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Preparing for success
Annual report and accounts 2019
Oxford Biomedica in brief
Oxford Biomedica is a pioneer of gene and cell therapy with a leading
position in lentiviral vector 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 system, LentiVector®
platform, 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, liver and CNS disorders.
The Group has also entered into a number of partnerships, including
with Novartis, Bristol Myers Squibb, Sanofi, Axovant Gene Therapies,
Orchard Therapeutics, Boehringer Ingelheim, the UK Cystic Fibrosis Gene
Therapy Consortium and Imperial Innovations, 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 550 people.
1 Preparing for success
3 Demand in the gene and
cell therapy sector is reaching
new heights
7 An area bursting with activity
11 Leading industrialisation
15 Strategic report
16 Group at a glance
18 Products pipeline
20 The Group's business model
22 The Group’s stakeholders
24 Operational highlights
delivered in 2019
Financial highlights delivered
in 2019
25
26 Chairman’s statement
28
Chief Executive Officer’s and
2019 performance review
Delivery of 2019 objectives
34 Management team
36
37 Objectives set for 2020
38
Financial review
48 Responsible business
55
Non-financial statement
57 Corporate governance
58
Principal risks, uncertainties
and risk management
63 Board of Directors
66 Corporate governance report
76 Directors’ remuneration report
94 Directors’ report
101
Independent auditors’
report
109 Group financial statements
110
Consolidated statement
of comprehensive income
Statement of financial
positions
111
112 Statements of cash flows
113
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
114
151 Other matters
Glossary
151
154 Advisers and contact details
Preparing for success
A leader in a rapid
growth sector
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Demand is reaching new heights
Interest in gene and cell therapies is booming. It's become a reality; working
for patients, curing disease and changing lives.
Read more about how our LentiVector® delivery system
is delivering the future of medicine today on page 4.
An area bursting with activity
The sector is rapidly expanding with an ever-increasing amount of new gene
therapies in development – all competing to deliver the next generation
commercial treatments.
Read more about how the Group is expanding
capacity to meet increasing demand on page 8.
Leading industrialisation
Oxford Biomedica has played an important role in developing this
science as healthcare’s future. The Group is now preparing to maximise
its impact and success.
Read more about how the Group is moving Lentiviral
vectors towards critical mass on page 12.
Oxford Biomedica plc | Annual report and accounts 2019
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900
700
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500
400
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200
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Approvals 20251
The FDA is anticipating
approvals rising to
between 10 and 20
a year by 2025
2
0
925
987
1,020
533
0
2
2
4
Approvals today
There have so far been eight
gene therapy products
approved for use by the FDA,
four of them in 2019
2016
2017
2018
2019
2025
Clinical trials underway worldwide
Both submissions and approvals have been increasing
steadily and are now expected to accelerate imminently2
Sources:
1 FDA,2 Alliance of Regenerative Medicine.
Oxford Biomedica plc | Annual report and accounts 2019
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Preparing for success
Demand in the
gene and cell therapy
sector is reaching
new heights
Oxford Biomedica plc | Annual report and accounts 2019
4
Preparing for success
Demand in the gene and cell therapy
sector is reaching new heights
The Group is in a perfect position to
exploit an exciting global opportunity
The fast growing cell and gene therapy market
The cell and gene therapy market continues to grow strongly
post the first approval of a CAR-T therapy in the market with
Novartis’s Kymriah® in August 2017. Since then four further cell
and gene therapy products have been approved and growth in
clinical trials in the area has grown substantially.
The cell and gene therapy market is expected to grow to
a multi-billion dollar market and the total number of gene
therapy and gene-modified cell therapy trials has increased
from 533 in 2016 to 1,020 in 2019 representing a CAGR 17.6%.
The US Food and Drug Administration in anticipation of this
growth has stated their intension to hire 50 additional clinical
reviewers to handle the increase in submissions and the FDA
estimates that by 2025 they will be approving 10 to 20 cell and
gene therapy products a year.
Cell and Gene therapies use vectors to deliver genetic
information into a patient’s cells. There are two types of vector
most commonly used lentiviral based vectors (LV) and adeno-
associated virus based vector (AAV).
Global clinical trials with lentiviral vectors have grown faster
than any other type and are the largest numerically having
grown from 23 clinical trial initiations in 2014 to 57 in 2018
(CAGR 25.5%).
“ We anticipate that by 2020
we will be receiving more
than 200 INDs (in gene and
cell therapy products) per year,
building upon our total of
more than 800 active
cell-based or directly
administered gene therapy
INDs currently on file with
the FDA. And by 2025, we
predict that the FDA will be
approving 10 to 20 cell and
gene therapy products
a year.”
Scott Gottlieb M.D.
Former FDA Commissioner
15 January 2019
Lentivirus
AAV
7
5
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2
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8
2
8
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3
3
2
4
2
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2
8
1
60
50
40
30
20
10
0
2014
2015
2016
2017
2018
Number of trials using each vector type (global)
Oxford Biomedica plc | Annual report and accounts 2019
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Lentivector® gene delivery
system – how it works for
the Novartis Kymriah® CAR-T
therapy
Making a safe vector from a
virus specific to the partners
needs
To make a safe vector system the
viral genes are removed; this also
creates space for the therapeutic
vector payload. The gene/s that
need to be delivered to the target
cells are engineered into the
vector genome. In the case of
CAR-T therapy this gene encodes
for a specific chimeric antigen
receptor (CAR) as required by
the partner. Scale up is then
undertaken to take the production
to a commercial 200L scale.
Production of GMP lentiviral
vector
200L bioreactors are used to
produce a batch of the specific
lentiviral vector which encodes
for the chimeric antigen receptor
(CAR) targeting the particular
antigen in question on the target
cell. In Kymriah® for example the
lentiviral vector encodes for a CAR
targeting CD19 which is expressed
on B-cell cancers. Post batch
production and multiple
confirmatory assays the vector
is them shipped to the partner.
T-cells isolated from patient
The partner arranges patient blood
collection and T-cell isolation.
Lentiviral vector encoding CAR
targeting the specific antigen
are used to transduce expanded
T-cells
T-cells harvested from the patient
are transduced with the lentiviral
vector encoding the specific CAR.
The resulting modified T-cells are
expanded ex vivo prior to infusion
into the patient.
The modified T-cells are infused
back into the patient
Once inside the patient, the
CAR modified T-cells target
‘hunt’ cancer cells and destroy
them and then multiply. These
specific antigen targeting T-Cells
destroy the target cells expressing
the antigen (in the case of
Kymriah® tumour cells expressing
CD19) and persist in the body to
guard against residual or recurring
disease.
LentiVector® platform works
Oxford’s Biomedica’s unparalleled expertise with lentiviral
vectors not only spans in vivo and ex vivo programmes but
also multiple therapeutic areas covering gene modified cell
therapies, ocular diseases, CNS disorders, liver diseases and
respiratory disease.
This expertise and the continual innovation across the platform
to expand the reach of gene therapy means Oxford Biomedica
is able to enable its partners as well as in house programs
to expand into areas otherwise deemed too technically
challenging or costly to pursue.
The Group generates revenue from providing its process
development and manufacturing services, and as well as from
royalties once treatments are approved and available for use as
they use the Group’s intellectual property as an integral part of
what makes these new treatments work.
Lentivector® gene delivery system – enabling the next
generation of medical advances
As at the end of December 2019 the company had 13 partner
programmes in their pipeline comprising eight ex vivo and five
in vivo programmes. This increased by an additional four ex vivo
programmes on signing with Bristol Myers Squibb in March
2020, as well as the additional programme from Novartis in
the first quarter of 2020 and COVID-19 vaccine programme
in April 2020. In total the Group is working with partners on 10
CAR-T/TCR-T programmes, including Novartis’ Kymriah®, the
first FDA and EMA approved CAR-T therapy.
Examples of how our technology works can be found in our
manufacturing brochure which can be downloaded here:
www.oxb.com/bioprocessing
3
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Oxford Biomedica plc | Annual report and accounts 2019
6
With the addition
of two new facilities,
Oxford Biomedica
has more than doubled
its footprint
Oxford Biomedica plc | Annual report and accounts 2019
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Preparing for success
An area bursting
with activity
Oxford Biomedica plc | Annual report and accounts 2019
8
Preparing for success
An area bursting with activity
Lentiviral vectors have several
important advantages over AAV
6 years
Lentiviral vectors demonstrate
long term expression
Lentiviral vectors have demonstrated dose dependant,
stable, long term expression out more than 6 years*
following a single in vivo administration.
* Campochiaro et al.
Hum Gene Ther 28 (1):99-111, 2016
A key advantage of the family of vectors that includes lentiviral
vector is their ability to integrate into the DNA of target cell so
that the genetic information will be copied as cells divide so
that this becomes a permanent modification. This is essential
for ex vivo therapies; while AAV vectors have some ability to
integrate this is limited and hence are currently only used
in vivo applications in cells with limited or no cell division.
Lentiviral vectors can carry about twice the genetic payload
compared to AAV, this allows for the carriage of larger genes
(up to 10kb) and/or the carriage of more than one gene.
This capability for example has been used with Parkinson’s
disease programme, Axo-Lenti-PD which contains three
genes. This programme was developed in house before being
out-licenced to Axovant in 2018.
There is no pre-existing immunity for lentiviral vectors and
hence no pre-screening is needed.
Lentiviral Vectors
AAV Vectors
Efficient in vivo gene delivery
Safe and well tolerated
Large therapeutic payload
No pre-existing immunity
Permanent modifications of dividing cells
IP protection
Ease of manufacture
Lentiviral vectors vs. AAV vectors
Lentiviral vectors such as the Group's Lentivector®
delivery system hold some key advantages over
AAV vectors.
Yes
Good
Excellent
No
Oxford Biomedica plc | Annual report and accounts 2019
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Significant additional capacity will match
global demand
Oxbox Bioprocessing facility
As the cell and gene therapy field continues to expand, the
Group leased an additional facility in Oxford at the end of 2018
to meet the anticipated higher demand for lentiviral vectors.
The new 84,000 sqft (7,800 sqm) facility, Oxbox, complements
Oxford Biomedica’s three existing state-of-the-art GMP
production suites. The initial development phase will fit out
approximately 45,000 sqft (4,200 sqm) in the new facility
with four GMP clean rooms, two fill / finish suites, offices,
warehousing and QC laboratories.
During 2019, facility development made good progress, with
the production suites’ building phase completed by the end
of the year as planned. Validation commenced at the start of
2020, and the Group anticipates achieving regulatory approval
and manufacture of the first commercial batches by the end
of the first half, 2020. In parallel, development of the fill / finish
suites are progressing well, with handover of the first suite
expected by the end of 2020.
Windrush Innovation Centre
Alongside the expansion of Oxford Biomedica’s manufacturing
capacity, the Group is in the process of establishing the
Windrush Innovation Centre (WIC), a new 32,000 sqft
(2,970 sqm) discovery and innovation hub. This brings
together research, automation, process development and
bioprocessing teams to drive LentiVector® platform innovation
and progress the proprietary pipeline. Occupation of the facility
began during the first half of 2019 with increased utilization
expected during 2020.
2
1
3
Expanding capacity
The images above show three of the Group's
five facilities in Oxford.
With the addition of these two new facilities, Oxford Biomedica
has more than doubled its footprint, which now extends to
over 226,000 sqft (21,000 sqm). With its five specialist facilities
centred around Oxford, the Group has built a global hub for
lentiviral vector development and commercialisation.
1
2
3
Shown in the top image is the Group's Windrush
headquarters (building complex on the right).
The new Windrush Innovation centre is
next door to the Group's headquarters
(building complex on the left).
The bottom image is the Group's new
Oxbox facility.
Oxford Biomedica plc | Annual report and accounts 2019
0
1
Driving cost down
through industrialisation
Oxford Biomedica is working
to reduce manufacturing costs,
already making progress and
setting new standards
Mass
markets
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A
Time
2017
First ever gene
therapy treatment
approved by the FDA
using our LentiVector®
delivery system
Availability of treatments
Clincial trials will gather pace and
more and more treatments will
become available
Oxford Biomedica plc | Annual report and accounts 2019
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Preparing for success
Leading
industrialisation
Oxford Biomedica plc | Annual report and accounts 2019
2
1
Preparing for success
Leading industrialisation
Driving lentiviral vectors
towards critical mass
Proprietary platform innovation
Through proprietary platform innovation the Group is driving
the industrialisation of lentiviral vectors. The Group is able
to leverage our expertise to deliver lentiviral vector based
gene therapies. The Group’s CDMO revenues provide a solid
growing financial foundation with significant upside from the
Group’s proprietary pipeline.
What the sector urgently needs to do:
How Oxford Biomedica is answering this:
e e d u p production
t r ialisatio
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1
Process
development
2
Cell and
vector
engineering
I n n ovation
Analytics
Continuous
innovation and
expertise
3
6
5
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4
5
6
The LentiVector® platform –
leading commercial lenti-based
delivery system:
Process development
State-of-the-art facilities spread
over 12,000 sqft (1,115 sqm) and
2 sites. Serum-free suspension
bioreactor process.
Cell and vector engineering
Optimised cell lines for simplified
and scalable manufacturing.
Next generation vectors with
pseudotyping expertise. Access
to EIAV and HIV-1.
SecNucTM
Efficient clearance of residual
DNA during vector production.
Streamlines vector production
and reduces cost of goods.
TRiPSystemTM
Repression of transgene during
vector production. Maximises yields
and improves product quality.
LentiStableTM
Inducible stable packaging and
producer cell lines Simplified,
cost effective and scalable
manufacturing process.
Analytics
Analytical methods recognised
by regulatory authorities. Quality
systems ensuring compliant release
of batches. Automated systems
increase efficiency and
reproducibility.
Oxford Biomedica plc | Annual report and accounts 2019
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Investment in new technologies
Automation and robotics are unlocking productivity.
Our automated systems are already enabling faster
cell line screening as well as highly efficient process
development and analytical testing.
Continuous innovation is driving
the cost of gene therapy down
As a pioneer in its field, Oxford Biomedica has built an enviable
position as a world leading lentiviral vector company. The Group
brings together innovation, expertise and infrastructure that
spans the entire product development and commercialisation
process. This provides a uniquely diversified business model
offering the prospect of long-term sustainable growth.
The Group’s LentiVector® platform enables the industrialisation
of the lentiviral vector, and underpins both its partnerships
and in-house pipeline. Constant innovation is accelerating
operational efficiency and driving down costs, whilst ongoing
investment, such as through the Group’s new artificial
intelligence collaboration with Microsoft, maintains the
LentiVector® platform’s world-leading position.
By spearheading the industrialisation of the lentiviral vector,
Oxford Biomedica can capture significant value from the
rapidly growing gene and cell therapy sector.
The Group continuously innovates to improve
its LentiVector® platform by:
— Engineering our proprietary cell lines and vectors to improve
bioprocessing yield, developing new analytical methods to
increase efficiency and quality, investing in automation.
— The Group's automated systems are already enabling
faster cell line screening as well as highly efficient process
development and analytical testing.
— The Group's investment in robotics and state-of-the-
art manufacturing technologies increases productivity
while reducing development timings and process risk,
using in silico design tools and machine learning to
drive development and innovation via the Group's new
partnership with Microsoft signed in 2019.
In collaborating with innovative companies to integrate cutting
edge technologies into the LentiVector® platform, Oxford
Biomedica is committed to driving costs down, enabling it
become a first choice technology for anyone developing
lentiviral based gene therapy treatments.
Oxford Biomedica plc | Annual report and accounts 2019
4
1
Healthcare stands at a pivotal
moment.
For decades, gene therapy was a
hope; that the future could bring
something better for people
suffering from life threatening
and debilitating diseases for
which there is no effective
available treatments.
Today gene therapy is a reality;
working for patients, curing
disease and changing lives.
5
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1 Preparing for success
3 Demand in the gene and
cell therapy sector is reaching
new heights
7 An area bursting with activity
11 Leading industrialisation
15 Strategic report
16 Group at a glance
18 Products pipeline
20 The Group's business model
22 The Group’s stakeholders
24 Operational highlights
delivered in 2019
Financial highlights delivered
in 2019
25
26 Chairman’s statement
28
Chief Executive Officer’s and
2019 performance review
Delivery of 2019 objectives
34 Management team
36
37 Objectives set for 2020
38
Financial review
48 Responsible business
55
Non-financial statement
57 Corporate governance
58
Principal risks, uncertainties
and risk management
63 Board of Directors
66 Corporate governance report
76 Directors’ remuneration report
94 Directors’ report
101
Independent auditors’
report
109 Group financial statements
110
Consolidated statement
of comprehensive income
Statement of financial
positions
111
112 Statements of cash flows
113
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
114
151 Other matters
Glossary
151
154 Advisers and contact details
Oxford Biomedica plc | Annual report and accounts 2019
6 Strategic report
1
Group at a glance
Who the Group is
Where the Group is
In the fast growing Gene and Cell
therapy sector the Group is leading
the way in lentiviral vectors.
Oxford is one of the global
hotspots for gene and cell
therapy
Windrush Court and Windrush Innovation
Centre, Oxford, UK
The Group’s headquarters are within our
Windrush Court facility which also houses
32,000 sqft (2,970 sqm) of lab space. Next
door is our new Innovation Centre which has
a further 32,000 (2,970 sqm) sqft of
laboratory and office space.
Harrow House and Chancery Gate,
Oxford, UK
The Group’s Harrow House facility first
received MHRA approval to manufacture
in 2012. It has around 4,000 sqft of
manufacturing space with two clean rooms.
Harrow House and Chancery Gate are
located directly opposite our headquarters.
Yarnton, Oxford, UK
Yarnton is where the Group’s facility has FDA
and MHRA approval to manufacture. It has
around 6,000 sqft of manufacturing space,
including one clean room.
Oxbox, Oxford, UK
The Group’s newest 84,000 sqft (7,800 sqm)
facility is Oxbox. The Group is currently fitting
out a portion of this building to provide
45,000 sqft (4,200 sqm) of manufacturing
space to include four cGMP suites and two
Fill and Finish suites. The facility has room for
significant future expansion.
Oxford, UK
Facilities less than one hour from
London Heathrow Airport.
>550
Employees
Oxford Biomedica employes
over 550 people at the Group’s
Oxford locations.
The Group has the first FDA and EMA
approved lentiviral vector-based
gene delivery system through the
Group’s collaboration with Novartis
on Kymriah.®
The Group is a leading global lentiviral vector
specialist with:
— 19 partner programmes.
— Eight proprietary products candidates.
— Over 550 staff.
— Facilities covering in excess of 226,000 sqft
(21,000 sqm).
A first choice partner
UK CYSTIC FIBROSIS
GENE THERAPY
CONSORTIUM
Oxford Biomedica plc | Annual report and accounts 2019
Oxford
London Heathrow
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What the Group does
CDMO and partner’s programmes
Oxford Biomedica’s products
The Group has strong partnerships with Novartis,
Bristol Myers Squibb, Bioverativ (part of the Sanofi
Group), Boehringer Ingelheim, the UK Cystic Fibrosis
Gene Therapy Consortium and Imperial Innovations,
Santen, the Oxford COVID-19 consortium and Orchard
Therapeutics, providing them with access to the Group’s
intellectual property, state-of-the-art production facilities
and expertise. These partnerships provide the Group
with multiple income streams, consisting of upfront
milestone payments, development and production
fees and potential royalties on future product sales.
Using the Group’s unique LentiVector® delivery platform,
the Group has created a valuable portfolio of gene and
cell therapy product candidates in the areas of oncology,
ophthalmology, liver and CNS disorders.
The Group plans to progress its wholly-owned products
via spin-outs and out-licensing opportunities, while
continuing to invest in the Group’s LentiVector®
platform. The Group plans to continue its pre-clinical
R&D to discover new potential products and are willing
to make modest investments to internal and external
assets up to early clinical stage before looking to spin
out or out-licence to a partner.
The Group has licensed products and technology rights
to Sanofi and Axovant.
Indications:
Oncology
Opthamology
CNS
Liver
Proprietary platform innovation
Through proprietary platform Innovation the Group
is driving the industrialisation of lentiviral vectors.
The Group is able to leverage our expertise to deliver
lentiviral vector based gene therapies.
Process
development
Cell and
vector
engineering
Early clinical and
commercial
manufacturing
Analytics
Proprietary
manufacturing
technologies
Oxford Biomedica plc | Annual report and accounts 2019
8 Strategic report
1
Products pipeline
The Group is currently working on 19 partner programmes and has
eight proprietary programmes of which three have been out-licenced.
CDMO Pipeline
The Group is working with partners on 19 programmes compared to nine at the end of
2018. Oxford Biomedica receives multiple revenues streams from its work with partners
inclining upfront licence fees, process development fees and incentives, bioprocessing
revenues and royalties on sales once a therapy has reached the market.
Product/ indication
Pre-clinical
Phase I
Phase I/II
Phase II
Phase III
Approved
LentiVector® platform
IP enabled and royalty bearing products (process development and bioprocessing revenues, and royalties)
Kymriah®
r/r ALL/ r/r DLBCL
2nd CAR-T
Cancer (multiple)
3rd CAR-T
Cancer (multiple)
4th CAR-T
Cancer (multiple)
5th CAR-T
Cancer (multiple)
6th CAR-T
Cancer (multiple)
AXO-Lenti-PD
Parkinson’s disease
1st CAR-T/ TCR-T
Undisclosed
2nd CAR-T/ TCR-T
Undisclosed
3rd CAR-T/ TCR-T
Undisclosed
4th CAR-T/ TCR-T
Undisclosed
OTL-101
ADA SCID
OTL-201
MPS-IIIA
Other
Undisclosed
Factor VIII
Haemophilia A
Factor IX
Haemophilia B
CFTR gene
Cystic Fibrosis
Ocular gene
Inherited retinal disease
Vaccine
COVID-19
1
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1
1
1
1
1
4
5
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9
4
2
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UK CYSTIC FIBROSIS
GENE THERAPY
CONSORTIUM
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Read more about our CDMO pipeline on pages 28 and 29.
Oxford Biomedica plc | Annual report and accounts 2019
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Gene therapeutics pipeline
The Group has eight programmes in its gene therapeutics pipeline of which three have
been out-licenced. Revenues from out-licenced programmes come in the form of upfront,
milestones and royalties.
Product/indication
Pre-clinical
Phase I
Phase I/II
Phase II
Phase III
Approved
5
6
6
Oxford Biomedica partnered products
Development milestones and royalties
AXO-Lenti-PD
Parkinson’s disease
SAR422459
Stargardt disease
SAR421869
Usher syndrome type 1B
Oxford Biomedica proprietary products
To be spun-out or out-licensed
OXB-302
Haematological malignancies
OXB-203
Wet AMD
OXB-204
LCA10
OXB-103
ALS
OXB-401
Liver indication
Read more about our the Group’s gene therapeutics pipeline
on page 30.
Pipeline indications
2
6
6
8
10
1
3
2
4
Oncology
Haematology
Immunology
Metabolic
Neurology
5
Ophthalmology
6
Respiratory
7
Central Nervous System (CNS)
8
9
Infectious Disease
Hepatology
10
1
Treatment approved
Oxford Biomedica plc | Annual report and accounts 2019
0
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Strategic report
The Group’s business model
LentiVector® platform
IP – patents and know-how | facilities | expertise | quality systems
1
Arising IP
Arising IP
Arising IP & technical and
scientific knowledge transfer
2
19 CDMO partner’s programmes
3
Eight gene therapeutics
proprietary products
Multiple revenue
streams
Out-licence
Internal
development
Partners’ programmes
Out-licenced products
Internal pipeline
— Process development fees
— Process development incentives
— Bio-processing revenues
— Royalties
— Development funding
— Upfront, milestones &
royalties
— Wholly owned products
4
UK CYSTIC FIBROSIS
GENE THERAPY
CONSORTIUM
1
2
LentiVector® platform
The Group’s LentiVector® platform
is at the heart of Oxford
Biomedica. The IP, patents and
know-how, along with the
Group’s 20 plus years of expertise
in applying its LentiVector®
technology for both in vivo and
ex vivo therapies has made the
Group not only a pioneer in the
field but also the global leader that
it is today. Looking to the future,
further innovation on the platform
is key to the Group’s success and
to remain at the forefront of this
technology. This constant
innovation and ongoing
investment in the platform
alongside new collaborations such
with Microsoft in artificial
intelligence and machine learning
will accelerate operational
efficiency and driving down costs.
The Group’s mission though this
investment and innovation is to
industrialise lentiviral vector and in
the process of doing so seed the
Group’s technology and IP across
the cell and gene therapy markets
to enable the full potential of this
market to be reached and for
Oxford Biomedica to reap the
benefits of being a key enabler in
this new wave of medical
advancement.
Link to risks
A C E
Partner programmes:
Contract Development
and Manufacturing
Organisation, (CDMO)
Oxford Biomedica was the first
FDA and EMA approved
commercial supplier of lentiviral
vectors and in the last year has
seen its partner funded pipeline
grow from ten to 19 programmes.
The Group leverages its position
to provide partners with access to
its world-leading capabilities and is
the leading supplier of scale up
solutions and commercial supply.
Oxford Biomedica’s high-value,
customer-centric partnerships form
a strong business foundation, bringing
ongoing repeatable revenues as
demonstrated by the Group’s
recently extended commercial
supply agreement with Novartis
and new partnership with Bristol
Myers Squibb. As Oxford Biomedica
continues its growth it is building
new capacity, such as its Oxbox
facility, to meet the increasing
demand for its expertise. The Group
expects the pipeline of partnerships
to expand further as the year progresses.
Link to risks
A B C E
Oxford Biomedica plc | Annual report and accounts 2019
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OXB products
(gene therapeutics)
Whilst the Group’s partnerships
are the foundation of a strong
underlying business, its wholly-
owned gene and cell therapy
pipeline offers significant upside.
Leveraging its internal research
expertise developed over 20
years, the Group selects patient-
centric product candidates
targeting clinical excellence.
These are progressed through
proof-of-concept, and
potentially into early clinical
development, before seeking
third-party funding for full
development and
commercialisation. This
approach reduces risk while
retaining significant value
through licence income,
milestone payments and sales
royalties. Additionally, Oxford
Biomedica seeks to retain
manufacturing rights for its
out-licensed programmes,
capturing further value
throughout their development
and commercialisation. This
pipeline strategy is exemplified
by the Group’s 2018 land-mark
out-licensing agreement with
Axovant for the Group’s
Parkinson’s disease candidate.
Link to risks
A C D E
Proprietary internal
pipeline
Following an internal pipeline
review priorities have now been
set for where investment will
be made. OXB-302 is the Group's
priority candidate and targets
haematological tumours with a
CAR-T 5T4. The 5T4 antigen has
been shown to be highly expressed
on various haematological
tumours as well as most solid
tumours with restricted
expression on normal tissues.
Advanced pre-clinical work is
continuing on OXB-302 as the
programme moves towards
entry into the clinic. OXB-203,
currently in pre-clinical studies,
is targeting Wet AMD and uses
Oxford Biomedica’s technology
to deliver a gene to express
afibercept (a VEGF-trap). This
programme builds on the
demonstrated long term gene
expression data seen with its
predecessor OXB-201, targeting
angiostatin and endostatin for
which work has now been
halted with VEGF-trap approach
taken with OXB-203 seen as a
better validate target for
wet-AMD. In addition, OXB-
202, which targeted the same
genes as OXB-201 but for
corneal graft rejection, will also
no longer be further advanced
due to moving away from the
angiostatin/endostatin
approach. In addition, the
Group is continuing pre-clinical
work on OXB-204 (LCA10) and
OXB-103 (ALS) and a new
pre-clinical program, OXB-401
(liver indication), has been
initiated. Work on OXB-208
(RP1) has been de-prioritised
and hence halted in favour of
far more promising
programmes. There were no
cost implications that resulted
from the decision to stop.
Link to risks
A D E
Oxford Biomedica plc | Annual report and accounts 2019
Value creation for our stakeholders in 2019
Shareholders
The Group’s shareholders play an
important role in monitoring and
safeguarding the governance of
the Group by ensuring their views
are brought into Board
discussions and considered
in decision making.
Partners
The Group will continue to target
new strategic commercial
relationships in 2020, whilst
continuing to maintain the very
good relationship it has with its
existing partners.
Employees
The Group’s team are some of the
most highly skilled and focused
people in the cutting edge world
of gene and cell therapy, working
in office and laboratory facilities
that are amongst the best.
Local communities
The Group has provided high
skilled jobs to the local community,
and have established an apprenticeship
scheme in collaboration with
Advanced Therapies Apprenticeship
Community and the University
of Kent.
200
In 2019 we attended over 200
meetings in the investor
community
19
Partner programmes
100
New colleagues in 2019
8
Apprenticeships created
in 2019
Governing bodies and regulators
The Group operates in a highly regulatory environment. With a long
history of achievements, the Group’s technology is recognised by
regulators on both sides of the Atlantic.
Read more about the Group’s stakeholders on pages 22 and 23.
Principal risks facing the business
The main risks are:
A
B
C
D
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 out-licence or spin-out the Group’s product development
candidates so that development stops.
E
Inability to attract and/or retain highly skilled employees.
The principle risks facing the Group, including how they are
managed and mitigated, are set out in detail on pages 58 to 62.
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Strategic report
The Group’s stakeholders
The Group believes that, to maximise value and secure
long-term success, the Group must take account of
what is important to key stakeholders. This is best
achieved through proactive and effective engagement.
A stakeholder mapping exercise identified the Group’s
key stakeholders and channels for engagement.
s172 Companies Act 2006
The Group sets out in the adjacent table the key stakeholder groups,
the material issues and how the Group engages with them. Each
stakeholder group requires a tailored engagement approach to foster
effective and mutually beneficial relationships.
By understanding the Group’s stakeholders, the Group can factor
into Board meeting discussions the potential impact of decisions on
each stakeholder group and consider their needs and concerns, in
accordance with s172 of the Companies Act 2006 (see page 68). The
Group works effectively with its employees, customers and suppliers,
to make a positive contribution to local communities and achieve long-
term sustainable returns for the Group’s investors. Acting in a fair and
responsible manner is a core element of the Group’s business practice
as seen in the Responsible business report on pages 48 to 54.
Key stakeholders
We have identified seven key stakeholders as follows:
Employees
1
Patients
2
Customers
3
Local communities
4
Suppliers
5
Regulators
6
Shareholders
7
Oxford Biomedica plc | Annual report and accounts 2019
1
2
3
4
5
6
7
Stakeholders
Employees
The Group has an experienced, diverse and
dedicated workforce which it recognises as
a key asset of the business. Therefore, it is
important that the Group continues to create
the right environment to encourage and create
opportunities for individuals and teams to realise
their full potential.
Patients
The Group works on the development of
innovative products either by itself or with
partners in order to provide life changing
treatments to patients.
Customers
The continued performance of the Group’s
business would not be possible without
understanding the customers’ needs and future
aspirations. Many of the customers have come
to the Group as their businesses have moved
into the cell and gene therapy sector, which
is testament to the Group’s expertise and
leadership in the sector.
Local communities
The Group is committed to supporting the
communities in which the Group operates,
including local businesses, residents, schools
and the wider public.
Suppliers
The Group outsource some of its activities to
third-party suppliers and providers. As a result,
it is crucial that the Group develops strong
working relationships with the Group’s suppliers,
so the Group can enhance the efficiency of the
business and create value.
Regulators
The Group operates in a highly regulated
environment and it is important that it engages
with the regulators as required.
Shareholders
The Groups shareholders play an important role
in monitoring and safeguarding the governance
of the Group.
– Patient safety.
– Well-designed
clinical trials.
– Progressing
product
candidates to
the market.
– Customer
retention and
expansion of
programmes.
– Identification of
new customers.
Key issues
How the group engages
2019 highlights
Further links
– Opportunities
The Group has an open, collaborative and inclusive management
– Stuart Henderson
p. 96 People and
for development
and progression.
– Health, safety
and wellbeing.
– Opportunity to
structure and engages regularly with employees. The Group does
this through site visits by Board members, an appraisal process,
structured career conversations, management development
programmes, employee surveys, webinars and webcasts, digital
sharing platforms, company presentations, town hall meetings,
share ideas and
email briefings and newsletters and its well-being programme.
make a difference.
Employee engagement is frequently measured and the Group has
– Diversity and
designated Stuart Henderson, as the Non-Executive Director to
inclusion.
oversee employee engagement, including gathering the views
designated as the
Non-Executive
Director to engage
with the workforce
advisory panel.
– Roll out of the
management
development
programme.
of the workforce. The Group is also in the process of establishing
– Roll out of the
a workforce advisory panel.
Rewards programme.
Employee.
p. 49 Rewards.
p. 49 Employee bonus.
p. 49 Diversity.
p. 50 Employee
communication.
Via the Clinical Development Service department the Group
– More than 200
p. 54 Clinical trials
consults with key clinical opinion leaders/physicians and regulatory
experts in order to design safe clinical trials for patients.
patients treated with
the Group’s lentiviral
vectors.
and ethics.
– Understand
Via the Group’s client partner & alliance management
customers’ needs.
department and also the business development team, the Group
communicates regularly with its existing customers/partners
to discuss their goals and incorporate them into the Group’s
– Added additional
CART targets with
Novartis.
– Progressed
p. 29 2019
Performance
review.
p. 81 Executive annual
bonus.
schedules/strategy. The Group does this through meetings, joint
steering committees, engagement events and forums. This active
programmes with the
Group’s partners as
engagement ultimately ensures that the Group meets their needs
per agreement.
and assists them to achieve their business goals.
– School and
The Group engages with the local community not only through the
– Eight apprenticeships
p. 48 People.
careers events.
planning process but also through the Group’s “Helping hands” forum,
– Appointment of an
p. 51 Charitable work.
