TIDMATD
RNS Number : 6114F
Asterand PLC
28 April 2011
For Immediate Release 28 April 2011
Asterand plc
FINAL RESULTS STATEMENT
for the year ended 31 December 2010
Evolution of Discovery
Asterand plc (LSE: ATD), a leading global supplier of human
tissue and human tissue-based research services to pharmaceutical
and biotechnology companies engaged in drug discovery research,
announces its audited preliminary financial results for the year
ended 31 December 2010.
Highlights
-- Revenue $21.3 million, an increase of 14% over 2009.
Operating loss $2.1 million (2009: $1.6 million), nearly break-even
adjusted EBITDA (2009: $0.4 million profit).
Adjusted EBITDA is defined as interest, taxes, depreciation and
amortisation ("EBITDA") - and excluding exceptional items and share
option related charge. See below for a reconciliation of operating
loss to adjusted EBITDA.
-- Successfully integrated our first acquisition as a public
Company - BioSeek: 2010 Revenues of $6.4 million represented a 68%
increase over 2009.
A California-based company with propriety human primary cell
based predictive technology. Complementary to Asterand's existing
human tissue based business.
Total consideration of $9.5 million represents a multiple of
less than 1.5 times 2010 sales - we believe that this is a
favourable arrangement, given BioSeek's true value.
-- Awarded prestigious contract under The Cancer Genome Atlas
Project (TCGA) - (US National Cancer Institute (NCI) / the National
Human Genome Research Institute (NHGRI)). Up to $24 million over
five years, including an initial base period of $5.4 million over
17 months. A validation of Asterand's approach.
-- Won key contracts with pharmaceutical and diagnostic
companies, and government agencies, including with Ono
Pharmaceuticals, Eisai Co. Ltd., Cellzome, Amylin Pharmaceuticals,
the EPA (Environmental Protection Agency).
-- Invested in science and innovation to lay the foundation for
future growth and profitability. Established GLP at Royston (UK
facility). Held successful inaugural annual human tissue conference
in Washington DC in April 2010. Appointed Dr Dalia Cohen as CSO in
September.
-- Gross margin 56% (2009: 58%), operating expenses increased to
$14.1 million (2009: $12.4 million) and cash resources of $5.9
million (2009: $6.6 million).
Post Year End Events
-- $8.5 million of contingent consideration due for BioSeek to
be paid entirely in cash - $2.5 million in May 2011 and the
remaining $6 million financed through the issue of loan notes to
the BioSeek vendors which mature over the period to December
2013.
-- Statement on Japan earthquake and tsunami
We have many close business and personal relationships in Japan
and we feel deep sadness over the tragic impact on the Japanese
people caused by the recent earthquake and tsunami. In terms of the
Asterand business, 12% of 2010 revenues were from Japan. However,
most of our business conducted in Japan is from long term BioMAP
collaborations with companies that were not significantly impacted
by the tragedy due to their geographical locations. Some minor
delays in the progression of these contracts may result in 2011.
However, currently, all indications suggest that they will not be
significant.
Martyn Coombs, CEO, Asterand, commented:
"2010 has been a year of renewed momentum for Asterand. Our
revenues grew by 14% fuelled by the successful integration of our
new acquisition BioSeek. Revenues of BioSeek were $6.4 million, 68%
growth over 2009. We invested as much as we could into our future,
for example by hosting our first ever human tissue conference and
in recruiting a top-flight CSO, whilst still achieving effectively
break even EBITDA. Furthermore, our 2010 revenue did not materially
include any contribution from the five year up to $24 million
contract win with the NCI. So, not only are we optimistic at the
potential for 2011, but it was also an honour to be awarded the
contract, and a clear endorsement of Asterand's approach to quality
and science. Whilst I am delighted with Asterand's achievements in
2010, I'm even more excited about our future given the scalability
of our business as we aim to lead the development of the
human-based solutions market.
I would like to take this opportunity to thank our dedicated and
talented staff together with our loyal shareholders."
The full 2010 Annual Report and Accounts can be found on our
website at
http://www.asterand.com/Asterand/investors/financialreports/2010/financi
alreports2010.htm
Webcast of 2010 Final Results:
An analyst briefing is scheduled for 4 May 2011 at 10:00am BST.
Simultaneously to the analyst briefing, there will be a live audio
web cast of the presentation.
To connect to the web cast facility, please go to:
http://mediaserve.buchanan.uk.com/2011/asterand040511/registration.asp
Please connect approximately 10 minutes (9:50 am BST) before the
start of the briefing. The presentation will also be available on
www.buchanan.uk.com for replay shortly after the conclusion of the
presentation.
Notes to Editors
Asterand is a leading global supplier of high quality human
tissue and tissue-based services. Our comprehensive approach to
human tissue and research services offers pharmaceutical, biotech
and diagnostic companies the unique opportunity to have one company
meet all of their human biomaterial needs along the continuum of
drug discovery and development. Our mission is to accelerate target
discovery and compound validation and enable pharmaceutical and
biotechnology companies to take safer and more effective drugs into
the clinic.
For further information contact:
Contacts:
Asterand plc
Martyn Coombs, Chief Executive Officer Tel: + 44 (0) 1763 211
600 / + 1 (313) 263-0960
John Stchur, Chief Financial Officer As above
Buchanan Communications
Lisa Baderoon / Mark Court / Isabel Podda Tel: +44 (0) 20 7466
5000
Daniel Stewart & Company plc
Antony Legge Tel: +44 (0) 20 7776 6566
Martin Lampshire Tel: +44 (0) 20 7776 6550
Chairman's Statement
Dear Shareholders,
As you may know, it has been my long held belief that human
tissue-based solutions will play an ever increasing role in the
discovery, development, and clinical evaluation of more effective
treatments and diagnostics, for human disease. I believe this now
more than ever, as the potential for drug discovery locked away in
world biobanks is beginning to be recognized more prominently.
Asterand continues to be the leading company in this growing niche,
with ever growing channels of distribution and world renowned
standards in quality, diversity of materials and ethical protocols.
This has been validated with the new contracts and customers that
we have secured in 2010. We are well positioned to benefit from
this growing trend while doing the important work of helping our
customers quicken the pace of bringing new treatments and
diagnostics to market.
Adding shareholder value through the integration of BioSeek
On 18 February 2010, Asterand finalised its acquisition of
BioSeek. Both organizations immediately set to work, to capitalize
on Asterand's worldwide commercial connections in order to expand
the use of the BioSeek platform. BioSeek's 2010 performance was
outstanding! Revenue grew 68% from 2009, greatly exceeding any
previous year's sales.
Our shareholders will recall that the terms of the BioSeek
acquisition included a contingent payment based upon BioSeek's 2010
revenue. Following the audit of BioSeek's 2010 revenues, this
contingent payment was calculated as US $8.5 million. As previously
announced, the first US $3 million of this payment was to be
satisfied through the issue of 8.1 million Asterand shares, and the
remaining $5.5 million consideration was to have been paid in cash.
