
Oxford BioMedica plc | Annual report and accounts 2017
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32, Contingent liabilities and capital commitments
The Group had commitments of £850,000 for capital expenditure for leasehold improvements, plant and equipment
not provided for in the financial statements at 31 December 2017 (2016: £237,000).
33, Related party transactions
Identity of related parties
The Group consists of a parent, Oxford BioMedica plc, one wholly-owned trading subsidiary (Oxford BioMedica (UK)
Limited), the principal trading company, and one dormant subsidiary (Oxxon Therapeutics Limited), which was
acquired and became dormant in 2007 when its assets and trade were transferred to Oxford BioMedica (UK) Limited.
The registered address for the Company and all of its subsidiaries is Windrush Court, Transport Way, Oxford OX4 6LT.
The parent company is responsible for financing and setting group strategy. Oxford BioMedica (UK) Limited carries
out the Group strategy, employs all the UK staff including the directors, and owns and manages all of the Group’s
intellectual property. The proceeds from the issue of shares by the parent are passed from Oxford BioMedica plc to
Oxford BioMedica (UK) Limited as a loan, and Oxford BioMedica (UK) Limited manages group funds and makes
payments, including the expenses of the parent company.
Company: transactions with subsidiaries
Purchases:
Parent company expenses paid by subsidiary
Warrants:
Issue of warrants for shares as part of consideration for loan obtained by subsidiary
Cash management:
Cash loaned by parent to subsidiary
2017
£’000
2016
£’000
(976)
(2,448)
1,218
–
5,551
12,794
The loan from Oxford BioMedica plc to Oxford BioMedica (UK) Limited is unsecured and interest free. The loan is not
due for repayment within 12 months of the year end. The year-end balance on the loan was:
Company: year-end balance of loan
Loan to subsidiary
2017
£’000
176,432
2016
£’000
170,639
The investment in the subsidiary, of which the loan forms part, has been impaired by £126 million (note 13)
in previous years.
In addition to the transactions above, options over the Company’s shares have been awarded to employees
of subsidiary companies. In accordance with IFRS 2, the Company has treated the awards as a capital contribution
to the subsidiaries, resulting in a cumulative increase in the cost of investment of £6,801,000 (2016: £6,052,000).
There were no transactions (2016: none) with Oxxon Therapeutics Limited.
Company: transactions with related parties
There is an outstanding balance of £5,000 (2016: £28,000) owed to Lorenzo Tallarigo at year end. There were no
other outstanding balances in respect of transactions with directors and connected persons at 31 December 2017
(2016: none). Key person remuneration can be seen in note 5 of the financial statements.
Oxford BioMedica plc | Annual report and accounts 2017
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
34. Subsequent events
On 15 February 2018, the Group announced that it had completed a major new collaboration and licence agreement
with Bioverativ Inc. for the development and manufacturing of lentiviral vectors to treat haemophilia. The agreement
includes a licence to use Oxford BioMedica's LentiVector-Enabled™ technology and access to its industrial-scale
manufacturing technology.
Under the terms of the agreement, Oxford BioMedica will receive a $5 million upfront payment from Bioverativ.
Oxford BioMedica is also eligible to receive various milestone payments, potentially worth in excess of $100 million,
and undisclosed royalties on net sales of Bioverativ's lentiviral vector haemophilia products. Bioverativ will fund
process development and scale-up activities for its lentiviral vector haemophilia products. The agreement allows
for the parties to put in place a clinical supply agreement for GMP manufacturing of haemophilia products by
Oxford BioMedica.
On 9 March 2018, the Group announced that it had placed 174,346,817 new ordinary shares in the Company at a
price of 11.75 pence per share with both new and existing investors. The price of 11.75 pence per share represented
a 6% discount to the closing price of 12.48 pence per share on 8 March 2018. Gross proceeds from the placing were
£20.5 million, net proceeds were £19.3 million.
The $55 million debt facility with Oaktree Capital Management ("Oaktree") contains an anti-dilution provision under
which, if the Group issues new ordinary shares, the number of warrants held by Oaktree will be adjusted depending
on the price at which the new ordinary shares are issued relative to an average trailing volume weighted share price.