– Local charity
involvement.
with volunteering, fundraising and charity work. The Group also
early careers advisor
p. 51 Community.
attends schools and career fairs, and also provides apprenticeships and
– £9,500 in fundraising
p. 51 Apprenticeship
work experience opportunities. The Group also liaises with industry
for local Oxford
scheme.
bodies and government organisations to enhance the positive impact
charity.
p. 51 Charitable giving.
the Group has on the communities and sector in which it operates.
– Long-term
partnerships.
– Collaborative
approach.
relationships with its suppliers so that both parties benefit. The
Group has regular supplier meetings and business reviews and
has a supplier code of conduct.
Through effective collaboration, the Group aims to build long-term
– Establishment of
p. 62 Brexit.
procurement and
supplier function to
interact with suppliers
more effectively.
p. 54 Slavery and code
of conduct.
– Meeting
regulatory
compliance.
The Group has dialogue with government regulatory bodies on
a regular basis and attends industry forums. The Group also has
compliance audits performed by both government regulatory
bodies and by its customers.
p. 59 Regulatory risk.
– Four audits by
government
regulatory bodies.
– Two audits by
customers.
– Corporate
governance.
Through the Group’s investor relations programme which
includes regular updates, meetings, roadshows and the Group’s
– 200+ meetings
with the investor
– Business ethics.
Annual General Meeting (AGM) and the fact that representatives
community.
p 70 Shareholder
engagement
in 2019.
– Strategy and
of two major shareholders sit on the Board, the Group ensures
business model
shareholder views are brought into the Board discussions and
– 30+ shareholders
attended the AGM.
p. 79 Remuneration –
annual bonus
– Financial
considered in the Groups decision making. The Group also
– New investor in Novo
and LTIP.
performance.
engages with shareholders via the Annual Report and Accounts
Holdings.
and the Corporate website.
3
2
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Stakeholders
Employees
The Group has an experienced, diverse and
dedicated workforce which it recognises as
a key asset of the business. Therefore, it is
important that the Group continues to create
the right environment to encourage and create
opportunities for individuals and teams to realise
their full potential.
Patients
The Group works on the development of
innovative products either by itself or with
partners in order to provide life changing
treatments to patients.
Customers
The continued performance of the Group’s
business would not be possible without
understanding the customers’ needs and future
aspirations. Many of the customers have come
to the Group as their businesses have moved
into the cell and gene therapy sector, which
is testament to the Group’s expertise and
leadership in the sector.
Local communities
The Group is committed to supporting the
communities in which the Group operates,
including local businesses, residents, schools
and the wider public.
Suppliers
The Group outsource some of its activities to
third-party suppliers and providers. As a result,
it is crucial that the Group develops strong
working relationships with the Group’s suppliers,
so the Group can enhance the efficiency of the
business and create value.
Regulators
The Group operates in a highly regulated
environment and it is important that it engages
with the regulators as required.
Shareholders
The Groups shareholders play an important role
in monitoring and safeguarding the governance
of the Group.
Key issues
How the group engages
2019 highlights
Further links
– Opportunities
for development
and progression.
– Health, safety
and wellbeing.
– Opportunity to
share ideas and
make a difference.
– Diversity and
inclusion.
The Group has an open, collaborative and inclusive management
structure and engages regularly with employees. The Group does
this through site visits by Board members, an appraisal process,
structured career conversations, management development
programmes, employee surveys, webinars and webcasts, digital
sharing platforms, company presentations, town hall meetings,
email briefings and newsletters and its well-being programme.
Employee engagement is frequently measured and the Group has
designated Stuart Henderson, as the Non-Executive Director to
oversee employee engagement, including gathering the views
of the workforce. The Group is also in the process of establishing
a workforce advisory panel.
– Stuart Henderson
designated as the
Non-Executive
Director to engage
with the workforce
advisory panel.
– Roll out of the
management
development
programme.
– Roll out of the
Rewards programme.
p. 96 People and
Employee.
p. 49 Rewards.
p. 49 Employee bonus.
p. 49 Diversity.
p. 50 Employee
communication.
– Patient safety.
– Well-designed
clinical trials.
– Progressing
product
candidates to
the market.
Via the Clinical Development Service department the Group
consults with key clinical opinion leaders/physicians and regulatory
experts in order to design safe clinical trials for patients.
– More than 200
p. 54 Clinical trials
patients treated with
the Group’s lentiviral
vectors.
and ethics.
– Understand
customers’ needs.
– Customer
retention and
expansion of
programmes.
– Identification of
new customers.
Via the Group’s client partner & alliance management
department and also the business development team, the Group
communicates regularly with its existing customers/partners
to discuss their goals and incorporate them into the Group’s
schedules/strategy. The Group does this through meetings, joint
steering committees, engagement events and forums. This active
engagement ultimately ensures that the Group meets their needs
and assists them to achieve their business goals.
– Added additional
CART targets with
Novartis.
– Progressed
programmes with the
Group’s partners as
per agreement.
p. 29 2019
Performance
review.
p. 81 Executive annual
bonus.
– School and
careers events.
– Local charity
involvement.
The Group engages with the local community not only through the
planning process but also through the Group’s “Helping hands” forum,
with volunteering, fundraising and charity work. The Group also
attends schools and career fairs, and also provides apprenticeships and
work experience opportunities. The Group also liaises with industry
bodies and government organisations to enhance the positive impact
the Group has on the communities and sector in which it operates.
– Eight apprenticeships
– Appointment of an
early careers advisor
– £9,500 in fundraising
for local Oxford
charity.
p. 48 People.
p. 51 Charitable work.
p. 51 Community.
p. 51 Apprenticeship
scheme.
p. 51 Charitable giving.
– Long-term
partnerships.
– Collaborative
approach.
Through effective collaboration, the Group aims to build long-term
relationships with its suppliers so that both parties benefit. The
Group has regular supplier meetings and business reviews and
has a supplier code of conduct.
– Establishment of
procurement and
supplier function to
interact with suppliers
more effectively.
p. 62 Brexit.
p. 54 Slavery and code
of conduct.
– Meeting
regulatory
compliance.
The Group has dialogue with government regulatory bodies on
a regular basis and attends industry forums. The Group also has
compliance audits performed by both government regulatory
bodies and by its customers.
p. 59 Regulatory risk.
– Four audits by
government
regulatory bodies.
– Two audits by
customers.
– Corporate
governance.
– Business ethics.
– Strategy and
business model
– Financial
performance.
Through the Group’s investor relations programme which
includes regular updates, meetings, roadshows and the Group’s
Annual General Meeting (AGM) and the fact that representatives
of two major shareholders sit on the Board, the Group ensures
shareholder views are brought into the Board discussions and
considered in the Groups decision making. The Group also
engages with shareholders via the Annual Report and Accounts
and the Corporate website.
– 200+ meetings
p 70 Shareholder
with the investor
community.
– 30+ shareholders
attended the AGM.
– New investor in Novo
Holdings.
engagement
in 2019.
p. 79 Remuneration –
annual bonus
and LTIP.
Oxford Biomedica plc | Annual report and accounts 2019
4
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Strategic report
Operational highlights delivered in 2019
Novartis partnership
— Novartis extended its commercial supply agreement by a further five years in December and
extended the number of lentiviral vector programmes in the collaboration from two to five.
The agreement includes a minimum of $75 million over five years in manufacturing batch
revenues in addition to undisclosed process development fees, with other financial terms, such
as royalties, as previously agreed.
See page 28.
— Kymriah® roll out accelerating in relapsed and refractory B-cell acute lymphoblastic leukaemia
and relapsed and refractory diffuse large B-cell lymphoma with reimbursement approved in
20 countries in at least one indication.
See page 28.
— Continued strong performance as sole global supplier of lentiviral vector for Kymriah®
See page 29.
CAR-T therapy.
New partnerships
— Collaboration, option and licence agreement established with Santen Pharmaceutical Co Ltd
See page 29.
for development of gene therapy vectors targeting an inherited retinal disease.
— Collaboration established with Microsoft Research to leverage machine learning and Cloud
See page 31.
Computing to improve process efficiency and reduce costs.
Proprietary product development
— First patient dosing in second cohort of SUNRISE-PD phase II study in Parkinson’s disease
See page 30.
triggered £11.5 million ($15 million) milestone payment from partner Axovant.
— The Group’s partner, Axovant, announced twelve month follow-up data in January 2020 from
the first cohort of the SUNRISE-PD study on two patients where a continued improvement in
UPRDS Part III ’OFF’ Score at twelve months over the six month data was reported.
Expansion of bioprocessing and laboratory facilities
— Development of major new 84,000 sqft (7,800 sqm) bioprocessing facility on target with initial
building phase completed, validation ongoing and first commercial batches anticipated in the
first half of 2020.
See page 31.
— Occupation of new 32,000 sqft (2,970 sqm) Windrush Innovation Centre (WIC) commenced
See page 32.
during 2019 with increased utilisation expected during 2020.
See page 18.
Post Period Highlights
— Signed new licence and five-year clinical supply agreement with Juno Therapeutics / Bristol
Myers Squibb for initially four CAR-T and TCR-T programmes. $10 million upfront payment and
up to $217 million in development, regulatory and sales related milestones in addition to undisclosed
process development, scale up and batch revenues and an undisclosed royalty on sales.
— In the first quarter of 2020 the Group started work on an additional vector construct for Novartis
which now takes the total number of active vector constructs to six.
— In April the Group has joined a Consortium led by the Jenner Institute, Oxford University, to
rapidly develop, scale-up and manufacture a potential vaccine candidate for COVID-19 called
ChAdOx1 nCoV-19. AstraZeneca subsequently entered into an agreement with Oxford University
for the global development and distribution of the vaccine on 30th April. While the potential
impact on the Group is currently uncertain, should clinical trials be successful the Group will
provide access to its large scale GMP manufacturing facilities including Oxbox to support the
manufacturing scale up for Oxford University and AstraZeneca.
— Subsequent to year end the Group identified an issue regarding an aspect of certain process
development work performed on behalf of a customer in 2018 and 2019 which potentially could
give rise to a material claim against the Group. The Group has been in communication with the third
party but is not yet in a position to verify or validate any information relating to this matter due to the
very recent timing of this issue being identified.
Oxford Biomedica plc | Annual report and accounts 2019
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2014
2015
2016
2017
2018
2019
Cash outflow before financing activities
£m
2014
2015
2016
2017
2018
2019
Operating EBITDA
£m
Strategic report
Financial highlights delivered in 2019
£53.5m
£64.1m
Equity placing in May 2019
Successful £53.5 million equity placing used
primarily to repay the loan facility with Oaktree
Capital Management with Novo Holdings
joining the share register.
+17%
Bioprocessing & Commercial
development revenue
Bioprocessing and commercial development
revenues increased by 17% to £47.3 million
(2018: £40.5 milllion).
Revenue
Revenue decreased by 4% from £66.8 million
to £64.1 million.
£16.8m
Licences, milestones & royalties revenue
Licences, milestones & royalties revenues
decreased to £16.8 million (2018: £26.3 million).
+57 %
£25.8m
Operating expenses 2
Operating expenses increased by 57% from
£26.6 million to £41.9 million.
Capital expenditure
Capital expenditure £25.8 million
(2018: £10.1 million).
£5.2m
£16.2m
Operating EBITDA 1 loss
Operating EBITDA loss incurred of £5.2 million
(2018: £13.4 million profit).
Cash
Cash of £16.2 million
(31 December 2018: £32.2 million).
£14.5m
Operating loss
Operating loss incurred of £14.5 million
(2018: £13.9 million profit).
£22.9m
Cash outflow
Cash outflow before financing activities
increased by £25.7 million to £22.9 million
(2018: £2.8 million inflow).
£43.6m
£1.9m
Loan facility repayment in June 2019
Successful £43.6 million repayment of our loan
facility with Oaktree Capital Management.
Change in fair value
£1.9 million loss (2018: £6.0 million gain)
in fair value of Orchard Therapeutics
available for sale asset.
5
0
–5
–10
–15
–20
–25
–30
15
10
5
0
–5
–10
–15
–20
1.
2.
Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and assets held for sale,
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. A reconciliation to GAAP measures is provided on page 42.
Operating expenses are made up out of Bioprocessing expenses, research and development expenses and administrative expenses.
A reconciliation to GAAP measures is provided on page 42.
Oxford Biomedica plc | Annual report and accounts 2019
6 Strategic report
2
Chairman’s statement
The Group achieved strong revenue growth in its underlying
bioprocessing and process development business, established new
and extended partnerships and delivered on its capacity expansion
programme. With these strong foundations in place, the Group is
ideally placed to deliver value by pursuing its mission of curing
patients as a fully integrated gene therapy company.
Building a gene and cell therapy leader
As a pioneer in its field, Oxford Biomedica has built an enviable position as a
world leading lentiviral vector company. The Group brings together innovation,
expertise and infrastructure that spans the entire product development and
commercialisation process. This provides a uniquely diversified business
model offering the prospect of long-term sustainable growth.
By spearheading the industrialisation of the lentiviral vector, Oxford
Biomedica can capture significant value from the rapidly growing gene and
cell therapy sector, without the major financial and clinical risks associated
with a more traditional biotechnology business. The Group’s underlying
bioprocessing and process development business is complemented by its
wholly-owned pipeline of earlier-stage product candidates, which offer
major upside potential.
Investing in innovation
The gene and cell therapy sector is maturing rapidly, as ever more products
move towards commercialisation. Oxford Biomedica is taking advantage of
this opportunity to lead in the industrialisation of lentiviral vectors, through
ongoing investment in platform innovation, development capabilities,
production capacity and expert people building the Group’s critical mass.
The Group’s investment strategy is making good progress, and a strategic
investment from leading life sciences investor Novo Holdings has further
strengthened our ability to accelerate this. The Group used the proceeds
from the Novo Holdings investment to fully repay debt and further boost
its Statement of financial position to support its LentiVector® platform and
in-house pipeline. By investing across its business, Oxford Biomedica is
building its long-term, sustainable future. As it reaches optimal scale, the
Group anticipates a smoother growth trajectory with increasingly robust
and predictable income.
“ I am pleased to report that
Oxford Biomedica made
good progress in 2019, as it
continued to consolidate
its position as a world leading
gene and cell therapy business.”
Dr. Lorenzo Tallarigo
Chairman
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Investing in the team
Throughout 2019, the Group continued its transformation, with the
completion of the first phase of its new Oxbox manufacturing facilities and
continued delivery across its partnerships. This ongoing progress was
supported by significant growth in the Oxford Biomedica team, and during
the year the Group welcomed over 100 new colleagues who bring a range
of production, analytical and research expertise. They are complemented by
a broadened Senior Executive Team, and the addition of a further Non-
Executive Board Director, Robert Ghenchev, who joins the Company as
Head of Novo Growth at Novo Holdings. The Group continues to grow at a
rapid pace and is looking to strengthen the Board further with the
appointment of additional Non-Executive Directors. In addition, having
served four years as Chairman, I have informed the Group of my intention to
retire from Oxford Biomedica's board. I will continue as Chairman while the
Group completes a search for my replacement. On behalf of the Board, I
would like to welcome our new colleagues, and thank all our employees for
their fantastic dedication and hard work during the year, which has enabled
Oxford Biomedica to build the world-leading position it holds today.
Positive outlook
The growth of the gene and cell therapy field continues at an exciting
pace. With its unique capabilities and diversified business model Oxford
Biomedica is ideally positioned to contribute to the sector’s success,
capture value and build a world-leading business. The Group has delivered
a large number of its targets in 2019, and during the coming year Oxford
Biomedica looks forward to progressing each of its operating segments
as it continues to meet the growing demands of the burgeoning gene and
cell therapy industry.
Dr. Lorenzo Tallarigo
Chairman
A world leader in the industrialisation
of lentiviral vectors
Oxford Biomedica is taking advantage of the gene
and cell therapy sector maturing rapidly, seizing
opportunity to lead in the industrialisation of lentiviral
vectors, through ongoing investment in platform
innovation, development capabilities, production
capacity and expert people building the Group’s
critical mass.
+100 people
Adding to our teams
The Group welcomed over 100 new colleagues
who bring a range of production, analytical and
research expertise.
Oxford Biomedica plc | Annual report and accounts 2019
8 Strategic report
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Chief Executive Officer’s and
2019 performance review
Oxford Biomedica made good progress during 2019, extending our
commercial supply agreement with Novartis for another five years,
establishing a new partnership with Santen and delivering our new
facilities expansion on target. The cell and gene therapy sector
continues its rapid growth, and we remain at the forefront of
innovation. Our new collaboration with Microsoft is harnessing the
power of artificial intelligence to further boost the efficiency of our
world-leading LentiVector® delivery platform, as we continue the
industrialisation of lentiviral vector development and manufacture.
We are building an exciting business, and with the significant
investment by Novo Holdings in 2019, our simplified Statement of
financial position places us in a stronger position to realise the
potential of our world-leading technology.
Oxford Biomedica continued to make strong progress in 2019,
consolidating its position as a world leading lentiviral vector company. It
increased its portfolio of collaborations, with the addition of Santen to its
list of partners, and advanced its pipeline of proprietary products, supporting
the clinical development of AXO-Lenti-PD following its out-licensing
in 2018. It continued to develop its LentiVector® cell and gene delivery
platform and boosted its manufacturing business with the extension of the
supply agreement for Novartis’ CAR-T portfolio. In parallel, expansion of
the Group’s industrial-scale bioprocessing facilities continued on track,
and its newly established collaboration with Microsoft is applying innovative
machine learning to further enhance its LentiVector® platform.
Oxford Biomedica’s financial performance demonstrates the Group’s
growing maturity as a leading gene and cell therapy business. The Group’s
underlying business enjoyed continued strong growth, with its bioprocessing
and process commercial development revenues increasing by 17%. While
this was offset to some extent by lower licensing income, the Group
strengthened its Statement of financial position with a major investment
from Novo Holdings. As Oxford Biomedica continues its strong underlying
growth, the Group anticipates further increase in manufacturing revenues
smoothing its revenue trajectory as it builds an exciting long-term business
maximizing the opportunity in the fast growing cell and gene therapy market.
Novartis partnership progress
Throughout 2019, the Group continued to deliver under its partnership
with Novartis for the commercial and clinical supply of lentiviral vectors for
Kymriah® (tisagenlecleucel, formerly CTL019) and Novartis’ broader CAR-T
portfolio. Kymriah® is a ground-breaking CAR-T therapy that uses patients’
T cells to target cancer. It is indicated in relapsed and refractory B-cell
acute lymphoblastic leukaemia (r/r ALL) and relapsed and refractory diffuse
large B-cell lymphoma (r/r DLBCL). During 2019 it continued its rapid
global roll out, and both product approvals and reimbursement continue
to grow. Currently, 20 countries, including the US, Canada, Japan, Australia
and a number of countries in Europe, have approved reimbursement in at
least one indication. Kymriah® remains the first and only CAR-T therapy to
receive regulatory approval in two distinct B-cell malignancies in these
territories, and was the first lentiviral vector based therapy to be approved
in the US and Europe.
“ The cell and gene therapy
sector continues its rapid
growth, and we remain at the
forefront of innovation.”
John Dawson
Chief Executive Officer
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Lentiviral vectors for Kymriah®
Throughout 2019, the Group continued
to deliver under its partnership with Novartis
for the commercial and clinical supply of lentiviral
vectors for Kymriah®.
+5 years
Novartis partnership
We extended our commercial supply agreement
with Novartis for another five years.
US$15m
Axovant collaboration and licence agreement
Dosing of the first patient in the second cohort
of Axovant’s phase II study of AXO-Lenti-PD triggered
a £11.5 million ($15 million) milestone payment.
In December, the success of the Novartis partnership culminated in the
extension of the supply agreement for an additional five years, covering
five lentiviral vectors for CAR-T products, including Kymriah®. Under the
terms of the agreement, Oxford Biomedica will receive $75 million
minimum of manufacturing revenues over the five years, in addition to
process development and facility reservation fees and royalties on product
sales as agreed in the initial 2014 collaboration. The Group remains the
sole global supplier of lentiviral vector for Kymriah® and will allocate a
dedicated manufacturing facility at its new Oxbox commercial production
site to the partnership.
Santen partnership
In June 2019, the Group established a new partnership with leading multi-
national ophthalmology company Santen Pharmaceutical Co Ltd. Santen
is the market leader for ophthalmic prescription pharmaceuticals in Japan
and has a global presence in over 60 countries.
Under the terms of the R&D collaboration, option and licence agreement,
Oxford Biomedica will develop and manufacture lentiviral vectors for
novel gene therapy products targeting the treatment of an inherited retinal
disease. On exercise of the option to access the Group’s LentiVector®
platform and industrial-scale production capabilities, Santen will pay an
undisclosed milestone, in addition to future development milestones and
single-digit royalties on product sales. Under the agreement, Oxford
Biomedica retains an option to partner and co-fund product development
and commercialisation in the United States and Europe.
Other existing partner programmes
During the year, the Group continued to progress its portfolio of existing
collaborations. These provide partners with access to its innovative
LentiVector® gene and cell therapy delivery platform, development and
production expertise and world-leading industrialisation capabilities.
The portfolio includes the Group’s $105 million strategic partnership with
Sanofi (formally Bioverativ) for the development and manufacture of
lentiviral vectors targeting the treatment of haemophilia, Orchard
therapeutics in the treatment of adenosine deaminase severe combined
(ADA-SCID), MPS-IIIA and a third undisclosed
immunodeficiency
programme, as well as a collaboration with the UK Cystic Fibrosis Gene
Therapy Consortium, Boehringer Ingelheim and Imperial Innovations
developing a novel inhaled gene therapy for cystic fibrosis.
Proprietary product development:
Axovant Gene Therapies licensing agreement
In 2018, the Group signed an agreement estimated to be worth up to
$842.5 million agreement with Axovant Sciences (now Axovant Gene
Therapies) for the exclusive worldwide development and commercialisation
rights to Oxford Biomedica’s internally developed gene therapy candidate
for Parkinson’s disease, OXB-102 (subsequently renamed AXO-Lenti-PD).
This landmark agreement validated the Group’s proprietary portfolio
strategy, with product innovation and initial development conducted in-
house prior to attracting partner funding for clinical development and
commercialisation, while retaining significant economic interest for
Oxford Biomedica.
Oxford Biomedica plc | Annual report and accounts 2019
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Chief Executive Officer’s and
2019 performance review
In April 2019, dosing of the first patient in the second cohort of the
SUNRISE-PD phase II study of AXO-Lenti-PD triggered a £11.5 million
($15 million) milestone payment to Oxford Biomedica.
In June 2019, six-month data from the first dose cohort showed patients
continued to improve across multiple metrics with no serious adverse
events related to the treatment, which was generally well tolerated. In
January 2020, 12-month data from this group demonstrated a continued
favourable safety profile and a 37% improvement in motor function from
baseline as assessed by the UPDRS Part III ‘OFF’ score. This followed an
improvement of 29% at six months on the same scale. Enrolment into the
second dose cohort continues and Axovant anticipates announcing six
month data from the first six patients in cohort one and two by the fourth
quarter of 2020. Based on the outcome of the dose-escalation phase,
and development of a suspension-based manufacturing process, Axovant
expects to begin the randomised, sham-controlled portion of the study
by the end of the year.
Proprietary in-house product development
In line with the Group’s proprietary portfolio strategy, Oxford Biomedica is
engaged in partnering discussions to out-license or spin-out a number of
its pipeline product candidates. The current portfolio consists of five
patient-centric products targeting a number of indications in ophthalmology,
oncology, liver and CNS disorders.
Following an internal pipeline review priorities have now been set for
where pre-clinical investment will be made, to potentially take through
into early stage clinical studies in the coming 12-18 months. OXB-302 is
the Group’s priority candidate and targets haematological tumours with a
CAR-T 5T4. Advanced pre-clinical work is continuing on OXB-302 as the
programme moves towards entry into the clinic. OXB-203, currently in
pre-clinical studies, is targeting Wet AMD and uses Oxford Biomedica’s
technology to deliver a gene to express afibercept. This programme
builds on the demonstrated long term gene expression data seen with its
predecessor OXB-201, for which work has now been halted. In addition,
the Group is continuing pre-clinical work on OXB-204 (LCA10) and
OXB-103 (ALS) and a new pre-clinical program, OXB-401 (liver indication),
has been initiated.
®
LentiVector platform development
Oxford Biomedica’s LentiVector® platform is a unique combination
of expertise, intellectual property and world-class facilities, all focused on
the industrialisation of the lentiviral vector. This world-leading, innovation-
centric platform is the foundation of the Group’s collaborations and
proprietary pipeline. Oxford Biomedica’s investment strategy is designed
to maintain LentiVector® platform’s leading position through constant
innovation, enhanced operational efficiency and expanded capacity.
Progress our portfolio of existing collaborations
During the year, the Group continued to progress its
portfolio of existing collaborations. These provide
partners with access to its innovative LentiVector®
gene and cell therapy delivery platform, development
and production expertise and world-leading
industrialisation capabilities.
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Collaboration with Microsoft Research
During 2019, Oxford Biomedica extended its
programme of innovation, establishing a collaboration
with Microsoft Research. This aims to harness the
power of artificial intelligence to enhance vector
development and industrial-scale production by
improving process efficiency and consistency.
>60 countries
Santen partnership
In 2019 the Group established a new partnership
with leading multi-national ophthalmology company
Santen Pharmaceutical Co Ltd, is the market leader
for ophthalmic prescription pharmaceuticals
in Japan with a global presence in over 60 countries.
Innovation
During 2019, Oxford Biomedica extended its programme of innovation,
establishing a collaboration with Microsoft Research. This aims to harness
the power of artificial intelligence to enhance vector development
and industrial-scale production by improving process efficiency and
consistency. The collaboration will apply machine learning and cloud
computing to the large datasets generated during process development,
analysis and manufacture. By combining computational modelling, novel
algorithms and laboratory automation the project aims to improve vector
yield and purity, providing quicker, cheaper and more reliable manufacture.
The Group’s continuous improvement programme focuses on developing,
refining and enhancing its technology. In recent years, Oxford Biomedica
has developed its proprietary Transgene Repression in vector Production
(TRiP) manufacturing system to dramatically improve vector yields, and its
LentiStable™ packaging and producer cell lines to enable scalable,
cost-effective manufacturing. Ongoing investment in high-throughput
automation and robotics is streamlining production, reducing costs and
enabling faster screening and analytical testing.
Capacity expansion
As the cell and gene therapy field continues to expand, the Group leased an
additional facility in Oxford at the end of 2018 to meet the anticipated higher
demand for lentiviral vectors. The new 84,000 sqft (7,800 sqm) facility,
Oxbox, complements Oxford Biomedica’s three existing state-of-the-art
GMP production suites. The development phase fits out approximately
45,000 sqft (4,200 sqm) in the new facility with four GMP clean rooms, two
fill/finish suites, offices, warehousing and QC laboratories, with the remaining
fallow area to be developed in future at the appropriate time
During 2019, facility development made good progress, with the
production suites’ building phase completed by the end of the year as
planned. Validation is currently ongoing, and the Group anticipates
achieving regulatory approval and manufacture of the first commercial
batches by the end of the second half of 2020. In parallel, development of
the fill / finish suites is progressing well, with hand over expected by the
end of the year. As announced in December, Oxford Biomedica will have
a dedicated a manufacturing suite for Novartis within Oxbox.
Alongside the expansion of Oxford Biomedica’s manufacturing capacity, the
Group is in the process of establishing the Windrush Innovation Centre (WIC),
a new 32,000 sqft (2,970 sqm) discovery and innovation hub. This brings
together research, automation, process development and bioprocessing
teams to drive LentiVector® platform innovation and progress the proprietary
pipeline. Occupation of the facility began during the first half of 2019 with
increased utilisation expected during 2020.
With the addition of these two new facilities, Oxford Biomedica has more
than doubled its footprint, which now extends to over 226,000 sqft
(21,000 sqm). With its five specialist facilities centred around Oxford,
the Group has built a global hub for lentiviral vector development
and commercialisation.
Oxford Biomedica plc | Annual report and accounts 2019
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Chief Executive Officer’s and
2019 performance review
Investment progress
In the first half of 2019, Oxford Biomedica received major support from
leading life sciences investor Novo Holdings. At the end of May 2019,
Novo Holdings invested £53.5 million in the Group in return for new
ordinary shares issued at the prevailing market rate, representing 10.1% of
the newly-enlarged share capital. Oxford Biomedica utilised the funds to
repay the £43.6 million debt facility provided previously by Oaktree Capital
Management, thereby simplifying and strengthening the Group’s
Statement of financial position. The Group invested the balance of the
proceeds in its LentiVector® platform and in-house pipeline programmes.
1
Building a global hub
With its five specialist facilities centred around
Oxford, the Group has built a global hub for lentiviral
vector development and commercialisation.
Organisational progress
As a highly-regarded long-term investor with a successful track record of
working with innovative life sciences companies, Novo Holdings was
granted the right to appoint a Non-Executive Director under the terms of
its subscription agreement. Following the issuance of the new shares, the
Group welcomed Robert Ghenchev to the Board. Robert is Head of Novo
Growth at Novo Holdings and brings a wealth of corporate finance
experience to Oxford Biomedica.
During the year, the wider Oxford Biomedica team also continued to grow,
reflecting the rapid expansion of the business. The Senior Executive Team
was strengthened with the addition of two newly-created positions:
General Counsel and Chief Medical Officer. This growth was mirrored
across the business as the Group continued its facilities expansion
programme. Headcount increased as planned with the total reaching 554
at the end of the year, compared with 432 at the end of 2018, with significant
growth in the bioprocessing, analytics and platform research teams.
Assessment of COVID-19 Potential impact
The Group has conducted an assessment of the potential financial and
operational risks to the business and has implemented a daily senior
management working group to monitor current COVID-19 developments,
GOV.UK guidance and to direct the Group’s phased response.
The Group takes comfort from:
— The day to day changes in working practices put in place to protect our
employees seem to be effective, with work continuing on in an as near
to normal way as possible.
— Revenues and their subsequent receipts are based on long term
contracts with financially sound and resilient companies.
— The Group has a stronger and more diversified customer base than it
has had previously.
— The Group has key worker status which allows us to continue providing
services to our customers throughout the lockdown period.
While the Group is yet to experience any significant impact from the virus,
there may be an impact on revenue, supply chain and operating facilities
if the situation continues or worsens. Management continues to constantly
monitor the ongoing situation.
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Outlook
In the coming year, Oxford Biomedica plans to build on the progress
made across its business in 2019. The Group anticipates continued strong
revenue growth from its portfolio of bioprocessing and development
partnerships, including its extended supply agreement with Novartis. With
its new Oxbox manufacturing facility coming on stream during 2020, the
Group will have significant additional capacity to serve the rapidly growing
gene and cell therapy sector. The Group anticipates adding further
partnerships during the year, as well as expanding the number of existing
partner programmes entering development.
During 2020, Oxford Biomedica intends to continue its investment
strategy, bringing its Oxbox manufacturing facility online, increasing its
laboratory capacity, training its newly-enlarged team and maintaining the
innovation that underpins its world-leading LentiVector® platform and
proprietary portfolio. With the Oxbox construction phase of the 45,000
sqft (4,200 sqm) building fully completed in 2019, the Group anticipates
somewhat lower capex expenditure in 2020, with higher operating
expenses due to the enlarged team working on the Group’s partnerships.
The Group also plans to attract third-party funding to progress the clinical
development of its in-house proprietary products. While the timing of
these transactions is less predictable than ongoing delivery under
bioprocessing agreements, the 2018 $842.5 million Axovant collaboration
demonstrates the potential to create significant shareholder value.
With the ongoing success of its Novartis collaboration and progress across
its other partnerships validating the LentiVector® platform, the Group has
built an industry leading position. As it continues to invest in its future,
it intends to progress each segment of its business. By leveraging its strong
and growing bioprocessing and development business to smooth less
predictable but potentially significant licensing income, Oxford Biomedica
intends to drive towards long-term stable profitability whilst delivering
major benefits for patients, partners and shareholders alike. Despite the
COVID-19 pandemic, the Group looks forward to another successful year
and is making encouraging progress towards this goal.
John Dawson
Chief Executive Officer
Progressing our in-house product pipeline
The Group plans to attract third-party funding to
progress the clinical development of its in-house
proprietary products.
Validating the LentiVector® Platform
The ongoing success of our Novartis collaboration
and progress across our other partnerships is
validating the LentiVector® platform.
Oxford Biomedica plc | Annual report and accounts 2019
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Management team
John Dawson
Stuart Paynter
Jason Slingsby
James Miskin
Kyriacos Mitrophanous
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 US$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.
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.
Chief Business Officer
Jason joined Oxford
Biomedica in 2015
as Head of Business
Development and was
promoted to Chief
Business Officer in May
2019. He has 20 years’
experience in the
biotechnology industry
in biologics, vaccines and
gene therapy. He has
worked in international
business development
roles at Sosei Co., Ltd.
and Intercell AG and was
co-founder and CEO of
ProtAffin AG, a venture
capital backed company
in Austria and UK. Jason
started his career as a
post-doctoral scientist
at Oxford Biomedica
and first worked at the
company 1997-2000.
He was awarded a 1st class
BA (Hons) in Biochemistry
from Magdalen College,
Oxford University and also
completed a PhD in
complex disease genetics
from Imperial College
London. Jason was also
awarded an MBA with
distinction from London
Business School in 2002.
Chief Technical Officer
Dr Miskin joined Oxford
Biomedica in 2000. He
has more than 18 years’
experience in gene and cell
therapy, 14 of which have
been in the GxP (good
practice) environment.
In his current role, he has
overall responsibility for
Oxford Biomedica’s Quality
systems, analytical testing
and lentiviral based
bioprocessing development,
as well as client programmes
and alliance management.
He is also a named inventor
on several patents in the
field. He holds a Bachelor
of Science degree and a
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 and
the Advanced Therapies
section of The Medicines
Manufacturing Industry
Partnership (MMIP).