To this end we announced in December 2010 that we had secured a
term loan and a revolving credit line from Silicon Valley Bank
("SVB") to fund this payment. However, volatility in trading during
March 2011 impaired our ability to draw on the revolving line of
credit. The $3 million term loan remains drawn and intact. As a
consequence, we subsequently agreed with the BioSeek vendors that
the entire $8.5 million of contingent consideration will be
satisfied with cash - $2.5 million will be paid in May 2011 and the
remaining $6 million is to be satisfied in loan notes that mature
over the period to December 2013, in a payment schedule that fits
well with our business.
I'd like to congratulate the Asterand and BioSeek management
teams and employees for the success of the integration. Mergers are
never easy, but both organizations worked tirelessly to make this
one exceed our pre-acquisition goals.
Board Changes and Corporate Governance
On 8 June 2010, Ian Ratcliffe's Board of Director term expired
and he did not present himself for re-election. Ian has proven to
be an asset to our company and has contributed significantly to our
success during his tenure. I would like to thank him warmly for his
insight and guidance over the past few years and wish him well in
his future endeavours. I would also like to take this opportunity
to thank all of the Board of Directors for their contributions
throughout 2010. It has been my pleasure to work with a Board of
such high calibre. Their deep industry experience, entrepreneurial
spirit and willingness to take on any assignment has set the
foundation for excellence at the Company.
The Board and Management continues to have a policy of
transparency in regards to our strategy and related activities. An
important component of this involves communicating and listening to
our shareholders to understand their ideas and points of view.
Aligning objectives between employees and shareholders
During 2010, we granted a total of 2.5 million share options to
our employees through our Long Term Incentive programme. We have a
deep commitment to this program which enables us to retain key
employees, while aligning the goals of our shareholders with those
of our employees and we were especially pleased to grant our first
shares to BioSeek employees. Every Asterand employee receives
shares under this programme, allowing them to own a part of the
Company and benefit from the growth and success they are helping to
build.
Positive Outlook
The year 2010 was a year of accomplishment on several fronts for
Asterand: The successful integration of the BioSeek acquisition,
the acceptance of our Royston facility for GLP accreditation, and
the award of a substantial government contract with the NCI/NHGRI
have positioned us well to achieve our strategic goals. These
advancements were made possible through the extra efforts of
Asterand's employees and management team. I'd like to take this
opportunity to thank all of Asterand's employees for their
dedication, commitment and hard work.
As witnessed in March 2011, we sometimes experience month to
month volatility in sales. As the business matures and grows, we
have made progress towards stabilizing monthly revenues with long
term contracts. I am pleased to say that there is more visibility
into 2011 sales than ever before with several multi-year
collaborative agreements for the BioSeek platform and our contract
with the NCI/NGHRI. Thus we believe that Asterand is well
positioned for 2011 and that the achievements of 2010 will provide
a solid foundation for Asterand's continued leadership within the
global marketplace for years to come.
Jack Davis Chairman, Asterand plc
Chief Executive's Business Overview
Dear Shareholders,
I'd like to take a brief moment to express my sympathy to the
Japanese people. I have a great many close business and personal
relationships in Japan and was deeply saddened by the tragic impact
of the recent earthquake and tsunami.
2010
2010 was a good year for Asterand - a year of inflection.
Our revenues exceeded $21.3 million (an increase of 14% over
2009), and we were nearly break even on an adjusted EBITDA
basis.
Furthermore, we met four key milestones:
1. Acquisition of BioSeek
As our first acquisition as a public company, and after
assessing many potential targets, we focused on BioSeek, a
California-based company with propriety human primary cell based
predictive technology. BioSeek met all of our acquisition criteria;
in particular its technology is complementary to Asterand's human
tissue based business. We negotiated a de-risked deal, and I would
like to thank our shareholders for approving this deal on February
18(th) , 2010.
Of course, after approval, that is when the hard work starts,
and those people who have had involvement in M&A will know that
the integration of two companies, cultures and histories can be
fraught with difficulties. Looking back now, I feel that we managed
the integration very well, and I feel very proud of the management
team, both those originally from Asterand and from BioSeek. This
bodes well for future acquisitions. 2010 Revenues of $6.4 million
represented a 68% increase over 2009.
http://www.rns-pdf.londonstockexchange.com/rns/6114F_-2011-4-28.pdf
More importantly even than the revenue metric:
-- We retained all of the senior key management team in
BioSeek
-- We established a blended selling model (where our territory
based sales representatives lead the promotion of a lite version,
and a central specialist team lead on larger deals). The sales
cycle of BioSeek is longer than for Asterand's traditional
business. Towards the end of 2010, we started getting some real
traction in this blended distribution model, which bodes well for
2011 and beyond.
2. Award under The Cancer Genome Atlas Project (TCGA)
In September we were awarded a contract under The Cancer Genome
Atlas Project (TCGA) - (US National Cancer Institute (NCI) / the
National Human Genome Research Institute (NHGRI)), for $24 million
over five years, including an initial base period of $5.4 million
over the first 17 months.
Under the contract Asterand will supply clinically annotated
human biospecimens to further the NCIs critical research into new
treatments and diagnostics for cancer.
Many shareholders will already be very familiar with the NCI,
but for the benefit of those perhaps non-US shareholders I will
point out that the NCI is an extremely prestigious well respected
organisation, that invests more in research into cancer than any
pharmaceutical company and is regarded as an opinion former and an
establisher of standards. We in Asterand therefore feel honoured to
be given the opportunity of working with the NCI, and feel that our
quest for the highest quality specimens and the most complete and
assured information has been validated. As an example, on award of
this contract, the US Government approved Asterand's model for the
ethical collection of tissues for research.
3. Establishment of new contracts
In 2010, we won key contracts with pharmaceutical and diagnostic
companies, and government agencies, including with Ono
Pharmaceuticals, Eisai Co. Ltd, Cellzome, Amylin Pharmaceuticals,
and the EPA (US Environmental Protection Agency).
We have an example of a new breed of deal for Asterand - beyond
mere fee and service, and encompassing the possibility of milestone
payments, if compounds progress through our platform. So, we have
now demonstrated that our platform is unique and significant enough
to be worthy of such deals.
In June the US EPA increased its Phase II funding commitment to
BioSeek under the ToxCast(TM) screening program to $3.2 million.
Approximately 750 chemicals and nanomaterials are being screened to
predict harmful effects using the BioMAP platform. BioSeek began
screening in 2010 and this project will continue throughout
2011.
4. Increased focus on science and innovation
We were awarded GLP accreditation at our Royston facility in
February. In April, we hosted a successful inaugural human tissue
conference in Washington DC. The conference provided an opportunity
for opinion leaders in the government, academia and commercial
companies to gather and discuss key issues at a critical time in
the development of this new field.
In addition, we appointed Dr Dalia Cohen as CSO in September.
Dalia, is a recognised leader in the drug and diagnostic
development field; she will help move our company to the next
level.
The macro environment in the immediate term
The environment over the last eighteen months has not been easy,
and the medium to long term trends have been impacted by short term
pressures. Our traditional customers, big Pharma, have found
themselves buffeted by patent expirations, increasing costs and
decreasing productivity of R&D, the economy, healthcare reform,
and have responded by offshoring, merging, reducing therapeutic
sites and closing key sites.
