2015 Annual Report and Accounts & AGM Notification
Copies of these documents have been submitted to the
Further copies of the 2015 Annual Report and Accounts are available from the Group Secretary, Oxford BioMedica plc, Windrush Court, Transport Way,
The AGM will be held on Tuesday 7 June 2016. The meeting will be held at the offices of Covington & Burling LLP, 265 Strand,
In accordance with the requirements of Rule 6.3.5 of the Disclosure Rules and Transparency Rules of the
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For further information, please contact:
Oxford BioMedica plc:
John Dawson, Chief Executive Officer
Tim Watts, Chief Financial Officer
Tel: +44 (0)1865 783 000
Consilium Strategic Communications
Mary-Jane Elliott/Matthew Neal/Chris Welsh/Laura Thornton
Tel: +44 (0)20 3709 5700
Notes for editors
About Oxford BioMedica®
Oxford BioMedica (LSE:OXB) is a leading gene and cell therapy company focused on developing life changing treatments for serious diseases. Oxford BioMedica has built a sector leading lentiviral vector delivery platform (LentiVector®) through which the Group develops in vivo and ex vivo products both in-house and with partners. The Group has created a valuable proprietary portfolio of gene and cell therapy product candidates in the areas of oncology, ophthalmology and CNS disorders. The Group has also entered into a number of partnerships, including with Novartis, Sanofi, GSK, and Immune Design, through which it has long-term economic interests in other potential gene and cell therapy products. Oxford BioMedica is based across several locations in
Unedited extracts from 2015 Annual Report and Accounts
Principal risks, uncertainties and risk management
Oxford BioMedica operates in the gene and cell therapy biotechnology sector which, by its nature, is relatively high risk compared with other industry sectors. Very few gene and cell therapy products have yet been approved for commercial use so there are significant financial and development risks in the sector, and the regulatory authorities have shown caution in their regulation of such products. Risk assessment and evaluation is therefore an integral and well-established part of Oxford BioMedica's management processes. Many of the Group's risks and uncertainties are common to all development-stage biopharmaceutical companies.
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. At least once annually, the Board specifically reviews risks within the Group and the risk management processes. The Audit Committee monitors the integrity of the financial statements of Oxford BioMedica and any formal announcements relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them. The Audit Committee also reviews the Group's internal financial controls and the internal control systems.
- Senior Executive Team - the SET generally meets twice monthly to discuss current business issues and considers relevant risks on each occasion. At least twice a year, the SET meets with representatives from the Risk Management Group to consider the operational risk management processes and risks identified.
- Key management committees - the Group has three key management sub-committees which meet monthly and through which much of the day-to-day business is managed. These are the 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 Group - with the increasing scale of the business during 2015, Oxford BioMedica established a Risk Management Group comprising senior managers from each area of the business and chaired by the Director of Corporate Activities & Strategy. This group meets quarterly with a remit to identify and assess risks in the business and to consider mitigation and risk management steps that can be taken. The Risk Register is reviewed by SET twice a year and formally reported to the Audit Committee, following which it is considered by the Board.
- 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.
The Group is exposed to a range of risks. Some of them are specific to Oxford BioMedica's current operations, others are more general business risks.
Key risks specific to Oxford BioMedica's current operations
Pharmaceutical product development risks
To develop a pharmaceutical product it is necessary to conduct pre-clinical studies and human clinical trials for product candidates to demonstrate safety and efficacy. The number of pre-clinical studies and clinical trials that will be required varies depending on the product candidate, the indication being evaluated, the trial results and the regulations applicable to the particular product candidate. In addition, the Group or its partners will need to obtain regulatory approvals to conduct clinical trials and bioprocess drugs before they can be marketed. This development process takes many years. The Group may fail to develop successfully a product candidate for many reasons, including:
- Failure to demonstrate long-term safety;
- Failure to demonstrate efficacy;
- Failure to develop technical solutions to achieve necessary dosing levels or acceptable delivery mechanisms;
- Failure to establish robust bioprocessing processes;
- Failure to obtain regulatory approvals to conduct clinical studies or, ultimately, to market the product; and
- Failure to recruit sufficient patients into clinical studies.
The failure of the Group to develop successfully a product candidate could adversely affect the future profitability of the Group. There is a risk that the failure of any one product candidate could have a significant and sustained adverse impact on the Group's share price. There is also the risk that the failure of one product candidate in clinical development could have an adverse effect on the development of other product candidates, or on the Group's ability to enter into collaborations in respect of product candidates.