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. 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 Corporate Member
of the UK BioIndustry
Association Board.
Full biographies for the Board of Directors
can be found on pages 64 to 65.
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Nick Page
Dmitry Zamoryakhin
Helen Stephenson-Ellis
Natalie Walter
Chief Operations Officer
Nick joined Oxford
Biomedica in April 2019.
Prior to joining he has held
a number of senior
operational leadership
positions in the
pharmaceutical industry,
most recently as Platform
Head of Anti-infectives
within Novartis. His 40+
years of industry experience
include API, Solid oral
dose, Sterile, and
Radiopharmaceutical
manufacturing in various
organisations encompassing
innovative, generic and
contract manufacturing.
During his career he has
spent several years working
in China and India as well
as in Global roles. He
originally qualified as a
Chartered Chemist and
also has an MBA from
The Open University.
Chief Medical Officer
Dmitry joined Oxford
Biomedica in July 2019
as a permanent member
of the Senior Executive
Team having previously
worked for 10 months with
the company as a
consultant. He brings
15+ years of experience in
clinical development within
the pharmaceutical and
biotechnology industry.
He started his pharmaceutical
career at GSK, then moving
to Ono Pharmaceutical
and later to Daiichi Sankyo
where he spent over 7 years
in cardiovascular and
metabolic diseases. Before
joining Oxford Biomedica,
Dmitry spent 2 years
working with Grunenthal
GmbH in Germany, most
recently as a Head of
Development Strategy and
Intelligence. He holds a
medical doctor’s degree
and specialisation in
obstetrics and gynaecology
as well as an MBA from
Warwick Business School.
Chief People Officer
Helen joined Oxford
Biomedica in April 2018.
She brings 20 years’
experience in senior Human
Resources roles within the
Biopharmaceutical sector,
including a number of years
in various HR Business
Partnering roles in GSK.
Following AstraZeneca’s
acquisition of MedImmune,
she moved to Cambridge
UK to head up HR for
MedImmune’s site there,
followed by a period as
Global HR Director within
AstraZeneca. Prior to
joining Oxford Biomedica,
she was Group Human
Resources Director for
Vernalis plc, leading HR
across Vernalis’ UK and US
sites. She holds a BA (Hons)
degree from Northumbria
University in the UK and is
a member of the Chartered
Institute of Personnel
and Development.
General Counsel
Natalie joined Oxford
Biomedica in May 2019
as General Counsel.
She has over 20 years’
experience as a corporate
lawyer advising life sciences
companies, including
Oxford Biomedica, on
a range of business and
transactional issues, equity
capital markets transactions,
mergers and acquisitions
and corporate governance.
Natalie also sits on the
board of C4X Discovery
Holdings plc as a non-
executive director. Natalie
has worked for a number
of UK and US law firms,
as well as working at
Lehman Brothers as a
Director and Legal Counsel
for the Equity Capital
Markets division. She was
most recently a Partner with
Covington & Burlington.
Oxford Biomedica plc | Annual report and accounts 2019
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Delivery of 2019 objectives
2019 objectives
Performance against priorities
1
2
3
4
5
Partners / Capacity / Technology advancement
The key objective for 2019 is to service the Group’s customers
as agreed with them and reach key milestones for Novartis,
Orchard Therapeutics and Bioverativ (now Sanofi).
A B
These targets were mainly met. The Group achieved key milestones for
Novartis with the conversion to a suspension production process and
expanding the portfolio of products with them. The Group also progressed
the Orchard Therapeutics programme as agreed, along with successful
progression of the CF programme. In addition, the handover and
commissioning of Oxbox was achieved on time. The Group does note the
issue identified in April 2020 with regards to the customer commercial
development work packages, but believe that the assessment of
performance is fair in terms of the objectives having been mainly met. Refer
note 36 of the financial statements for further information on this issue
Patent / product advancement and innovation
Goals for 2019 were to advance two new platform products
into the Group’s portfolio, alongside technical (two new
patentable inventions) along with data driven innovations in
the platform. These goals are essential to keep the Group
ahead of the competition. Valuable pipeline products such as
AXO-Lenti-PD, which has been seen to bring great value to
the Group, move forward in clinical development.
A
B
These goals were mainly met. The Group strengthened the pipeline with
two new programmes OXB-203 and OXB-302 progressing through
proof of concept to pre-clinical studies, along with two new potential
inventions filed for the platform process. Digital advancement via the
Microsoft collaboration is underway but has only been partially met.
Axo-Lenti-PD has moved forward in clinical development into cohort 2
studies.
Financial
The financial objectives set out for 2019 were to achieve
revenue and EBITDA targets which were driven by the budget.
Set in the regime of aggressively growing sales with strict
control of costs, these were going to be a significant
challenge. Assumptions in the budget included new
manufacturing deals and a product out licensing deal, along
with refinancing/clear the loan on more favourable terms.
C B
Overall the financial objectives were not met. The Group did manage to
extinguish the loan, however, which was a key objective. However, the
Group did not achieve the revenue and EBITDA target as per the budget
or the cash in-flow as per budget. This was due to not completing a
product out-licensing deal or a large manufacturing deal as targeted by
the end of the year.
Business development
A critical success factor for 2019 was the signing of new deals.
The plan was to out-licence one product, agree three platform
technology deals and start two feasibility studies.
B C
The objectives were only partially met. The plan to out-licence one
product was not achieved and of the three platform technology deals
only two were signed (Novartis and Santen) by the end of 2019. The
goal of signing two new feasibility studies was achieved, however.
Organisational development
With the rapid pace of growth for the Group, together with
competition for key staff in the Group’s field it is essential that
the Group builds a culture, competitive rewards/benefits and
staff support systems to ensure a balanced productive work
force for the future. A programme to enhance the organisation
effectiveness is planned along with the creation of a discovery/
innovation centre.
A
These objectives were met in full. The Reward strategy was successfully
developed and communicated to include competitive grading and pay
structures and benefits. The organisation effectiveness programmes
were also rolled out to include annual performance management,
management development programme and talent management. The
creation of the Windrush Innovation Centre, which is the Group’s
discovery/innovation hub was also established.
A
B
C
Met
Part met
Not met
Oxford Biomedica plc | Annual report and accounts 2019
Strategic report
Objectives set for 2020
Objectives set for 2020
Partners / Capacity / Technology Advancement
The key here in 2020 is to service the Group’s customers as agreed
with them and reach key milestones for Novartis and other key
partners. In addition, it is fundamental to the Group’s future success
that appropriate regulatory approvals are received for Oxbox.
Patent / product advancement and innovation
In 2020, the goal is to advance two new platform products into the
Group’s portfolio, alongside technical (two new patentable inventions)
and process (rapid process and improved process) innovations to the
platform that is essential to keep the Group ahead of the competition.
Financial objectives
The financial objectives for 2020 are to achieve revenue and EBITDA
targets which are driven by the budget. Set in the regime of
aggressively growing sales with strict control of costs, these are going
to be a significant challenge. Assumptions in the budget include new
manufacturing deals and a product out licensing deal, along with
strengthening the Statement of financial position. The Group is also
looking to create internal divisions for financial reporting aligned with
the new segments.
Business development
The key success factor for 2020 will continue to be new deals. The
plan is to out-licence one product, agree three platform technology
deals and start two new feasibility studies.
Organisational development
With the rapid pace of growth for the Group, together with
competition for key staff in the Group’s field the Group continues to
build a culture of competitive rewards/benefits and staff support
systems to ensure a balanced productive work force for the future in
2020. Stakeholder engagement is also very important, as well as the
implementation the Group’s ESG targets. The goal in 2020 is also to
enhance the Group’s organisation effectiveness programme through
implementing a business change portfolio.
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UK CYSTIC FIBROSIS
GENE THERAPY
CONSORTIUM
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Operational transformation
In 2019, the Group moved towards completion of phase 1 of its Oxbox bioprocessing facility and made many other
investments in its goal to industrialise the process of making Lentiviral vectors. The first two clean rooms are expected
to be producing commercial and clinical batches in 2020. Importantly, the Group will bring Fill & Finish in house for the
first time in this new facility. This will provide our customers with an end to end offering. We will continue to make
selective investments in infrastructure to both have the capacity for new customers and to innovate valuable Intellectual
Property to add to our offering.
The Group has continued to build on the significant commercial success achieved during 2018. Bioprocessing and
commercial development revenue increased by 17% with growth driven by the new commercial arrangements signed
with Axovant, Sanofi (Bioverativ) and the UK Cystic Fibrosis Gene Therapy Consortium, and increased bioprocessing
volumes as a result of Novartis’ continued commercial roll-out of Kymriah® across the globe with the product now
having approved reimbursement in 20 countries.
A 5 year extension to the current commercial supply agreement with the Group’s long term partner, Novartis, was
signed in December 2019, and a new research and development collaboration was signed with Santen.
A significant clinical milestone was reached by Axovant with the dosing of the first patient in the second cohort of the
AXO-Lenti-PD Parkinson’s disease clinical trial, triggering a £11.5 million ($15 million) milestone to Oxford Biomedica.
The Group also made significant improvements to its Statement of financial position with £53.5 million of equity raised
from new Investor Novo Holdings which was used to fully repay the £43.6 million ($55 million) Oaktree loan.
Selected highlights are as follows:
— Revenues from the underlying bioprocessing and commercial development business continued to show good year
on year growth. Despite the capacity constraints within the business, growth in full year revenues of 17% was achieved
driven by double digit growth across both activities. Revenues from the bioprocessing and commercial development
business has now increased by 557% since 2013.
— Revenues from milestones, licences and royalties declined 36% on the prior year with the £11.5 million ($15 million)
Axovant milestone and strongly growing royalties unable to compensate for the sizable licence income received on
signing the Sanofi (Bioverativ) and Axovant agreements in 2018. The timing of receipt of milestone and licence
revenues are, by nature, hard to predict especially when connected to the execution of new licence and supply
agreements.
“2019 has been year of
operational transformation
with the construction of the
Oxbox bioprocessing facility
and underlying revenues
continuing to show good
growth as we built on the
successful partnerships
signed in the current as well
as prior periods.”
Stuart Paynter
Chief Financial Officer
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— Total revenues decreased by 4% over 2018, but has now increased by 371% since 2013 when the revenue generating
Platform division was created.
— In 2019 the Group did not recognise revenues of £1.8 million (2018: Nil) relating to an estimate of bioprocessed
product for which revenue has previously been recognised and which may be reversed should the product go out
of specification.
— Operating EBITDA and operating profits slipped back into a loss-making position due to lower milestone and licensing
revenue and investment by the Group into its bioprocessing operations and people in preparation for the Oxbox
bioprocessing facility coming online in 2020.
— The Product division made an Operating EBITDA1 profit of £6.5 million (2018: £3.6 million) and an operating profit of
£5.7 million (2018: £2.5 million).
— Cash used in operations of £6.6 million in 2019 (2018: £9.2 million inflow) reflected revenue mix and the operational
investments explained above.
— £53.5 million of equity was raised from new Investor Novo Holdings which was used to fully repay our £43.6 million
($55 million) Oaktree loan facility.
— Cash at 31 December was £16.2 million reflecting the continued capital expenditure on the new Oxbox
bioprocessing facility.
Overview
The slight decrease in revenues was largely driven by the fact that the £11.5 million ($15 million) milestone triggered with
the dosing of the first patient in the second cohort of the AXO-Lenti-PD Parkinson’s disease clinical trial, and the 17%
increase in the Bioprocessing and commercial development revenue, was just not sufficient to offset the £18.3 million
worth of license revenue received in 2018 as a result of the Axovant and Bioverativ (Sanofi) deals. Bioprocessing and
commercial development revenues increased from the prior year with double digit growth across both activities. The
chart opposite shows the growth in output since 2013.
Operating costs, including Cost of Sales, grew by 30%, and by 29% when non-cash items1 are excluded. Manpower and
facility costs have increased as the Group invested heavily in its bioprocessing operations and people in preparation for
the Oxbox bioprocessing facility coming online in 2020. This investment is expected to allow the Group to meet
increasing customer demand, both for bioprocessing and commercial development services, thereby positioning for
future growth in activities in 2020 and beyond. Headcount rose from 432 at December 2018 to 554 at the end of 2019.
600
550
500
450
400
350
300
250
200
150
100
50
0
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
2013
2014
2015
2016
2017
2018
2019
2013
2014
2015
2016
2017
2018
2019
Year-end headcount
Revenue
£m
Licence, milestones and grants
(light tints)
Bioprocessing and process
development (dark tints)
1 Operating EBITDA (Earnings Before Interest,
Tax, Depreciation, Amortisation, revaluation of
investments and assets at fair value through profit
& loss, 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. A reconciliation to GAAP measures
is provided on page 42.
2 Non-cash items include depreciation,
amortisation, revaluation of investments, Fair
value adjustments of assets held at fair value
through profit & loss and the share based
payment charge. A reconciliation to GAAP
measures is provided on page 41.
Oxford Biomedica plc | Annual report and accounts 2019
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Financial review
The Group has also recognised a £1.9 million loss on revaluation of the Orchard Therapeutics investment asset after the
share price gave up some of the large gains (2018: £6.0 million) achieved during 2018, although this was fully offset by
a £2.3 million increase in the R&D tax credit as the Group incurred additional qualifying research and development
expenditure in 2019.
The signing of commercial contracts in 2018 with Axovant, Sanofi (Bioverativ) and the UK Cystic Fibrosis Gene Therapy
Consortium, the five year extension to the current commercial supply agreement with Novartis, and a new research
and development collaboration with Santen in 2019 have strengthened the Group’s commercial pipeline, diversified the
Group’s customer base and bolstered the Group’s commercial development revenues in 2019. Additional commercial
development and bioprocessing revenues are expected from these partnerships in the future. The Group will ensure
that it continues to foster its current strong customer relationships, whilst continuing the Group’s stated aim of targeting
new strategic commercial partnerships to build on the platform of established growth.
The Group will continue its proven strategy of developing its proprietary technologies, processes and products, and will
seek partnerships for later stage clinical studies. The Group has recently undertaken a review of its pipeline to determine
which programmes it would focus on in pre-clinical development to potentially take through into early stage clinical
studies in the coming 12-18 months. The Group will continue to assess the financial risk/reward profile of these projects
and will seek to provide maximal returns to shareholders accordingly.
Key Financial and Non-financial Performance Indicators
£m
Revenue
Bioprocessing / commercial development
Licences, milestones & royalties
Operations
Operating EBITDA1
Operating profit / (loss)
Cash flow
Cash generated from/(used in) operations
Capex3
Cash burn2
Financing
Cash
Loan
Non-Financial Key Performance Indicators
Headcount
Year-end
Average
2019
47.3
16.8
64.1
(5.2)
(14.5)
(6.6)
25.8
26.3
16.2
–
554
500
2018
40.5
26.3
66.8
13.4
13.9
9.2
10.1
1.9
32.2
41.2
432
377
2017
31.8
5.8
37.6
(1.9)
(5.7)
(1.5)
2.0
9.8
14.3
36.9
321
295
2016
22.6
5.2
27.8
(7.1)
(11.3)
(5.9)
6.4
11.5
15.3
34.4
256
247
2015
11.3
4.6
15.9
(12.1)
(14.1)
(14.9)
16.6
29.8
9.4
27.3
231
196
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and Assets at fair value through profit & loss, 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 based payments. A reconciliation to GAAP measures is provided on page 42.
2 Cash burn is net cash generated from operations plus net interest paid plus capital expenditure. A reconciliation to GAAP measures is provided on page 44.
3 This is Purchases of property, plant and equipment as per the cash flow statement which excludes additions to Right-of-use assets. A reconciliation to GAAP measures is provided on page 44.
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The Group evaluates its performance by making use of alternative performance measures as part of its Key Financial
Performance Indicators (refer table above). The Group believes that these Non-GAAP measures, together with the
relevant GAAP measures, provide an accurate reflection of the Group’s performance over time. The Board has taken
the decision that the Key Financial Performance Indicators against which the business will be assessed are Revenue,
Operating EBITDA and Operating Profit/(loss).
Revenue
Revenue decreased by 4% to £64.1 million as compared to 2018 (£66.8 million). Revenue generated from bioprocessing/
commercial development increased by 17% to £47.3 million (from £40.5 million in 2018), and is up 557% since 2013. The
main contributor to growth has been the revenues generated from increased commercial development services
provided to new customers Cystic Fibrosis Consortium, Axovant and Santen, as well as growth in Novartis commercial
bioprocessing volumes.
Revenues from licence fees, milestones and royalties, including the £11.5 million ($15 million) Axovant milestone,
represented a decrease of 36% from the prior year due to £18.3 million of licence income received in 2018 on the
signing of the Sanofi (Bioverativ) and Axovant agreements not recurring.
The largest portion of the Group’s revenue continues to be derived from its relationship with Novartis, although this has
now reduced to just over 50% of revenues as we continue to diversify our customer base and revenue streams.
£m
Revenue
Operating EBITDA
£m
Revenue
Other income
Total expenses
Operating EBITDA1
Non cash items2
Operating (loss)/profit
2019
64.1
2019
64.1
0.9
(70.2)
(5.2)
(9.3)
(14.5)
2018
66.8
2018
66.8
1.1
(54.5)
13.4
0.5
13.9
2017
37.6
2017
37.6
1.8
(41.3)
(1.9)
(3.8)
(5.7)
2016
27.8
2016
27.8
3.0
(37.9)
(7.1)
(4.2)
(11.3)
2015
15.9
2015
15.9
2.9
(30.9)
(12.1)
(2.0)
(14.1)
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and Assets at fair value through profit & loss, 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 based payments. A reconciliation to GAAP measures is provided on page 42.
2 Non-cash items include depreciation, amortisation, revaluation of investments, Fair value adjustments of available-for-sale assets and the share based payment charge.
Revenue decreased by 4% in 2019 whilst the Group’s cost base grew by 29% to £70.2 million both to accommodate the
growth in bioprocessing and commercial development revenues and in bringing online in the first half of 2020 additional
Oxbox bioprocessing capacity. The Operating EBITDA loss of £5.2 million is £18.6 million lower than the £13.4 million
profit generated in 2018 as a result of increased operational cost and lower license revenues when compared to the
prior year. If IFRS 16 (Leases) was not implemented at the start of 2019, the Operating EBITDA loss would be £6.0 million
on a like for like basis with 2018.
Total Expenses
In order to provide the users of the accounts with a more detailed explanation of the reasons for the year on year
movements of the Group’s operational expenses included within Operating EBITDA, the Group has added together
research and development, bioprocessing and administrative costs and has removed depreciation, amortisation and
the share option charge as these are non-cash items which do not form part of the Operating EBITDA alternative
performance measure. As Operating profit/(loss) is assessed separately as a key financial performance measure, the
year on year movement in these non-cash items is then individually analysed and explained specifically in the Operating
and Net profit/(loss) section. Expenses items included within Total Expenses are then categorised according to their
relevant nature with the year on year movement explained in the second table on the next page.
Oxford Biomedica plc | Annual report and accounts 2019
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Financial review
£m
Research and development
Bioprocessing costs1
Administrative expenses
Operating expenses2
Depreciation
Amortisation
Share option charge
Adjusted Operating Expenses1
Cost of sales
Total Expenses3
£m
Raw materials, consumables and
other external bioprocessing costs
Manpower-related
External R&D expenditure
Other costs
Total expenses1
2019
22.6
7.4
11.9
41.9
(5.8)
–
(1.6)
34.5
35.7
70.2
2019
22.8
35.2
1.4
10.8
70.2
2018
18.0
1.2
7.4
26.6
(4.3)
–
(1.1)
21.2
33.3
54.5
2018
18.3
26.7
1.9
7.6
54.5
2017
21.6
–
7.3
28.9
(4.1)
(1.2)
(0.7)
22.9
18.4
41.3
2017
13.2
19.3
1.7
7.1
41.3
2016
24.3
–
6.0
30.3
(3.3)
(0.3)
(0.6)
26.1
11.8
37.9
2016
9.3
17.4
2.8
8.4
37.9
2015
20.3
–
6.7
27.0
(1.3)
(0.4)
(0.2)
25.1
5.8
30.9
2015
6.1
13.6
3
8.2
30.9
1 Bioprocessing costs have increased from the prior period due to additional facility costs, headcount and related spend incurred due to the Group’s investment in additional bioprocessing capacity at Oxbox. It was also
impacted by downtime at the Group’s Yarnton bioprocessing facility as when it was converted from an adherent process to bioreactors, the costs were not recovered to cost of goods but remained in bioprocessing
whilst the facility was not in use.
2 Research, development, bioprocessing and administrative expenses excluding depreciation, amortisation and the share option charge.
3 Cost of goods plus research, development, bioprocessing and administrative expenses excluding depreciation, amortisation and the share option charge.
— Raw materials, consumables and other external bioprocessing costs have increased as a result of the increase in
commercial development activities and bioprocessing volumes, as well as higher material and subcontracted spend.
— The increase in manpower-related costs is due to the increase in the average headcount from 377 in 2018 to 500 in
2019. This is as a result of increasing commercial development and bioprocessing capacity in line with the Group’s
increased revenues, as well as in anticipation of Oxbox coming online in the first half of 2020.
— External R&D expenditure was lower due to lower levels of pass-through clinical development spend for Axo-Lenti-PD
as the development was fully taken over by Axovant at the end of 2018.
— Other costs were higher due to increased facility costs for the Oxbox and Windrush Innovation Centre properties, as
well as a forex loss of £0.6 million (2018: £1.3 million gain) as sterling weakened against the dollar. Due to the
implementation of IFRS 16 (Leases) at the start of 2019, £0.8 million worth of operating lease payments now form
part of the depreciation of the right-to-use asset (£0.7 million), and the interest on the lease liability (£0.7 million).
Operating and Net profit/(loss)
£m
Operating EBITDA
Depreciation, Amortisation and
share option charge
Revaluation of investments/
Change in fair value of assets at
fair value through profit and loss
Operating (loss)/profit1
Interest
R&D tax credit
Foreign exchange revaluation
(non cash)
Net(loss)/profit
2019
(5.2)
(7.4)
(1.9)
(14.5)
(5.4)
4.8
(1.0)
(16.1)
2018
13.4
(5.5)
6.0
13.9
(6.2)
2.5
(2.7)
7.5
2017
(1.9)
(6.1)
2.3
(5.7)
(9.3)
2.7
3.3
(9.0)
2016
(7.1)
(4.2)
–
(11.3)
(4.9)
3.7
(4.1)
(16.6)
2015
(12.1)
(2.0)
–
(14.1)
(1.9)
4.0
(1.0)
(13.0)
1 If IFRS 16 (Leases) were not implemented at the start of 2019, the operating loss would be £13.8 million on a like for like basis with 2018.
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The Operating EBITDA loss for 2019 is further negatively impacted by a £1.9 million loss on revaluation of the Orchard
Therapeutics investment asset after the share price gave up some of the large gains achieved during 2018. The
depreciation, amortisation and share option charge was higher in 2019 due to depreciation on an increased asset base,
depreciation arising on leased assets following the adoption of IFRS 16 (Leases), and a higher share option charge due
to the increased employee headcount. The interest charge of £5.4 million was lower than the prior year as the Oaktree
loan was repaid at the end of June 2019, although this decrease was offset by a non-cash accelerated interest charge
incurred as a result of the early repayment of the loan, and interest arising on the adoption of IFRS 16 (Leases). The R&D
tax credit in 2019 has increased due to additional research and development expenditure, both in terms of headcount
and materials. The net loss in 2019 was negatively impacted by the devaluation of sterling against the dollar, resulting in
a foreign exchange loss of £1.0 million being recognised which was mainly as a result of the revaluation of the previously
held dollar denominated Oaktree loan.
Segmental analysis
Reflecting the way the business is currently being managed by the Senior Executive Team, the Group reports its results
within two segments, namely the ’Platform’ segment which includes the revenue generating bioprocessing and process
development activities for third parties (i.e. the Partner programmes CDMO business), and internal technology projects
to develop new potentially saleable technology, improve the Group’s current processes and bring development
and manufacturing costs down within the LentiVector® Platform. The other segment, “Product“, includes the costs of
researching and developing new gene therapeutic product candidates.
£m
2019
Revenue
Operating EBITDA
Operating (loss)/profit
2018
Revenue
Operating EBITDA
Operating profit/(loss)
Platform
Product
51.0
(11.7)
(20.2)
55.0
9.8
11.4
13.1
6.5
5.7
11.8
3.6
2.5
Total
64.1
(5.2)
(14.5)
66.8
13.4
13.9
The Platform segment in 2019 saw a decrease in revenue of 8% from £55.0 million to £51.0 million as license income
from new customers in 2018 as a result of the Axovant and Bioverativ (Sanofi) deals did not recur. This was however
partly offset by increased bioprocessing volumes and additional commercial development services provided. Operational
results were further impacted by additional investment in headcount and facilities resulting in an operating EBITDA loss
of £11.7 million, as compared to a profit of £9.8 million in 2018. The Group continues to target increased profitability
from this segment through higher bioprocessing volumes, increased royalty payments from partners, and additional
commercial development services to customers.
The Product segment has generated revenues of £13.1 million and an Operating EBITDA profit of £6.5 million (2018:
£3.6 million) largely as a result of the £11.5 million ($15 million) Axovant milestone achieved in April 2019 on dosing of the
first patient in the second cohort. The segment also generated an Operating profit of £5.7 million (2018: £2.5 million).
Oxford Biomedica plc | Annual report and accounts 2019
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Financial review
Cash flow
The Group held £16.2 million cash at 31 December 2019, having begun the year with £32.2 million. Significant
movements across the year are explained below.
— The operating loss in 2019 was £28.4 million lower than the operating profit of £13.9 million achieved in 2018,
principally as a result of lower license fees, but also increased operational investments in headcount and facility costs,
as well as lower revaluation gains on Assets at fair value through profit & loss.
— This loss flowed through to Operating EBITDA which decreased by £18.6 million to a loss of £5.2 million (2018:
£13.4 million profit).
— Cash used in operations was £6.6 million, a £15.8 million reversal from the £9.2 million cash generated in 2018.
— Net cash used in operations during 2019 at £3.5 million was helped by a £3.1 million R&D tax receipt, down
£0.6 million from the prior year. This was due to the tax credit being capped as a result of the profits achieved in 2018
as compared to 2017.
— Interest paid during the year was £3.3 million, down from £4.7 million in the prior year as the Oaktree loan facility was
paid at the end of June 2019.
— £6.3 million of funds was generated from the sale of shares of the Orchard investment asset.
— Purchases of property, plant and equipment increased from £10.1 million to £25.8 million, mainly consisting of
purchases of equipment and leasehold improvements for the new Oxbox manufacturing facility.
— Cash burn, the aggregate of these items, was therefore increased from £1.9 million in 2018 to £26.3 million in 2019
as a result of the lower level of cash generated from the Group’s operations, and the increased capital expenditure
on the Oxbox bioprocessing facility.
— The net proceeds from financing during 2019 were £10.3 million, consisting almost entirely of the Novo Holdings
equity raise of £53.5 million which was used to fully repay the £43.6 million ($55 million) Oaktree loan.
— The result of the above movements is a net decrease in cash of £16.0 million from £32.2 million to £16.2 million.
£m
Operating (loss)/profit
Non-cash items included in
operating loss
Operating EBITDA
Working capital movement
Cash (used in)/ generated from
operations
R&D tax credit received
Net cash (used in)/generated
from operations
Interest paid, less received
Sale of investment asset
Capex
Cash burn
Net proceeds from financing
Movement in year
2019
(14.5)
9.3
(5.2)
(1.4)
(6.6)
3.1
(3.5)
(3.3)
6.3
(25.8)
(26.3)
10.3
(16.0)
2018
13.9
(0.5)
13.4
(4.2)
9.2
3.7
12.9
(4.7)
–
(10.1)
(1.9)
19.8
17.9
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)
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Statement of financial position review
The most notable items on the Statement of financial position, including changes from 31 December 2018, are as follows:
— Assets at fair value through profit & loss decreased by £6.3 million as a result of the sale of Orchard shares, and by
£1.9 million due to the devaluation of the Orchard investment based on the quoted Orchard share price at year end.
— Property, plant and equipment has increased by £30.1 million to £61.9 million as depreciation of £5.8 million only
partially offset additions of £29.6 million, mainly purchases of equipment and leasehold improvements for the new
Oxbox manufacturing facility, a £3.7 million Oxbox leasehold restoration asset, and £6.4 million of right to use asset
recognised upon the implementation of IFRS 16 (Leases).
— Inventories have decreased from £4.3 million to £2.6 million due to work in progress balances released to cost of
goods due to the ability to more accurately reflect the percentage of completion on bioprocessing batches, as well
as lower raw material levels after planned increases in stock levels at 31 December 2018 due to Brexit uncertainty.
— Trade and other receivables increased from £30.6 million to £33.7 million, due predominantly to the increased levels
of process development activities, as well as the timing of bioprocessing orders placed at year-end.
— Tax assets increased from £2.4 million to £5.4 million due to increased research and development expenditure
qualifying for tax relief.
— Trade and other payables increased from £11.4 million to £14.3 million, due to the purchases of equipment and
leasehold improvements for the new Oxbox manufacturing facility, as well as an increased level of operational activity.
— Contract liabilities decreased from £18.5 million in 2018 to £14.9 million due to the release of the NVS bioprocessing
capacity reservation fee and the funds received in advance for Axovant process development activities.
— Deferred Income decreased from £5.0 million in 2018 to £4.3 million mainly due to the reclassification of a £2.3 million
lease incentive upon implementation of IFRS 16 (Leases), partly offset by the £0.4 million Santen option and the net
movement in innovate capex grant funding of £1.5 million.
— The Oaktree loan balance of £41.2 million at 31 December 2018 was fully repaid during 2019 after the Group raised
£53.5 million equity from new Investor Novo Holdings.
— Lease liabilities of £8.4 million were recognised as required by the implementation of IFRS 16 (Leases) from the start
of 2019.
Events after the Statement of financial position date – contingent liability
The Group routinely enters into a range of contractual arrangements in the ordinary course of business which may give
rise to claims or potential litigation against the Group.
Subsequent to year end the Group identified an issue regarding an aspect of certain process development work
performed on behalf of a customer in 2018 and 2019 which potentially could give rise to a material claim against the
Group. The Group has been in communication with the third party but is not yet in a position to verify or validate any
information relating to this matter due to the very recent timing of this issue being identified.
As at 31 December 2019, the Group regards this matter as an adjusting post Statement of financial position event
(IAS10) and has assessed the performance obligations for which the revenue has been recognised and reversed all
potentially affected revenues relating to the work packages with the liability recognised within Contract liabilities due
within one year.
In addition, the Group expects that the potential liability arising with regards to the affected work packages will be
extinguished either through re-performance of the affected work packages, or ultimately form part of any potential
claim. If a claim were to materialise, the Group estimates the range of all potential costs could be between £250,000
and £1,000,000. However, as there is no such claim to date and given the early stage of the investigation into the cause,
no liability has been recognised at the Statement of financial position date, as in management’s opinion it is too early to
consider the above estimate sufficiently reliable to recognise a provision (if any) in respect of this matter. The assessment
required is inherently judgmental, and there is a risk that the final settlements are materially different to the range
provided above or do not include all claims and therefore the amounts may be understated.
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Financial review
A contingent asset could potentially exist within the financial statements for the insurance cover that the Group maintains,
however the Group cannot determine the extent of any cover until further investigation is undertaken as necessary. On
this basis it is too early to assess the likelihood of an asset arising, therefore no contingent asset has been recognised.
No other amounts have been provided for in respect of this matter.
Financial outlook
The Group is targeting improved financial performance in 2020. The contracts signed in 2018 with Axovant, Sanofi
(Bioverativ) and the UK Cystic Fibrosis Gene Therapy Consortium have bolstered the Group’s commercial development
revenues in 2019, with additional commercial development and bioprocessing revenues expected from these
partnerships in the future. The Group’s customer base also continues to diversify with the signing of a new commercial
collaboration agreement with Santen Pharmaceutical Company.
The Group will continue to target improvements in its commercial relationship with its existing customers. The signature
of a five year extension to the commercial supply agreement with Novartis is testament to the joint success achieved
in this strategically important collaboration since 2013. Novartis continues to launch Kymriah® across the globe with the
product now having approved reimbursement in 20 countries. New marketing approvals were seen in Japan with
Kymriah® being the only CAR-T available in Asia. The Group will continue to target new strategic commercial relationships
in 2020, whilst remaining focused on meeting the growing demands of its existing customer base.
The Group is continuing the development of its proprietary pipeline, and while discussions are ongoing for further out-
licensing or spin-out of these programmes, the Group has also undertaken a review of its pipeline to determine which
programmes it would focus on in pre-clinical development to potentially take through into early stage clinical studies
in the coming 12-18 months.
The Group continues to make selective strategic investments in its products and enabling technologies where the
opportunity exists to increase shareholder value and improve patient outcomes. The Group will continue to invest in
early stage concepts and pre-clinical studies, and in its key LentiVector® technology platform.
Going concern
The financial position of the Group, its cash flows and liquidity position are described in the primary statements and
notes to these financial statements.
The Group held £16.2 million and £17.2 million of cash at the end of December 2019 and April 2020 respectively.
Although in 2019 the Group recorded an operating loss of £14.5 million and did not generate positive operational cash
flow, this was largely due to operational scale-up of investments in its people and operational capabilities as part of the
strategic decision to increase its bioprocessing capacity.
In assessing the going concern assumptions, the Board has undertaken a rigorous assessment of the forecasts and
assessed identified downside risks and mitigating actions. The downside risks include a number of severe but plausible
scenarios incorporating underperformance against the business plan, unexpected cash outflows and fewer new
customers. Due to the Group’s scale-up of investments and strategic decision to increase it’s bioprocessing facility, the
Group requires additional financing in the form of equity financing, loan financing or other government finance
initiatives in order to continue its operations and current capabilities.