Whilst in the medium term, this will probably be advantageous
for Asterand (e.g. more outsourcing), over the last eighteen months
it has led to a brake on demand.
It is pleasing therefore that our results described above have
been achieved despite these macro issues.
BioSeek payment
In April 2011, our contingent payment for BioSeek to the
previous owners became due. As previously announced in December
2011, our intention was to satisfy the consideration with cash to
avoid unnecessary dilution for our existing shareholders. We have
now achieved this, albeit that the Company now has debt of
approximately $9m, with what we believe is an acceptable and an
achievable payment schedule.
What next for Asterand?
Towards the end of 2009, seeing the short term issues in Pharma,
management in Asterand decided to seek business with government and
diagnostic companies (i.e. as well as Pharma companies). In 2011,
we anticipate that our two top customers will be the NCI and the
EPA. Furthermore, in our tissue business, three of the top five
commercial customers currently are diagnostic companies.
In terms of the medium to long term, let me quote from an
independent report on Biobanking in the Medical R&D Market from
VisionGain (2009):
"The biobanking market is expected to see significant growth
from 2010 to 2025, due primarily to the realisation of advantages
of biospecimens compared with animal models in pre-clinical pharma
research."
"...we conclude that the biobanking market will thrive during
the forecast period, from 2010 to 2025, biobanks will become one of
the most important resources for advancing medical research and
development of drugs and diagnostic tests."
So, we are very optimistic for 2011 and beyond. In 2011 we will
have revenue from the TCGA (negligible in 2010) and anticipate
further growth for BioSeek (we already have $5.5 million booked
business). Indeed, our line of sight of business is higher than
ever previously.
We are fortunate to operate in a niche (human based solutions
for companies engaged in research) that has potential for
substantive growth, has barriers to entry, and is very fragmented,
with the majority of competition stemming from academia and cancer
centres. We seek to be the leader and the consolidator in this
niche, and to offer a credible one stop shop to our customers.
We intend to hold our second human tissue conference, on the 1st
and 2nd June 2011 in Chicago, and have already lined up an
impressive cast of speakers.
While I'm proud of what Asterand has accomplished in 2010, I'm
even more excited about what our future holds.
Martyn Coombs CEO, Asterand plc
Financial Review
Results for the year ended 31 December 2010
As previously communicated, we changed our presentation currency
to US dollars beginning in 2010. The majority of our sales and
costs are denominated in USD, and the USD has an increasing
influence on the Company's operations. Ongoing presentation in USD
should allow clear and transparent year to year comparability with
fewer effects from foreign currency translation.
The Group's 2010 revenue was $21.3 million (2009: $18.7
million), an increase of 14%. To understand fully the performance
in the business, one-off effects need to be analysed. Revenue from
2009 included $3.7 million from Asterand's contract with Baylor
College of Medicine. This contract was completed in that year. When
proceeds from this non-recurring source are excluded, revenue for
the period (including BioSeek from 18 February 2010) grew 42%.
Excluding revenues from BioSeek and the Baylor contract, human
tissue based solutions revenues were relatively flat over 2009.
http://www.rns-pdf.londonstockexchange.com/rns/6114F_1-2011-4-28.pdf
The Group's cost of sales was $9.3 million (2009: $7.9 million),
leading to a gross profit for the year of $12 million (2009: $10.8
million profit). As a result, gross margins were 56% (2009: 58%).
Margins were flat in a period of relatively flat sales.
On 31 December 2010, the carrying value of the biobank inventory
was $9.1 million (31 December 2010: $8.8 million). During 2010, the
Group continued to invest in expanding its donor network to meet
changing customer needs. However, the inventory expansion was more
modest than ever before as we implemented changes that enabled us
to more efficiently match supply with demand.
Research & Development (R&D) expenses were $1.3 million
(2009: $0.5 million). 2010 R&D expenses relate to an expansion
in our scientific management through the hiring of a CSO as well as
improvements to new product offerings to support the Group's focus
on the business of human tissue supply and human tissue-based
solutions.
Selling and distribution costs were $3.8 million (2009: $3.7
million). These costs relate to sales staff salaries, commissions
and marketing expenses. The modest increase is attributable to
additional marketing and sales staff salaries expense associated
with supporting the expanded product offering associated with the
purchase of BioSeek.
Total general and administrative expenses were $8.9 million, an
increase of 8% from $8.2 million in 2009. General and
administrative expenses are analysed between those relating to
exceptional costs and those to normal operations. Exceptional
general and administrative costs were $0.9 million (2009: $1.5
million). $0.4 million of the exceptional expenses relate to the
final purchase price for BioSeek being higher than initial
estimates, which is recorded as a loss for the year under IFRS 3
(revised). As the final purchase price for BioSeek is based on a
multiple of revenue in 2010, this means that BioSeek revenues were
higher than anticipated, not necessarily a bad problem to have. The
remaining $0.5 million of exceptional expenses related to severance
expenses, legal and professional fees associated with the BioSeek
acquisition and the defence of the Group's ability to secure Asian
supply collaborations.
General and administrative costs relating to normal operations
were $8.0 million (2009: $6.7 million). $1.8 million relates to
additional costs related to BioSeek operations. Excluding this,
general and administrative costs were reduced by $0.5 million as
compared to 2009. The resulting loss for the year was $2.0 million
(2009: $1.6 million).
Though it is a non-IFRS measure, Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) and excluding
exceptional items and share option related charge is monitored
closely by the Directors and management as a metric to measure
progress of business operations towards profitability and positive
cash flow. The adjusted EBITDA for 2010 was close to break-even, a
$0.4 million reduction over 2009 (2009: $0.4 million profit).
BioSeek Acquisition
BioSeek contributed $6.3 million in revenue to the Group after
its acquisition on 18 February 2010, beating our original estimates
of $6.2 million. Total consideration is based on 2010 full year
BioSeek revenues which were $6.4 million (2009: $3.8 million)
Initial consideration of $1.0 million was satisfied by the issue of
2.7 million shares in February 2010. An additional contingent
payment initially valued at $8.5 million (which has been revalued
at $7.6 million on the balance sheet based on year-end share price
and exchange rates) is payable based on a multiple of 2010 revenue.
Therefore, the total purchase price is $9.5 million or 1.5 times
revenue. As previously announced, the first US $3 million of this
payment was to be satisfied through the issue of 8.1 million
Asterand shares, and the remaining $5.5 million consideration we
intended to pay with cash. In December 2010, we announced that we
secured a term loan and a revolving credit line from Silicon Valley
Bank ("SVB") to fund this payment. However, volatility in trading
during March 2011 impaired our ability to draw on the revolving
line of credit. The $3 million term loan remains in place. In April
2011, we subsequently agreed with the former BioSeek shareholders
that the entire $8.5 million of contingent consideration will be
satisfied with cash - $2.5 million will be paid in May 2011 and the
remaining $6 million will be satisfied by the issue of loan notes
which matures over the period to December 2013.
Financing & Liquidity
The Directors monitor the cash flow and cash resources closely.
