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| News / 27 February 2002 |
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Chairman and Chief Executive's ReportIn gaining admission to the Official List of the United Kingdom Listing Authority and to trading by the London Stock Exchange in April 2001, Oxford BioMedica achieved a major goal. The Company also raised £35.5 million before expenses in a placing and open offer that was supported by major institutions in London and Europe - a substantial accomplishment in difficult financial markets. This success was a direct result of the Group's technical, clinical and commercial progress since its foundation in 1996. The fundraising and move to the Official List resulted in many existing shareholders reinvesting, and it also brought more than 15 new institutions onto the shareholder register. As a result, the breadth of BioMedica's institutional investor base has expanded. The money raised has enabled the Group to expand its clinical programmes, to continue its aggressive research and development programme, to increase its facilities in Oxford and to establish a wholly owned subsidiary, BioMedica Inc. in San Diego, California. BioMedica Inc. will develop new production technologies for the Group's products, run much of the neurobiology research and development, and act as a focal point for interactions with the FDA as BioMedica moves towards conducting clinical trials in the USA. The subsidiary will also function as an important centre for business development in the USA and, in that role, new opportunities are already being created. Clinical Development Beyond the move to the Official List, some of BioMedica's most important recent events have been in the clinical development programmes. In July 2001, the Gene Therapy Advisory Committee gave BioMedica approval for a `new' version of MetXia® to be used in the Phase I/II MetXia® clinical trial. The rapidity of approval was testament to the quality of the safety and gene transfer data obtained in the first part of the MetXia® BC1 trial. At the Beeson Gregory Cancer conference in February 2002, BioMedica presented encouraging results from the first part of the BC1 trial. In Phase I/II cancer trials it is common for patients to drop out of the trial because of the severity of their disease. However, of the four patients who did complete the trial, two showed clear reduction in the size of their treated tumours. In addition, one of the patients showed a clear improvement in a cancerous skin lesion that had not been treated directly. This suggests the involvement of a systemic anti-tumour immune response that might be exploited to clear secondary tumours and thereby broaden the market for MetXia®. BioMedica also presented interim results from the TroVax® trial, where there was also evidence of clinical improvement. Tumour destruction was correlated with an immune response induced by TroVax® in two out of three immunocompetent patients. These interim data are exciting and provide a useful basis for future trials. However, because of the small size of the trial group and the varying stages of disease amongst the patients, further analysis will be required before firm conclusions can be made about the efficacy of MetXia® and TroVax®. Together with the safety, gene transfer and immunological data, these initial results support the continuing investment in MetXia® and TroVax®. This includes the alternative formulations of MetXia® and TroVax®, MetXia®-MG and MetXia®-VM and TroVax®-DC. The development pipeline is strong with several new clinical programmes due to start this year (see Figure 1). Product Portfolio (Figure 1)
Preclinical Research Progress has been made on all fronts, but the preclinical highlight of the year has been in neurobiology. At the time of the April 2001 fundraising, BioMedica stated that some of the money raised would be used to accelerate development of the Group's neurobiology products. In the Parkinson's disease programme, ProSavin® was shown to correct the symptoms in a preclinical model of the disease, putting the candidate product on course for clinical development in 2002. In addition, BetOvac® has shown good efficacy in preclinical models of ovarian cancer, and the hypoxia response element that brings genes under the control of oxygen concentration was used in the successful development of a candidate for treating anaemia. Research The Group's research ranges from small exploratory activities to major projects aimed at establishing novel product development programmes. In the nerve regeneration programme with King's College, London, the first major milestone in the collaboration was achieved. Progress to date with this collaboration has been rapid, and this bodes well for the future of this innovative approach to nerve repair for spinal injury and diabetic neuropathy. The programme has now entered the preclinical phase. Other important developments were the demonstration that the hypoxia response element can be used to control the treatment of retinopathies, the most common cause of