Due to volatility in the financial markets created by the impact of the COVID-19 pandemic, fund raising through issuance
of equity to the investment community as planned has become very difficult and the Group has not had the opportunity
to raise funding in line with the originally planned timeline. Therefore, the Board has undertaken a much more rigorous
review of the detailed cash flow forecast prepared as part of the going concern assessment process. The process
identified that the Group would not be able to continue its activities for at least 12 months from the date of approval of
these financial statements if the Group could not secure the external financing and continue to execute and recover
known and expected revenues from existing customers under long term contracts, which are ongoing but still to be
delivered or securing the benefit of any upfront receipts from licensing out the Group’s intellectual property or win new
customer contracts for process development and bioprocessing services.
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Whilst it is difficult to estimate the impact of COVID-19 due to the rapidly changing nature of the pandemic, the cash
flow forecasts include the Group’s current assumptions, taking into account the severe but plausible downsides. The
assumptions include a reduction in revenues by almost 30% (fewer new customer, lower demand from existing
customers and reduction in milestones), a reduction in associated costs and lower discretionary capital expenditure.
If the Group is unable to the secure the external financing and receipt the revenues described above, it has assessed that
it would not be able to generate sufficient cash flows to support its level of activities beyond the third quarter of 2020.
The above situation gives rise to a material uncertainty, as defined in auditing and accounting standards, related to events
or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and in such
circumstances, it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.
However, despite the above uncertainties, the Board has the confidence that the accounts should be prepared on a
going concern basis for the following reasons:
— The Group has key worker status which allows continuity of providing services to the Group’s financially stable
customer base throughout the lockdown period.
— The Group’s ability to continue to be successful in winning new customers and building its brand as demonstrated by:
— Signing the substantial license, manufacturing and development agreement with Juno (BMS) in March 2020.
— Joining a Consortium led by the Jenner Institute, Oxford University, to rapidly develop, scale-up and manufacture
a potential vaccine candidate for COVID-19, with Government support for the funding of the project expected.
— The Group’s ability to potentially access the Government Coronavirus Business Interruption Loan Scheme and also
external debt finance as required.
— The Group’s history of being able to access capital markets.
— The Group’s ability to control capital expenditure costs and lower other operational spend, as necessary.
Therefore the Directors have continued to adopt the going concern basis of preparation in the financial statements.
Although the UK’s decision to leave the European Union may significantly affect the fiscal, monetary and regulatory
landscape in the UK, the Group has assessed the future impact of Brexit on its operations to be minor. Further details
of the Group’s contingency planning is provided on page 62.
Stuart Paynter
Chief Financial Officer
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Responsible business
Oxford Biomedica is committed to its role as a responsible business and the Group has developed a policy and strategy
to ensure it meets this objective. The responsible business committee, which has been established, is chaired by John
Dawson, the Group’s Chief executive Officer.
The Groups responsible business mission is to deliver life changing gene therapies to patients in an ethical and socially
responsible way. The Group’s work is governed by its values.
The Group’s strategy is focused on a number of main areas:
People
Safety
Being able to deliver the Group’s products and services both safely and sustainably is the number one priority. Via the
systematic evaluation all of activities, the Group ensures that significant risks are identified and controlled in such a way
as to minimise the risk to employees and anyone else who may be affected by the Group’s acts or omissions. The
Group endeavours to maintain its facilities and equipment to the highest standards.
The Group’s Health and Safety Management System covers all aspects of its work, from working with biological
materials, to use of display screen equipment. The Safety Management System continues to evolve and grow with the
organisation, and the Group has taken steps to improve consultation in developing policies and procedures to ensure
they adequately reflect working practices. Improving employee engagement is a focus for the year ahead, and the
Group plans to run a safety climate survey in the first quarter of 2020 to actively engage all staff and identify areas for
improvement.
Oxford Biomedica continues to have a first-class safety record, with no reportable incidents in the reporting year.
Health and Safety is a standing item on the Board’s agenda, and the Group has taken steps to improve the metrics used
to monitor performance in this important part of the business. The Group is committed to meet both the letter and
spirit of all health and safety regulation and best practice.
Values
The Group’s company values are: ‘Have integrity’, ‘Be inspiring’ and ‘Deliver innovation’.
These three values govern the way that the Group does business, how the Group works together and the interactions
the Group has with all its stakeholders.
Have integrity
We always do the right thing.
Whatever the situation and
consequences, we do what’s
right for employees, patients
and partners. We make objective
decisions and can be trusted
to deliver on our commitments.
Be inspiring
We succeed together through
our passion, commitment and
teamwork. Through our actions
and behaviours, we create an
environment which positively
challenges, engages and excites us.
Deliver innovation
We drive credible science
to realise incredible results.
We deliver ground-breaking
scientific excellence by nurturing
exceptional talent. Together, we
continually improve by generating
new ideas and creative ways of
working to bring about better
solutions for patients.
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The Group’s values are also reflected in the people processes – the Group looks for evidence that the job candidates
share the values. The values are an important factor in measuring performance, and the Group recognises and rewards
adherence to the values.
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 embrace diversity in all forms.
The table shows the gender split across the organisation as at 31 December 2019:
Board including Non-Executive
Directors
Senior managers
All other employees
Total
Male
Female
Total
% Male
% Female
7
22
234
263
1
14
276
292
8
36
510
554
87%
61%
46%
47%
13%
39%
54%
53%
The Gender Pay Gap Report for 2019 has been prepared by the Group and the Group is pleased to report an increase
in representation of female employees at the more senior levels of the organisation over the last year. This has had a
positive impact on the Group’s gender pay ratio. For full details of the report please visit the website at www.oxb.com.
Reward
The Group is committed to providing competitive reward packages for all employees. The Group participate in industry
specific pay surveys which inform the salaries which are reviewed annually. In 2020, the Group is introducing a
company-wide cash bonus scheme which will give employees at all levels the opportunity to share in the success of
the Company by receiving a cash bonus linked to their grade level and their own personal performance.
Through the Group’s comprehensive benefits programme, employees are encouraged to save for the future, via the
pension plan. The Group also provide employees with protection should they fall sick or be unable to work through
long term disability. The Group has recently improved maternity pay provision, and increased sick pay benefits.
The Group also provides all employees with the opportunity to own a share in the business through share option and
share save schemes.
Delivering safely and sustainably
Being able to deliver the Group’s products
and services both safely and sustainably
is the number one priority.
Sharing in our success
The Group is introducing a company-wide cash bonus
scheme which will give employees at all levels the
opportunity to share in the success of the Company by
receiving a cash bonus linked to their grade level and
their own personal performance.
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Responsible business
Training and Development
The Group invests in the development of its people at all levels. Every employee has a development plan, and throughout
the year there are a range of development courses, both classroom based and on-line offered to all employees.
The Group has a modular Management Development Programme which is offered to all managers at OXB. Managers
attend modules in various management related topics over a period of several months, and are given support to embed
their learning throughout the programme. During 2019, around 100 managers attended this programme and a similar
number will benefit from it in 2020.
Training is also essential for ensuring compliance with the Group’s processes and the safety and wellbeing of everyone
who works in the facilities.
Employee Well-being
The well-being of the Group’s people is very important. The Group has an on-site occupational health service, which,
in addition to providing job specific health surveillance, is also available for medical referrals and advice on general well-
being. In 2020, the Group is also focused on providing support to help identify and manage mental health issues in the
workplace.
During the COVID-19 pandemic the safety and well-being of our staff is paramount. The Group has a duty of care
towards all employees, and therefore the Group expects some of our staff to be required to self-isolate to prevent the
possible spread of infection. The Group continually assesses the risks for employees and regularly communicates with
staff on the ongoing situation and has implemented steps to contain any spread such as publicising good personal
hygiene practices, provision of hand sanitiser in common areas, wearing of face masks, staggering of shifts, enforcing
a travel management prevention strategy and encouraging people to work from home.
Employee Communication
The Group acknowledges the importance of communication and consultation across the business. The Group uses a
variety of communications channels to share information on the business, science, and other topics of interest to
employees. These include regular all-employee town hall briefings, R&D seminars, employee newsletters, and work-
related social media. The Group is currently reviewing its communication strategy, including the channels used to
ensure that the Group is able to keep all its employees engaged as the business grows.
Well-being
The Group has an on-site occupational health service,
which, in addition to providing job specific health
surveillance, is also available for medical referrals and
advice on general well-being.
Disposal of chemical waste
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.
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Community
The Group recognises the value of being a good local citizen in the Oxford community. The Group endeavours 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. The Group seeks 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 its employees. The Group has a well-established Cycle-
To-Work scheme and interest-free season ticket loans to help minimise its traffic impact on the local area.
Apprenticeship scheme
As part of the Group’s focus of delivering local benefits and providing high skilled jobs to the local community the
Group has established an apprenticeship scheme in collaboration with Advanced Therapies Apprenticeship Community
and the University of Kent. Currently the Group has eight apprenticeships in operation including school leavers from the
local community which are enrolled on a training scheme in the highly skilled areas of Manufacturing and Analytical
testing. The Group is committed to supporting the apprentices through support and training and expanding the scheme
in the future.
Charitable Giving
This year the Group setup the Helping Hands Team as part of its commitment to its chosen charity SeeSaw (charity
registration 1076321). SeeSaw is an Oxford based charity providing support for bereaved children, young people and
their families when they face a death in the family.
The Group’s Helping Hands Team and employees organised and participated in a number of events during the year.
This included participation in the Oxford half marathon, a Fire walk and Christmas raffle. These activities and a donation
from the Group meant that Oxford Biomedica raised £9,500 for SeeSaw in 2019.
Charity
SeeSaw (Employee donation)
SeeSaw (Group donation)
Total
Donation
£8,200
£1,300
£9,500
Apprenticeship scheme
The Group has eight apprenticeships in operation
including school leavers from the local community
which are enrolled on a training scheme in the highly
skilled areas of Manufacturing and Analytical testing.
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Responsible business
Environment
Environmental policies & initiatives
Oxford Biomedica fully recognises its responsibility to minimise the impact of our activities on the environment, its
neighbours and the local community. Much like its Health and Safety Management System, its Environmental
Management System continues to evolve and grow with the organisation. The Group is mapping its system against
ISO14001 with the aim of having a certifiable system in place by the end of the next reporting year. 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.
Energy Savings Opportunity Scheme (ESOS)
As an organisation of over 250 employees the Group has engaged with ESOS, in compliance with EU Energy Efficiency
Directive (2012/27EU). This has involved an ESOS Phase 2 energy assessment based on 2019 data covering all aspects
of its energy usage. The recommendations from that audit will be incorporated into the Environmental section of the
Group’s Responsible Business policy and will form part of the environmental targets for the coming year.
Greenhouse gas emissions report
The tables below show the Group’s usage in 2019 and 2018 of energy and water at its sites in Oxford, UK. The Group
has also estimated its total CO2 emissions and has indicated its “environmental intensity” on a per employee basis, an
important indicator of its activity.
2019
Electricity
Gas
Water supply
Other activities (estimated)
including waste disposal and travel
Total
Unit
MW hours
MW hours
Cubic metres
Usage
4,974
3,599
11,799
Usage per employee
9.6
6.9
23.0
CO2 emission (tonnes)
1,271
662
4
778
2,716
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2018
2019
Water use (cubic metres)
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2018
Electricity
Gas
Water supply
Other activities (estimated)
including waste disposal and travel
Total
Unit
MW hours
MW hours
Cubic metres
Usage
4,169
3,225
6,330
Usage per employee
11.4
8.8
17.3
CO2 emission (tonnes)
1,180
593
2
590
2,365
Waste and Energy efficiency
The Group is committed to energy efficiency and has a number of policies to decrease energy usage where possible. For
instance, when existing lighting needs replacing the Group switches to LED lights which are significantly more energy
efficient than traditional lighting systems. The Group is looking at reducing the water usage throughout its sites in its facilities
with more efficient system controls. In its Windrush laboratories the Group has passive infrared light sensors in all areas that
have been refurbished to ensure lighting is extinguished in areas that are not currently in use.
Waste management
The Group continues to review its waste management systems to manage waste more effectively. This includes:
— recycling all paper and cardboard waste, aluminium cans, glass, plastics and printer toner/cartridges.
— use of different waste streams to increase processing efficiency.
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.
5.000
4.000
3.000
2.000
1.000
0
Electricity
Gas
2018
2019
Electricity and gas use (MWh)
Oxford Biomedica plc | Annual report and accounts 2019
28.7
0.2
24.4
46.8
Electricity
Gas
Water supply
Other activities
CO2 emissions 2019 %
Our total CO2 emissions have reduced slightly
from the previous year at 2,716 tonnes in 2019
(2018: 2,365).
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Responsible business
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 and all employees receive training in this matter. 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.
Clinical trials
The Group instils transparency, safety and ethics in all aspects of its responsible business, including the design and
conduct of its clinical trials. The Group’s 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. The Group also has standard operating
procedures in place under a controlled Quality Management System to ensure compliance with appropriate guidelines
and legislation.
The Group is also committed to transparency, and the website (www.oxb.com) 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 the Group also discloses its trials on a US government-sponsored website (www.clinicaltrials.gov).
Human rights and anti-slavery
The Group fully respects human rights and conducts its 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 the website www.oxb.com.
The Group’s facilities are all located in the UK, where its policies accord with human rights regulations and its 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. The Group
is 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.
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Strategic report
Non-financial statement
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The Group aims to comply with the new non-financial reporting requirements contained in section 414CA and 414CB
of the Companies Act 2006. The table below, and information it refers to, is intended to help stakeholders understand
the Group’s position on key non-financial matters
Requirement
Environment
Employees
Human rights
Social matters
Policies and standards which govern
the Group’s approach
– Environment statement.
– Responsible business policy.
– Health, safety policy.
– Equal opportunities policy.
– Diversity policy.
Risk management and additional information
Health and Safety disclosures on page 48; Stakeholders
pages 22 and 23; Environment greenhouse gas emissions
and electricity usage disclosures on pages 52 and 53.
Stakeholders page 23; People pages 48; Employee
numbers by gender pages 49; Board engagement
with the business page 96; Diversity page 75; CEO’s
remuneration comparted to employees page 87; Gender
pay gap report page 49 and published on the Group’s
website.
– Data protection policy.
– Slavery and human trafficking policy.
– Whistleblowing policy.
– IT and information security policy.
Review and approval of the Group’s modern slavery and
human trafficking statement page 54; Stakeholders pages
22 and 23; Whistleblowing page 54.
The Group has a responsible business policy,
which covers the Group’s way of working
with employees, customers, patients; the
local community and the environment.
Stakeholders pages 22 and 23; engaging with the local
community and charitable work page 51; responsible
business pages 48 to 54.
Anti-corruption and
anti-bribery
– Anti-corruption.
– Audit services policy.
Anti-corruption/anti-bribery page 54.
Policy embedding due diligence
and outcomes
Principle risks and impact
on business activity
Governance framework and structure page 67; Board
activity during the year page 69; Audit Committee report
page 71.
Principle risks and effective management page 58 to
page 62; Audit Committee report page 71;
Risk management and regulatory disclosure page 58.
Description of business model
The Group’s business model pages 20 to page 21.
Non-financial key performance
indicators
The Group at a glance page 16; Operational highlights
page 24; Stakeholders page 22 to 23.
The Strategic report on pages 15 to 55 was approved by the Board on 6 May 2020 and signed on its behalf by:
John Dawson
Chief Executive Officer
Oxford Biomedica plc | Annual report and accounts 2019
As more and more commercial
gene therapy treatments are
approved by regulators in
the US and EU come online,
the challenge has evolved.
The race is well and truly on
to meet growing demand, bring
costs down and industrialise the
science. The Group is playing
a major role in this.
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1 Preparing for success
3 Demand in the gene and
cell therapy sector is reaching
new heights
7 An area bursting with activity
11 Leading industrialisation
15 Strategic report
16 Group at a glance
18 Products pipeline
20 The Group's business model
22 The Group’s stakeholders
24 Operational highlights
delivered in 2019
Financial highlights delivered
in 2019
25
26 Chairman’s statement
28
Chief Executive Officer’s and
2019 performance review
Delivery of 2019 objectives
34 Management team
36
37 Objectives set for 2020
38
Financial review
48 Responsible business
55
Non-financial statement
57 Corporate governance
58
Principal risks, uncertainties
and risk management
63 Board of Directors
66 Corporate governance report
76 Directors’ remuneration report
94 Directors’ report
101
Independent auditors’
report
109 Group financial statements
110
Consolidated statement
of comprehensive income
Statement of financial
positions
111
112 Statements of cash flows
113
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
114
151 Other matters
Glossary
151
154 Advisers and contact details
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Corporate governance
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. During 2019 there have only been a few gene and cell therapy products which
have been approved for commercial use. As a consequence 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. However, twice a year in March and September a
full presentation to the Board on Risk occurs. The risk management processes are the responsibility of the Senior
Executive Team (SET) 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 (SET) – the SET generally met 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 currently has three key management sub-committees which meet
monthly and through which much of the day-to-day business is managed. These are the extended Operational
Leadership Team (incorporates the Quality and Manufacturing Operations Committee), the Product 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 Committee – Oxford Biomedica has a Risk Management Committee comprising senior managers
from each area of the business and chaired by the Chief of Staff. 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
which are required 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.
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;
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— 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
candidate’s characteristics such as the delivery mechanism or the bioprocessing process. There is no certainty that
such technical improvements or solutions can be identified.
(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 candidate’s 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.
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Corporate governance
Principal risks, uncertainties and risk management
(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.
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. In addition, the Group is also bringing in certain processes
such as Fill & Finish in house in order to reduce the risk of failure via contracting out the service. 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 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.
Business development
The Group is seeking to out-license 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 the 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.
Attraction and retention of highly skilled employees
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.
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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 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
either in Europe and/or 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.
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;
— 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 license 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, but 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. To the extent that the Group’s foreign currency assets and potential liabilities 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 that 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.
UK’s departure from European Union (“Brexit”)
The impact of the UK’s departure from 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 the UK’s economy and the future
growth of its industries, including the pharmaceutical and biotechnology industries.
Depending on the free trade agreement 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 the free
trade agreement with 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.
COVID-19
As a result of the COVID-19 pandemic, the Group has conducted an assessment of the potential financial and operational
risks to the business. While the Group is yet to experience any significant impact from the virus, there may be an impact
on revenue, supply chain and operating facilities if the situation continues or worsens. Management continues to
constantly monitor the ongoing situation.
The Group has implemented a daily senior management working group to monitor current COVID-19 developments
and GOV.UK guidance, to risk assess the Group’s supply chain and to direct the Group’s phased response. The Group is
working with staff, customers and suppliers to monitor any potential disruption and, so far, the Group has not experienced
any, and does not currently expect to experience, significant supply issues or any changes in overall customer demand.
The Group continues to monitor the potential impact on the supply chain, with a particular focus on key manufacturing
and process development inventories. To date we have not seen any impact but we are aware there is the potential for
shortages in certain inventories globally.
The Group has a duty of care towards all employees, and therefore we expect some of our staff to be required to self-
isolate to prevent the possible spread of infection. The Group has taken action to mitigate the spread of infection at our
facilities through enhanced cleaning processes, staggering of shifts and the provision of hand sanitiser in common
areas. The Group continually assesses the risks for employees, regularly communicates with staff on the ongoing
situation, and has implemented steps to contain any spread such as publicising good personal hygiene practices,
enforcing a travel management prevention strategy and encouraging people to work from home.
As part of the 2020 strategy, the Group has increased the level of finished goods held in warehouses which will mitigate
the risk in the short term against labour shortages and subsequent production delays at our key suppliers.
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Corporate governance
Board of Directors
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Standing, left to right:
Martin Diggle, Andrew Heath,
Stuart Henderson, Heather Preston
and John Dawson.
Seated, left to right:
Stuart Paynter, Lorenzo Tallarigo
and Robert Ghenchev.
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Corporate governance
Board of Directors
Dr. Lorenzo Tallarigo
Dr. Andrew Heath
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.
From 01 January 2019 Dr Tallarigo joined the Board of
Directors at Angelini Holding S.p.A., an Italian company
with major business in healthcare and consumer goods.
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 and held senior positions at Astra AB and Astra
USA, including Vice President Marketing & Sales. He is
Chairman of TauC3 Biologics Ltd and a Non-Executive
Director of Novacyt SA. 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
Stuart Paynter
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.
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
Stuart Henderson
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. He is a Non-Executive Director
of Scancell Holdings plc and Proteome Sciences plc.
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 Andersen,
where he was Head of Emerging Biotechnology. He
is a former Director of the Babraham Institute and
Norwich Research Partners LLP and currently sits as a
Non-Executive Director on the Boards of One
Nucleus (the Life Sciences trade body for Cambridge
and London), the Cell and Gene Therapy Catapult
and BioCity Group.
Appointment:
— Appointed a Director in June 2016.
Committee membership:
— Audit Committee.
— Remuneration Committee.
— Nomination Committee.
Dr. Heather Preston
Robert Ghenchev
Independent Non-Executive Director
Dr. Heather Preston was appointed to Oxford
Biomedica’s Board in March 2018. Dr. Preston is the
Managing Partner of Pivotal BioVentures. She has
over 30 years of experience in healthcare, as a
scientist, physician and management consultant and
she has been an investor in life sciences and biotech
for the last 18 years. She holds a degree in Medicine
from the University of Oxford.
Appointment:
— Appointed a Director in March 2018.
Committee membership:
— Audit Committee.
— Remuneration Committee.
— Nomination Committee.
Non-Executive Director
Robert Ghenchev was appointed a Non-Executive
Director in June 2019. Robert is currently Senior
Partner and Head of Novo Growth at Novo Holdings.
Prior to joining Novo Holdings, he was an investment
banker at Moelis & Company and Deutsche Bank in
London. Robert has deep corporate finance experience
advising life science companies on a wide range of
issues. He holds a J.Hons. B.A. degree in Finance and
Economics from McGill University and a M.Sc. degree
in Financial Economics from the University of Oxford.
He is also on the Board of Tempus Labs Inc.
Appointment:
— Appointed a Director in June 2019.
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 2019.
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 Executives.
There has been a change to the Board during 2019. In June, Robert Ghenchev joined the Board as a Non-Executive
Director, following Novo Holdings’ strategic investment of approximately £53.5 million in the Group.
The Group has had a good year, with an increase in the Group’s commercial development and bioprocessing revenues
during 2019. The Group has continued to grow substantially over the year and the corporate governance framework
and committees are in the process of being reviewed in order to understand whether the current structure and
committees are fit for a larger company. With this amount of change within the Group 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.
Between December 2018 and February 2019 the Board had Deloitte LLP perform an external evaluation of the Board’s
performance during 2018/2019. The review process comprised the completion of a questionnaire covering the various
aspects of Board activities, interviews with each Director individually by the external evaluator and an active observation
of a Board meeting. The independent report was received in first quarter of 2019 and the Board is implementing the
appropriate changes based on the recommendations of the report. A review of the 2019 performance in relation to
whether the appropriate changes have been successfully implemented via an externally generated questionnaire will
occur during 2020.
The Financial Reporting Council produced a revised UK Corporate Governance Code in July 2018 (the “2018 Corporate
Governance Code”). The Board considers that it has been largely compliant with the 2018 Corporate Governance Code
during 2019. The exception being that following the appointment of Robert Ghenchev in June 2019 the Board no
longer met the requirement for half the Board to be comprised of independent Non-Executive Directors. The Board
has addressed this issue by initiating a search for additional independent Non-Executive Directors. In addition, having
served four years as Chairman, I have informed the Group of my intention to retire from Oxford Biomedica’s Board.
I will continue as Chairman while the Group completes a search for my replacement.
The following pages set out in more detail the activities and major matters considered by the Board in 2019.
Dr. Lorenzo Tallarigo
Chairman
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Corporate Governance Framework
As the Group has continued to grow over the year, the corporate governance framework and committees are in the
process of being reviewed in order to understand whether the structure and committees are fit for a larger company.
The final structure and committees have not yet been finalised, so the current governance framework comprises the
Board and the Senior Executive Team and their respective sub-committees is set out below:
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
EOLT
CDC
RMC
SET – Senior Executive Team.
PDC – Product Development Committee.
TDC – Technical Development Committee eOLT – Extended Operations Leadership Team (incorporates the Quality, Manufacturing and Operations Committee).
CDC – Commercial Development Committee RMC – Risk Management 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 changes during 2019 the Board comprised six Non-Executive Directors
and two Executive Directors.
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 also takes a close interest in Quality, Health, Safety & Environment and Risk Management. Each of these areas
prepare reports for the Board ahead of each Board meeting.
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 and taking into account section 172 responsibilities items are circulated several
days ahead of each meeting. Regular board papers cover Research, Quality, Process R&D, Client Programmes & Alliance,
Management, Analytical Services, Clinical Development & Regulatory, Digital Strategy and Business Change Projects,
Business Development, Finance, Investor Relations, HR, Operations and Health & Environment and Risk Management.
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Factoring stakeholder engagement into Board decisions
By thoroughly understanding the Group’s key stakeholder groups, the Group can factor their needs and concerns into
Boardroom discussions (further information on the Group’s stakeholders is on pages 22 to 23. The Board’s procedures
have been updated to require a stakeholder impact analysis to be completed for all material decisions requiring its
approval that could impact on one or more of its stakeholder groups. The stakeholder impact analysis assists the
Directors in performing their duties under s172 of the Companies Act 2006 and provides the Board with assurance that
the potential impacts on its stakeholders are being carefully considered by management when developing plans for
Board approval. The stakeholder impact analysis identifies:
— potential benefits and areas of concern for each stakeholder group;
— the procedures and plans being implemented to mitigate against any areas of concern; and
— who is responsible for ensuring the mitigation plans are being effectively implemented.
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 (www.oxb.com).
Reports from the Audit and Nomination Committees are included in this section and the Directors’ Remuneration
Report is on pages 76 to 93 incorporating the Remuneration Committee report.
The current Board member biographies are set out on pages 64 to 65.
— 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, was considered to be independent during 2019, however, due to
his length of tenure as a Director, he will not be considered independent under the 2018 Corporate Governance
Code following his proposed re-appointment at the AGM.
— Stuart Henderson is the chairman of the Audit Committee. He is considered to be independent.
— Heather Preston 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 2018 Corporate Governance Code.
— Robert Ghenchev is Senior Partner and Head of Novo Growth at Novo Holdings which is a 10.1% investor in the
Group and as such he is not considered independent under the 2018 Corporate Governance Code.
Since the appointment of Robert Ghenchev in the middle of 2019, the Group has not been in full compliance with 2018
Corporate Governance Code which recommends that half the Board should be consist of independent Non-Executive
Directors, excluding the Chairman. The Board is addressing this issue by initiating a search for two independent Non-
Executive Directors.
Each Director is provided with an appropriate induction on appointment.
All Directors and the Board and its committees have access to 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.
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Board meetings
The Board meets regularly with meeting dates agreed for each year in advance. During 2019 there were six regular
Board meetings. The attendance of individual Directors at Board and Committee meetings was as follows:
John Dawson
Martin Diggle
Robert Ghenchev 1
Andrew Heath
Stuart Henderson
Stuart Paynter
Heather Preston
Lorenzo Tallarigo
Regular Board
Attended
6
6
3
6
6
6
6
6
Possible
6
6
3
6
6
6
6
6
1 Robert Ghenchev was appointed in June 2019
Audit Committee
Attended
Possible
Remuneration Committee
Attended
Possible
Nominations Committee
Attended
Possible
3
3
3
3
3
3
8
8
8
8
8
8
1
1
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 2018 financial statements and the
interim 2019 financial results.
The Chairman holds meetings from time to time with Non-Executive Directors without the Executive Directors in
attendance.
Board activity during 2019
Board matters during 2019 included:
— Routinely recurring items such as the approvals of the 2019 financial budget and objectives, the 2018 preliminary
results and Annual Report, and the 2019 interim results announcement.
— A review of the Group’s strategy, conducted in March and September.
— Monitoring the progress of the Group’s priority product development programmes.
— Reviewing business development opportunities including partnering and collaboration transactions.
— The appointment of Robert Ghenchev as a Director.
— Ongoing reviews of the Group’s risk management processes and key risks.
— The Group’s activities surrounding workforce engagement.
— Review of the Deloitte Report on Board effectiveness.
— Preparedness for the implications of Brexit.
Retirement of Directors
In accordance with the articles of association, at each Annual General Meeting (AGM) any Director who was appointed
after the last AGM 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. However, to ensure
compliance with the 2018 Corporate Governance Code all Directors will now be subject to annual re-election.
At the AGM in 2020, Robert Ghenchev will stand for appointment having being appointed to the Board in June 2019.
In line with the 2018 Corporate Governance Code, Andrew Heath, Stuart Henderson, Martin Diggle, Heather Preston,
John Dawson and Stuart Paynter will retire and be subject to re-election at the AGM in 2020. Lorenzo Tallarigo has
informed the Group of his intention to retire, however, he will continue as Chairman until the Group completes a search
for his replacement. Lorenzo Tallarigo, therefore, intends to stand for re-election at the AGM in 2020. In the event a
successor is appointed before the 2020 AGM, Lorenzo Tallarigo will not offer himself up for re-election. The Group
notes that since Andrew Heath has been appointed to the Board for more than nine years, in accordance with the 2018
Corporate Governance Code, he will not considered independent following the 2020 AGM.
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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 Group’s largest
investor, is represented on the Board by Martin Diggle and Novo Holdings (10.1% shareholder), is represented on the
Board by Robert Ghenchev ensuring a clear channel of communication with VLSF and Novo Holdings.
The Group has engaged with shareholders and potential investors through the various channels below:
Meetings with existing shareholders John Dawson and Stuart Paynter met with major shareholders during 2019. Lorenzo Tallarigo has also met
2019 Annual General Meeting
Meetings with potential investors
Results announcements and
presentations
2018 Annual Report
Website
Investor relations
Social media
with major shareholders.
The 2019 AGM was held in London on 29 May 2019. Shareholders were invited to attend the AGM 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 2018 full year performance and financial results in March 2019, and its 2019 half year
interim results in September 2019 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 2018 Annual Report in April 2019.
The Group’s website http://www.oxb.com 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@oxb.com
The Group also uses LinkedIn and Twitter to alert followers to relevant sector news which is relevant to the Group.
The Senior Executive Team (SET) and its committees
Operational management is conducted by the Executive Directors who, together with James Miskin, Kyriacos
Mitrophanous, Nick Page, Jason Slingsby, Helen Stephenson-Ellis, Natalie Walter and Dmitry Zamoryakhin 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 Safety, Health & 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; and
— Extended Operational Leadership Team (eOLT) – incorporates the Quality and Manufacturing Operations Committee
and covers quality, operational and manufacturing matters.
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:
— Commercial Development Committee (CDC) – which covers the external opportunities to out-licence and in-licence
technology or product candidates, and also to generate partnership opportunities for manufacturing and product
development; and
— Risk Management Committee (RMC) – this committee comprises senior managers from all parts of the business.
The committee 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.
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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.
The Board’s assessment of the prospects of the Board, its expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due, and the viability statement, is set out on page 97.
Board committee reports
Audit Committee report
The Audit Committee comprises Stuart Henderson, Heather Preston and Andrew Heath.
Stuart Henderson, Heather Preston and Andrew Heath all have relevant experience which qualifies them for membership
of the Audit Committee and, in Mr. Henderson’s case, to be Chair of the Audit Committee. Their experience is set out
in their brief biographies on pages 64 and 65.
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; and
— review and recommend to the Board the financial statements and associated announcements.
The 2018 Corporate Governance 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 Audit Committee regularly reviews this at its meetings with the external auditors.
The Audit Committee met three times in 2019:
— 05 March 2019 – to review the 2018 audit and approve the auditors’ report; review specific accounting issues
including revenue recognition, the adoption of IFRS 16, system control procedures around manual journal entries,
the impact of uncorrected misstatements, deferred taxation and use of Alternative Performance Measures (APM) in
the Annual report. The Audit Committee discussed and agreed the wording for the going concern and viability
statement. The auditors’ opinion was reviewed and no issues or concerns were raised. The Audit Committee reviewed
a number of areas of the quality of the audit and no significant concerns arose;
— 14 March 2019 – to approve the 2018 Annual Report; approve the 2019 preliminary results and review the KPMG LLP
management representation letter;
— 29 October 2019 – to review the full 2019 audit strategy; insurance strategy, tax strategy, risk process, treasury policy
and financial control assessment. The Audit Committee debated and agreed the 2019 year-end audit strategy. The
significant risks in the audit strategy included contract revenue recognition and IFRS 15 (complex customer agreements);
revenue recognition – bioprocessing estimate, revenue recognition; management override of controls; IFRS 16 lease
arrangements – impact and disclosure. Other noted matters include inventories, taxation, deferred tax and going
concern. The updated 2018/2019 insurance strategy was discussed and agreed. The Audit Committee also agreed with
the current tax strategy. An update on the risk management process was presented to the Audit Committee, which was
as a result of the work the Group commissioned from PricewaterhouseCoopers (PwC) around the risk management
process. The Audit Committee approved the current treasury policy and discussed the financial control assessment
with the Group. The Audit Committee agreed that a financial control assessment will be performed on an annual basis.
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Significant issues
The issues considered by the Audit Committee that are deemed to be significant to the Group are the percentage of
completion of bioprocessing and fixed price commercial development revenues, the bioprocessing out of specification
estimate and going concern. Due to quantum and value of new customer contracts signed, contract revenue recognition
was not deemed by KPMG LLP to be a significant risk in 2019, whilst going concern was identified as being significant
due to the impact of COVID-19 as well as turbulence in the financial markets.