At 31 December 2010 the Group had cash and cash equivalents of $5.9
million (2009: $6.6 million). During 2010, the Group utilised $4.8
million of cash in operations principally attributable to working
capital movements. Other uses of cash include defence of the
Group's ability to secure Asian supply collaborations, expenses and
professional fees associated with the BioSeek acquisition. The use
of cash was partially offset by a new term loan from Silicon Valley
Bank that was secured and drawn down in December 2010 and $1.6
million of cash acquired in the BioSeek transaction. The term loan
will be used to fund part of the cash settlement of the remaining
contingent payment for the BioSeek acquisition on the basis
described above.
Outlook
During 2010, the Group made investments in building its supply
of biospecimens, expanding its government contract business and
integrating its new acquisition BioSeek. These investments are
paying off. We have begun to see adoption of the BioMAP platform
with some of our key clients and collaborative agreements for the
platform continue to grow. We secured a 5-year contract for
supplying the US National Cancer Institute with biospecimens for
The Cancer Genome Atlas (TCGA) project. With this contract and
significant secured commitments from several other large clients,
we have a greater line of sight on sales than ever before. We
believe that these advancements put us on firm footing for future
growth in revenue and that because our business is quite scalable,
this will result in sustainable profitability.
John Stchur, CPA Chief Financial Officer
Consolidated Income Statement
for the year ended 31 December 2010
2009
2010 Re-presented
Note $'000 $'000
-------------------------------------------- ----- --------- --------------
Revenue 2 21,310 18,706
-------------------------------------------- ----- --------- --------------
Cost of sales (9,332) (7,893)
-------------------------------------------- ----- --------- --------------
Gross profit 11,978 10,813
-------------------------------------------- ----- --------- --------------
Research and development costs (1,326) (478)
-------------------------------------------- ----- --------- --------------
Selling and distribution costs (3,824) (3,661)
-------------------------------------------- ----- --------- --------------
General and administrative expenses - pre
exceptional items (8,003) (6,735)
-------------------------------------------- ----- --------- --------------
Exceptional items (severance, acquisition
and litigation costs) (920) (1,491)
-------------------------------------------- ----- --------- --------------
Total general and administrative expenses (8,923) (8,226)
-------------------------------------------- ----- --------- --------------
Total operating expenses (14,073) (12,365)
-------------------------------------------- ----- --------- --------------
Operating loss (2,095) (1,552)
-------------------------------------------- ----- --------- --------------
Financial income 4 48
-------------------------------------------- ----- --------- --------------
Financial costs (57) (49)
-------------------------------------------- ----- --------- --------------
Foreign exchange credit/(charge) 107 (374)
-------------------------------------------- ----- --------- --------------
Finance income/(expense) 54 (375)
-------------------------------------------- ----- --------- --------------
Loss before taxation (2,041) (1,927)
-------------------------------------------- ----- --------- --------------
Taxation (32) 296
-------------------------------------------- ----- --------- --------------
Loss for the financial year attributable to
owners of the parent (2,073) (1,631)
-------------------------------------------- ----- --------- --------------
Loss per 5p ordinary share
-------------------------------------------- ----- --------- --------------
Basic 4 (1.8)c (1.4)c
-------------------------------------------- ----- --------- --------------
Diluted 4 (1.8)c (1.4)c
-------------------------------------------- ----- --------- --------------
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2010
Group
Group 2009
2010 Re-presented
$'000 $'000
---------------------------------------------------- -------- --------------
Loss for the financial year (2,073) (1,631)
---------------------------------------------------- -------- --------------
Other comprehensive income:
---------------------------------------------------- -------- --------------
Exchange translation difference on consolidation
recognised directly in equity (66) 271
---------------------------------------------------- -------- --------------
Other comprehensive expense for the year net of tax (2,139) (1,360)
---------------------------------------------------- -------- --------------
Total comprehensive expense for the year (2,139) (1,360)
---------------------------------------------------- -------- --------------
There is no tax arising on the exchange translation difference
on consolidation recognised directly in equity. Non-IFRS
Measure
Earnings before interest, taxes, depreciation and amortisation
("EBITDA") - and excluding exceptional items and share option
related charge for the year ended 31 December 2010:
2009
2010 Re-presented
$'000 $'000
----------------------------------------------- -------- --------------
Operating loss (2,095) (1,552)
----------------------------------------------- -------- --------------
Exceptional items (severance, acquisition and
litigation costs) 920 1,491
----------------------------------------------- -------- --------------
Share option related charge 132 86
----------------------------------------------- -------- --------------
Depreciation and amortisation 1,022 340
----------------------------------------------- -------- --------------
Adjusted EBITDA (21) 365
----------------------------------------------- -------- --------------
Consolidated Balance Sheet
2009 2008
2010 Re-presented Re-presented
as at 31 December 2010 Note $'000 $'000 $'000
---------------------------- ----- --------- -------------- --------------
Assets
---------------------------- ----- --------- -------------- --------------
Non-current assets
---------------------------- ----- --------- -------------- --------------
Intangible assets 4,778 1,311 997
---------------------------- ----- --------- -------------- --------------
Property, plant and
equipment 3,386 756 672
---------------------------- ----- --------- -------------- --------------
Deferred tax asset 3 4,843 1,129 --
---------------------------- ----- --------- -------------- --------------
Trade and other receivables 94 -- --
---------------------------- ----- --------- -------------- --------------
13,101 3,196 1,669
---------------------------- ----- --------- -------------- --------------
Current assets
---------------------------- ----- --------- -------------- --------------
Biobank inventory 9,136 8,818 6,453
---------------------------- ----- --------- -------------- --------------
Trade and other receivables 6,216 3,645 5,948
---------------------------- ----- --------- -------------- --------------
Cash and cash equivalents 5,918 6,644 9,957
---------------------------- ----- --------- -------------- --------------
21,270 19,107 22,358
---------------------------- ----- --------- -------------- --------------
Liabilities
---------------------------- ----- --------- -------------- --------------
Current liabilities
---------------------------- ----- --------- -------------- --------------
Trade and other payables (5,250) (4,884) (6,136)
---------------------------- ----- --------- -------------- --------------
Income tax payable (797) (395) --
---------------------------- ----- --------- -------------- --------------
Other financial liabilities
--Finance leases (12) -- --
---------------------------- ----- --------- -------------- --------------
--Current debt (703) (57) (46)
---------------------------- ----- --------- -------------- --------------
--Contingent
consideration 5 (7,624) -- --
---------------------------- ----- --------- -------------- --------------
(14,386) (5,336) (6,182)
---------------------------- ----- --------- -------------- --------------
Net current assets 6,884 13,771 16,176
---------------------------- ----- --------- -------------- --------------
Non-current liabilities
---------------------------- ----- --------- -------------- --------------
Deferred tax liability 3 (282) (364) --
---------------------------- ----- --------- -------------- --------------
Other financial liabilities
--Finance leases (5) -- --
---------------------------- ----- --------- -------------- --------------
--Long term debt (2,348) -- --
---------------------------- ----- --------- -------------- --------------
Other payables (2,191) -- --
---------------------------- ----- --------- -------------- --------------
(4,826) (364) --
---------------------------- ----- --------- -------------- --------------
Net assets 15,159 16,603 17,845
---------------------------- ----- --------- -------------- --------------
Equity attributable to
owners of the parent
---------------------------- ----- --------- -------------- --------------
Ordinary shares 9,262 9,043 8,226
---------------------------- ----- --------- -------------- --------------