blindness, and the configuration of a lentiviral vector-based candidate product for prostate cancer, ProCaStat®. Subject to obtaining preclinical efficacy data and the development of a clinically useful vector production process, ProCaStat® is a candidate for the first LentiVector® product that the Group will take to the clinic. Gene Discovery Division BioMedica's genomics activity is now fully staffed and housed in new facilities on the Oxford Science Park alongside the laboratories that are used for therapeutic product development. The initial programme has already generated potential targets for stroke, angiogenesis and inflammation. New programmes in neurobiology are gaining pace with further work being done in stroke and nerve regeneration. Coincident with BioMedica's move into focused genomics has been a general change in the market, with a greater emphasis on downstream products. The directors believe that BioMedica is well placed to respond to this change, and the Group has already taken steps to move its focus from target identification to product lead generation, both for new biological and new chemical entities. BioMedica is in discussion with small molecule development companies to generate candidate drugs for novel targets in order to leverage the value of its discovery programme. External Programmes The major commercial event of the year was the deal with Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products Corporation (`Wyeth') for the development and commercialisation of a novel anti-cancer therapy based on an Oxford BioMedica proprietary antibody. This collaboration is progressing well, with the second payment having been received in February 2002 from Wyeth for the continuation of the programme. This programme has also laid the foundations for building a future capability in antibody technology. In the collaboration with IDM S.A., the goal of defining new clinical programmes during 2001 was achieved, and this should result in new clinical trials starting in 2003. The Aventis cardiovascular programme has been delayed by the transfer of the Aventis gene therapy activities to Gencell. However, the interaction remains in place. All of the Group's other collaborations are progressing, with the exception of the diabetes project with Modex, which was terminated by mutual agreement in October 2001, due to Modex changing its business plan. BioMedica's LentiVector® technology worked well and was able to deliver genes to the insulin-producing _-islet cells at high efficiencies. As a result, the Group anticipates that the Modex programme will be replaced by another diabetes collaboration in due course. Intellectual Property More than a quarter of BioMedica's patent portfolio has now been examined in the major territories of Europe, USA and Japan. So far, every application that has proceeded to examination has led to an issued patent. 2001 was a particularly good year with 33 patents being granted including broad patents for LentiVector® and other aspects of gene delivery and regulation. In addition, 20 new applications were filed during 2001, protecting the growing output from the Gene Discovery Division and enhancing the protection of the product development programmes in immunotherapy and neurobiology. The Group will continue to pursue an aggressive patent strategy to build a portfolio that constitutes the foundations of shareholder value. Commercial Strategy The overall strategy continues to be the management of risk, inherent in pharmaceutical product development, by creating as many commercial opportunities as possible. Any one of the product opportunities that the Group has created so far could make BioMedica profitable if it reached the market. However, this must be achieved within a controlled budget. This approach has been successful so far, with the Group funding internal product development in cancer and neurobiology, and partners funding and carrying out the majority of the other collaborative programmes. This dual approach will continue, but as the Group's clinical trials progress, there will be a greater emphasis on establishing partnerships for internal product programmes. This will begin in 2002. However, there is always a balance to be struck between an early deal and investing further in the product to increase its value. The intriguing but anecdotal clinical benefits to patients in the MetXia® and TroVax® trials make this judgement of fundamental importance for mid-term shareholder value. The events of September 11th and the economic downturn of last year led many companies to retrench. This slowed progress on several potential new collaborations. Nevertheless, there remains considerable interest in the Group's technology and candidate products from both biotech and pharmaceutical companies. Financial The placing and open offer has significantly strengthened the balance sheet, and has allowed the planned increase in operations, including the programmes described above. The average headcount increased in 2001 by 49% from 49 to 73, and the Oxford offices and laboratories were expanded from 