Percentage of completion of bioprocessing batch revenues
Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time
as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the bioprocessing
process. Revenues are recognised on a percentage of completion basis and as such require judgement in terms of the
assessment of the correct stage of completion including the expected costs of completion for that specific bioprocessing
batch. The value of the revenue recognised and the related contract asset raised with regards to the bioprocessing
batches which remain in progress at year end is £20,863,000. If the assessed percentage of completion was 10 percentage
points higher or lower, revenue recognised in the period would have been £2,863,000 higher or lower.
Upon identification of this judgmental issue management provided to the Audit Committee a detailed update on the
nature, reasoning behind, and risk of misstatement of this accounting estimate. Any significant change to the method
of calculation of this estimate is flagged to the Audit Committee with regular updates being provided until such time as
these are finalised prior to release of the year end or interim results.
The Group’s external auditor has reported to the Audit Committee that they have reviewed the assumptions and
methods used in calculating the percentage of completion, as well as performing detailed testing of the year end
position, and found the percentage of completion to be appropriately accounted for.
Having provided appropriate challenge to management and the external auditor, the Audit Committee has concluded
that the percentage of completion of bioprocessing revenues to be appropriately accounted for.
Percentage of completion of fixed price process development revenues
As it satisfies its performance obligations the Group recognises revenue and the related contract asset with regards to
fixed price process development work packages. Revenues are recognised on a percentage of completion basis and as
such require judgement in terms of the assessment of the correct percentage of completion for that specific process
development work package. The value of the revenue recognised and the related contract asset raised with regards to
the work packages which remain in progress at year end is £5,447,000. If the assessed percentage of completion was
10 percentage points higher or lower, revenue recognised in the period would have been £540,000 higher or lower.
Upon identification of this judgmental issue management provided to the Audit Committee a detailed update on the
nature, reasoning behind and risk of misstatement of this accounting estimate. Any significant change to the method
of calculation of this estimate is flagged to the Audit Committee with regular updates being provided until such time as
these are finalised prior to release of the year end or interim results.
The Group’s external auditor has reported to the Audit Committee that they have reviewed the assumptions and
methods used in calculating the percentage of completion, as well as performing detailed testing of the year end
position and found the percentage of completion to be appropriately accounted for.
Having provided appropriate challenge to management and the external auditor, the Audit Committee has concluded
that the percentage of completion of fixed price commercial development revenues to be appropriately accounted for.
Estimate and judgments: Potential litigation
Subsequent to year end the Group identified an issue regarding an aspect of certain process development work
performed on behalf of a customer in 2018 and 2019 which potentially could give rise to a material claim against the
Group. The Group has been in communication with the third party but is not yet in a position to verify or validate any
information relating to this matter due to the very recent timing of this issue being identified.
The Audit Committee considered the contingent liability referred to in Note 36 to the financial statements and reviewed
a paper prepared by the executives on the matter which provided comfort to the Directors that this was an isolated
incident and the matter was being handled and disclosed appropriately.
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Going concern
Management and the Directors have had to make estimates and important judgements when assessing the going
concern status of the Group.
At year-end, management provides to the Audit Committee an accounting paper on the going concern status and
future viability of the Group which is assessed by the Audit Committee as a sub-committee of the Board. The paper is
based on a detailed cash flow forecast, taking into consideration both a base case and a downside scenario where
specific sensitivities are stress tested, and long range plan prepared by management.
The Group has considered the impact of COVID-19 on the adoption of the going concern basis of preparation in these
financial statements. In the preparation of the downside scenario detailed cash flow forecast, management assessed
the impact of the risk currently facing the business under the COVID-19 pandemic. The Audit Committee also considered
further potential downside risks to this forecast, as well as the mitigating actions which could be required if these
downside risks were to occur. This was to stress test an aggregation of the worst scenario occurring that would
represent the greatest potential financial impact in the short term and over the longer term (currently assessed as three
years) considered within the Group’s viability statement.
Having provided appropriate challenge to management and the external auditor, the Audit Committee has concluded
that the going concern status and future viability of the Group has been appropriately assessed, although it does note
a material uncertainty which is further explained in the going concern note on page 96.
The Board concluded on the going concern status and future viability of the business, the outcome of which is detailed
in the Directors Report on page 96.
The Group’s external Auditor has reported to the Audit Committee that they have reviewed the going concern status
and future viability of the Group, as well as performing detailed testing of the cash flow forecast and found the going
concern status and future viability of the Group to be appropriately reflected in the Group’s disclosures and that it is
appropriate for the financial statements to be prepared on a going concern basis.
Provision for out of specification bioprocessing batches
Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time
as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the process.
As the Group has now been bioprocessing product across a number of years, and also in a commercial capacity, the
Group has assessed the need to include an estimate of bioprocessed product for which revenue has previously been
recognised and which may be reversed should the product go out of specification during the remaining period over
which the product is bioprocessed. In calculating this estimate the Group has looked at historical rates of out of
specification batches across the last four years, and has applied the percentage of out of specification batches to total
batches produced across the assessed period to the revenue recognised on batches which have not yet completed the
bioprocessing process at year end. This estimate, based on the historical percentage, may be significantly higher or
lower depending on the number of bioprocessing batches actually going out of specification in future.
Upon identification of this judgmental issue management provided to the Audit Committee a detailed update on the
nature, reasoning behind, and risk of misstatement of this accounting estimate. Any significant change to this estimate
is flagged to the Audit Committee with regular updates being provided until such time as these are finalised prior to
release of the year end or interim results.
The Group’s external auditor has reported to the Audit Committee that they have reviewed the assumptions used in
preparing the out of specification estimate, as well as performing detailed testing of the historic inputs to the calculation,
and found the out of specification estimate to be appropriately accounted for.
Having provided appropriate challenge to management and the external auditor, the Committee has concluded that
the out of specification estimate to be appropriately accounted for.
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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 2019 was prepared by the Chief Financial Officer and the Group Financial
Controller and was further reviewed at the October 2019 Audit Committee meeting, where it was determined that
certain internal functions will be outsourced in 2020 and that the finance function will be further strengthened to reflect
the growth and the complexity of the business.
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 invoices, 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.
COVID-19
As a result of COVID-19, the Group has implemented extensive working from home by its employees. As most of the
internal controls implemented by the business are system based, this change has not had a detrimental impact on the
control environment. The business did have to implement some changes to the sign-off process for bank payments to
ensure adequate availability of supporting documentation during the payment process, but this has been implemented
successfully. The Group already had extensive remote working facilities in place including functionally limited access
from users’ own devices. No major changes were required to enable the significant shift to remote usage. Proactive
monitoring of remote usage has been increased as a precaution.
The Group plans to maintain its level of internal control during the period in which the COVID-19 pandemic has a
significant impact on the UK, but to continue to seek to improve it internal control environment through the implementation
of improved processes and controls, and an increased awareness, emphasis and consideration of control matters
throughout the organisation.
Nomination Committee report
The Nomination Committee, which is chaired by the Group’s Chairman, leads the process for making appointments to
the Board and succession planning, and comprises all of the independent Non-Executive Directors.
The Nomination Committee met several times in 2019 on an ad hoc basis with one meeting held to consider appointment
of Robert Ghenchev as a Non-Executive Director member of Board.
During the first half of the year the Board was fully compliant with the 2018 Corporate Governance Code in that half
the Board, excluding the Chair, comprised of Non-Executive Directors whom the Board considered to be independent.
However, with the appointment of Robert Ghenchev as a Non-Executive Director in June 2019, the Board became
non-compliant. The Board recognised the issue at that time and a search for additional independent Non-Executive
Directors is in progress.
In compliance with the 2018 Corporate Governance Code, Stuart Henderson was appointed as the nominated
Non-Executive Director who will oversee engagement between the Board and the workforce.
Board evaluation
In accordance with the 2018 Corporate Governance Code, between December 2018 and February 2019, Deloitte LLP
conducted an independent review of the Board’s performance for 2018/2019. Deloitte provides advice to the Group on
Directors Remuneration matters and on tax but has no connection with individual Directors.
The Board review process comprised the completion by each Director of a comprehensive questionnaire covering
all aspects of a Board’s performance, an interview with each Director and an active observation of a Board meeting.
The independent report was received in the first quarter of 2019 and the Board is implementing appropriate changes
based on the recommendations of the report. A review of the 2019 performance in relation to whether the appropriate
changes have been successfully implemented via an externally generated questionnaire will occur during 2020.
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Board succession planning
The Board has reviewed the succession plans for both its composition and that of its committees and the continued
development of the Board. The Board have initiated a search for additional independent Non-Executive Directors to address
the 2018 Corporate Governance Code recommendation that half the Board should consist of independent Non-Executive
Directors. In addition, the Board has initiated a search for a new Chair following Lorenzo Tallarigo’s decision to retire.
Following Andrew Heath’s proposed re-appointment at the upcoming AGM, he will no longer be deemed to be independent
and accordingly he will step down as the Senior Independent Non-Executive Director and Chair of the Remuneration
Committee. Heather Preston will replace Andrew Heath as the Senior Independent Non-Executive Director and Chair of the
Remuneration Committee. In addition, Andrew Heath has informed the Board of his decision to retire once the Group has
found a suitable independent Non-Executive Director to replace him, or, in any case, by 31 December 2020.
Diversity
The Group recognises the importance of diversity and is committed to encouraging equality and diversity among its
workforce. Oxford Biomedica aims to create an inclusive working environment based on merit, fairness and respect to
enable it to attract and retain the most talented people from all backgrounds and cultures. The Group is also working
to achieve a diverse Board and, just as importantly, diverse management teams. Appointments to the Board are based
on merit taking into account suitability for the role, composition and balance of the Board to ensure that the Group has
the right mix of skills, experience, independence, knowledge and consideration of the Group’s strategic objectives.
The Nomination Committee has a formal and rigorous appointment process involving most if not all Board members
and makes recommendations based on the capabilities of individual candidates, having due regard for the benefits of
diversity with no restrictions on age, gender, religion, ethnic background whose competencies will enhance the Board.
The Group supports the principles of the Hampton-Alexander report on gender. At present, the Board is comprised of
one woman and seven men and therefore does not meet the Hampton-Alexander recommendation that 33% of a FTSE
350 Board be women. Even though Oxford Biomedica plc is not a FTSE 350 company, the Group likes to adhere to the
principles as such. The Board is, therefore, aware of this issue and is currently looking to appoint two new independent
Non-Executive Director’s which, of course, will take diversity into consideration when appointing.
Oxford Biomedica believes that members of the Board and senior management should collectively possess a diverse
range of skills, expertise and ethnic and societal backgrounds. In terms of the next level of management, the Senior
Executive Team, excluding the Executive Directors, totalled eight, of which there are two female members. In 2019 in
the gender pay gap report, (for the full report see our website www.oxb.com) the Group is progressing towards an
equal male/female split at the Head of Department level and at the Senior Management level there are more females
than males and as such the Group met the 33% requirement. As a Group, its strategy will be to maintain and improve
on these both at Board and the Senior Executive Team level, so that the objectives of the Hampton-Alexander Review
will hopefully be met during 2020/2021. The Board is aware of the recommendations of the Parker Review on Ethnic
Diversity. This is being taken into account in future succession planning activities.
Share capital
The information about the share capital required by the Takeover Directive is in the Directors’ report on page 95.
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Directors’ remuneration report
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. 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 2019 financial year; and
— extracts from the Directors’ remuneration policy (the “policy”), which was approved at the 2018 AGM, and took
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
2020 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
Dear Shareholder
I am pleased to introduce our remuneration report for the 2019 financial year. The report is divided into two sections:
the annual report on remuneration followed by extracts from our Directors’ remuneration policy (“the policy”) approved
at the 2018 AGM with over 97% of the votes cast in favour of it.
The policy
The Remuneration Committee considers that the policy remains appropriate and, accordingly shareholder approval for
a new policy will not be sought at the 2020 AGM. Although the relevant regulations do not require us to include the
policy in the Directors’ remuneration report, we have included those parts we think shareholders will find most useful.
The full policy as approved by shareholders at the 2018 AGM is included in the Company’s 2017 Annual report and
accounts, which is available at www.oxb.com.
During 2020 the Remuneration Committee will review the policy to ensure it remains fit for purpose, linked to the
Group’s strategy and appropriately takes account of corporate governance updates since its adoption, in advance of
seeking shareholder approval for a new policy at the 2021 AGM.
2019 business performance and incentive impact
In February 2020 the Remuneration Committee met to consider the achievement of 2019 objectives and the annual
bonus award for 2019.
The performance of the business in 2019 is set out in detail in the Strategic report from pages 15 to 55 and the
performance against corporate objectives is set out on page 81 of this remuneration report. The Remuneration
Committee considered overall business performance as part of its assessment of the annual bonus out-turn and
concluded the overall bonus payments earned by reference to the annual bonus performance measures to be
appropriate and accordingly approved the award to John Dawson of a bonus of 88% of salary and to Stuart Paynter a
bonus of 90% of salary. The bonuses will be paid 50% in cash and 50% in deferred share awards. Further details are
provided on page 79 with regards to how performance under the annual bonus targets translated into bonus payment.
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Vesting of the 2016 LTIP award
LTIP awards were granted on 16 May 2016 to John Dawson, Peter Nolan and Tim Watts when the share price was
274.7p (after adjustment for the 50 to 1 share consolidation in May 2018); the vesting conditions were 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%
The 2016 LTIP awards vested during 2019. The share price was averaged across the 20 business days prior to the end
of the assessment period. Details are provided on page 83.
The awards were also subject to a performance underpin, such that the awards would only vest to the extent that the
Remuneration Committee considered that the overall performance of the business across the period justified it. The
Remuneration Committee reviewed performance against this underpin and concluded the overall LTIP payments to be
appropriate. Clawback and malus provisions will apply to the awards.
Implementation of our policy in 2020
Information on the way in which the Group will implement the policy in 2020 is set out on page 89.
Other matters
The Remuneration Committee recognises the expectations of our shareholders on executive pay and we were pleased
that the 2018 Directors’ remuneration report received votes in favour in excess of 94% at the 2019 AGM. Shareholders
will be invited to approve the 2019 Directors’ remuneration report at the 2020 AGM.
The Remuneration Committee reported last year that we would introduce a number of changes to the way in which
we implement the policy having regard to the 2018 Corporate Governance Code (the introduction of a holding period
to the LTIP, enhancement of recovery provisions, an increase to our shareholding guideline and the introduction of a
post-employment shareholding guideline). Those changes will continue to apply in 2020, and will be enshrined in the
new policy to be proposed to shareholders at the 2021 AGM. The new policy will also confirm that pension provision
for any newly appointed Executive Director will be aligned with that available to the wider workforce, and as part of our
consideration of the new policy we will also consider our approach to incumbent Executive Directors’ pension, having
regard to the provisions of the 2018 Corporate Governance Code relating to the alignment of pension provision for
Executive Directors with that for the wider workforce.
The Remuneration Committee reviewed the Group’s Gender Pay Gap Report for 2019 and was pleased to see the
growth of the Group over the year and the progression towards an equal male/female split at the more senior levels of
the organisation and that this has had a positive impact on the Group’s gender pay gap. For full details of the report
please visit our website at www.oxb.com.
Dr. Andrew Heath
Chair, Remuneration Committee
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Directors’ remuneration report
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 (Senior Executive Team). The remuneration of the Non-Executive Directors is a matter for the Chairman;
— approval of individual remuneration packages for Executive Directors and the Senior Executive Team;
— 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 (Senior
Executive Team), and awards granted under the plan; and
— approval of options granted to all employees under the Group’s share option plan.
The Remuneration Committee members are currently Andrew Heath (Chairman), Heather Preston (appointed 12 March
2019) and Stuart Henderson. Other Directors are invited to attend meetings on an agenda driven basis.
Remuneration Committee activities during 2019
During 2019 the Remuneration Committee met 8 times. The main activities and decisions were as follows:
— 18 February 2019 – the Remuneration Committee considered whether or not bonuses should be paid to the
Executive Directors in respect of 2018 in light of the performance against the Group’s 2018 objectives, and also
whether there should be salary increases for 2019. The outcome of these discussions was reported in the 2018
Annual report.
— 18 April 2019 – the Remuneration Committee considered the granting of options to employees under the Group’s
Long Term Incentive Plan, Deferred Bonus Plan and Employee Share Option Scheme.
— 16 May 2019 – the Remuneration Committee considered the extent to which the share price performance conditions
for the May 2016 LTIP grant of options had been met and whether vesting was appropriate by reference to the
performance underpin. The outcome was that 100% of the options granted in 2016 would vest, more information is
included on page 83. The Remuneration Committee also approved the vesting of Deferred Bonus Plan (DBP) options
granted in 2016, 2017 and 2018. DBP options vest in three equal instalments on the first, second and third anniversaries
of the grant.
— 11 September the Remuneration Committee approved an invitation to all employees to participate in the 2019 offer
under the Company’s Save As You Earn scheme.
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Annual report on remuneration
Summary of changes to executive remuneration for 2020
Under the remuneration policy Executive Directors’ base salaries are normally reviewed annually. The Remuneration
Committee has carried out this review in February 2020 and has awarded the following base salary increases:
John Dawson
Stuart Paynter
Current salary
£410,000
£228,000
Percentage increase
5.0%
5.0%
Total of increase
£20,500
£11,400
New salary
£430,500
£239,400
The Remuneration Committee recognises that the salaries for the CEO and CFO are significantly below market for
companies of similar size and complexity. The 2018 Directors’ remuneration report indicated that the Remuneration
Committee would look to increase the salaries to achieve a base salary of £450,000 for John Dawson and £260,000
for Stuart Paynter over two to three year period subject to company and individual performance. As a consequence,
the Remuneration Committee decided for 2020 to award a 5% increase in salary. The Remuneration Committee
granted the wider workforce on average a 9% increase in salary for 2020 due to the implementation of the Group’s
reward Programme.
Annual bonus
The maximum annual bonus opportunity for the Group’ Executive Directors will remain up to 125% of salary in line with
the opportunity for 2019. Performance objectives for the Group have been agreed by the Board and the extent to which
Executive Directors’ bonuses for 2020 are earned will be determined by the Remuneration Committee early in 2021 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 81.
LTIP
The Remuneration Committee has agreed that the Executive Directors will be granted LTIP awards of up to 125% of
salary in the case of the CEO and 100% in the case of the CFO. As with the awards granted in 2019, recognising the
growth of the business the Remuneration Committee believes that making the awards subject to performance measures
equally weighted between share price growth (requiring 10% CAGR for threshold vesting and 17.5% CAGR or greater for
maximum vesting) and revenue growth (requiring 15% CAGR for threshold vesting and 24% or greater for maximum
vesting) remains appropriate. There will 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.
Share price growth will also be averaged across a three month period to avoid rewarding for short term spikes
in performance.
As with the 2019 awards, the awards will be subject to a two year holding period following the end of the performance
period. Awards will vest following the end of the performance period but will not be released, so that the Executive
Director is not entitled to acquire the vested shares until the end of the holding period.
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Directors’ remuneration report
Single total figure of remuneration
(audited)
The following tables show a single total figure of remuneration for 2019 for each Director and comparative.
2019
John Dawson
Stuart Paynter
Total
2018
John Dawson
Stuart Paynter
Peter Nolan 5
Total
Salary
£’000
410
228
638
Salary
£’000
380
214
108
702
Benefits 1
£’000
11
11
22
Benefits
£’000
4
4
1
9
Bonus
£’000
359
205
564
Bonus
£’000
439
251
127
817
LTIP 2
£’000
386
-
386
LTIP 3
£’000
438
-
268
706
Pension 4
£’000
54
32
86
Pension 4
£’000
50
32
16
98
Total
£’000
1,220
476
1,696
Total
£’000
1,311
501
520
2,332
1 Benefits comprise medical insurance and the provision of a car allowance.
2 This comprises the LTIP awards granted in 2016 which vested on 16 May 2019. The relevant performance criteria and the performance against them are set out on page 83.
The values are calculated by reference to the share price at the last day of the period over which the share price was averaged to determine the extent of vesting (690.0p).
3 This comprises the LTIP awards granted in 2015 which vested in June 2018. The relevant performance criteria and the performance against them are set out on page 77 of the 2018
Directors’ Remuneration Report. The values are calculated by reference to the share price at the last day of the period over which the share price was awarded to determine the extent
of vesting (1,000p).
4 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 –
John Dawson had elected to receive such a cash allowance.
5 Peter Nolan stepped down from the Board on 1 July 2018. His 2018 remuneration is in respect of the period to his retirement from the Board, including his 2018 bonus.
The following table sets out the amount of the value attributable to the share price at the grant of the awards (274.7p)
and the amount that is attributable to the growth in share price to 690p at vesting. No discretion has been exercised in
the decision to award the options to the relevant Directors by the Remuneration Committee.
John Dawson
Total value
£386,228
Value attributable to share
price at grant of 274.7p
£153,763
Value attributable to growth in
share price to 690.0p at vesting
£232,465
The following table sets out the amount of the value attributable to the share price at the grant of the awards (450p)
and the amount that is attributable to the growth in share price to 1,000p at vesting.
John Dawson
Peter Nolan
Total value
£438,240
£268,169
Value attributable to share
price at grant of 450p
£197,208
£120,676
Value attributable to growth in
share price to 1,000p at vesting
£241,032
£147,493
In February 2020 the Remuneration Committee met to consider the achievement of the 2019 objectives and the
annual bonus award for 2019. The performance of the business 2019 is set out in detail in the Strategic report from
pages 15 to 55.
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Performance against the Group objectives for 2019, on which the Executives Directors’ bonuses are based, was as follows:
Weighting
Performance assessed
Assessment
against objective
% of bonus awarded
Mainly met
22.5%
The Group had achieved key milestones for Novartis
with the conversion to a suspension production process
(5%) and expanded the portfolio of products with them
(5%). The Group had also progressed the Orchard
Therapeutics programme as agreed (5%), along with
successful progression of the CF programme (2.5%). In
addition, the handover and commissioning of Oxbox
was achieved on time (5%).
25%
20%
15%
30%
10%
Objective
Partners / Capacity / Technology
Advancement
The key here is to service the
Group’s customers as agreed with
them and reach key milestones for
Novartis, Orchard Therapeutics
and Sanofi (Bioverativ). Aside to
that, it is fundamental to the
Group’s future success that the
Group innovates with the creation
of the new Windrush Innovation
Centre and complete the new
manufacturing facility on time and
within budget.
Patent / product advancement
and innovation
Advance two new platform
products into the Group’s
portfolio, alongside technical (two
new patentable inventions) along
with data driven innovations in the
Group’s platform. These goals are
essential to keep us ahead of the
competition. Valuable pipeline
products such as AXO-Lenti-PD,
which have been seen bring great
value to the Group, move forward
in clinical development.
Financial objectives
The financial objectives set are to
achieve revenue and EBITDA
targets. Assumptions in the budget
include new manufacturing deals
and a product out-licensing deal
along with extinguishing or
refinancing the loan on more
favourable terms.
Business development
A critical success factor for the
budget was to complete new
deals. The plan was to out-licence
one product, agree three platform
deals and start two feasibility
studies.
Organisational development
With the rapid pace of growth for
the Group, together with
competition for key staff in the
field, it is essential the Group builds
a culture, competitive rewards/
benefits and staff support systems
to ensure a balanced and
productive work force for the
future. The goal is to enhance our
organisational effectiveness
programmes and it is essential that
the Group innovates with the
creation of the new discovery/
innovation centre.
The Group had strengthened the pipeline with two new
programmes OXB-203 and OXB-302 progressing
through proof of concept to pre-clinical studies (5%),
along with two new potential inventions filed for
platform process (5%). Digital advancement via the
Microsoft collaboration is underway and has only been
partially met (2.5%). Axo-Lenti-PD has moved forward in
clinical development into cohort 2 (5%).
Mainly met
17.5%
Overall the financial objectives were not met. The
Group did manage to extinguish the loan, however,
which was an objective (5%). The Group did not achieve
our revenue and EBITDA target as per the budget (0%)
or the cash in-flow as per budget (0%). This was due to
not completing a product out-licensing deal or a large
manufacturing deal.
Partially met
5%
The plan to out-licence one product was not achieved
(0%). Of the three platform technology deals only two
were signed (Novartis and Santen) by the end of 2019
(10%). The goal of signing two new feasibility studies
was achieved, however (5%).
Partially met
15%
Met in full
10%
The Reward strategy was successfully developed and
communicated to include competitive grading and pay
structures and benefits (2.5%). The Group’s organisation
effectiveness programmes were also rolled out to
include annual performance management,
management development programme and talent
management (2.5%). The creation of the Windrush
Innovation Centre, which is the Group’s discovery/
innovation hub was also established (5%).
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Directors’ remuneration report
John Dawson’s bonus is entirely (100%) linked to the achievement of the corporate objectives. The bonus for Stuart
Paynter is 80% linked to corporate objectives and 20% linked to personal objectives.
The personal element of the bonus for Stuart Paynter was assessed by reference to the achievement of clear personal
objectives and targets which supported the strategic objectives of the business. The objectives and targets are considered
by the Group to be commercially sensitive, as they will give the Group’s competitors insight into its strategic plans, and
so are not fully disclosed below. However, the principal areas of the personal objectives were related to clearance of
the debt, optimising the financial strategy for the Group and enhancing the financial function of the Group to support
business development activities.
The Remuneration Committee undertook a robust assessment of the achievements of Stuart Paynter with respect to
his personal objectives, and based on achievements against those objectives, awarded a bonus equal to 20% of salary.
Accordingly, bonuses earned by the Executive Directors in respect of 2019 were:
— John Dawson: £359,000 (88% of salary); and
— Stuart Paynter: £205,000 (90% of salary).
The bonuses 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. The Remuneration Committee reviewed performance against the annual bonus out-turn and
concluded the overall bonus payments to be appropriate.
The single total figures of remuneration for Non-Executive Directors are shown in the table below:
Fees
Lorenzo Tallarigo
Andrew Heath
Stuart Henderson
Heather Preston
Total
2019
£’000
150
65
65
65
345
2018
£’000
150
65
65
52
332
Robert Ghenchev was appointed as a Non-Executive Director with effect from 24 June 2019. Both Robert Ghenchev
and Martin Diggle have elected to receive no fees for their services as Directors.
Aggregate Directors’ emoluments
Salaries
Benefits
Pension / cash alternative
LTIP
Bonuses
Non-Executive Directors fees
Total
2019
£’000
638
22
86
386
564
345
2,041
2018
£’000
702
9
98
706
817
332
2,664
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LTIPs vesting during 2019
(audited)
LTIP awards were granted on 16 May 2016 to John Dawson, Peter Nolan and Tim Watts when the share price was
274.7p (after adjustment for the 50 to 1 share consolidation in May 2018), the vesting conditions were 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%
The 2016 LTIP awards vested during 2019. The share price was averaged across the 20 business days prior to the end
of the assessment period. Over the three year performance period from the date of grant, the annual compound share
price growth was 35.8%.
The outcome was that 100% of the options granted in 2016 vested.
The awards were also subject to a performance underpin, such that they would vest only to the extent that the
Remuneration Committee considers that the overall performance of the business across the period justifies it. The
Remuneration Committee reviewed performance against this underpin and concluded the overall LTIP payments to be
appropriate. Clawback and malus provisions will apply to the awards.
The value of the awards vesting during 2019 are detailed below:
John Dawson
Peter Nolan
Tim Watts
Number of awards
granted that vested1
55,975
34,589
23,949
Share price at the date
on which the shares vest
690p
690p
690p
Value of awards on
vesting2
£386,228
£238,664
£165,248
1 Number of shares post 30 May 2018 share consolidation.
2 The values are calculated by reference to the share price of 690p on the last day of the averaging period.
LTIPs awarded during 2019
(audited)
On 18 April 2019, the Executive Directors were awarded the following options under the Group’s LTIP scheme:
John Dawson
Stuart Paynter
Number of
options granted
72,736
32,358
Face value
of grant
£512,500
£228,000
The number of options awarded in April 2019 was calculated by reference to 125% (John Dawson) and 100%
(Stuart Paynter) of salary divided by the average share price of 704.6p in the five business days preceding the award.
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Directors’ remuneration report
The awards are nil cost options and are subject to a three year vesting period. They are subject to the achievement of
the performance conditions set out below, which are weighted equally between the share price measure and the
revenue measure:
Compound annual growth rate
of the company’s share price
over the three year period
starting with the date of grant1
Less than 10%
10% (i.e. 33% over 3 years)
Between 10% and 17.5%
17.5% or more (i.e. 63% over 3 years)
Percentage of the options
subject to the share price
measure that will vest
0%
25%
Calculated on a straight line basis
between 25% and 100%
100%
Compound annual growth rate
of the company’s revenue
between 2018 and 20212
Less than 15%
15% (i.e. 52.1% over 3 years)
Percentage of the options
subject to the revenue
measure that will vest
0%
25%
Calculated on a straight line basis
between 25% and 100%
Between 15% and 24%
24% or more (i.e. 90.7% over 3 years) 100%
1 The starting share price is 704.6, 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 18 April 2022.
2 Calculated by comparing the audited revenue figure as of 31 December 2018 of £66.8m with the audited revenue figure as of 31 December 2021.
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.
Although the awards will vest following the assessment of the performance period (subject to satisfaction of the
performance conditions), they cannot be exercised until the end of a further holding period of two years.
Statement of Directors’ shareholding and share interests
(audited)
The Remuneration Committee has adopted a shareholding guideline for the Executive Directors, which specifies a
shareholding equivalent to 200% of base salary with effect from 1 January 2019.
The value of the shares as at 31 December 2019 has been determined based on a share price of 645p (being the
prevailing closing share price on 31 December 2019). Under this criteria John Dawson meets the shareholding guideline,
with Stuart Paynter working towards meeting this guideline.
The interests in shares of the Directors who served during the year as at 31 December 2019 were as follows:
Executive Directors
John Dawson
Stuart Paynter
Non-Executive Directors
Lorenzo Tallarigo
Martin Diggle 1
Andrew Heath
Stuart Henderson
Heather Preston
Robert Ghenchev 2
Shares held outright
2018
88,468
1,753
2019
88,468
6,770
Vested but
unexercised options
2018
289,668
–
2019
394,516
–
Unvested deferred
bonus plan
2018
45,455
4,354
2019
52,002
20,723
Unvested LTIP awards
subject to
performance conditions
2018
172,006
88,762
2019
188,765
121,120
52,891
11,668,640
55,000
7,925
–
–
47,942
11,640,177
36,000
6,677
–
–
1 Includes the interest of Vulpes Life Science Fund, Vulpes Testudo Fund and other parties connected to Martin Diggle.
2 Robert Ghenchev was appointed to the Board as a Non-Executive Director with effect from 24 June 2019.
Robert Ghenchev is Head of Novo Growth at Novo Holdings which has a holding of 7,750,000 shares.
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Reflecting best practice, the Remuneration Committee has adopted, with effect from 1 January 2019, a post-cessation
shareholding guideline. This requires that an Executive Director must retain shares with a value (as at cessation) equal
to 100% of base salary for two years following cessation. If the Executive Director holds fewer than the required number
of shares, he or she must retain the shares held. The guideline does not apply to shares which the Executive Director
has purchased. The Remuneration Committee retains discretion to vary the post-cessation shareholding guideline in
appropriate circumstances and will continue to review the guideline in light of developing market practice before
formally enshrining it in the next policy.
During 2019 the following options have vested and lapsed:
LTIP
John Dawson
Stuart Paynter
Deferred bonus
John Dawson
Stuart Paynter
Unvested at
1 January 2019
172,006
88,762
Vesting
during 2019
55,975
–
Unvested at
1 January 2019
45,455
4,354
Lapsed
during 2019
–
–
Vesting
during 2019
24,632
1,451
Awarded
during 2019
72,736
32,358
Unvested at
31 December 2019
188,767
121,120
Awarded
during 2019
31,179
17,820
Unvested at
31 December 2019
52,002
20,723
During 2019 John Dawson and Stuart Paynter did not exercise any options.
In 2020 the performance criteria for the LTIP awards granted in respect of 2017 will be assessed. The awards granted to
John Dawson in respect of 2017 are subject to a share price growth target by reference to a price of 496.5p and the awards
granted to Stuart Paynter in respect of 2017 are subject to a share price growth target by reference to a price of 430.2p,
with the difference reflecting the awards having been granted on different dates. The vesting conditions are as follows:
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%
Payment to past Directors and payments for loss of office
(audited)
As previously disclosed, Tim Watts and Peter Nolan retained the benefit of their LTIPs granted in 2016, the vesting of
which is disclosed on page 83.
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Directors’ remuneration report
Performance graph and comparison with CEO’s remuneration
The chart below illustrates the Company’s TSR performance since January 2010 relative to the FTSE all-share index, the
FTSE techMARK MediScience index and the NASDAQ Biotech 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 and NASDAQ Biotech index, comprising biotech companies either in the UK (FTSE techMARK MediScience) or in
the US (NASDAQ Biotech) market, provide further benchmarks that are more specific comparators.
600
Key:
Oxford Biomedica plc
FTSE all-share index
FTSE techMARK mediscience index
NASDAQ Biotech index
500
400
300
200
100
0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
CEO’s remuneration in last ten years
Year
CEO’s total single figure
of remuneration
LTIP vesting
Annual bonus
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
£’000
% of maximum
% of maximum
450
0%
42%
413
0%
0%
401
40%
17%
468
0%
30%
680
0%
75%
732
100%
42%
653
50%
50%
811
25%
85%
1,311
80%
92%
1,220
100%
70%
Percentage change in CEO’s remuneration
The table below shows how the percentage change in the CEO’s salary, benefits and bonus between 2018 and 2019
compares with the equivalent changes in those components for a group of employees. As 2018 and 2019 have seen
significant changes in headcount numbers, the Remuneration Committee has chosen as the comparator group all
those employees other than the CEO who were employed throughout the whole of both 2018 and 2019.