Share premium 84,298 84,282 76,561
---------------------------- ----- --------- -------------- --------------
Shares to be issued 535 5 29
---------------------------- ----- --------- -------------- --------------
Reverse acquisition reserve (66,757) (66,757) (60,664)
---------------------------- ----- --------- -------------- --------------
Merger reserve 510 -- --
---------------------------- ----- --------- -------------- --------------
Other reserves 4,910 4,910 4,462
---------------------------- ----- --------- -------------- --------------
Profit and loss reserve (22,149) (19,496) (17,885)
---------------------------- ----- --------- -------------- --------------
Currency translation
reserve 4,550 4,616 7,116
---------------------------- ----- --------- -------------- --------------
Total equity 15,159 16,603 17,845
---------------------------- ----- --------- -------------- --------------
Consolidated Statement of Changes in Equity
as at 31 December 2010
Profit
Shares Reverse Investment and Currency
Ordinary to be Share acquisition Merger Other in own loss translation Total
shares issued premium reserve reserve reserves shares reserve reserve equity
Group $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $000
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
At 1 January
2009 8,226 29 76,561 (60,664) -- 4,462 (998) (16,887) 7,116 17,845
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Comprehensive
income
------------------ --------- ---- ---- ---- ---- ------ ------ -------- ---- ----- ----------- --------- ------------ --------
Loss for the
year - - - - - - - (1,631) - (1,631)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Other
comprehensive
income
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Exchange
translation - - - - - - - -- 271 271
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Total
comprehensive
income - - - - - - (1,631) 271 (1,360)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Employee share
option schemes
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Value of employee
services - - - - - - 86 - 86
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Proceeds from
shares issued 26 (31) 32 - - - - - - 27
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Shares to
be issued - 5 - - - - - - - 5
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Reclassification (36) - - - - - 36 - - --
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Currency
translation 827 2 7,689 (6,093) -- 448 (100) (2) (2,771) --
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Transactions
with owners 817 (24) 7,721 (6,093) - 448 (64) 84 (2,771) 118
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
At 31 December
2009 9,043 5 84,282 (66,757) -- 4,910 (1,062) (18,434) 4,616 16,603
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Comprehensive
Income
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Loss for the
year - - - - - - - (2,073) - (2,073)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Other
comprehensive
income
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Exchange
translation - - - - - - - - (66) (66)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Total
Comprehensive
Income - - - - - - - (2,073) (66) (2,139)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Employee share
option schemes
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Value of employee
services - - - - - - - 132 - 132
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Proceeds from
shares issued 6 - 16 - - - - - - 22
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Modification
to equity
settled share
option scheme - - - - - - - (187) - (187)
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Shares to
be issued - 530 - - - - (525) - - 5
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Acquisition
of BioSeek 213 - - - 510 - - - - 723
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Transactions
with owners 219 530 16 - 510 - (525) (55) - 695
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
At 31 December
2010 9,262 535 84,298 (66,757) 510 4,910 (1,587) (20,562) 4,550 15,159
------------------ --------- ---------- ---------- -------------- -------- ----------- ----------- --------- ------------ --------
Consolidated Cash Flow Statement
2009
2010 Re-presented
for the year ended 31 December 2010 Note $'000 $'000
--------------------------------------------- ----- -------- --------------
Cash flows from operating activities
Loss for the year (2,073) (1,631)
Adjustments for:
Contingent consideration remeasurement 356 -
Finance (income)/expense (54) 375
Tax charge/(credit) 32 (296)
Depreciation of property, plant and
equipment 827 307
Amortisation of intangible assets 195 33
Share option compensation charge 132 86
--------------------------------------------- ----- -------- --------------
Operating cash flows before movement in
working capital (585) (1,126)
--------------------------------------------- ----- -------- --------------
(Increase)/decrease in trade and other
receivables (2,242) 2,040
Increase in biobank inventories (318) (2,365)
Decrease in trade and other payables (1,570) (1,422)
--------------------------------------------- ----- -------- --------------
Cash used in operations (4,715) (2,873)
--------------------------------------------- ----- -------- --------------
Interest received 4 48
Interest paid (53) (49)
Interest element of finance lease rental
payments (4) -
Income taxes paid (120) (83)
Receipt of research and development tax
credit - 120
--------------------------------------------- ----- -------- --------------
Net cash used in operating activities (4,888) (2,837)
--------------------------------------------- ----- -------- --------------
Cash flows from investing activities
Cash acquired on acquisition of BioSeek 5 1,573 -
Purchase of property, plant and equipment (311) (340)
Sale of property, plant and equipment - 2
Purchase of intangible assets (64) (246)
--------------------------------------------- ----- -------- --------------
Net cash generated/(used) in investing
activities 1,198 (584)
--------------------------------------------- ----- -------- --------------
Cash flows from financing activities
Proceeds from issue of ordinary share
capital 22 27
Proceeds from ordinary share capital to be
issued 5 5
Proceeds from exercise of share options - 1
Loan received 2,948` -
Debt and finance lease principal payments (11) 11
--------------------------------------------- ----- -------- --------------
Net cash generated from financing activities 2,964 44
--------------------------------------------- ----- -------- --------------
Net decrease in cash and cash equivalents (726) (3,377)
Exchange gains on cash and cash equivalents - 64
Cash and cash equivalents at beginning of
year 6,644 9,957
Cash and cash equivalents at end of year 5,918 6,644
--------------------------------------------- ----- -------- --------------
Notes to the preliminary statement for the year ended 31
December 2010
1. Accounting policies and basis of preparation
The final results announcement for the year ended 31 December
2010 has been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU),
International Accounting Standards (IAS) and IFRIC interpretations
and the listing rules of the Financial Services Authority. The
details of the significant accounting policies of the Group are set
out in the 2009 Annual Report, copies of which are available from
the Company or on the Company's website. Based on audited accounts,
the financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended 31
December 2010 as defined in Section 434 of the Companies Act 2006,
but is derived from those accounts. Statutory accounts for 2009
have been delivered to the Registrar of Companies and those for
2010 will be delivered after the Company's Annual General meeting.
The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under Section 498(2) or
(3) of Companies Act 2006.
As the Group's principal assets and operations are in the US and
the majority of its operations are conducted in US dollars, the
Directors have changed the presentational currency to US dollars
for the Company and the Group effective 1 January 2010. In
addition, on the same date, as a result of the majority of the
operations being denominated in US dollars, the functional currency
of the Company became the US dollar.
A change in presentation currency is accounted for as a change
in accounting policy and is applied retrospectively, as if the new
presentation currency had always been the presentation currency.
Consequently, the comparatives for the year ended, and as at, 31
December 2009 and 2008 have been re-presented in US dollars using
average exchange rates for income and expenses and the closing rate
at the balance sheet date for assets, liabilities and items related
to equity. Retained earnings have been translated using the
historic closing rate applicable on 1 January 2005 (i.e. the date
of transition to IFRS) and were not retranslated at each subsequent
balance sheet date. Resulting exchange differences have been
recognised within equity. The currency translation reserve was set
to nil at 1 January 2005. All subsequent movements comprising
differences on the retranslation of the opening net assets of non
US dollar subsidiaries have been charged to the currency
translation reserve.