Consequently, Oxford BioMedica is required to issue 133,156 warrants to Oaktree following completion of the
Placing representing an increase of 0.1% over the 134,351,226 warrants already issued to Oaktree as announced
on 30 June 2017.
The Group announced in January 2018 that it has been awarded a £3 million grant by the UK's innovation agency,
Innovate UK, to support the UK's efforts to produce viral vectors and ensure adequate supply to meet future demand.
The grant will be used to support investment in equipment for vector development, vector manufacture, storage and
analytical equipment, as well as other items that are key for the operation of vector GMP facilities. In addition, a small
part of the grant will be used to support the planning for the transition of GMP suites from the use of adherent to
suspension cultures.
The Group notes that during March 2018 it was subject to a cybersecurity incident which involved unauthorised
access to part of the Group's computer systems. As soon as it was discovered, the Group took immediate steps to
respond to and manage the incident appropriately. The Group's initial investigations have indicated that unauthorised
access was gained via a single and isolated user account which has since been disabled. However, it is possible that
the person or persons behind the incident may release some data. The Group's investigation is continuing and
includes an ongoing review of the Group's information security systems. The Group would like to reassure clients,
shareholders and other stakeholders that this incident has not affected, and does not affect, its ability to do business.
The Group has contacted those clients it believes may have been affected. The Group does not expect the incident,
including any possible release of data, to have a material effect on its operations or financial position.
Oxford BioMedica plc | Annual report and accounts 2017
Other matters
Glossary
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Oxford BioMedica specific terminology
LentiVector® platform
Oxford BioMedica’s LentiVector® platform technology is
an advanced lentiviral vector based gene delivery system
which is designed to overcome the safety and delivery
problems associated with earlier generations of vector
systems. The technology can stably deliver genes into
cells with up to 100% efficiency and can integrate genes
into non-dividing cells including neurons in the brain and
retinal cells in the eye. In such cell types, studies suggest
that gene expression could be maintained indefinitely.
The LentiVector® platform technology also has a larger
capacity than most other vector systems and can
accommodate multiple therapeutic genes.
OXB-102: Parkinson’s disease
OXB-102 is a gene-based treatment for Parkinson’s
disease, a progressive movement disorder caused by the
degeneration of dopamine producing nerve cells in the
brain. OXB-102 uses the Company’s LentiVector® platform
technology to deliver the genes for three enzymes that
are required for the synthesis of dopamine. The product
is administered locally to the region of the brain called
the striatum, converting cells into a replacement
dopamine factory within the brain, thus replacing
the patient’s own lost source of the neurotransmitter.
OXB-201: “wet” age-related macular degeneration
OXB-201 is a gene-based treatment for neovascular
“wet” age-related macular degeneration (AMD) and
diabetic retinopathy (DR). OXB-201 aims to preserve and
improve the vision of patients through anti-angiogenesis;
blocking the formation of new blood vessels. The product
uses the Company’s LentiVector® platform technology
to deliver two anti-angiogenic genes, endostatin and
angiostatin, directly to the retina.
SAR 422459: Stargardt disease
SAR 422459 is a gene-based therapy for the treatment
of Stargardt disease. The disease is caused by a mutation
of the ABCR gene which leads to the degeneration of
photoreceptors in the retina and vision loss. SAR 422459
uses the Company’s LentiVector® platform technology
to deliver a corrected version of the ABCR gene. A single
administration of the product directly to the retina could
provide long-term or potentially permanent correction.
SAR 421869: Usher syndrome type 1B
SAR 421869 is a gene-based therapy for the treatment
of Usher syndrome 1B. The disease is caused by a
mutation of the gene encoding myosin VIIA (MY07A),
which leads to progressive retinitis pigmentosa combined
with a congenital hearing defect. SAR 421869 intends to
address vision loss due to retinitis pigmentosa by using
the Company’s LentiVector® platform technology to
deliver a corrected version of the MYO7A gene. A single
administration of the product could provide long-term
or potentially permanent correction.