Year
John Dawson
(£’000)
Comparator
employee group
(£’000)
Salary
Benefits
Bonus
2019
2018 % increase
2019
2018 % increase
2019
2018 % decrease
410
380
10,521
9,573
7.9
9.9
11
4
1751
359
439
244
114
114
978
1,084
18
10
1 The increase in benefits is due to the full year impact of the provision of a car allowance.
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CEO’s pay ratio
The table below sets out the CEO pay ratio at the 25th, median and 75th percentile employee within the organisation.
The Group used Option A as defined in The Companies (Miscellaneous Reporting) Regulations 2018, as this calculation
methodology for the ratios was considered to be the most accurate method. The 25th, median and 75th percentile pay
ratios were calculated using the full time equivalent remuneration for all UK employees as at the end of 2018 and 2019
respectively. 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 also participate in discretionary bonus schemes.
The Group aims to provide a competitive remuneration package which is appropriate to promote the long-term
success of the Group and to apply this policy fairly and consistently to attract and motivate staff. The Group considers
the median pay ratio to be consistent with the Group’s wider policies on employee pay, reward and progression.
Financial year
2018
2019
Method
Option A
Option A
25th percentile pay ratio
1:48
1:42
Median pay ratio
1:37
1:32
75th percentile pay ratio
1:27
1:24
Pay details for the individuals are set out below:
2018
Salary (£’000)
Total remuneration (£’000)
CEO
£380
£1,311
2019
Salary (£’000)
Total remuneration (£’000)
CEO
£410
£1,220
25th percentile
£25
£27
25th percentile
£26
£29
Median
£32
£35
Median
£35
£38
75th percentile
£44
£48
75th percentile
£45
£50
Relative importance of spend on pay
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.
The Group’s key cash measures were chosen by the Directors because they illustrate very clearly the importance of
employee remuneration as a fundamental element of operational spend and our activities, as well as the continued
investment of the business in its people. The key cash measure amounts were identified as being:
70
60
50
40
m
£
30
20
10
0
-10
Staff pay
Non-payroll costs
Cash generated from / (used in)
operations
Net cash burn
Cash revenues
2017
2018
2019
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Corporate governance
Directors’ remuneration report
Statement of voting at AGM
At the 2019 AGM, the 2018 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)
24,818,930*
94.8%
1,365,178*
5.2%
26,184,108*
557*
* The number of votes reflects that the vote took place after the 50 to 1 share consolidation in May 2018.
At the 2018 AGM, the Directors’ remuneration policy 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)
1,930,039,150
97.2%
56,288,698
2.8%
1,986,327,848
8,903,541
Advisers to the Remuneration Committee
Deloitte LLP acted as adviser to the Remuneration Committee during 2019 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 fees for advice to the Remuneration Committee during 2019 were £5,400 plus VAT. The advice
received from Deloitte LLP was both objective and independent. Deloitte also advised the Group on Board remuneration
and in relation to the operation of its share plans during 2019.
The Remuneration 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.
Dr. Andrew Heath
Chair, Remuneration Committee
6 May 2020
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Directors’ remuneration policy
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
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
Remuneration 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
Remuneration 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 200% of salary minimum
level of shareholding.
Not applicable.
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Corporate governance
Directors’ remuneration report
Component and purpose
Operation
Maximum potential and payment at threshold Performance targets and metrics
Sharesave Scheme
To create alignment with
the Group and promote
a sense of ownership.
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).
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.
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 Remuneration
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.
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 Remuneration
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 Remuneration
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 Remuneration
Committee’s assessment of the extent to
which the measure has been achieved.
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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 Remuneration 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 Remuneration Committee may require the repayment of some or all of the deferred
shares in the relevant circumstances (clawback).
LTIP:
The Remuneration 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 Remuneration 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 Remuneration 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 2019 will be subject to measures based on share price growth and revenue.
The Remuneration 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 Remuneration 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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Corporate governance
Directors’ remuneration report
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 Remuneration Committee;
the Remuneration 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.
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.
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
Stuart Paynter
Letters of appointment
Lorenzo Tallarigo
Martin Diggle
Andrew Heath
Stuart Henderson
Heather Preston
Robert Ghenchev
Contract date
10 October 2008
29 August 2017
Date of appointment
1 February 2016
4 October 2012
1 January 2010
1 June 2016
15 March 2018
24 June 2019
Unexpired term at
31 December 2019
N/A
N/A
Unexpired term at
31 December 2019
N/A
N/A
N/A
N/A
N/A
N/A
Notice period
12 months
12 months
Notice period
3 months
3 months
3 months
3 months
3 months
3 months
All Directors are subject to re-election by shareholders on an annual basis in line with the 2018 Corporate Governance Code.
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The principles on which the determination of payments for loss of office will be approached are set out below:
Payment in lieu of notice
Annual Bonus
Policy
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.
This will be at the discretion of the Remuneration 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 Remuneration Committee retains discretion to pay the bonus
earlier in appropriate circumstances). The Remuneration 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 Remuneration
Committee, the Remuneration 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 Remuneration Committee,
taking into account, unless the Remuneration 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 Remuneration Committee determines. Awards which have already vested at the date of cessation
may be exercised for such period as the Remuneration 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 Remuneration
Committee, the Remuneration 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 Remuneration Committee
taking into account the extent to which the performance condition is satisfied and, unless the Remuneration
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 Remuneration
Committee determines. Awards which have already vested at the date of cessation may be exercised for such
period as the Remuneration Committee determines.
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 Remuneration
Committee will determine the level of vesting taking into account the extent to which the performance condition
is satisfied and, unless the Remuneration 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 Remuneration 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.
By order of the Board
Dr. Andrew Heath
Chair, Remuneration Committee
6 May 2020
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4 Corporate governance
Directors’ report
for the year ended 31 December 2019
The Directors present their Annual report and audited consolidated financial statements for the year ended
31 December 2019 as set out on pages 110 to 150. This report should be read in conjunction with the Corporate
governance report on pages 57 to 100. 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 2020 on page 33, is on pages 15 to 55. 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
2019 audit, and the full Board reviewed the contents of the report at its 24 March 2020 meeting. Since the Board met
six times for routine meetings in 2019 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 38 to 47.
Corporate governance
The Group’s statement on corporate governance is included in the Corporate governance report on pages 57 to 100.
Risk management
The Group’s exposure to risks is set out on pages 58 to 62 (principal risks and uncertainties) and on page 125
(note 3: financial risk management).
Dividends
The Directors do not recommend payment of a dividend (2018: £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 64 and 65 and page 34. 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 2019 are disclosed in the Directors’ remuneration report on pages 76 to 93.
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 AGM and may offer himself for
re-election. In order to ensure that the Company complies with the 2018 Corporate Governance Code all Directors will
retire at each AGM 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 or she is prohibited by law from being a Director; in the event of
bankruptcy; if he or she is suffering from specified mental disorders; if he or she 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.
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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 2019 and up to the date of approval of the financial statements.
Share capital
Structure of the Company’s capital
On 30 May 2018, Oxford Biomedica consolidated its existing ordinary shares of 1 pence each into new consolidated
ordinary shares of 50 pence each (each carrying one vote and ranking equally with each other). At 31 December 2019
the Company had 76,859,131 ordinary 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 29 May 2019, authority was given to allot up to
22,053,954 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
22,053,954 shares, solely in a rights issue. Authority was also given, subject to certain conditions, to waive pre-emption
rights over up to 6,616,184 shares, being 10% of the shares then in issue. No rights have been granted to the Directors
to buy back shares.
Substantial shareholdings
At 15 April 2020, 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
Novo Holdings
Hargreaves Lansdown PLC
Mr. S M H Shah
Liontrust Asset Management
Aviva plc
Interactive Investor Trading
Oaktree Capital Management
Number of ordinary shares
11,668,640
11,563,240
7,750,000
3,243,825
2,992,000
2,501,993
2,425,544
2,372,412
2,314,054
Percentage of issued share capital
15.1%
15.0%
10.1%
4.2%
3.9%
3.3%
3.2%
3.1%
3.0%
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.
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Corporate governance
Directors’ report
for the year ended 31 December 2019
Employees
In accordance with s172 of the Companies Act 2006, the Group communicates and consults regularly with employees
throughout the year. In addition, the Group has designated Non-Executive Director, Stuart Henderson, for gathering the
views of the workforce and to oversee employee engagement. Employees’ involvement in the Group’s performance is
encouraged, with all employees eligible to participate in the Group’s share option scheme or the LTIP. Certain employees
currently participate in discretionary bonus schemes but in the future all employees will be eligible for the bonus scheme.
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
responsible business statement on pages 48 to 54.
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 2013 Deferred Bonus Plan. The EBT currently holds 116,724
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 financial position of the Group, its cash flows and liquidity position are described in the primary statements and
notes to these financial statements.
The Group held £16.2 million and £17.2 million of cash at the end of December 2019 and April 2020 respectively.
Although in 2019 the Group recorded an operating loss of £14.5 million and did not generate positive operational cash
flow, this was largely due to operational scale-up of investments in its people and operational capabilities as part of the
strategic decision to increase its bioprocessing capacity.
In assessing the going concern assumptions, the Board has undertaken a rigorous assessment of the forecasts and
assessed identified downside risks and mitigating actions. The downside risks include a number of severe but plausible
scenarios incorporating underperformance against the business plan, unexpected cash outflows and fewer new
customers. Due to the Group’s scale-up of investments and strategic decision to increase it’s bioprocessing facility, the
Group requires additional financing in the form of equity financing, loan financing or other government finance
initiatives in order to continue its operations and current capabilities.
Due to volatility in the financial markets created by the impact of the COVID-19 pandemic, fund raising through issuance
of equity to the investment community as planned has become very difficult and the Group has not had the opportunity
to raise funding in line with the originally planned timeline. Therefore, the Board has undertaken a much more rigorous
review of the detailed cash flow forecast prepared as part of the going concern assessment process. The process
identified that the Group would not be able to continue its activities for at least 12 months from the date of approval of
these financial statements if the Group could not secure the external financing and continue to execute and recover
known and expected revenues from existing customers under long term contracts, which are ongoing but still to be
delivered or securing the benefit of any upfront receipts from licensing out the Group’s intellectual property or win new
customer contracts for process development and bioprocessing services.
Whilst it is difficult to estimate the impact of COVID-19 due to the rapidly changing nature of the pandemic, the cash
flow forecasts include the Group’s current assumptions, taking into account the severe but plausible downsides. The
assumptions include a reduction in revenues by almost 30% (fewer new customer, lower demand from existing
customers and reduction in milestones), a reduction in associated costs and lower discretionary capital expenditure.
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If the Group is unable to the secure the external financing and receipt the revenues described above, it has assessed that
it would not be able to generate sufficient cash flows to support its level of activities beyond the third quarter of 2020.
The above situation gives rise to a material uncertainty, as defined in auditing and accounting standards, related to events
or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and in such
circumstances, it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.
However, despite the above uncertainties, the Board has the confidence that the accounts should be prepared on a
going concern basis for the following reasons:
— the Group has key worker status which allows continuity of providing services to the Group’s financially stable
customer base throughout the lockdown period.
— the Group’s ability to continue to be successful in winning new customers and building its brand as demonstrated by:
— signing the substantial license, manufacturing and development agreement with Juno (BMS) in March 2020,
— joining a Consortium led by the Jenner Institute, Oxford University, to rapidly develop, scale-up and manufacture
a potential vaccine candidate for COVID-19, with Government support for the funding of the project expected.
— the Group’s ability to potentially access the Government Coronavirus Business Interruption Loan Scheme and also
external debt finance as required,
— the Group’s history of being able to access capital markets and,
— the Group’s ability to control capital expenditure costs and lower other operational spend, as necessary.
Therefore the Directors have continued to adopt the going concern basis of preparation in the financial statements.
Although the UK’s decision to leave the European Union may significantly affect the fiscal, monetary and regulatory
landscape in the UK, the Group has assessed the future impact of Brexit on its operations to be minor. Further details of
the Group’s contingency planning is provided on page 62.
Viability Statement
Assessment of prospects
In accordance with the 2018 UK Corporate Governance code, the Directors have performed a robust assessment over
their prospects for a period, based on their assessment, of three years covering the period from 1 January 2020 to
31 December 2022. They believe three years to be appropriate due to the inherent significant uncertainties of forecasting
within and 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 since that time.
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. Prior to the outbreak of the COVID-19 pandemic, the
Group was 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. The Group is expected to be significantly impacted over the short term by the COVID-19 pandemic,
predominantly by the current difficulties in accessing the capital markets, as is set out in further detail in the going
concern assessment on page 96 which looks at the 12-month period from date of signature of the accounts. However,
the Directors believe that once the short term funding constraints have been overcome, that revenues from licensing
its technology to third parties and from providing process development and bioprocessing services to its partners will
continue to grow and will be sufficient to support a sustainable Group.
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Corporate governance
Directors’ report
for the year ended 31 December 2019
Assessment of viability
The main area of risk to the viability of the Group within the three-year period to December 2022 is the Group being
unable to access the capital markets to obtain the necessary funding required to make the operational and capital
investments required to continue its growth strategy. In terms of the short term outlook of the Group, this risk is brought
into sharp focus by the COVID-19 pandemic which has caused disruption in the markets and impacted the Group’s
ability to access the capital markets (refer going concern assessment on page 96 for further detail). Whilst demand for
the Group’s bioprocessing and process development services is not currently impacted, a protracted economic
slowdown and strict isolation measures within the UK will impact the Group’s revenue generating capabilities over the
short term. The Group is however confident that with its leading position in the fast growing cell and gene therapy
industry, its expanding customer base (underpinned by long term contracts and a resilient and financially stable
customer base), and with the support of its largest shareholders, that it will be able to access the additional capital
required to allow it to continue its operations and ultimately to achieve its long term growth ambitions.
Over the longer term, it is important for the Group to be able to generate sufficient revenues to cover its operational
spend, facility expansion commitments and the additional investments required in R&D to maintain its leading position
and develop its own products e.g. OXB-302. In particular, the successful development of Axo-Lenti PD is of significant
importance due to the large milestones receivable under the terms of our collaboration, which if not achieved would
have a materially negative impact on the Group. However, to a large degree the current investments in facilities and
internal R&D projects can be managed in line with revenues, and the Group continues its efforts to mitigate its financial
risks by expanding and deepening its customer base e.g. the addition of Juno (BMS) and other new customers already
conducting feasibility studies, as well as other potential new customers, and by securing a 5-year extension to the
Novartis commercial supply agreement. The progression of other major customer programmes such as Sanofi
(Hemophilia), UKCFGTC/Boehringer (Cystic Fibrosis), Santen and Orchard also remains important to the Group, but as
the number of customer products’ increase, the risk from individual product setbacks reduces.
The Directors anticipate that the Group has strong prospects for attracting and fulfilling the demands from more
customer programmes, and in doing so ultimately being able to continue the Group’s recent growth in customer
activity over the longer term. The Group’s financial forecasts 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 2022. However, over the short
term as outlined in the going concern assessment on page 96 the Group will need to raise funds before the end of the
third quarter 2020, and over the longer term, in the event revenues were to fall below the Director’s expectations, the
Group would need to again secure alternative sources of financing to continue to fund its operations.
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Amendment of the Company’s articles of association
Amendment of the Company’s articles of association 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
Arrangement under which a
Director has waived current or
future emoluments.
Allotment of shares other than to
existing shareholders in proportion
to holdings.
Response
Martin Diggle and Robert Ghenchev have elected to receive no fees for their
services as Directors (page 82).
Allotment of shares on exercise of options by employees under approved
share schemes (note 27, page 141).
Statement of Directors’ responsibilities in respect of the annual report and the financial statements
The Directors are responsible for preparing the Annual report and the Group and parent Company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year.
Under that law they are required to prepare the Group financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have
elected to prepare the parent Company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In
preparing each of the Group and parent Company financial statements, the Directors are required to:
— select suitable accounting policies and then apply them consistently;
— make judgements and estimates that are reasonable, relevant and reliable;
— state whether they have been prepared in accordance with IFRSs as adopted by the EU;
— assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
— use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are
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, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors’ report,
Directors’ remuneration report and Corporate governance report that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
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Corporate governance
Directors’ report
for the year ended 31 December 2019
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
— the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
— the Strategic report includes a fair review of the development and performance of the business and the position of
the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance, business model and strategy.
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
The auditors, KPMG LLP, have indicated their willingness to continue in office and a resolution concerning their
reappointment will be proposed at the AGM.
Greenhouse gas emissions report
Details on greenhouse gas emissions are set out in the Responsible business section of the Strategic report on page 52.
Annual General Meeting
The AGM will be held at 3p.m. on Tuesday 23 June 2020 at our Windrush Court laboratories and offices but the Group
encourages shareholders to attend the AGM by webcast and vote by proxy.
By order of the Board
Stuart Paynter
Chief Financial Officer
6 May 2020
Oxford Biomedica plc | Annual report and accounts 2019
Independent auditors’ report
To the members of Oxford Biomedica plc
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1. Our opinion is unmodified
We have audited the financial statements of Oxford Biomedica plc (“the Company”) for the year ended 31 December
2019 which comprise the consolidated statement of comprehensive income, the Group and parent Company Statement
of financial positions, the Group and parent Company statements of cash flows, the Group and parent Company
statements of changes in equity attributable to owners of the parent, and the related notes, including the accounting
policies in note 1.
In our opinion:
— the financial statements give a true and fair view of the state of the Group’s and parent Company’s affairs as at
31 December 2019 and of the Group’s profit for the year then ended;
— the Group financial statements have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU);
— and the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by
the EU and as applied in accordance with the provisions of the Companies Act 2006;
— and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.
We were first appointed as auditor by the shareholders on 29 May 2018. The period of total uninterrupted engagement
is for the two financial years ended 31 December 2019. We have fulfilled our ethical responsibilities under, and we
remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities. No non-audit services prohibited by that standard were provided.
Overview
Materiality: Group financial statements as a whole £520k (2018: £570k) 0.81% of revenue (2018: 0.85%).
Coverage: 100.0% of Group revenue (2018: 100%).
Key audit matters vs 2018 (New and recurring risks):
New: Going concern material uncertainty and the impact of uncertainties due to the COVID-19 pandemic (2018:
New: Bioprocessing revenue recognition (2018:
).
New: Uncertain outcome of customer claim (2018:
Recurring: Recoverability of parent Company’s investment in and loans due from subsidiaries (2018:
).
).
).
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Independent auditors’ report
To the members of Oxford Biomedica plc
2. Material uncertainty related to going concern
Going concern – material
uncertainty in relation to
going concern, including
the impact of the
uncertainties of COVID-19
pandemic
We draw attention to note 1
to the financial statements
which indicates that the
Group’s and the parent
company’s ability to
continue as a going concern
is dependent on additional
funding in the form of equity
financing, loan financing or
other government finance
initiatives.
These events and conditions,
along with the other matters
explained in note 1, constitute
a material uncertainty that
may cast significant doubt on
the group’s and the parent
company’s ability to continue
as a going concern.
Our opinion is not modified
in respect of this matter.
The risk
Disclosure quality
Our response
Our procedures included:
The financial statements explain how
management has formed a judgement that
it is appropriate to adopt the going concern
basis of preparation for the Group and
Parent company.
Their judgement is based on the evaluation
of the inherent risks to the Group and parent
company’s access to funding, including the
impact of the uncertainties of COVID-19
pandemic, and how those risks might affect
the Group’s and the Company’s financial
resources or ability to continue operations
over a period of at least a year from the
approval of the financial statements.
The risk for our audit is whether or not those
risks are such that they amount to a material
uncertainty that may cast significant doubt
about their ability to continue as a going
concern. If so that fact is required to be
disclosed (as has been done) and, along
with a description of the circumstances, is a
key financial statements disclosure.
— Evaluating management’s intent: Evaluating the intent of the
management and the timing and achievability of funding options and
cost saving actions they consider would improve the position should
risks materialise.
— Historical comparisons: Assessing cashflow forecasts against actual
cash flows achieved in the year and in previous years to assess
historical reliability of data.
— Sensitivity analysis:
— Considering key inputs into the cash flow forecasts and assessing
the company’s sensitivity analysis on reasonably possible (but not
unrealistic) adverse effects that could arise from these risks
individually and collectively whilst considering the effect on the
level of available financial resources.
— Challenged management on the appropriateness of expected
revenue volumes, growth rates, and expected costs by comparing
to historical trends and our knowledge of the business and sector
it operates in.
— Assessing transparency: Assessing the completeness and accuracy
of the matters covered in the going concern disclosures with
reference to the outcome of the procedures detailed above.
Our results: We found the disclosure quality of the material uncertainty
to be acceptable.
We are required to report to you if the directors’ going concern statement under the Listing Rules set out on page 96 is
materially inconsistent with our audit knowledge. We have nothing to report in this respect.
3. Other key audit matters: including our assessment of risks of material misstatement
Other key audit matters are those matters that, in our professional judgment, were of most significance in the audit of
the financial statements and include the most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, 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. Going concern is a significant key audit matter
and is described in section 2 of our report. We summarise below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters
and, as required for public interest entities, our results from those procedures. These matters were addressed, and our
results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
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Bioprocessing revenue
recognition and related
contract liabilities
Contract liabilities: £(13.8m)
including the £1.8m relating
to bioprocessing contract
liabilities. (2018: £(18.4m)
including £nil relating to
contract liabilities)
Refer to page 121 Contract
liabilities and deferred
income (accounting policy)
and page 72 of audit
committee report
Refer to note 20, page 136
contract balances
disclosures (financial
disclosures).
Uncertain outcome of
customer claim
We draw attention to note
36 of the Financial
Statements concerning the
uncertain outcome of a
potential claim against the
Group. The claim is in
respect of a certain process
development work
performed on behalf of the
customer in 2018 and 2019.
Recoverability of parent
Company’s investment in
and intercompany loans
due from subsidiaries
Investments: Group £15.2m
(2018:£15.2m).
Loans to group
undertakings £122.1m
(2018: 68.7m)
Refer to page 120
investment in subsidiaries
(accounting policy) and
page 133 note 15
Investments: Group
(financial disclosures).
The risk
Subjective estimate
Our response
Our procedures included:
Bioprocessing revenue relates to the
manufacture of lentiviral vectors and is
recognised over time. Bioprocessing of
lentiviral vectors is complex, such that
batches may fail to meet the required
specifications due to contamination or
inadequate yield. Therefore, there is a risk
that amounts recognised as revenue
overtime will subsequently be reversed.
Management uses historical data to
estimate a refund liability (bioprocessing
contract liability) for future batch failures at
the Statement of financial position date. The
effect of this matter is that, as part of our
risk assessment, we determined that the
value of the refund liability has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole
Disclosure Quality
The financial statements explain how
management have formed a judgement
based on the evaluation of the inherent risks
to the Group and the Parent company of
the level of uncertainty in estimating the
quantum and timing (if any) on account
balances relating to a potential claim from a
third party.
The risk for our audit is whether or not the
circumstances, risks, significant judgements,
and estimation uncertainties, which are key
financial statement disclosures, are
disclosed.
— Accounting analysis: Assessing the assumptions made by the Group
in determining their estimate of future batch failures.
— Personnel interviews: Corroborating reasonableness of assumptions
with individuals in the technical team, including the Qualified Person,
who holds the regulatory license for releasing finished products.
— Historical comparisons: Evaluating the accuracy of the failure rate
as previously recognised, based on developments through the
second half of the year.
— Sensitivity analysis: Performing sensitivity analysis to assess the
reasonable range of potential outcomes.
— Assessing transparency: Assessing the adequacy of the Group’s
disclosures about the estimation uncertainty involved in the
recognition of the bioprocessing contract liability.
Our results: We found the Group’s estimate of the Bioprocessing refund
liability and related disclosures of the estimation uncertainty to be
acceptable.
Our procedures included:
— Enquiry of lawyers: Inspecting correspondence with the Group’s external
counsel accompanied by formal confirmations from that counsel.
— Accounting analysis: Challenging the Group’s judgement and estimates
on the appropriate accounting treatment and assessing conclusions
reached, in particular the revenue reversal and the likelihood of a claim for
external costs from the customer, against known facts and circumstances.
— Assessing transparency: Assessing whether the disclosures provide a
clear and sufficient description of the nature of the contingent liability
of the Group and of the Parent Company and the inherently subjective
nature of the judgements and accounting estimates on the timing and
quantum of any outflows.
Our Results: We found the disclosure quality of the matter to be acceptable.
Low risk, high value
Our procedures included:
The carrying amount of the parent
Company’s investment in and intercompany
loans to the sole trading subsidiary represents
(99.7%) of the Company’s total assets. Their
recoverability is not at high risk of significant
misstatement or subject to significant
judgements. However, due to their materiality
in the context of the parent Company
financial statements, this is considered to be
the areas that had the greatest effect on our
overall parent Company audit.
— Test of details: Confirming the mathematical integrity of the company’s
value in use model
— Comparing the carrying amount of the investment and loans owed by
Group undertakings with the expected value of the business based on
the Group’s market capitalisation as adjusted by the trade and monetary
assets and liabilities held by the parent Company.
— Comparing the carrying amount of the investment to the value in use
of the Group’s assets, being an indication of its recoverable amount
to assess whether there are any indicators of impairment of the
investment’s and the loans owed by group undertakings.
— Historical comparisons: Assessing cashflow forecasts against historical
results achieved in the year and in previous years to assess historical
reliability of the forecasts.
— Sensitivity analysis: Performing sensitivity analysis to evaluate the
impact of reasonably possible changes to key assumptions.
Our results: We found the Parent’s assessment of the recoverability of the
investment in and loans due from its subsidiaries to be acceptable (2018:
acceptable)
We continue to perform procedures over contract revenue recognition. However, based on the contracts signed in the
year we have not assessed these to be the most significant risks in our current year audit and, therefore, it is not
separately identified in our report this year.
Oxford Biomedica plc | Annual report and accounts 2019
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Independent auditors’ report
To the members of Oxford Biomedica plc
4. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £520k (2018: £570k), determined with reference to
a benchmark of revenue of which it represents 0.81% (2018: 0.85%).
We consider total revenue to be the most appropriate benchmark as it provides a more stable measure year on year
than group profit before tax.
Materiality for the parent Company financial statements as a whole was set at £180k (2018: £540k), determined with
reference to a benchmark of Company total assets, of which it represents 0.26% (2018: 0.58%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £25.5k
(2018: £28.0k), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the group’s 4 components, we subjected 2 to full scope audits for group purposes. The components within the
scope of our work accounted for 100% of group revenue, profit before tax and total assets (2018: 100% of group
revenue, profit before tax and total assets).
The Group team approved the component materialities, which were set at £484k and £180k for both in-scope
components (2018: £540k for both). The work on all of the components, including the audit of the parent Company,
was performed by the Group team.
£520k
Whole financial statements materiality
(2018: £570k)
£180k – £484k
Materiality’s at 2 component
(2018: £540k)
Revenue
Group materiality
£25.5k
Misstatements reported to the
audit committee (2018: £28.0k)
Revenue
£64.1m (2018: £66.8m)
Group Materiality
£520k (2018: £570k)
5. We have nothing to report on the other information in the Annual report
The directors are responsible for the other information presented in the Annual report together with the financial
statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the strategic report and the directors’ report;
— in our opinion the information given in those reports for the financial year is consistent with the financial statements;
and
— in our opinion those reports have been prepared in accordance with the Companies Act 2006.
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Directors’ remuneration report
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, other than the material uncertainty related
to going concern referred to above, we have nothing further material to add or draw attention to in relation to:
— the directors’ confirmation within the viability statement on page 97 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 and liquidity;
— the Principal risks facing the business disclosures describing these risks and explaining how they are being managed
and mitigated; and
— the directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what
period they have done so and why they considered 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.
Under the Listing Rules we are required to review the viability statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes
that are inconsistent with judgments that were reasonable at the time they were made, the absence of anything to
report on these statements is not a guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
— we have identified material inconsistencies between the knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that the annual report and financial statements taken as a whole
is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy; or
— the section of the annual report describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
— adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
— the parent Company financial statements and the part of the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by law are not made; or
— we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Oxford Biomedica plc | Annual report and accounts 2019
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To the members of Oxford Biomedica plc
6. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 99, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; 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; assessing the parent Group and parent 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 they either intend
to liquidate the parent Company or Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
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 other irregularities (see below), or error, and to issue our opinion in an
auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and through discussion with the directors and other
management (as required by auditing standards), and discussed with the directors and other management the policies
and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the group is subject to laws and regulations that directly affect the financial statements including financial
reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial
statement items.
Secondly, the group is subject to many other laws and regulations where the consequences of non-compliance could
have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines
or litigation or the loss of the group’s licence to operate. We identified the following areas as those most likely to have
such an effect: those related to the pharmaceutical industry imposed by the Food and Drug Administration (FDA) and
Medicines and Healthcare products Regulatory Agency (MHRA) recognising the regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to
enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any.
These limited procedures did not identify actual or suspected non-compliance.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed non-compliance with laws and regulations
(irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a
higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and
cannot be expected to detect non-compliance with all laws and regulations.
Oxford Biomedica plc | Annual report and accounts 2019
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7. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members,
as a body, for our audit work, for this report, or for the opinions we have formed.
William Smith (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
2 Forbury Place
33 Forbury Road
Reading
RG1 3AD
6 May 2020
Oxford Biomedica plc | Annual report and accounts 2019
The Group has pioneered this
science from the beginning.
The Group must now maintain
momentum, seize opportunity
and remain front and centre
as gene therapies become
commonly used healthcare
solutions for millions of people
everywhere.
It’s going mainstream. Fast.
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1 Preparing for success
3 Demand in the gene and
cell therapy sector is reaching
new heights
7 An area bursting with activity
11 Leading industrialisation
15 Strategic report
16 Group at a glance
18 Products pipeline
20 The Group's business model
22 The Group’s stakeholders
24 Operational highlights
delivered in 2019
Financial highlights delivered
in 2019
25
26 Chairman’s statement
28
Chief Executive Officer’s and
2019 performance review
Delivery of 2019 objectives
34 Management team
36
37 Objectives set for 2020
38
Financial review
48 Responsible business
55
Non-financial statement
57 Corporate governance
58
Principal risks, uncertainties
and risk management
63 Board of Directors
66 Corporate governance report
76 Directors’ remuneration report
94 Directors’ report
101
Independent auditors’
report
109 Group financial statements
110
Consolidated statement
of comprehensive income
Statement of financial
positions
111
112 Statements of cash flows
113
Statements of changes in
equity attributable to owners
of the parent
Notes to the consolidated
financial statements
114
151 Other matters
Glossary
151
154 Advisers and contact details
Oxford Biomedica plc | Annual report and accounts 2019
0 Group financial statements
1
1
Consolidated statement of comprehensive income
for the year ended 31 December 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Research and development costs
Bioprocessing costs
Administrative expenses
Other operating income
Revaluation of investments
Change in fair asset held at fair value
through profit and loss
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before tax
Taxation
(Loss)/ profit and total
comprehensive (expense)/income
for the year
Basic (loss)/earnings
per ordinary share
Diluted (loss)/earnings
per ordinary share
Note
4
4
4
4
6
6
8
29
9
9
There was no other comprehensive income or loss in either year.
The loss for the year is attributable to the owners of the parent.
2019
£’000
64,060
(35,723)
28,337
(22,546)
(7,378)
(11,881)
884
–
(1,883)
(14,467)
104
(6,526)
(20,889)
4,823
2018
£’000
66,778
(33,261)
33,517
(17,973)
(1,243)
(7,433)
1,064
5,983
–
13,915
71
(8,972)
5,014
2,527
(16,066)
7,541
(22.10p)
11.57p
(22.10p)
10.89p
Oxford Biomedica plc | Annual report and accounts 2019
Group financial statements
Statement of financial positions
as at 31 December 2019
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment at fair value through
profit and loss
Investments and loans in subsidiary
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Assets at fair value through profit and loss
Trade and other receivables
Current tax assets
Cash and cash equivalents
Current liabilities
Trade and other payables
Contract liabilities
Deferred income
Lease liabilities
Provisions
Net current assets/(liabilities)
Non-current liabilities
Loans
Provisions
Contract Liabilities
Deferred income
Lease liabilities
Deferred tax liabilities
Net assets
Equity attributable to owners
of the parent
Ordinary shares
Share premium account
Other reserves
Accumulated losses
Total equity
Note
11
12
14
15
17
24
16
13
17
8
18
19
20
20
33
22
21
22
20
20
33
24
25
26
30
29
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Group
2019
£’000
95
61,932
–
–
3,605
359
65,991
2,579
2,719
30,045
5,351
16,243
56,937
14,297
13,156
1,006
482
–
28,941
27,996
–
5,086
1,695
3,310
7,907
359
18,357
75,630
2018
£’000
117
31,791
10,966
–
4,000
–
46,874
4,251
–
26,585
2,446
32,244
65,526
11,422
17,084
–
–
–
28,506
37,020
41,153
1,287
1,401
5,033
–
279
49,153
34,741
Company
2019
£’000
2018
£’000
–
–
–
146,761
–
359
147,120
–
–
–
–
2
2
109
–
–
–
–
109
(107)
–
–
–
–
–
–
–
147,013
–
–
–
91,786
–
1,129
92,915
–
–
–
–
11
11
164
–
–
–
–
164
(153)
–
–
–
–
–
–
–
92,762
38,416
222,618
2,291
(187,695)
75,630
33,034
172,074
3,509
(173,876)
34,741
38,416
222,618
11,072
(125,093)
147,013
33,034
172,074
10,731
(123,077)
92,762
The Company’s registered number is 03252665.
The Company made a loss for the year of £2,016,000 (2018: £446,000).