In accordance with IAS 1, 'Presentation of financial
statements', an additional balance sheet for the Group has been
presented as at the beginning of the earliest comparative period,
being 1 January 2009, together with the related notes.
IFRS 3 (revised) 'Business combinations,' and consequential
amendments to IAS 27, 'Consolidated and separate financial
statements', IAS 28, 'Investments in associates', and IAS 31,
'Interests in joint ventures', are effective prospectively to
business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or
after 1 July 2009.
The revised standard continues to apply the acquisition method
to business combinations but some significant changes compared with
IFRS 3. For example, all payments to purchase a business are
recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently re-measured through the
consolidated income statement. There is a choice on an
acquisition-by-acquisition basis to measure the non-controlling
interest in the acquiree either at fair value or at the
non-controlling interest's proportionate share of the acquiree's
net assets. All acquisition-related costs are expensed.
The revised standard was applied to the acquisition of 100% of
the share capital of BioSeek Inc. on 18 February 2010. Contingent
consideration of $7,268,000 was recognised at fair value on 18
February 2010. Subsequent remeasurement of the contingent
consideration to $7,624,000 at the balance sheet date has resulted
in a loss of $356,000 being recorded in the consolidated income
statement. Prior to the revision of the standard, this loss would
have been recorded as an adjustment to the goodwill arising on the
acquisition. Acquisition-related costs of $962,000 (year ended 31
December 2010:$153,000 and year ended 31 December 2009: $809,000)
have been recognised in the consolidated income statement, which
previously would have been included in the consideration for the
business combination.
2. Segmental reporting
The Directors are of the opinion that under IFRS 8 'Operating
Segments', the Group has two business segments: Tissue Based
Solutions and Licensing. All revenue and costs are recorded in the
income statement under these two segments.
The segment information for the year ended 31 December 2010 is
as follows:
Tissue Based
Solutions Licensing Total
Group 2010 $'000 $'000 $'000
------------------------------------ ------------- ---------- -------
Revenue from external customers 21,291 19 21,310
------------------------------------ ------------- ---------- -------
Adjusted EBITDA 202 (223) (21)
------------------------------------ ------------- ---------- -------
Gross margin 57% - 56%
------------------------------------ ------------- ---------- -------
Share option related charge 132 - 132
------------------------------------ ------------- ---------- -------
Depreciation and amortisation 1,022 - 1,022
------------------------------------ ------------- ---------- -------
Exceptional items 920 - 920
------------------------------------ ------------- ---------- -------
Finance income 4 - 4
------------------------------------ ------------- ---------- -------
Finance costs 57 - 57
------------------------------------ ------------- ---------- -------
Income tax charge 32 - 32
------------------------------------ ------------- ---------- -------
Total allocated assets 29,528 - 29,528
------------------------------------ ------------- ---------- -------
Additions to non-current assets
(other than financial instruments
and deferred tax assets) 7,164 - 7,164
------------------------------------ ------------- ---------- -------
The segment information for the year ended 31 December 2009 is
as follows:
Tissue Based
Solutions Licensing Total
Group 2009 $'000 $'000 $'000
------------------------------------ ------------- ---------- -------
Revenue from external customers 18,706 - 18,706
------------------------------------ ------------- ---------- -------
Adjusted EBITDA 796 (431) 365
------------------------------------ ------------- ---------- -------
Gross margin 60% - 58%
------------------------------------ ------------- ---------- -------
Share option related charge 86 - 86
------------------------------------ ------------- ---------- -------
Depreciation and amortisation 340 - 340
------------------------------------ ------------- ---------- -------
Exceptional items 1,491 - 1,491
------------------------------------ ------------- ---------- -------
Finance income 48 - 48
------------------------------------ ------------- ---------- -------
Finance costs 49 - 49
------------------------------------ ------------- ---------- -------
Income tax credit 296 - 296
------------------------------------ ------------- ---------- -------
Total allocated assets 21,174 - 21,174
------------------------------------ ------------- ---------- -------
Additions to non-current assets
(other than financial instruments
and deferred tax assets) 586 - 586
------------------------------------ ------------- ---------- -------
A reconciliation of adjusted EBITDA to loss before tax is
provided as follows:
2010 2009
$'000 $'000
------------------------------- -------- --------
Adjusted EBITDA for total
segments (21) 365
------------------------------- -------- --------
Share option related charge (132) (86)
------------------------------- -------- --------
Depreciation and amortisation (1,022) (340)
------------------------------- -------- --------
Exceptional items (920) (1,491)
------------------------------- -------- --------
Finance income/(expense) 54 (375)
------------------------------- -------- --------
Loss before tax (2,041) (1,927)
------------------------------- -------- --------
Reportable segments' assets are reconciled to total assets as
follows:
2010 2009
$'000 $'000
-------------------- ------- -------
Segment assets 29,528 21,174
-------------------- ------- -------
Unallocated:
-------------------- ------- -------
Deferred tax asset 4,843 1,129
-------------------- ------- -------
Total assets 34,371 22,303
-------------------- ------- -------
There were no revenues during the year ended 31 December 2010
that were derived from a single customer where that customer
contributed more than 10% of total revenues (2009: $3.7 million of
revenues from one customer contributing more than 10% of total
revenues was attributable to the Tissue Based Solutions segment).
The licensing revenue for the year ended 31 December 2010 is
$19,000 (2009: $nil). The Group continues to invest modestly to
maintain certain intellectual property in this segment.
The Group operates across four geographical segments. The UK is
the home country of the legal parent.