11,000 sq.ft. to 28,000 sq.ft. BioMedica Inc. was incorporated in February 2001 and began operations in the second half of 2001. The 2001 financial result was in line with the budget that was set at the time of the placing and open offer. Operating expenses in 2001 were £11.4 million, an increase of 69% over 2000 as a result of increased levels of activity. This was offset by higher interest receivable on bank deposits and a three-fold increase in the UK Corporation Tax research and development credit. The loss after tax for 2001 was £8.4 million (2000 loss: £5.0 million). Capital expenditure in 2001 was £3.2 million, of which £2.4 million was for the fitting out and equipping of new laboratories and offices in Oxford, and £0.5 million was for equipment at BioMedica Inc. The bank balance at 31 December 2001 of £32.6 million (2000: £11.6 million) was in line with the budget. The net cash outflow was £11.9 million (2000: £5.6 million). Changes to the Board During the year BioMedica made two key appointments. In February 2001 the Group welcomed Mr Raj Uppal to the board as a non-executive director. Raj is a Chartered Accountant and has extensive financial and commercial experience in the sector. He is currently a Senior Vice President of the drug delivery business unit of Elan Corporation. In May 2001 Dr Doug Jolly was appointed CEO of the Group's US subsidiary BioMedica Inc., and to the Group board. Dr Jolly is a leading figure in gene technology in the USA. He is a named inventor on many patents, and was founder and Vice-President of Research of Viagene Inc. Most recently he held the position of Vice President for Scientific Affairs at Chiron Corporation's Center for Gene Therapy. In Summary 2001 has been a landmark year for BioMedica with its move to the Official List, the establishment of a US operation and the greater emphasis on clinical results emerging from its internal programmes. As a result of the funds raised in 2001, the Group has been able to make substantial increases in the level of investment in research and development and in facilities and equipment, in order to expand its development and clinical pipelines and so to build up the base from which future shareholder value will be derived. Looking forward, the focus for 2002 is to extend the clinical and preclinical pipeline further. In particular, we expect to complete the Phase I/II trials for MetXia® and initiate Phase II clinical trial programmes with TroVax®. We thank our shareholders and our dedicated, hard-working staff for their significant support during 2001 and we look forward to further success during 2002.
Dr Peter Johnson Chairman Prof. Alan Kingsman Chief Executive Officer Return to the News
Consolidated profit and loss accountfor the year ended 31 December 2001
The results for the years above are derived entirely from continuing operations. There is no difference between the loss on ordinary activities before taxation and the loss for the years stated above, and their historical cost equivalents. Statement of group total recognised gains and losses
Consolidated balance sheetat 31 December 2001
Consolidated cash flow statement for the year ended 31 December 2001
Reconciliation of operating loss to net cash outflow from operating activities
Notes to accounts1 Basis of preparation The preliminary results for the year ended 31 December 2001 do not constitute the Company's statutory financial statements within the meaning of s227 of the Companies Act 1985, but are derived from the audited statutory financial statements. The financial information for the year ended 31 December 2000 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's reports on these accounts were unqualified. The new accounting standard FRS 18 (Accounting policies) has been adopted in the current year. This has not resulted in any changes in accounting policies. Copies of this announcement are available from the Company Secretary. The audited statutory financial statements for the year ended 31 December 2001 are expected to be distributed to shareholders by 15 March 2002 and will be available at the registered office of the Company, Medawar Centre, Oxford Science Park, Oxford, OX4 4GA. This announcement was approved by the Board of Oxford BioMedica plc on 26 February 2002. 2 Turnover and loss on ordinary activities before taxation The Group's turnover and loss on ordinary activities before taxation are derived entirely from its principal activity. With the commencement of operations of BioMedica Inc., the Group now has operations in the United Kingdom and in the United States of America.
3 Tax credit on loss on ordinary activities The Group is entitled to claim tax credits for certain research and development expenditure. The amount included in the financial statements for the year ended 31 December 2001 represents the credit receivable by the Group for that year, less income tax payable by the Group's subsidiary in the United States of America. These amounts have not yet been agreed with the relevant tax authorities.
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