(i) Safety risks
Safety issues may arise at any stage of the drug development process. An independent drug safety monitoring board (DSMB), the relevant regulatory authorities or the Group itself may suspend or terminate clinical trials at any time. There can be no assurances that any of the Group's product candidates will ultimately prove to be safe for human use. Adverse or inconclusive results from pre-clinical testing or clinical trials may substantially delay, or halt, the development of product candidates, consequently affecting the Group's timeline for profitability. The continuation of a particular study after review by the DSMB or review body does not necessarily indicate that all clinical trials will ultimately be successfully completed.
(ii) Efficacy risks
Human clinical studies are required to demonstrate efficacy in humans when compared against placebo and/ or existing alternative therapies. The results of pre-clinical studies and initial clinical trials of the Group's product candidates do not necessarily predict the results of later stage clinical trials. Unapproved product candidates in later stages of clinical trials may fail to show the desired efficacy despite having progressed through initial clinical trials. There can be no assurance that the efficacy data collected from the pre-clinical studies and clinical trials of the Group's product candidates will be sufficient to satisfy the relevant regulatory authorities that the product should be given a marketing authorisation.
(iii) Technical risks
During the course of a product's development, further technical development may be required to improve the product candidates' characteristics such as the delivery mechanism or the bioprocessing process. There is no certainty that such technical improvements or solutions can be identified.
(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 (
If regulatory approval is obtained, the product candidate and bioprocessor will be subject to continual review and there can be no assurance that such an approval will not be withdrawn or restricted. The Group's laboratories, bioprocessing facility and conduct of clinical studies are also subject to regular audits by the MHRA to ensure that they comply with GMP, GCP and GLP standards. Failure to meet such standards could result in the laboratories or the bioprocessing site being closed or the clinical studies suspended until corrective actions have been implemented and accepted by the regulator.
(vi) Failure to recruit sufficient patients into clinical studies
Clinical trials are established under specific protocols which specify how the trials should be conducted. Protocols specify the number of patients to be recruited into the study and the characteristics of patients who can and cannot be accepted into the study. The risk exists that it proves difficult in practice to recruit the number of patients with the specified characteristics, potentially causing delays or even abandonment of the clinical study.
This could be caused by a variety of reasons such as the specified characteristics being too tightly defined resulting in a very small population of suitable patients, or the emergence of a competing drug, either one that is approved or another drug in the clinical stage of development.
Bioprocessing revenue risk
The Group has started to earn significant revenues from bioprocessing lentiviral vectors for third parties. 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.
External supply chain
The Group relies on third party contractors for the supply of many key materials and services. These processes inherently carry risks of failure and loss of product and are risks with a lower degree of control. Problems at contractors facilities, such as technical issues, may lead to disruption or loss of supply or available capacity.
Some materials and services used by the Group maybe available only from one source.
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.
The Group has incurred significant losses since incorporation and continues to incur significant costs as it builds an integrated platform gene delivery company and develops its portfolio of development products.
The Directors have considered the cash position in the context of going concern and their conclusions are set out in the Financial review (page 31), the Directors' report (page 69) and in Note 1 to the consolidated financial statements (page 81).
The Group has a
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.
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 supplying services to 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 two gene therapy products have been approved in
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 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.
(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. The Group also incurs a proportion of its expenditure in US dollars and the Euro. The Group's cash balances are predominantly held in pounds sterling, although the Group's Treasury Policy permits cash balances to be held in other currencies in order to hedge foreseen foreign currency expenses. The Group also has a US dollar loan facility provided by Oberland Capital Management LLC. To the extent that the Group's foreign currency assets and liabilities in the longer term are not so well 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.
(b) Interest rate exposure
The Group is exposed to interest rate movements, primarily arising on the Oberland loan facility. the interest rate is 9.5% plus the greater of 1% and 3 month LIBOR. If 3 month LIBOR rises above 1% the Group's interest payments may increase.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the Directors have prepared the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgements and accounting estimates that are reasonable and prudent;
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 40 to 41 in the Annual Report confirm that, to the best of their knowledge:
- The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and
- The Directors' report contained on page 69 of the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
In accordance with Section 418, Directors' reports shall include a statement, in the case of each Director in office at the date the Directors' report is approved, that:
(a) So far as the Director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and
(b) He 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.
Related party transactions
Company: transactions with related parties
On 23 February 2016, the Group announced that it had placed 128,383,528 new ordinary shares in the Company at a price of
As part of this placing, Vulpes Life Sciences Fund (VLSF) subscribed for 23,809,523 shares. VLSF is managed by Vulpes Investment Management of which Martin Diggle, a non-Executive Director, is a founder. As such, VLSF's participation in the placing constituted a "smaller related party transaction".
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