Revenue Revenue Net Capital
(by destination) (by origin) (liabilities)/assets expenditure
2010 2009 2010 2009 2010 2009 2010 2009
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
United
Kingdom 1,356 724 3,743 4,061 (815) 1,687 70 401
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
Rest of
Europe 4,906 3,506 - - - - - -
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
North
America 12,469 13,700 17,567 14,645 15,974 14,916 305 185
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
Japan 2,579 776 - - - - - -
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
21,310 18,706 21,310 18,706 15,159 16,603 375 586
--------- -------- --------- ------- ------- -------- ------------- ------ ----------
3. Deferred income tax
The analysis of deferred tax assets and deferred tax liabilities
is as follows:
2010 2009 2008
$'000 $'000 $'000
Deferred tax assets:
----------------------------------------------- ------- ------- -------
-US deferred tax asset to be recovered after
more than 12 months 4,674 1,129 -
----------------------------------------------- ------- ------- -------
-US deferred tax asset to be recovered within
12 months 169 - -
----------------------------------------------- ------- ------- -------
Total deferred tax asset 4,843 1,129 -
----------------------------------------------- ------- ------- -------
Deferred tax liabilities
----------------------------------------------- ------- ------- -------
- US deferred tax liability to be recovered
within 12 months (282) (364) -
----------------------------------------------- ------- ------- -------
Total deferred tax liability (282) (364) -
----------------------------------------------- ------- ------- -------
Deferred tax assets (net) 4,561 765 -
----------------------------------------------- ------- ------- -------
The gross movement on the deferred income tax account is as
follows:
2010 2009 2008
$'000 $'000 $'000
----------------------------------- ------- ------- -------
At 1 January 765 - -
----------------------------------- ------- ------- -------
US Income statement charge 418 765 -
----------------------------------- ------- ------- -------
Arising on acquisition of BioSeek 3,378 - -
----------------------------------- ------- ------- -------
At 31 December 4,561 765 -
----------------------------------- ------- ------- -------
The movement in deferred income tax assets and liabilities
during the year is as follows:
Provision
for BioSeek
impairment net
Inventory of Accrued operating
reserve receivables income losses Total
Deferred tax assets $'000 $'000 $'000 $'000 $'000
-------------------- ---------- ------------ -------- ----------- -------
At 31 December 2008 - - - - -
-------------------- ---------- ------------ -------- ----------- -------
Credited to the
income statement 1,126 3 - - 1,129
-------------------- ---------- ------------ -------- ----------- -------
At 31 December 2009 1,126 3 - - 1,129
-------------------- ---------- ------------ -------- ----------- -------
Deferred tax asset
acquired on
acquisition of
BioSeek - - - 3,378 3,378
-------------------- ---------- ------------ -------- ----------- -------
Credited/(charged)
to the income
statement 462 13 30 (169) 336
-------------------- ---------- ------------ -------- ----------- -------
At 31 December 2010 1,588 16 30 3,209 4,843
-------------------- ---------- ------------ -------- ----------- -------
Insurance Deferred
proceeds revenue Total
Deferred tax liabilities $'000 $'000 $'000
---------------------------------- ---------- --------- -------
At 31 December 2008 - - -
---------------------------------- ---------- --------- -------
Charged to the income statement (277) (87) (364)
---------------------------------- ---------- --------- -------
At 31 December 2009 (277) (87) (364)
---------------------------------- ---------- --------- -------
Credited to the income statement 69 13 82
---------------------------------- ---------- --------- -------
At 31 December 2010 (208) (74) (282)
---------------------------------- ---------- --------- -------
No current tax liability arises on the UK results for each year
due to losses incurred. At 31 December 2010, there were UK tax
losses available for carry forward in excess of $54.7 million
(2009: $54.1 million) subject to approval by HM Revenue and
Customs. A potential deferred tax asset of up to $14.8 million
(2009: $15.1 million) based on UK losses available for carry
forward at the full Corporation rate (27% as set out in the Finance
(No.2) Act 2010) has not been recognised because it is not probable
that these assets will be recovered in the foreseeable future.
A number of changes to the UK Corporation Tax System were
announced in the June 2010 Budget Statement. The Finance (No. 2)
Act 2010 which was substantively enacted on 20 July 2010, includes
legislation reducing the main rate of corporation tax from 28% to
27% from 1 April 2011. As no UK deferred tax has been recognised,
there is no impact of this change in these financial
statements.
In the March 2011 UK Budget Statement, legislation was proposed
to reduce the main rate of corporation tax to 26% from 1 April 2011
with further deductions to the main rate proposed to reduce the
rate by 1% per annum to 23% by 1 April 2014. The changes had not
been substantively enacted at the balance sheet date and,
therefore, are not included in these financial statements.
4. Loss per share -
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of 5p Ordinary Shares in issue during the year.
For diluted earnings per share, the weighted average number of
Ordinary Shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary Shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's Ordinary Shares during the
year ended 31 December 2010.
Since 31 December 2010, no 5p ordinary shares have been issued
(2009: 35,690).
2010 2009
---------------------------------------------------- -------- --------
Loss attributable to owners of the parent ($'000s) (2,073) (1,631)
---------------------------------------------------- -------- --------
Weighted average number of shares (000's) 115,792 112,847
---------------------------------------------------- -------- --------
Basic loss per Ordinary Share (1.8)c (1.4)c
---------------------------------------------------- -------- --------
Diluted loss per Ordinary Share (1.8)c (1.4)c
---------------------------------------------------- -------- --------
In the year ended 31 December 2010, the Group had no potentially
dilutive Ordinary Shares in issue because it made a loss for the
year.
At the balance sheet date, the contingent consideration due on
the acquisition of BioSeek (see Note 5) required part of the
consideration to be settled in shares. Based on the revenue
recorded by BioSeek in the year ended 31 December 2010, 8.1 million
shares were to be issued. As the Group is loss-making for the year
ended 31 December 2010, the impact on the loss per share is
anti-dilutive and consequently has not been reflected in the
calculation of diluted loss per share. As disclosed in Note 6, it
is no longer anticipated that any of the contingent consideration
will be settled in shares.
5. BioSeek Acquisition
The Group acquired 100% of the share capital of BioSeek, Inc.
("BioSeek") on 18 February 2010. BioSeek is a privately held drug
discovery services company that has developed proprietary human
primary cell-based, high throughput assay systems (BioMAP(R) )
designed to replicate the intricate cell and pathway interactions
present in disease. The system helps to predict clinical activities
of a potential drug candidate through comparison of assay results
to a proprietary database of data profiles for known compounds. The
Board of Asterand believe that Asterand and BioSeek are highly
complementary businesses, with BioSeek's assay systems extending
the range of human tissue-based products and services currently
provided by Asterand.
The initial consideration paid by Asterand was a sum of $1.0
million satisfied by the issue of 2,695,856 New Asterand Shares at
$0.37 (22p) per share - calculated based on the per share closing
prices of Ordinary Shares on the London Stock Exchange during the
thirty (30) consecutive trading day period ended on 17 November
2009, converted into U.S. dollars at the exchange rate for
purchasing U.S. dollars with pound sterling as quoted in the
Financial Times on such date.
An additional sum ("Contingent Payment") is payable based on the
following criteria:
(a) if the BioSeek 2010 Revenue is less than $4.0 million, the
Contingent Payment will be an amount equal to (A) 0.75 multiplied
by BioSeek's 2010 Revenue minus $1.0 million, which will be payable
only in Ordinary Shares;
(b) if the BioSeek 2010 Revenue is equal to or greater than $4.0
million, the Contingent payment will be an amount equal to (A) $3.6
million plus (B) the product of 2.5 multiplied by the amount by
which the BioSeek 2010 Revenue exceeds $4.0 million minus $1.0
million.
Actual BioSeek revenue for the year ended 31 December 2010 was
$6,370,000 resulting in a Contingent Payment of $8.5 million (total
purchase price of $9.5 million including initial consideration).
The Contingent Payment became due in April 2011. As previously
announced, the first US $3 million of this payment was to be
satisfied through the issue of 8.1 million Asterand shares, and the
remaining $5.5 million consideration was to be paid in cash. All
amounts recorded at the balance sheet date (valued under IFRS 3
(revised)) have been made under this assumption. However, in April
2011 we subsequently agreed with the former BioSeek shareholders
that the entire $8.5 million of contingent consideration will be
satisfied with cash - $2.5 million will be paid in May 2011 and the
remaining $6 million satisfied by the issue of loan notes that
mature over the period to December 2013. The Company has also
entered into a warrant agreement with the lenders whereby the
Lenders will have the right to subscribe for up to 5.2 million new
Ordinary Shares at 14.12p per share. This warrant agreement will
expire on 30 December 2013, on redemption of the loan. See also
Note 6 - post balance sheet events.