OXB-202: corneal graft rejection
OXB-202 is a gene-based treatment for the prevention
of corneal graft rejection. Corneal grafting arises from
a need to remove and replace pathology arising in the
cornea causing ‘clouding’. Although one of the most
successfully transplanted tissues, a significant number
of grafts are rejected due to vascularisation. OXB-202
uses the Company’s LentiVector® platform technology
to deliver endostatin and angiostatin ex vivo to
donor corneas prior to transplant in order to block
vascularisation and to prevent graft rejection.
5T4 tumour antigen
The 5T4 tumour antigen is a unique protein found
on most common types of solid cancer. It is potentially
a valuable target for novel anti-cancer interventions given
its restricted expression in normal tissues and its high
prevalence on the surface of both primary and metastatic
cancerous cells. The 5T4 tumour antigen was identified
through research into the similarities between the
development of the placenta during pregnancy and the
progression of cancer. 5T4 is produced by both cancerous
cells and also by placental and foetal cells,suggesting that
the process of immunological escape in pregnancy and
cancer is based on similar mechanisms.
OXB-302 (CAR-T5T4): cancer
OXB-302 aims to destroy cancerous cells expressing the
5T4 tumour antigen. It uses the Group’s LentiVector®
platform and 5T4 antigen to target cancer cells expressing
5T4 tumour antigen expressed on the surface of most
solid tumours and some haematological malignancies.
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Other matters
Glossary
Terminology not specific to Oxford BioMedica
AAV
Adeno-associated viruses (AAV) is a small virus which
infects humans and some other primate species.
Advanced Manufacturing Supply Chain Initiative
(AMSCI)
The Advanced Manufacturing Supply Chain Initiative
is a funding competition designed to improve the global
competitiveness of UK advanced manufacturing
supply chains.
Anti-angiogenisis
The creation of new blood vessels, known as
angiogenesis, is a critical element in tumour formation
and growth. Endostatin and angiostatin were discovered
by one of the best known researchers in the field of
angiogenesis, Dr. Judah Folkman of Children’s Hospital
and the Harvard Medical School in Boston. The proteins
have shown potent anti-cancer activity in preclinical
models and a potentially additive effect when used
in combination.
Biologics License Application (BLA)
The BLA is a request for permission to introduce
or deliver for introduction, a biological product into
the US market.
CAR-T therapy
Adoptive transfer of T cells expressing Chimeric
Antigen Receptors (CAR) is an anti-cancer therapeutic
as CAR-modified T cells can be engineered to target
virtually any tumour associated antigen.
Cell therapy
Cell therapy is defined as the administration of live whole
cells in a patient for the treatment of a disease often
in an ex vivo setting.
Clinical trials (testing in humans)
Clinical trials involving new drugs are commonly
classified into three phases. Each phase of the drug
approval process is treated as a separate clinical trial.
The drug-development process will normally proceed
through the phases over many years. If the drug
successfully passes through all phases it may be
approved by the regulatory authorities
— Phase I: screening for safety
— Phase II: establishing the efficacy of the drug,
usually against a placebo
— Phase III: final confirmation of safety and efficacy
CTL019
CTL019 is a CAR-T cell therapy for patients with B cell
cancers such as acute lymphoblastic leukemia (ALL),
B cell non-Hodgkin lymphoma (NHL), adult disease
chronic lymphocytic leukemia (CLL) and diffuse large
B cell lymphoma.
DLBCL
Diffuse large B-cell lymphoma (DLBCL) is a cancer of B cells,
a type of white blood cell responsible for producing
antibodies. It is the most common type of non-Hodgkin
lymphoma among adults.
DNA
Deoxyribonucleic acid (DNA) is a molecule that carries
genetic information.
Ex Vivo
Latin term used to describe biological events that take
place outside the bodies of living organisms.
FDA
US Food and Drug Administration (FDA) is responsible
for protecting the public health by assuring the safety,
effectiveness, quality, and security of human and
veterinary drugs, vaccines and other biological products,
and medical devices.
Gene therapy
Gene therapy is the use of DNA to treat disease by
delivering therapeutic DNA into a patient’s cells which
can be in an ex vivo or in vivo setting. The most common
form of gene therapy involves using DNA that encodes
a functional, therapeutic gene to replace a mutated gene.
Other forms involve directly correcting a mutation,
or using DNA that encodes a therapeutic protein drug
to provide treatment.