The financial statements on pages 110 to 150 were approved by the Board of Directors on 6 May 2020 and were signed
on its behalf by:
John Dawson
Chief Executive Officer
Oxford Biomedica plc | Annual report and accounts 2019
1
1
2 Group financial statements
Statements of cash flows
for the year ended 31 December 2019
Cash flows
from operating activities
Cash (used in) / generated from
operations
Tax credit received
Net cash (used in) / generated from
operating activities
Cash flows
from investing activities
Purchases of property, plant
and equipment
Purchases of intangible assets
Proceeds on disposal of property,
plant and equipment
Proceeds on disposal of
investment assets
Interest received
Net cash used in investing activities
Cash flows
from financing activities
Proceeds from issue of
ordinary share capital
Costs of share issues
Proceeds from the exercise
of warrants
Loan to subsidiary
Interest paid
Redemption fee
Payment of lease liabilities
Loans repaid
Net cash generated
from financing activities
Net (decrease)/ increase in cash
in cash and cash equivalents
Cash and cash equivalents
at 1 January
Cash and cash equivalents
at 31 December
Note
31
12
11
25, 26
26
25
21
18
Group
2019
£’000
2018
£’000
Company
2019
£’000
2018
£’000
(6,636)
3,128
9,214
3,654
(1,301)
–
(1,483)
–
(3,508)
12,868
(1,301)
(1,483)
(25,774)
–
(10,103)
(45)
2
–
6,270
104
(19,398)
–
52
(10,096)
–
–
–
–
–
–
–
–
–
–
–
–
54,132
(769)
1,345
–
(2,513)
(866)
(835)
(43,589)
21,184
(1,376)
–
(4,665)
–
–
–
54,132
(769)
1,345
(53,416)
–
–
–
–
21,143
(1,376)
–
(18,304)
–
–
–
–
6,905
15,143
1,292
1,463
(16,001)
17,915
32,244
14,329
16,243
32,244
(9)
11
2
(20)
31
11
Oxford Biomedica plc | Annual report and accounts 2019
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Total
equity
£’000
6,146
7,541
7,541
Group financial statements
Statements of changes in equity attributable to owners of the parent
for the year ended 31 December 2019
Group
At 1 January 2018
Year ended 31 December 2018
Income for the year
Total comprehensive income 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 2018
Year ended 31 December 2019:
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
Exercise of warrants
Cost of share issues
At 31 December 2019
Company
At 1 January 2018
Year ended 31 December 2018:
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 2018
Year ended 31 December 2019:
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 shares excluding options
Exercise of warrants
Cost of share issues
At 31 December 2019
25, 26
28, 29
25, 26
26
Notes
10
25, 26
26, 28
28
26
10
25, 26
28, 29
25. 26
26
Ordinary
shares
£’000
31,076
Share
premium
account
£’000
154,224
Notes
Reserves
Merger
£’000
2,291
Treasury
£’000
–
Warrant
£’000
1,218
Accumulated
losses
£’000
(182,663)
–
–
–
–
–
–
25, 26
28, 29
25, 26
26
246
–
1,712
–
33,034
478
–
18,748
(1,376)
172,074
–
–
–
–
2,291
–
–
–
–
–
–
–
–
–
–
–
2,291
162
–
3,875
1,345
–
38,416
Ordinary
shares
£’000
31,076
495
–
49,600
1,218
(769)
222,618
Share
premium
account
£’000
154,224
Reserves
Merger
£’000
1,580
Warrant
£’000
1,218
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,541
7,541
–
–
–
–
1,218
–
1,246
–
–
(173,876)
724
1,246
20,460
(1,376)
34,741
–
–
(16,066)
(16,066)
(16,066)
(16,066)
–
–
–
(1,218)
–
–
–
2,247
–
–
–
(187,695)
Accumulated
losses
£’000
(122,590)
Other
£’000
6,801
657
2,247
53,475
1,345
(769)
75,630
Total
equity
£’000
72,309
–
–
–
–
–
–
–
–
–
–
(446)
(446)
(446)
(446)
246
–
1,712
–
33,034
478
–
18,748
(1,376)
172,074
–
–
–
–
162
–
3,875
1,345
–
38,416
495
–
49,600
1,218
(769)
222,618
–
–
–
–
1,580
–
–
–
–
–
–
–
1,580
–
–
–
–
1,218
–
1,132
–
–
7,933
–
(41)
–
–
(123,077)
724
1,091
20,460
(1,376)
92,762
–
–
–
–
(2,016)
(2,016)
(2,016)
(2,016)
–
–
–
(1,218)
–
–
–
1,559
–
–
9,492
–
–
–
–
–
(125,093)
657
1,559
53,475
1,345
(769)
147,013
Oxford Biomedica plc | Annual report and accounts 2019
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2019
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 2019
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 76 to 93 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 financial position of the Group, its cash flows and liquidity position are described in the primary statements and
notes to these financial statements.
The Group held £16.2 million and £17.2 million of cash at the end of December 2019 and April 2020 respectively.
Although in 2019 the Group recorded an operating loss of £14.5 million and did not generate positive operational cash
flow, this was largely due to operational scale-up of investments in its people and operational capabilities as part of the
strategic decision to increase its bioprocessing capacity.
In assessing the going concern assumptions, the Board has undertaken a rigorous assessment of the forecasts and
assessed identified downside risks and mitigating actions. The downside risks include a number of severe but plausible
scenarios incorporating underperformance against the business plan, unexpected cash outflows and fewer new
customers. Due to the Group’s scale-up of investments and strategic decision to increase it’s bioprocessing facility, the
Group requires additional financing in the form of equity financing, loan financing or other government finance
initiatives in order to continue its operations and current capabilities.
Due to volatility in the financial markets created by the impact of the COVID-19 pandemic, fund raising through issuance
of equity to the investment community as planned has become very difficult and the Group has not had the opportunity
to raise funding in line with the originally planned timeline. Therefore, the Board has undertaken a much more rigorous
review of the detailed cash flow forecast prepared as part of the going concern assessment process. The process
identified that the Group would not be able to continue its activities for at least 12 months from the date of approval of
these financial statements if the Group could not secure the external financing and continue to execute and recover
known and expected revenues from existing customers under long term contracts, which are ongoing but still to be
delivered or securing the benefit of any upfront receipts from licensing out the Group’s intellectual property or win new
customer contracts for process development and bioprocessing services.
Oxford Biomedica plc | Annual report and accounts 2019
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Whilst it is difficult to estimate the impact of COVID-19 due to the rapidly changing nature of the pandemic, the cash
flow forecasts include the Group’s current assumptions, taking into account the severe but plausible downsides. The
assumptions include a reduction in revenues by almost 30% (fewer new customers, lower demand from existing
customers and reduction in milestones), a reduction in associated costs and lower discretionary capital expenditure.
If the Group is unable to the secure the external financing and receipt the revenues described above, it has assessed that
it would not be able to generate sufficient cash flows to support its level of activities beyond the third quarter of 2020.
The above situation gives rise to a material uncertainty, as defined in auditing and accounting standards, related to events
or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and in such
circumstances, it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.
However, despite the above uncertainties, the Board has the confidence that the accounts should be prepared on a
going concern basis for the following reasons:
— the Group has key worker status which allows continuity of providing services to the Group’s financially stable
customer base throughout the lockdown period.
— the Group’s ability to continue to be successful in winning new customers and building its brand as demonstrated by:
— signing the substantial license, manufacturing and development agreement with Juno (BMS) in March 2020,
— joining a Consortium led by the Jenner Institute, Oxford University, to rapidly develop, scale-up and manufacture
a potential vaccine candidate for COVID-19, with Government support for the funding of the project expected.
— the Group’s ability to potentially access the Government Coronavirus Business Interruption Loan Scheme and also
external debt finance as required,
— the Group’s history of being able to access capital markets and,
— the Group’s ability to control capital expenditure costs and lower other operational spend, as necessary.
Therefore the Directors have continued to adopt the going concern basis of preparation in the financial statements.
Although the UK’s decision to leave the European Union may significantly affect the fiscal, monetary and regulatory
landscape in the UK, the Group has assessed the future impact of Brexit on its operations to be minor. Further details of
the Group’s contingency planning is provided on page 62.
Accounting developments
The Group has adopted the following IFRSs in these financial statements.
— IFRS 16: Leases. See note 2. This has been adopted using the modified retrospective method and as a result the
comparatives have not been restated and are reported under IAS 17.
— IFRIC 23: Uncertainty over Income Tax Treatments.
— Amendments to IAS 19: Plan Amendment, Curtailment or Settlement.
— Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures.
— Amendments to IFRS 9: Prepayments Features with Negative Compensation.
— Annual Improvements to IFRS Standards 2015-2017 Cycle.
Of these standards that became effective from 1 January 2019, only IFRS 16 had a material impact on the Group
financial statements.
Oxford Biomedica plc | Annual report and accounts 2019
6 Group financial statements
1
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Notes to the consolidated financial statements
for the year ended 31 December 2019
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.
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 Statement
of financial position 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, royalties, options, and funded research
and development programmes.
Platform
Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time
as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the process.
The gross amount due from customers on all partnerships in progress for which costs incurred plus recognised profits
exceed progress billings is presented as a contract asset separately on the Statement of financial position.
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.
Technology licences that have been established by the group have all been determined as “right to use” licences, rather
than “right to access” licences. As such, the revenue from these licences is recognised at the point in time at which the
licence transfers to the customer.
The granting of the technology licences to the Group’s background intellectual property and know-how constitutes a
“right to use” licence as our customers are able to conduct development work on the licence independent of Oxford
Biomedica. Oxford Biomedica is incentivised separately for its performance obligations in relation to development work
and milestone payments. The criteria for recognising these technology licences as “right to access” licences has
therefore not been met.
Milestones relating to bioprocessing or process development activities have been identified as separate performance
obligations as they involve the transfer of a distinct good or service, determined with reference to conditions stipulated
in the relevant agreements or contracts. Each milestone is determined as either binary or non-binary.
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Milestones that are considered to be binary relate to the achievement of specific events rather than the provision of, for
example, support. Incentives related to the achievement of specific deliverables are considered to be binary incentives
and will be recognised in full once it is deemed highly probable that the obligation will be met.
Milestones related to the provision of support services are considered to be non-binary incentives and are recognised
on a percentage of completion basis, but taking into account the likelihood of achievement of the deliverable. Amounts
receivable on delivery of a milestone performance obligation represents variable consideration and have been allocated
to the relevant performance obligation.
Options to technology licences are recognised when the customer exercises the option to obtain that licence.
Non-cash revenues are recognised at fair value through profit and loss.
Product
Product licences that have been established by the Group have all been determined as “right to use” licences, rather
than “right to access” licences. As such, the revenue from these licences is recognised at the point in time at which the
licence transfers to the customer.
The granting of the product licences to the Group’s background intellectual property and know-how constitutes a
“right to use” licence as our customers are able to conduct development work on the licence independent of Oxford
Biomedica. Oxford Biomedica is incentivised separately for its performance obligations in relation to development work
and milestone payments. The criteria for recognising these technology licences as “right to access” licences has
therefore not been met.
Amounts receivable in respect of milestone payments are considered to be separate performance obligations which
are binary and will be recognised in full once it is deemed highly probable that the specific performance obligations
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.
Non-binary milestones are recognised on a percentage of completion basis 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.
Amounts receivable on delivery of a milestone performance obligation represents variable consideration and have been
allocated to the relevant performance obligation.
Royalty revenue is recognised as the underlying sales occur.
Research and development revenue and associated costs are recognised over time. Progress is determined based on
the cost-to-cost method.
Cost of sales
Cost of sales comprises the cost of bioprocessing clinical product for partners, the cost of customer development
project activities, and royalties arising on partners’ licences.
The cost of customer development project activities includes the labour costs, overheads and other directly attributable
material and third party 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 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.
Oxford Biomedica plc | Annual report and accounts 2019
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Notes to the consolidated financial statements
for the year ended 31 December 2019
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.
Leases
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information
has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under
IAS 17 and IFRIC 4 are disclosed separately if they are different from those under IFRS 16 and the impact of changes is
disclosed in Note 3.
This policy is applied to contract entered into on or after 1 January 2019.
As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the
leases of property the Group has elected to separate non-lease components and account for the lease and non-lease
components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or site on which it is located less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the
lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the
right-of-use asset will depreciated over the useful life of the underlying asset, which is determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses,
if any, and adjusted for certain re-measurements of the lease liability.
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The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rate form external financing sources and
makes certain adjustments to reflect the terms of the lease and the type of the asset leased.
Lease payments included in the measurement of the lease liability comprise fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is re-measured if:
— there is a change in the Group’s estimate of the amount expected to be payable under a residual future lease
payments;
— the Group changes its assessment of whether it will exercise a purchase, extension or termination options; or
— there is a revised in-substance fixed lease payment.
If a lease liability is re-measured, a corresponding adjustment is made to the carrying amount of the right-of-use asset,
or is recorded in the Profit or Loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets in ’property, plant and equipment’ and lease liabilities as a category on the face
of the Statement of Financial Position.
Short-term or low-value leases
The Group has elected not to recognise right-of-use assets and lease liabilities of short-term and low-value lease. The
Group recognises lease payments associated with these leases as an expense 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 Statement of financial position, whilst where grant income recognised exceeds grant income
received, it is included within accrued income on the Statement of financial position.
Revaluation of equity instruments
Gains and losses on the revaluation of equity instruments are recognised at fair value in the statement of
comprehensive income.
Change in fair value of investment asset
The change in fair value of investment assets 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 Statement of financial position until such time as it is received.
The Group also receives a Research and Development Expenditure Credit (’RDEC’) which is accounted for as a reduction
in research, development and bioprocessing costs in the statement of comprehensive income, and within trade and
other receivables in the Statement of financial position,
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 Statement of financial position date.
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Notes to the consolidated financial statements
for the year ended 31 December 2019
Deferred tax is calculated in respect of all temporary differences identified at the Statement of financial position 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 Statement of
financial position 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.
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. Residual values are set at zero and will be reassessed
should the asset’s selling price exceed its net book value.
The bioprocessing plants are reviewed annually for impairment triggers and, where necessary, a full impairment review
is performed.
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 Group's 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.
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Financial assets
Assets at fair value through profit and loss
Assets at fair value through profit and loss by the Group are classified as fair value through profit and loss.
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
valued at amortised cost.
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.
Trade receivables
Trade receivables are recognised initially at the transaction price as these assets do not have significant financing
components and are subsequently measured at amortised cost. The Group recognises loss allowances for receivables
under the expected credit loss model as established by 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.
Deposits
Deposits consist of amounts held in escrow and is included within other receivables within the Statement of financial
position until such time as the restrictions relating to those amounts have been lifted.
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.
Contract liabilities and deferred income
Contract liabilities primarily relate to the advance consideration received from customers for commercial development
work and bioprocessing batches, as well as options and funded research and development activities.
Deferred income
Deferred income primarily relates to the advance consideration received for grants and lease incentives.
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.
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 Statement of financial position.
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Notes to the consolidated financial statements
for the year ended 31 December 2019
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 IFRS9, 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 a finance cost.
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.
Key accounting matters
IFRS 16 Leases
The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of the initial
application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented in
2018 is not restated – i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of
the change in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have
generally been applied to comparative information.
Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC
4 ’Determining whether an Arrangement contains a Lease’. The Group now assesses whether a contract is or contains
a lease based on the definition of a lease as explained in Note 2.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions
are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease under IFRS 16. Therefore, the
definition of a lease under IFRS 16 was applied only to contracts entered into or changed in or after 1 January 2019.
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As a lessee
As a lessee, the Group leases property and IT equipment. The Group previously classified leases as operating or finance
leases based on its assessment of whether the lease transferred significantly all of the risks and reward incidental to
ownership of the underlying asset to the Group. Under IFRS 16, the Group recognises right-of-use assets and lease
liabilities for most of these leases.
At the commencement or on modification of a contract that contain a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone price. However, for leases
of property the Group has elected not to separate non-lease components and account for the lease and associated
non-lease components as a single lease component.
Leases classified as operating leases under IAS 17
Previously, the Group classified property and IT equipment leases as operating leases under IAS 17. On transition, for
these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the
Group’s incremental borrowing rate as at 1 January 2019. Right-of-use assets are measured at an amount equal to the
lease liability, adjusted by the amount of any prepaid or accrued lease payments and lease incentives.
The Group tested its right-of-use assets for impairment on the date of transition and has concluded that there is no
indication that the right-of-use assets are impaired.
The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating
leases under IAS 17:
— Applied a single discount rate to a portfolio of leases with similar characteristics.
— Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term.
— Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
Leases classified as finance leases under IAS 17
The Group had no leases that were previously classified as finance leases.
Impact on transition
On transition to IFRS 16, the Group recognised additional right-of-use assets and lease liabilities. The difference is due
to adjustments related to any prepaid or accrued lease payments and lease incentives. The impact on transition is
summarised below:
Right-of-use assets
Prepayments
Accruals
Deferred income
Lease liabilities
Total
£’000
6,355
4
7
2,250
8,616
When measuring lease liabilities for lease that were classified as operating lease, the Group discounted lease payments
using a weighted-average rate of 8%:
Operating lease commitments at 31 December 2018
as disclosed under IAS 17 in the Group’s consolidated financial statements
Discounted using the incremental borrowing rates at 1 January 2019
Total
£’000
13,906
8,616
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Notes to the consolidated financial statements
for the year ended 31 December 2019
Judgments
Going concern
Management and the directors have had to make estimates and important judgments when assessing the going
concern status of the Group. The conclusions of these estimates and judgments are reported in several places in this
annual report including the Directors Report (page 96) and Note 1 to the financial statements (page 114).
Estimations
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are discussed below. The nature of estimation means that actual outcomes could differ from
those estimates.
Lease liability discount rate
Since the rates implicit in our leases are not readily determinable, we use the Group’s incremental borrowing rates (the
rate of interest that we would have to pay to borrow on a collateralised basis over a similar term for an amount equal
to the lease payments in a similar economic environment) based on the information available at commencement date
in determining the discount rate used to calculate the present value of lease payments. The rates have been determined
using previously available information on borrowing rates as well as indicative borrowing rates that would be available
to us based on the value, currency and borrowing term provided by financial institutions, adjusted for company and
market specific factors. Although we do not expect our estimates of the incremental borrowing rates to generate
material differences within a reasonable range of sensitivities, judgement is involved in selecting an appropriate rate,
and the rate selected for each lease will have an impact on the value of the lease liability and corresponding right-of-
use (ROU) asset in the Consolidated Statement of financial positions.
Percentage of completion of bioprocessing batch revenues
Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time
as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the bioprocessing
process. Revenues are recognised on a percentage of completion basis and as such require judgement in terms of the
assessment of the correct stage of completion including the expected costs of completion for that specific bioprocessing
batch. The value of the revenue recognised and the related contract asset raised with regards to the bioprocessing
batches which remain in progress at year end is £20,863,000. If the assessed percentage of completion was 10 percentage
points higher or lower, revenue recognised in the period would have been £2,086,300 higher or lower.
Percentage of completion of fixed price process development revenues
As it satisfies its performance obligations the Group recognizes revenue and the related contract asset with regards to
fixed price process development work packages. Revenues are recognised on a percentage of completion basis and as
such require judgement in terms of the assessment of the correct percentage of completion for that specific process
development work package. The value of the revenue recognised and the related contract asset raised with regards to
the work packages which remain in progress at year end is £5,447,000. If the assessed percentage of completion was
10 percentage points higher or lower, revenue recognised in the period would have been £540,000 higher or lower.
Provision for out of specification bioprocessing batches
Bioprocessing of clinical/commercial product for partners is recognised on a percentage of completion basis over time
as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the process.
As the Group has now been bioprocessing product across a number of years, and also in a commercial capacity, the
Group has assessed the need to include an estimate of bioprocessed product for which revenue has previously been
recognised and which may be reversed should the product go out of specification during the remaining period over
which the product is bioprocessed. In calculating this estimate the Group has looked at historical rates of out of specification
batches across the last four years, and has applied the percentage of out of specification batches to total batches produced
across the assessed period to the revenue recognised on batches which have not yet completed the bioprocessing
process at year end. This estimate, based on the historical percentage, may be significantly higher or lower depending on
the number of bioprocessing batches actually going out of specification in future. If the historical percentage had been
10% higher or lower, the estimate would be £180,000 higher or lower.
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The estimate will increase or decrease based on the number of bioprocessing batches which go out of specification over
the historic assessment period, but also the number of bioprocessing batches which have not yet completed the
bioprocessing process at year end.
Consequently, bioprocessing revenue of £1.8 million (2018: nil) has not been recognised during 2019 (2018: Nil) with
the corresponding credit to contract liabilities (note 20). This unrecognised revenue will be recognised as the batches
complete bioprocessing, although batches bioprocessed in 2020 and beyond will be included in the estimate as they
progress through the bioprocessing process.
Estimate and judgments: Potential litigation
The Group are currently aware of a potential claim and are assessing the facts and circumstances surrounding the
possible outcomes, with the assistance of internal technical experts and external counsel, to determine the likelihood
of the Group incurring a liability and to evaluate the extent to which a reliable estimate of any liability can be made.
Considering the nature of the matter, there is an inherent judgement and a level of uncertainty in the revenue reversal
and the quantum and timing of any cash outflows. The likely cost to the group of any litigation which may potentially
be brought against the Group is subject to a number of significant uncertainties and these cannot be estimated reliably.
Accordingly, no provision has been made in respect of this matter.
The Group have insurance cover, which they intend to use, however the Group cannot be confident to a highly
probable level that the full extent of any potential claim would be covered, therefore no contingent asset has been
recognised. Further detail is provided in Note 36.
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 2019 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 loan
finance costs and the capital repayment which took place in June 2019 were 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 £1,373,000 (2018: £3,054,000) over the year and would lead to an unrealised foreign exchange
gain/loss of £4.3 million (2018: £4.1 million) on any outstanding loan balance.
The Group also has exposure to the £/€ exchange rate due to the need to fund certain expenditure denominated in
Euros. Had the £/€ exchange rate been 10% different, the impact on cost in 2019 would have been approximately
£343,000 (2018: £156,000). 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
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 2019 was just £104,000 (2018: £71,000).
On 28 June 2019 the Group repaid its $55 million (£43.6 million) loan facility with Oaktree Capital Management (“Oaktree”)
financed through £53.5 million of equity issued to Novo Holdings in May 2019. The loan facility was fully repaid at a cost
of £43.6 million plus a redemption fee of £0.9 million, and the security over the assets of the Group was removed.
If interest rates had been 1% higher in 2019 the impact on cash interest paid would have been £215,000 (2018: £555,000).
(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 17).
Oxford Biomedica plc | Annual report and accounts 2019
6 Group financial statements
2
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
Derivative financial instruments and hedging
There were no material derivatives at 31 December 2019 or 31 December 2018 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 agreement during 2019
in the period prior to repayment of the loan in June 2020 (2018: No breaches).
Group
Net debt
Equity
Debt/equity
Note 1: Represents Cash balance only as no debt.
4. Segmental analysis
2019
£’000
(16,243)1
75,630
21%
2018
£’000
8,909
34,741
26%
Segmental reporting
The chief operating decision-maker has been identified as the Senior Executive Team (SET), comprising the Executive
Directors, Chief Medical Officer, Chief Technical Officer, Chief Scientific Officer, Chief Business Officer, Chief Operations
Officer and Chief People 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 (i.e the partner programmes CDMO business). It also includes internal technology
developments and technical intellectual property within the LentiVector® platform.
(ii) Product – this segment consists of the clinical and pre-clinical development of in vivo and ex vivo gene and cell
therapy products (gene therapeutics) which are owned by the Group.
Revenues, other operating income and operating loss by segment
Revenues, Operating 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.
Total
£’000
64,060
884
(5,241)
(7,343)
(1,883)
(14,467)
(6,422)
(20,889)
2019
Revenue
Other operating income
Operating EBITDA¹
Depreciation, amortisation and share based payment
Change in fair value of asset held at fair value through profit and loss
Operating (loss)/profit
Net finance cost
Loss before tax
Platform
£’000
50,997
884
(11,699)
(6,584)
(1,883)
(20,166)
–
–
Product
£’000
13,063
–
6,458
(759)
–
5,699
–
–
Oxford Biomedica plc | Annual report and accounts 2019
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2018
Revenue
Other operating income
Operating EBITDA¹
Depreciation, amortisation and share based payment
Revaluation of investments
Operating profit
Net finance cost
Profit before tax
Platform
£’000
55,004
645
9,743
(4,358)
5,983
11,368
Product
£’000
11,774
419
3,637
(1,090)
–
2,547
Total
£’000
66,778
1,064
13,380
(5,448)
5,983
13,915
(8,901)
5,014
1 Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments and Assets at fair value through profit & loss, 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 based payments
options. A reconciliation to GAAP measures is provided on page 42.
Other operating income of £0.9 million (2018: £1.1 million) includes grant income of £nil (2018: £0.4 million) which is
used to fund clinical and pre-clinical development and is included within the Product segment. Grant income to
develop our supply chain capabilities of £0.9 million (2018: £0.5 million) is included within the Platform segment. 2019
includes £nil (2018: £0.2 million) of partially funded development income.
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. In 2019 a
more detailed apportionment of these costs was made leading to a greater proportion of the costs being allocated to
the Platform segment. If the same apportionment was applied retrospectively to 2018, £1.5 million of additional costs
would have been allocated to the Platform segment instead of the Product segment.
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.
Disaggregation of revenue
Revenue is disaggregated by the type of revenue which is generated by the commercial arrangement. Revenue shown
in the table below is denominated in GBP and is generated in the UK.
2019
Bioprocessing/Commercial
development
Licence fees & Incentives
Total
2018
Bioprocessing/Commercial
development
Licence fees & Incentives
Total
Platform
£’000
Product
£’000
45,715
5,282
50,997
1,553
11,510
13,063
Platform
£’000
Product
£’000
39,034
15,970
55,004
1,470
10,304
11,774
Total
£’000
47,268
16,792
64,060
Total
£’000
40,504
26,274
66,778
Oxford Biomedica plc | Annual report and accounts 2019
8 Group financial statements
2
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
Revenue by geographical location
The Group’s revenue derives wholly from assets located in the United Kingdom. Analysed by location the Group’s
revenues derive predominantly from Europe:
Revenue by customer location
Europe
Rest of world
Total revenue
2019
£’000
46,602
17,458
64,060
2018
£’000
41,542
25,236
66,778
In 2019 Novartis, Axovant and Orchard Therapeutics each generated more than 10% of the Group’s revenues. In 2018
Novartis, Axovant, Sanofi (Bioverativ) and Orchard Therapeutics each generated more than 10% of the Group’s revenues.
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 32)
Share based payments (note 28)
Total employee benefit costs
Key management compensation
Wages and salaries
Social security costs
Other pension costs
Share based payments
Total
2019
Number
38
2018
Number
27
462
500
2019
£’000
27,438
2,861
1,769
1,559
33,627
2019
£’000
3,417
512
186
869
4,984
350
377
2018
£’000
20,444
2,411
1,278
1,132
25,265
2018
£’000
3,267
788
186
572
4,813
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 80 which forms part of these
financial statements.
The Company had no employees during the year (2018: zero).
Oxford Biomedica plc | Annual report and accounts 2019
6. Finance income and costs
Group
Finance income:
Bank interest receivable
Total finance income
Finance costs:
Unwinding of discount in provisions (note 22)
Revaluation of liabilities in foreign currency
Interest payable
Total finance costs
Net finance costs
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2019
£’000
2018
£’000
104
104
(57)
(969)
(5,500)
(6,526)
(6,422)
71
71
(8)
(2,744)
(6,220)
(8,972)
(8,901)
On 28 June 2019 the Group repaid its $55 million (£43.6 million) loan facility with Oaktree Capital Management (“Oaktree”)
financed through £53.5 million of equity issued to Novo Holdings in May 2019. The loan facility was fully repaid at a cost
of £43.6 million plus a redemption fee of £0.9 million, and the security over the assets of the Group was removed.
Up to 29 June 2019, interest payable consisted of the cash interest paid on the Oaktree loan facility at 9.0% plus US$
three month LIBOR, subject to a minimum of 1%.
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
Group
2019
£’000
33,627
5,765
22
–
13,374
104
(255)
2018
£’000
25,265
4,332
25
–
9,825
30
(1,305)
Company
2019
£’000
345
2018
£’000
365
–
–
–
–
–
–
–
–
–
–
–
–
Company employee benefit costs of £382,000 (2018: £365,000) relates to non-executive costs paid by Oxford
Biomedica UK Ltd and recharged to the Company.
Depreciation is charged to cost of goods, research and 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
Review of interim results
Audit related assurance services
and grant income audits
Total
Group
2019
£’000
25
2018
£’000
25
165
26
20
94
330
125
–
20
8
178
Oxford Biomedica plc | Annual report and accounts 2019
0 Group financial statements
3
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
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 2019 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 Statement of financial position.
The amounts for 2019 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
Current tax
Deferred tax
Relating to the origination of timing allowances
Adjustments in respect of prior periods
Deferred Tax (note 24)
Taxation Credit
Group
2019
£’000
(5,018)
–
(5,018)
473
(4,545)
(278)
–
(278)
(4,823)
2018
£’000
(2,278)
–
(2,278)
(528)
(2,806)
(312)
(33)
279
(2,527)
The adjustment of current tax in respect of prior year of £473,000 (2018: £528,000) relates to a lower than anticipated
tax receipt (£363,000), and an expected tax repayment relating to prior years (£110,000).
The Company has no tax liability, nor is it entitled to tax credits (2018: £nil).
The tax credit for the year is higher (2018: higher) than the standard rate of corporation tax in the UK. The differences
are explained below:
(Loss)/profit on ordinary activities before tax
(Loss)/profit on ordinary activities before tax multiplied
by the standard rate of corporation tax in the UK of 19% (2018: 19%)
Effects of:
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
Recognition of previously unrecognised tax losses
Tax rate changes
Deferred tax not recognised
Chargeable gains
Tax losses carried forward to future periods
Adjustments in respect of prior periods
Total tax credit for the year
Group
2019
£’000
(20,889)
2018
£’000
5,014
Company
2019
£’000
(1,246)
2018
£’000
(1,575)
(3,969)
953
(237)
(299)
464
(2,434)
–
20
(682)
33
288
937
47
473
(4,823)
264
(1,880)
(32)
(387)
(963)
(33)
(358)
–
–
(91)
(2,527)
–
–
–
–
–
(90)
–
(937)
160
–
770
–
–
–
–
(963)
133
–
–
–
–
(1,129)
At 31 December 2019, the Group had tax losses to be carried forward of approximately £84.2 million (2018: £85.7 million).
Of the Group tax losses, £84.2 million (2018: £85.7 million) arose in the United Kingdom.
Oxford Biomedica plc | Annual report and accounts 2019
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9. Basic earnings / (loss) and diluted earnings per ordinary share
The basic loss per share of 22.10p (2018: earnings of 11.57p) has been calculated by dividing the (loss)/earnings
for the period by the weighted average number of shares in issue during the year ended 31 December 2019
(72,709,944; 2018: 65,188,414).
The Group made a loss for the period ended 31 December 2019. There is therefore no difference between the basic
loss per ordinary share and the diluted loss per ordinary share in the period.
The diluted earnings per share in the prior period of 10.89p has been calculated by dividing the earnings for the period
by the weighted average number of shares in issue during the period after adjusting for the dilutive effect of the share
options and warrants outstanding at 31 December 2018 (69,242,901).
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 £2,016,000 (2018: £446,000).
11. Intangible assets
Intangible assets comprise intellectual property rights.
Cost at 1 January
Additions
Cost at 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
The Company had no intangibles at 31 December 2019 or 31 December 2018.
2019
£’000
5,636
–
5,636
5,519
22
–
5,541
95
2018
£’000
5,591
45
5,636
5,494
25
–
5,519
117
Oxford Biomedica plc | Annual report and accounts 2019
2 Group financial statements
3
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
12. Property, plant and equipment
Freehold
property
£’000
Leasehold 1
improvements
£’000
Office
equipment and
computers
£’000
Bioprocessing
and Laboratory
equipment
£’000
Right of use
asset2
£’000
Cost
At 1 January 2019
Adoption of IFRS 16 (Leases)
Additions at cost
Reclassification
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Adoption of IFRS 16 (Leases)
Charge for the year
Reclassification
Disposals
At 31 December 2019
21,283
–
144
–
7,735
(1,263)
15,436
–
21,427
21,908
6,324
–
2,036
–
–
8,360
1,450
188
417
–
–
1,679
Net book amount at 31 December 2019
13,067
20,229
5,088
–
2,681
(374)
7,395
2,416
–
877
(239)
–
3,054
4,341
12,337
–
7,513
374
(50)
20,174
4,462
–
1,784
239
(45)
6,440
–
7,618
3,782
–
–
11,400
–
188
651
–
–
839
Total
£’000
46,443
6,355
29,556
–
(50)
82,304
14,652
–
5,765
–
(45)
20,372
13,734
10,561
61,932
Freehold
property
£’000
Leasehold
improvements
£’000
Office
equipment and
computers
£’000
Bioprocessing
and Laboratory
equipment
£’000
Cost
At 1 January 2018
Additions at cost
Disposals
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge for the year
Disposals
At 31 December 2018
21,171
112
–
21,283
4,306
2,018
–
6,324
Net book amount at 31 December 2018
14,959
4,689
3,046 1
–
7,735
978
472
–
1,450
6,285
3,179
1,909
–
5,088
1,862
554
–
2,416
2,672
6,651
5,686
–
12,337
3,174
1,288
–
4,462
7,875
Total
£’000
35,690
10,753
–
46,443
10,320
4,332
–
14,652
31,791
1. Included within Leasehold improvements are Assets-under-construction of £17,590,000 (2018: £2,396,000), representing ongoing construction works at the Oxbox
bioprocessing facility.
2. The adoption of IFRS 16 (Leases) at the start of 2019 required the restoration provision to be reclassified as a right of use asset. Refer note 22 for further information
on the nature of the restoration provision.
Leasehold improvements are capital improvements to buildings which we lease. Bioprocessing and Laboratory equipment
is equipment we purchase for our laboratory and bioprocessing processes and are generally movable from one facility
to another.