IFRS 3 (revised), 'Business combinations' was applied to the
acquisition of BioSeek, Inc. on 18 February 2010. Acquisition costs
of $153,000 (2009: $809,000) have been recognised in the income
statement.
The Contingent Consideration is classified as a financial
liability under IFRS 3 (revised) and has been re-valued at the
period end to $7,624,000 based on 8,087,568 shares expected to be
issued multiplied by the 31 December 2010 Asterand closing share
price of 16.75p and the 31 December 2010 spot rate of $1.55 to the
pound sterling, together with a cash payment of $5,524,000. This
has resulted in a loss of $356,000 being recorded as an exceptional
loss within operating expenses in the income statement.
A reconciliation of total consideration as valued in the
transaction to the revaluation under IFRS 3 (revised) is as
follows.
Value under Value under
=============== ============== ============= ============== ============
IFRS 3 IFRS 3
(revised) (revised) Exceptional
=============== ============== ============= ============== ============
at 18 at 31
February December
Consideration 2010 2010 gain/(loss)
=============== ============== ============= ============== ============
$'000 $'000 $'000 $'000
--------------- -------------- ------------- -------------- ------------
Initial
consideration 1,000 722(1) 722 -
=============== ============== ============= ============== ============
Contingent
consideration
=============== ============== ============= ============== ============
- Shares 3,000 2,168 2,100 68
=============== ============== ============= ============== ============
- Cash -
estimate at 18
February 2010 -- 5,100 --
=============== ============== ============= ============== ============
- Cash - final
amount due at
31 December
2010 5,524 -- 5,524 --
--------------- -------------- ------------- -------------- ------------
Cash total 5,524 5,100 5,524 (424)
--------------- -------------- ------------- -------------- ------------
Total
Consideration 9,524 7,990 8,346(2) (356)
=============== ============== ============= ============== ============
Initial
consideration 722
=============== ============== ============= ============== ============
Contingent consideration
(before revaluation under
IFRS 3 (revised)) 7,268
------------------------------- ------------- ============== ============
7,990
=============== ============== ============= ============== ============
Fair value of
assets
acquired (see
below) 7,615
--------------- -------------- ------------- ============== ============
Goodwill 375
=============== ============== ============= ============== ============
(1) Calculated based on 2,695,856 shares, the 18 February 2010
Asterand closing share price of 17p and 18 February 2010 spot rate
of 1.57 dollars to the GBP.
(2) Calculated based on total consideration of $8.3 million
including $1 million initial consideration. The first $3.0 million
of contingent consideration is calculated based on 8,087,568 shares
issued multiplied by the 31 December 2010 Asterand closing share
price of 16.75p and 31 December 2010 spot rate of 1.55 dollars to
the GBP.
The assets and liabilities arising from the acquisition are as
follows:
Carrying Fair
Value Value
$'000 $'000
--------------------------------------------------------- --------- --------
Cash and cash equivalents 1,573 1,573
--------------------------------------------------------- --------- --------
Property, plant and equipment (including computer
software of $11,000) 3,190 3,190
--------------------------------------------------------- --------- --------
Developed technology - 3,224
--------------------------------------------------------- --------- --------
Deferred tax asset - 3,378
--------------------------------------------------------- --------- --------
Trade and other receivables 316 316
--------------------------------------------------------- --------- --------
Trade and other payables (1,509) (1,509)
--------------------------------------------------------- --------- --------
-Financial liabilities-finance leases (14) (14)
--------------------------------------------------------- --------- --------
Non-current liabilities
--------------------------------------------------------- --------- --------
-Finance lease obligations (15) (15)
--------------------------------------------------------- --------- --------
-Deferred rent (2,528) (2,528)
--------------------------------------------------------- --------- --------
Net assets acquired 1,013 7,615
--------------------------------------------------------- --------- --------
The goodwill is attributable to the expected synergies from
combining the business operations and the assembled workforce. No
goodwill is expected to be deductible for tax purposes.
The acquired BioSeek business contributed revenues of $6,285,000
and net profit of $1,732,000 to the Group for the period from 18
February 2010 to 31 December 2010. If the acquisition had occurred
on 1 January 2010, consolidated revenue and consolidated loss for
the twelve months ended 31 December 2010 would have been
$21,394,000 and $2,790,000, respectively.
The fair value of trade and other receivables is $316,000 and
includes trade receivables with a fair value of $204,000. The gross
contractual amount for trade receivables due is $204,000; all of
which is expected to be collectible.
6. Post balance sheet event
$8.5 million of contingent consideration became payable in April
2011 to complete the BioSeek acquisition (see also Note 5 - BioSeek
Acquisition). As previously announced, the first US $3 million of
this payment was to be satisfied through the issue of 8.1 million
Asterand shares and the remaining $5.5 million consideration was to
be paid in cash. We also announced that we secured a term loan and
a revolving credit line from Silicon Valley Bank ("SVB") to fund
this payment. However, volatility in trading during March 2011
impaired our ability to draw on the revolving line of credit. The
$3 million term loan remains drawn and intact. Subsequently in
April 2011 we agreed with the former BioSeek shareholders that the
entire $8.5 million of contingent consideration will be satisfied
with cash - $2.5 million will be paid in May 2011 and the remaining
$6 million will be satisfied by the issue of loan notes that mature
over the period to December 2013. The Company has also entered into
a warrant agreement with the lenders whereby the Lenders will have
the right to subscribe for up to 5.2 million new Ordinary Shares at
14.12p per share. This warrant agreement will expire on 30 December
2013, on redemption of the loan
Notice of Annual General Meeting
-- Asterand Plc will hold its Annual General Meeting at the
offices of
Buchanan Communications, 107 Cheapside, London, EC2V 6DN on
Wednesday 8 June 2011 at 10:00 am.
The following documents have been sent to shareholders
today:
-- Annual Report and Accounts 2010
-- Notice of 2011 Annual General Meeting ('AGM')
-- Form of Proxy
In accordance with Listing Rule 9.6.1 Asterand Plc has submitted
two copies each of the above documents to the UK Listing Authority
('UKLA') and these documents will shortly be available for
inspection at the UKLA's Document Viewing Facility, which is
situated at: Financial Services Authority 25 The North Colonnade
Canary Wharf London E14 5HS Tel: (0) 20 7066 1000. Copies of the
Annual Report and Accounts 2010 and Notice of AGM, which includes a
summary of proposed changes to the Articles of Association, will be
available on the Company's website at www.asterand.com on 28 April
2011. Copies of the new Articles of Association, showing the
amendments to be proposed at the AGM, will be forwarded to the UKLA
and the FSA in accordance with DTR 6.1.2. For further information
contact:
John Stchur, Chief Financial Officer and Company Secretary
Tel No: +44 (0) 1763 211600
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Bioseek (LSE:ATD)
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