GxP, GMP, GCP, GLP
GxP is a general term for Good (Anything) Practice.
GMP, GCP and GLP are the practices required to conform
to guidelines laid down by relevant agencies for
manufacturing, clinical and laboratory activities.
Innovate UK
Innovate UK is the UK’s innovation agency. Its role is to
stimulate innovation, working with business and other
partners, in order to accelerate economic growth.
In Vitro
Latin term (for within the glass) refers to the technique
of performing a given procedure in a controlled
environment outside of a living organism.
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In Vivo
Latin term used to describe biological events that take
place inside the bodies of living organisms.
IP
Intellectual Property (IP) refers to creative work
which can be treated as an asset or physical property.
Intellectual property rights fall principally into four main
areas; copyright, trademarks, design rights and patents.
Investigational Medicinal Product (IMP)
A pharmaceutical substance being tested in a clinical trial.
Lentiviral vectors
Gene delivery vector based on lentiviruses.
Definitions of non-GAAP measures
EBITDA
EBITDA (Earnings before Interest, Tax, Depreciation,
Amortisation and share based payments) is a non-GAAP
measure and is often used as a surrogate for operational
Cash flow.
EBIDA
EBIDA is an internal measure used by the Group, defined
as EBITDA with the R&D tax credit included.
Gross income
Gross income is the aggregate of Revenue and Other
Operating income.
Pre-clinical studies
Pre-clinical studies (also known as non-clinical studies)
is the stage of research that takes place before clinical
trials can begin during which important feasibility,
iterative testing and drug safety data is collected.
r/r paediatric ALL
Relapsed or refractory (r/r) acute lymphoblastic leukaemia
(ALL) is a type of cancer in which the bone marrow
in children and young adults make too many immature
B lymphocytes (a type of white blood cell) that are
resistant to treatment.
SPV
Special Purpose Vehicle (SPV) is a subsidiary company
with an asset/liability structure and legal status that
is created to fulfil specific objectives.
UK Corporate Governance Code (the Code)
The UK Corporate Governance Code is published
by the UK Financial Reporting Council and sets out
standards of good practice in relationship to board
leadership and effectiveness, remuneration,
accountability and relations with shareholders.
Viral vectors
Are tools commonly based on viruses used by molecular
biologists to deliver genetic material into cells.
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Other matters
Advisers and contact details
Advisers
Financial adviser and broker
Peel Hunt
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
Financial adviser and joint broker
WG Partners
85 Gresham Street
London EC2V 7NQ
United Kingdom
Financial and corporate
communications
Consilium Strategic Communications
41 Lothbury
London EC2R 7HG
United Kingdom
Registered independent auditors
PricewaterhouseCoopers LLP
3 Forbury Place
23 Forbury Road
Reading RG1 3JH
United Kingdom
Contact details
Oxford BioMedica plc
Windrush Court
Transport Way
Oxford OX4 6LT
United Kingdom
Tel: +44 (0) 1865 783 000
Fax: +44 (0) 1865 783 001
Oxford BioMedica (UK) Ltd
bioprocessing facilities
Harrow House
County Trading Estate
Transport Way
Cowley
Oxford OX4 6LX
United Kingdom
Tel: +44 (0) 1865 785 300
Fax: +44 (0) 1865 785 301
Unit 5
Oxford Industrial Park
Yarnton
Oxford OX5 1QU
United Kingdom
Tel: +44 (0) 1865 785 300
Fax: +44 (0) 1865 785 301
enquiries@oxfordbiomedica.co.uk
www.oxfordbiomedica.co.uk
Solicitors
Covington & Burling LLP
265 Strand
London WC2R 1BH
United Kingdom
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Company secretary
and registered office
Stuart Paynter
Windrush Court
Transport Way
Oxford OX4 6LT
United Kingdom
Oxford BioMedica plc | Annual report and accounts 2017
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Oxford BioMedica plc
Windrush Court, Transport Way
Oxford OX4 6LT, United Kingdom
Tel: +44 (0) 1865 783000
Fax: +44 (0) 1865 783001
www.oxfordbiomedica.co.uk
enquiries@oxfordbiomedica.co.uk