The Company had no property, plant and equipment at 31 December 2019 or 31 December 2018.
Oxford Biomedica plc | Annual report and accounts 2019
13. Assets at fair value through profit and loss
Assets at fair value through profit and loss: Group
At 1 January
Reclassification of investment as asset at fair value through profit and loss (note 14)
Costs to sell asset at fair value through profit and loss
Sale of shares
Change in fair value of available-for-sale asset
At 31 December
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2019
£’000
–
10,966
(94)
(6,270)
(1,883)
2,719
2018
£’000
–
–
–
–
–
–
14. Investments held at fair value through profit and loss
During the first half of 2019 the Group determined that the equity held in Orchard Therapeutics met the definition of
an Asset at fair value through profit & loss under IFRS 5. As such, the equity investment was reclassified from Investments
held at fair value through profit and loss (non-current assets) to Assets at fair value through profit & loss (current assets).
At 1 January
Reclassification of investment as asset held at fair value through profit and loss (note 13)
Recognition of milestones
Revaluation of investments
At 31 December
15. Investments and loans in subsidiaries
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
2019
£’000
10,966
(10,966)
–
–
–
2018
£’000
2,954
–
2,029
5,983
10,966
2019
£’000
2018
£’000
15,182
15,182
194,736
53,416
248,152
263,334
176,432
18,304
194,736
209,918
126,065
137,269
126,065
83,853
7,933
1,559
9,492
6,801
1,132
7,933
146,761
91,786
Oxford Biomedica plc | Annual report and accounts 2019
4 Group financial statements
3
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
The application of the expected credit loss model has had no significant impact on the level of impairment of the loan
to group undertakings as the market value of the Group, of which OxfordBiomedica (UK) Ltd. as the operational
company makes up almost all of the value, considerably exceeds the value of the loan and investment made by the
parent company.
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.
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, 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 27).
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 2018 no impairment charge was assessed to be
required. Cumulative impairment of £126.0 million has been recognised up to 31 December 2019.
16. Inventories
Group
Raw Materials
Work-in-progress
Total inventory
2019
£’000
2,579
–
2,579
2018
£’000
2,422
1,829
4,251
Inventories constitute raw materials held for commercial bioprocessing purposes, and work-in-progress inventory
related to contractual bioprocessing obligations. The Group has no Work-in-progress at the end of 2019 due to the fact
that during 2019 the Group changed its method of calculating the percentage of completion on bioprocessing batches
to more accurately be measured, leading to the Work-in-progress balance being recognised as cost of sales in the
statement of comprehensive income.
During the year, the Group wrote down £171,000 (2018: £288,000) of inventory which is not expected to be used in
production or sold onwards. The Company holds no inventories.
Oxford Biomedica plc | Annual report and accounts 2019
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17. Trade and other receivables
Current
Trade receivables
Contract assets
Other receivables
Other tax receivable
Prepayments
Total trade and other receivables
Group
2019
£’000
12,766
13,406
563
1,537
1,773
30,045
2018
£’000
15,408
8,886
307
1,144
840
26,585
Company
2019
£’000
–
–
–
–
–
–
2018
£’000
–
–
–
–
–
–
The fair value of trade and other receivables are the current book values. We have performed an impairment assessment
under IFRS 9 and have concluded that the application of the expected credit loss model has had an immaterial impact
on the level of impairment of receivables.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £7,472,000 (2018: £1,768,000)
which were past due at the reporting date and of which £5,450,000 has been received after the reporting date.
Contract assets relates to the Group’s rights to consideration for work completed but not billed at the reporting date
for Commercial Development work and Bioprocessing batches. The contract assets are transferred to receivables
when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer.
A portion of contract assets relates to fixed price process development work packages which are recognised on a
percentage of completion basis and as such requires estimation in terms of assessment of the correct percentage of
completion for that specific work package. The value of the contract asset raised with regards to these work packages
is £5,447,000. If the assessed percentage of completion was 1 percentage point higher or lower, revenue recognised in
the period would have been £54,000 higher or lower.
Non-current trade and other receivables constitute other receivables of £3,605,000 (2018: £4,000,000) which consists
of deposits held in escrow as part of the Windrush Innovation Centre and Oxbox lease arrangements.
Ageing of past due but not impaired trade receivables:
0–30 days
30–60 days
60+ days
2019
£’000
1,142
–
6,330
7,472
2018
£’000
–
–
1,768
1,768
Contract assets of £13.4 million (2018: £8.9 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
2019
£’000
25,939
7,711
33,650
2018
£’000
28,098
2,487
30,585
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.
Oxford Biomedica plc | Annual report and accounts 2019
6 Group financial statements
3
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
18. Cash and cash equivalents
Cash at bank and in hand
19. Trade and other payables
Trade payables
Other taxation and social security
Accruals
Total trade and other payables
Group
2019
£’000
16,243
2018
£’000
32,244
Company
2019
£’000
2
2018
£’000
11
Group
2019
£’000
7,311
1,042
5,944
14,297
2018
£’000
3,746
770
6,906
11,422
Company
2019
£’000
–
–
109
109
2018
£’000
–
–
164
164
20. Contract liabilities and deferred income
Contract liabilities and deferred income arise when the Group has received payment for services in excess of the stage
of completion of the services being provided.
Contract liabilities and deferred income have decreased from £18.5 million at the end of 2018 to £14.9 million at the
end of 2019 due to the recognition of process development income and capacity reservation revenues as the
performance obligation was satisfied and the batches manufactured.
Contract liabilities consists primarily of deferred bioprocessing and process development revenue, and are expected to
be released as the related performance obligations are satisfied over the period as described below:
Years
Contract liabilities
Bioprocessing income
Process development income
Licence fees and incentives
Deferred Income
Lease incentives
Grant
0–1
£’000
13,156
8,380
4,760
16
1,006
–
1,006
1–3
£’000
707
675
–
32
1,992
–
1,992
3–5
£’000
928
–
–
928
1,318
–
1,318
5–10
£’000
60
–
–
60
–
–
–
Total
14,851
9,055
4,760
1,036
4,316
–
4,316
Included within bioprocessing contract liabilities is revenue £1.8 million which has not been recognised during 2019
(2018: Nil) relating to the estimate of out of specification batches (refer note 2: ’Estimates’ for additional information).
Deferred income relates to grant funding received from the UK Government for capital equipment purchased as part
of the Oxbox bioprocessing facility expansion. The income will recognised over the period over which the purchased
assets are depreciated.
The Company had no contract liabilities or deferred income in 2019 or 2018.
Oxford Biomedica plc | Annual report and accounts 2019
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21. Loans
On 28 June 2019 the Group repaid its $55 million (£43.6 million) loan facility with Oaktree Capital Management
(“Oaktree”) financed through £53.5 million of equity issued to Novo Holdings in May 2019. The loan facility was fully
repaid at a cost of £43.6 million plus a redemption fee of £0.9 million which forms part of interest payable within finance
costs in the statement of comprehensive income, and the security over the assets of the Group was removed.
Prior to repayment the loan carried an interest rate of 9.0% plus US$ three month LIBOR, subject to a minimum of 1%.
Subject to achieving certain conditions, the interest rate could have reduced 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 2,689,686 (post consolidation) warrants to Oaktree (note 30). The terms also included financial covenants
relating to the achievement of revenue targets and a requirement to hold a minimum of $2.5 million cash at all times.
The Oaktree facility was secured by a pledge over substantially all of the Group’s assets.
22. Provisions
At 1 January
Unwinding of discount
New provision
Additional provision recognised
At 31 December
Current
Non-current
Total provisions
2019
£’000
1,287
58
3,741
–
5,086
2019
£’000
–
5,086
5,086
2018
£’000
630
8
–
649
1,287
2018
£’000
–
1,,287
1,287
The dilapidations provisions relate to anticipated costs of restoring the leasehold Yarnton, Oxbox and Windrush
Innovation Centre properties in Oxford, UK to their original condition at the end of the lease terms in 2024, 2033 and
2028 respectively, discounted using the rate per the Bank of England nominal yield curve. The equivalent rate was used
in 2018. The provisions will be utilised at the end of the leases if they are not renewed.
In 2018 the Group signed the lease on its Oxbox bioprocessing facility in Oxford near to its Windrush laboratories in
Oxford, UK. The new facility is 84,000 sq. ft (7,800 sqm). The Group’s Phase I and planned Phase 2 expansion will fit out
around 45,000 sq. ft (4,200 sqm) for four GMP clean room suites and two fill and finish suites as well as offices,
warehousing and quality control laboratories, with space available for future expansion. A provision of £3,741, 000 was
recognised at the end of 2019 for the cost of restoring this property to its original condition at the end of the lease term.
The Company had no provisions at 31 December 2019 or 31 December 2018.
Oxford Biomedica plc | Annual report and accounts 2019
8 Group financial statements
3
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
23. 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 18)
Trade receivables and
other receivables (note 17)
Investments at fair value through
profit and loss (note 15)
Assets at fair value through profit
and loss (note 13)
Trade and other payables
excluding tax (note 19)
Loans (note 21)
Financial assets at fair
value through profit & loss
2018
£’000
–
2019
£’000
–
Cash &
receivables
2019
£’000
16,243
2018
£’000
32,244
Amortised costs, loans
& other liabilities
2019
£’000
–
2018
£’000
–
–
–
2,719
–
–
2,719
–
31,877
29,281
10,966
–
–
–
10,966
–
–
–
–
48,120
–
–
–
–
61,525
–
–
–
–
–
–
13,255
–
13,255
10,652
41,153
51,805
Floating rate instant access deposits earned interest at prevailing bank rates.
Sterling
US Dollars
2019
2018
Year average Year average
Weighted
average rate
0.48%
1.45%
Weighted
average rate
0.55%
1.62%
Assessment of financial assets by credit risk rating:
Cash and cash equivalents are held with reputable banks with a low assessed risk of default.
All trade receivables are assessed as having a low credit risk rating as the debt is owed by blue chip pharmaceutical
groups in the top 10 in the world by market capitalisation, and by Biotechnology companies with sufficient cash
reserves to satisfy their obligations. There has been no change in the determined risk during 2019, therefore
no reconciliation between the 2018 and 2019 closing debtor balance assessed by risk of default has been provided.
The opening and closing position was low (2018: low).
Other receivables are rent deposits to held in separately administered bank accounts with covenants limiting their use
and are as such assessed as having a low risk of default.
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
2019
£’000
5,454
10,789
16,243
2018
£’000
3,560
28,684
32,244
Oxford Biomedica plc | Annual report and accounts 2019
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Financial assets classified as level 1 in hierarchy
The investment asset represented by ordinary shares in Orchard Therapeutics is classified as at fair value through profit
and loss. Please refer to note 13 (2018: note 14) for further information.
Reconciliation in liabilities from financing activities
At 1 January
Interest payable
Foreign exchange movement
Cash interest paid
Redemption fee
Oaktree loan repayment
At 31 December (note 19)
2019
£’000
41,153
4,819
969
(2,486)
(866)
(43,589)
–
2018
£’000
36,864
6,210
2,744
(4,665)
–
–
41,153
24. Deferred taxation
The Company and the Group have recognised deferred tax assets and liabilities at 31 December 2019 and 31 December
2018. In light of the Group’s history of losses, recovery of the whole deferred tax asset is not sufficiently certain, and
therefore a deferred tax asset has been recognised only to the extent that there is a deferred tax liability in the form of
a future taxable gain on the sale of the Orchard investment asset.
A reduction in the UK corporation tax rate from 19% to 17% (effective 1 April 2020) was substantively enacted on
6 September 2016, and the UK deferred tax asset/(liability) as at 31 December 2019 has been calculated based on this rate.
The March 2020 Budget announced that a rate of 19% would continue to apply with effect from 1 April 2020, and this
change was substantively enacted on 17 March 2020. This will increase the company’s future current tax charge
accordingly and increase the recognised deferred tax asset and liability by £42,000 respectively.
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 – recognised
Deferred tax (assets)/liabilities – recognised
At 1 January 2019
Origination and reversal of temporary differences
At 31 December 2019
At 1 January 2018
Origination and reversal of temporary differences
At 31 December 2018
Company – recognised
Deferred tax (assets)/liabilities – not recognised
At 1 January 2019
Origination and reversal of temporary differences
At 31 December 2019
At 1 January 2018
Origination and reversal of temporary differences
At 31 December 2018
Tax losses
£’000
Revaluation of
investments
£’000
(1,129)
770
(359)
–
(1,129)
(1,129)
1,408
(1,049)
359
–
1,408
1,408
Tax losses
£’000
Revaluation of
investments
£’000
(1,129)
770
(359)
–
(1,129)
(1,129)
–
–
–
–
–
–
Total
£’000
279
(279)
–
–
279
279
Total
£’000
(1,129)
770
(359)
–
(1,129)
(1,129)
Oxford Biomedica plc | Annual report and accounts 2019
0 Group financial statements
4
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
Group – not recognised
Deferred tax (assets)/liabilities – not recognised
At 1 January 2019
Origination and reversal of temporary differences
At 31 December 2019
At 1 January 2018
Origination and reversal of temporary differences
At 31 December 2018
25. Ordinary shares
Group and Company
Issued and fully paid
Ordinary shares of 50p each
At 1 January – 66,103,528 (2018: 62,154,084 post consolidation) shares
Allotted for cash in placing and subscription – 7,750,000 (2018: 3,486,936) shares
Allotted on exercise of warrants – 2,689,686 (2018:Nil) shares
Allotted on exercise of share options – 315,917 (2018: 462,507 adjusted
for consolidation) shares
At 31 December – 76,859,131 (2018: 66,103,528) shares
Tax
depreciation
£’000
Provisions
£’000
Tax losses
£’000
Share options
£’000
(786)
724
(62)
(1,071)
285
(786)
(138)
(303)
(441)
(133)
(5)
(138)
(16,528)
(564)
(17,092)
(16,378)
(150)
(16,528)
(1,712)
48
(1,664)
(148)
(1,564)
(1,712)
2019
£’000
33,034
3,875
1,345
162
38,416
Total
£’000
(19,164)
(95)
(19,259)
(17,730)
(1,434)
(19,164)
2018
£’000
31,076
1,712
–
246
33,034
In April 2019, Oaktree exercised its warrants which were then converted into 2,689,686 ordinary shares of 50p each.
Proceeds from the shares issued were £1.3 million.
On 28 May 2019, the Group announced that Novo Holdings had subscribed to 6,568,024 new ordinary shares at a price
of £6.90. Novo Holdings also exercised in full its option to subscribe to a further 1,181,976 new ordinary shares at a price
of £6.90 on 29 May 2019. Gross proceeds from the placing were £53.5 million; net proceeds were £52.8 million.
On 30 May 2018, Oxford Biomedica consolidated its existing ordinary shares of 1 pence each to 65,701,073 new
consolidated ordinary shares of 50 pence each.
26. Share premium account
Group and Company
At 1 January
Premium on shares issued for cash in placing and subscription
Premium on exercise of warrants
Premium on exercise of share options
Costs associated with the issue of shares
At 31 December
2019
£’000
172,074
49,600
1,218
495
(769)
222,618
2018
£’000
154,224
18,748
–
478
(1,376)
172,074
Oxford Biomedica plc | Annual report and accounts 2019
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27. 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 and Save As You Earn Scheme.
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 both revenue
and 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.
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.
Oxford Biomedica plc | Annual report and accounts 2019
2 Group financial statements
4
1
Notes to the consolidated financial statements
for the year ended 31 December 2019
Share options outstanding at 31 December 2018 have the following expiry date and exercise prices:
Options granted to employees under the Oxford Biomedica 2007 and 2015 Share Option Schemes
2019 Number of shares
–
–
9,718
13,608
24,525
34,302
69,7681
130,7941
305,3601
237,1041
459,5861
1,284,765
2018 Number of shares
–
–
12,211
22,406
40,314
47,114
101,7571
221,2561
340,9951
271,5061
–
1,057,559
Exercise price per share
290p
305p
270p to 290p
115p to 155p
80p to 140p
100p to 200p
490p
275p
495p
502 to 904p
618p to 705p
Date from which exercisable
Vested
Vested
Vested
Vested
Vested
Vested
Vested
Vested
13/07/20
15/02/2018 to 07/08/2021
04/01/2022 to 12/9/2022
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
15/02/2028 to 07/08/2028
04/01/2022 to 12/09/2029
Note 1 – Options granted under the 2015 Executive share option scheme.
Options granted to employees under the Oxford Biomedica 2015 Save As You Earn Scheme
2019 Number of shares
–
66,864
73,443
75,845
268,781
484,933
2018 Number of share
27,078
144,466
77,283
114,731
–
363,558
Exercise price per share
310p
145p
330p
725p
422p
Date from which exercisable
01/10/18
13/10/19
12/10/20
10/10/21
09/10/22
Expiry date
01/04/19
12/04/20
12/04/21
10/04/22
09/04/23
Options granted under the Oxford Biomedica 2007 and 2015 Long Term Incentive Plans
2019 Number of shares 2018 Number of shares
–
–
142,000
142,000
72,679
66,679
93,349
89,082
113,158
113,158
178,9092
122,3442
231,256 1,2
218,1811,2
196,9121,2
191,1951,2
298,3231,2
–
1,028,263
1,240,962
3,010,660
2,449,380
Exercise price per share
50p
50p
50p
50p
0p
0p
0p
0p
0p
Date from which exercisable
Vested
Vested
Vested
Vested
Vested
Vested
17/07/20 to 25/09/20
15/02/2021 to 7/8/2021
18/04/2022 to 12/9/2022
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
15/02/2021 to 7/8/2021
18/04/2029 to 12/09/2029
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.
Oxford Biomedica plc | Annual report and accounts 2019
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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 £385,000 vested during 2019 (2018: £267,000).
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 2019, all shares held by the EBT had vested.
The EBT is consolidated at year end with the shares held in trust until the exercise of the option. During the year no
shares (2018: nil) 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.
Options granted to employees under the Oxford Biomedica 2013 and 2015 Deferred Bonus Plan
2019 Number of shares 2018 Number of shares
116,723
78,907
81,257
53,900
48,422
–
379,209
93,725
78,907
66,592
53,900
48,422
86,320
427,866
Exercise price per share
0p
0p
0p
0p
0p
0p
Date from which exercisable
Vested
Vested
Vested
11/07/18 to 11/07/20
07/08/19 to 07/08/21
18/04/20 to 18/04/22
Expiry date
15/06/24&14/10/24
04/05/25
14/05/26
11/07/27
07/08/28
18/04/29
National insurance liability
Certain options granted to UK employees could give rise to a national insurance (NI) liability on exercise. A liability of
£529,000 (2018: £437,000) 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 645p (2018: 707p) per share.
Oxford Biomedica plc | Annual report and accounts 2019
4 Group financial statements
4
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Notes to the consolidated financial statements
for the year ended 31 December 2019
28. Share based payments
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
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
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
09 Oct 2019
515.00p
421.68p
3
270,915
50.56%
3
0.27%
210.48p
Options awarded
12 Sep 2019
552.00p
617.86p
3
10,561
50.71%
3
0.46%
169.62
LTIPs awarded
12 Sep 2019
552p
0p
3
30,751
50.71%
3
0.46%
421.80p
Options awarded
04 Jan 2019
645p
659.24p
3
19,113
54.73%
3
0.77%
235.38p
LTIPs awarded
18 Apr 2019
665p
0p
3
262,031
53.36%
3
0.76%
516.87p
Options awarded
18 Apr 2019
665p
704.6p
3
469,710
53.60%
3
0.77%
230.37p
LTIPs awarded
01 May 2019
696p
0p
3
20,647
53.60%
3
0.77%
539.52p
Oxford Biomedica plc | Annual report and accounts 2019
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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 and Deferred Bonus awards which are exercisable at par/nil value, the weighted average exercise
price for options granted during the year was 597.8p (2018: 850.1p).
315,917 options were exercised in 2019 (2018: 462,507), including 14,664 of deferred bonus options (2017: 53,174).
The total charge for the year relating to employee share-based payment plans was £1,559,000 (2018: £1,132,000),
all of which related to equity-settled share based payment transactions.
Share options excluding LTIP
Outstanding at 1 January
Forfeited
Granted
Cancelled
Exercised
Share consolidation
Granted
Forfeited
Exercised
Cancelled
Outstanding at 31 December
Exercisable at 31 December
Exercisable and where market price exceeds
exercise price at 31 December
LTIP awards (options exercisable at par value 1p or nil cost)
Outstanding at 1 January
Exercised
Share consolidation
Granted
Expired
Exercised
Outstanding at 31 December
Exercisable at 31 December
Number
65,260,044
(2,174,134)
166,857
(180,674)
(2,056,185)
(59,795,959)
386,029
(28,985)
(149,191)
(6,685)
1,421,117
250,880
250,880
Number
1,421,117
–
–
–
–
–
770,299
(125,373)
(253,718)
(42,627)
1,769,698
349,579
349,579
2019
Weighted average
exercise price
419.2p
–
–
–
–
–
602.8
654.9
243.0
673.8
548.7
263.1
263.1
2019
Number
1,028,263
313,429
(45,874)
(54,856)
1,240,962
533,263
2018
Weighted average
exercise price
6.7p
8.0p
10.5p
5.8p
3.3p
6.8p
633.4p
474.9p
337.7p
156.1p
419.2p
299.7p
299.7p
2018
Number
54,297,969
(300,000)
(52,918,024)
204,147
(42,811)
(213,018)
1,028,263
421,186
Range of exercise prices
LTIP:
Exercisable at par or at nil cost
Deferred bonus:
Exercisable at par or at nil cost
Options:
50p to 150p
150p to 250p
250p to 350p
350p+
Weighted
average
exercise
price
Number
of shares
2019
Weighted average
remaining
life (years)
Contractual
Weighted
average
exercise
price
Number
of shares1
2018
Weighted average
remaining
life (years)
Contractual
12p 1,240,962
0p
427,866
111,418
129p
27,881
180p
293p
213,955
628p 1,416,444
3,438,526
6.8
6.6
5.6
3.7
6.6
8.7
15p
1,028,263
0p
379,209
132p
175p
290p
659p
215,881
38,419
337,828
828,989
2,828,589
8.1
6.9
6.8
4.4
7.5
8.8
Oxford Biomedica plc | Annual report and accounts 2019
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Notes to the consolidated financial statements
for the year ended 31 December 2019
29. Accumulated losses
At 1 January
Profit/(Loss) for the year
Share based payments
Vesting of deferred share award
At 31 December
Group
2019
£’000
(173,876)
(16,066)
2,247
–
(187,695)
2018
£’000
(182,663)
7,541
1,246
–
(173,876)
Company
2019
£’000
(123,077)
(2,016)
–
–
(125,093)
2018
£’000
(122,590)
(446)
(41)
–
(123,077)
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 £1,559,000 (2018: £1,132,000) (note 28), £688,000
(2018: £267,000) related to the vesting of deferred share awards made to executive directors and senior managers, less £nil (2018: £153,000) in relation to the exercise of none
(2018: 53,174) of these deferred share awards (note 27).
Neither the Company nor its subsidiary undertakings had reserves available for distribution at 31 December 2019 or
31 December 2018.
30. Other reserves
Group
At 1 January 2019
Exercise of warrants
At 31 December 2019
Group
At 1 January 2018
Issue of warrants
At 31 December 2018
Warrant
reserve
£’000
1,218
(1,218)
–
Warrant
reserve
£’000
1,218
–
1,218
Merger
reserve
£’000
2,291
–
2,291
Merger
reserve
£’000
2,291
–
2,291
Total
£’000
3,509
(1,218)
2,291
Total
£’000
3,509
–
3,509
The Group merger reserve at 31 December 2019 and 2018 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.
Under the Oaktree loan agreement the Company issued 134,351,226 warrants to Oaktree, equivalent to 4.4% of the
enlarged Group’s share capital. The warrants were exercisable at the nominal share price of 1p and could be exercised
at any time over the following ten years. The warrants were fair valued at £1.2 million net of related expenses and this
amount was credited to the warrant reserve. A further 2,661 warrants were issued to Oaktree since then due to equity
fundraisings by the Company.
On 18 April 2019, Oaktree exercised its warrants representing 2,689,686 ordinary shares of 50p each for total
consideration of £1,344,843. The exercise price of the warrants was 50p per warrant. Upon exercise the warrant reserve
was released to share premium.
Oxford Biomedica plc | Annual report and accounts 2019
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Company
At 1 January 2019
Credit in relation to employee share schemes
At 31 December 2019
At 1 January 2018
Credit in relation to employee share schemes
Issue of warrants
At 31 December 2018
Warrant
reserve
£’000
1,218
(1,218)
–
1,218
–
–
1,218
Merger
reserve
£’000
1,580
–
1,580
1,580
–
–
1,580
Share
Scheme
Reserve
£’000
7,933
1,559
9,492
6,801
1,132
–
7,933
Total
£’000
10,731
341
11,072
9,599
1,132
–
10,731
Options over the Company’s shares have been awarded to employees of Oxford Biomedica (UK) Ltd. In accordance
with IFRS 2 ’Share-based Payment’ the expense in respect of these awards is recognised in the subsidiaries’ financial
statements (see note 28). 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 £1,559,000 (2018: £1,132,000) (see note 15) and a
corresponding credit to reserves.
31. 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
Loss on disposal of property plant and equipment
Charge for impairment
Charge in relation to employee share schemes
Non-cash loss/(gains)
Changes in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Increase in deferred income
(Increase)/decrease in contract liabilities
Increase in provisions
Decrease/(increase) in inventory
Net cash used in/(generated from) operations
Group
2019
£’000
2018
£’000
Company
2019
£’000
2018
£’000
(14,467)
13,915
(1,246)
(1,575)
5,765
22
3
–
2,247
1,883
(4,586)
2,868
1,533
(3,634)
58
1,672
(6,636)
4,332
25
–
1,246
(8,012)
(14,559)
2,732
5,046
5,400
8
(919)
9,214
–
–
–
–
–
–
–
(55)
–
–
–
–
(1,301)
–
–
–
–
–
–
9
83
–
–
–
–
(1,483)
32. 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 £1,769,000 (2018: £1,278,000) represents
amounts payable by the Group to the scheme. Contributions of £253,000 (2018: £186,000), included in accruals, were
payable to the scheme at the year-end.
Oxford Biomedica plc | Annual report and accounts 2019
8 Group financial statements
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Notes to the consolidated financial statements
for the year ended 31 December 2019
33. Leases
The Group leases land and buildings and IT equipment. Information about leases for which the Group is a lessee is
presented below:
Group
Balance at 1 January 2019
Reclassified balances at 1 January 2019
Additions
Depreciation charge for the period
Balance at 31 December 2019
Right-of-use assets:
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five year
Total undiscounted cash flows at 30 June 2019
Lease liabilities:
Lease liabilities included in the Statement of Financial Position
Current
Non-current
Total lease liabilities at 30 June 2019
Amounts recognised in the profit or loss
2019 – Leases under IFRS 16
Interest on lease liabilities
Expense relating to short-term leases
2018 – Operating leases under IAS 17
Lease expense
Amounts recognised in the statement of cash flows
Total cash outflow for leases
Property
£’000
6,211
1,075
3,741
(608)
10,419
IT equipment
£’000
144
–
41
(43)
142
Total
£’000
6,355
1,075
3,782
(651)
10,561
31 December 2019
£’000
1,117
4,490
7,222
12,829
31 December 2019
£’000
482
7,907
8,389
31 December 2019
£’000
654
137
385
31 December 2019
£’000
835
34. Contingent liabilities and capital commitments
The Group had commitments of £1,946,000 for capital expenditure for leasehold improvements, plant and equipment
not provided for in the financial statements at 31 December 2019 (2018: £15,723,000). These relate to contracts entered
into for the construction of the Oxbox bioprocessing facility and also equipment required for the fill/finish process in
the new facility.
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35. 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.
During the prior year, OcQuila (UK) Ltd was incorporated as a wholly-owned subsidiary of the parent company.
It remained dormant since being incorporated and in November 2018 was sold for no consideration. It remained
dormant from incorporation to date of sale.
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
2019
£’000
2018
£’000
(1,413)
(1,370)
–
–
54,829
19,674
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
2019
£’000
248,152
2018
£’000
194,736
The investment in the subsidiary, of which the loan forms part, has been impaired by £126 million (note 15) 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 £9,492,000 (2018: £7,933,000).
There were no transactions (2018: none) with Oxxon Therapeutics Limited.
Company: transactions with related parties
There is an outstanding balance of £5,417 (2018: £10,767) owed to Lorenzo Tallarigo at year end. This was paid in
January. There were no other outstanding balances in respect of transactions with directors and connected persons at
31 December 2019 (2018: none). Key person remuneration can be seen in note 5 of the financial statements.
Oxford Biomedica plc | Annual report and accounts 2019
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Group financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2019
36. Events after the Statement of financial position date
COVID-19
In early 2020, the existence of a new coronavirus (COVID-19) was confirmed, which has since spread across a significant
number of countries, leading to disruption to businesses and economic activity that has been reflected in recent
fluctuations in global stock markets. The Group considers the emergence and spread of COVID-19 to be a non-
adjusting post Statement of financial position event and given the inherent uncertainties, it is not practicable at this time
to determine the exact impact of COVID-19 on the Group or to provide a quantitative estimate of the impact. The
broader political and economic uncertainty coupled with the potential future impact on the Group of the recent
COVID-19 outbreak has been factored into the scenarios considered as part of the Group’s adoption of the going
concern basis in the preparation of the Group’s financial statements (refer note 1 on page 114).
Contingent Liability
The Group routinely enters into a range of contractual arrangements in the ordinary course of business which may give
rise to claims or potential litigation against the Group.
Subsequent to year end the Group identified an issue regarding an aspect of certain process development work
performed on behalf of a customer in 2018 and 2019 which potentially could give rise to a material claim against the
Group. The Group has been in communication with the third party but is not yet in a position to verify or validate any
information relating to this matter due to the very recent timing of this issue being identified.
As at 31 December 2019, the Group regards this matter as an adjusting post Statement of financial position event (IAS10)
and has assessed the performance obligations for which the revenue has been recognised and reversed all potentially
affected revenues relating to the work packages with the liability recognised within Contract liabilities due within one year.
In addition, the Group expects that the potential liability arising with regards to the affected work packages will be
extinguished either through re-performance of the affected work packages, or ultimately form part of any potential
claim. If a claim were to materialise, the Group estimates the range of all potential costs could be between £250,000
and £1,000,000. However, as there is no such claim to date and given the early stage of the investigation into the cause,
no liability has been recognised at the Statement of financial position date, as in management’s opinion it is too early to
consider the above estimate sufficiently reliable to recognise a provision (if any) in respect of this matter. The assessment
required is inherently judgemental, and there is a risk that the final settlements are materially different to the range
provided above or do not include all claims and therefore the amounts may be understated.
A contingent asset could potentially exist within the financial statements for the insurance cover that the group maintains,
however the Group cannot determine the extent of any cover until further investigation is undertaken as necessary. On
this basis it is too early to assess the likelihood of an asset arising, therefore no contingent asset has been recognised.
No other amounts have been provided for in respect of this matter.
Oxford Biomedica plc | Annual report and accounts 2019
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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 Group’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-302 (CAR-T 5T4): 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.
Other matters
Glossary
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.
AXO-Lenti-PD (formerly OXB-102: Parkinson’s disease)
Axo-Lenti-PD (formerly 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.
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 Group’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.
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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.
EMA
European Medicines Agency
is an agency
of the European Union in charge of the evaluation
and supervision of medicinal products.
(EMA)
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.
into
Gene therapy
Gene therapy is the use of DNA to treat disease by delivering
a patient’s cells which
therapeutic DNA
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
in a controlled
of performing a given procedure
environment outside of a living organism.
In Vivo
Latin term used to describe biological events that take
place inside the bodies of living organisms.
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.
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Definitions of non-GAAP measures
Operating EBITDA
(Earnings before Interest, Tax, Depreciation, Amortisation,
revaluation of investments and share base payments)
is a non-GAAP measure and is often used as a surrogate
for operational Cash flow.
Operating EBIDA
Operating EBIDA is an internal measure used by the Group,
defined as Operating EBITDA with the R&D tax credit
included.
Gross income
Gross income is the aggregate of Revenue and Other
operating income.
Adjusted Operating expenses
Being Operating espenses before Depreciation, Amortisation
and Share based payments and the revaluation of investments.
Cash burn
Cash burn is net cash generated from operations plus net
interest paid plus capital expenditure.
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.
Lentiviral vectors
Gene delivery vector based on lentiviruses.
MHRA
Medicines and Healthcare products Regulatory Agency
(MHRA) is an executive agency of the Department of
Health and Social Care in the United Kingdom which
is responsible for ensuring that medicines and medical
devices work and are acceptably safe.
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.
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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Advisers and contact details
Advisers
Contact details
Oxford Biomedica plc
Headquarters:
Windrush Court
Transport Way
Oxford OX4 6LT
United Kingdom
Tel: +44 (0) 1865 783 000
Other locations:
Harrow House
County Trading Estate
Transport Way
Cowley
Oxford OX4 6LX
United Kingdom
Unit 5
Oxford Industrial Park
Yarnton
Oxford OX5 1QU
United Kingdom
Oxbox
Unit A, Plot 7000
Alec Issigonis Way
Oxford Business Park North
Oxford OX4 2JZ
United Kingdom
enquiries@oxb.com
www.oxb.com
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
KPMG LLP
2 Forbury Place
33 Forbury Road
Reading
RG1 3AD
United Kingdom
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
Natalie Walter
Windrush Court
Transport Way
Oxford OX4 6LT
United Kingdom
Oxford Biomedica plc | Annual report and accounts 2019
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Oxford Biomedica plc
Windrush Court, Transport Way
Oxford OX4 6LT, United Kingdom
Tel: +44 (0) 1865 783 000
enquiries@oxb.com
www.oxb.com