2018 Annual Report and Accounts & AGM Notification
London, UK - 18 April 2019: Oxford Biomedica plc ("Oxford Biomedica", "the Company" or "the Group") (LSE:OXB), a leading gene and cell therapy group, gives notice that copies of the 2018 Annual Report and Accounts and the Notice of Annual General Meeting ("AGM") have been sent to shareholders. These documents are available on the "Investors" section of the Group's website at www.oxb.com. Oxford Biomedica plc announced preliminary results for the year ended 31 December 2018 on 14 March 2019.
Copies of these documents have been submitted to the UK Listing Authority for publication through the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.
Further copies of the 2018 Annual Report and Accounts are available from the Group Secretary, Oxford Biomedica plc, Windrush Court, Transport Way, Oxford, OX4 6LT, United Kingdom (telephone number: +44 (0) 1865 783 000).
Oxford Biomedica plc also announces that its AGM will be held on Wednesday 29 May 2019. The meeting will be held at the offices of Covington & Burling LLP, 265 Strand, London WC2R 1BH, commencing at 11.00 a.m.
In accordance with the requirements of Rule 6.3.5 of the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority, the appendix to this announcement contains descriptions of the principal risks and uncertainties affecting the Group and material related party transactions, and a responsibility statement which has been extracted from the 2018 Annual Report and Accounts. This announcement should be read in conjunction with, and not as a substitute for, reading the full 2018 Annual Report and Accounts.
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For further information, please contact:
Oxford Biomedica plc:
Stuart Paynter, Chief Financial Officer
Tel: +44 (0)1865 783 000
Notes for editors
Oxford Biomedica (LSE:OXB) is a leading gene and cell therapy group focused on developing life changing treatments for serious diseases. Oxford Biomedica and its subsidiaries (the "Group") have built a sector leading lentiviral vector delivery platform (LentiVector®), which the Group leverages to develop in vivo and ex vivo products both in-house and with partners. The Group has created a valuable proprietary portfolio of gene and cell therapy product candidates in the areas of oncology, ophthalmology and CNS disorders. The Group has also entered into a number of partnerships, including with Novartis, Sanofi, Axovant Gene Therapies, Orchard Therapeutics, Boehringer Ingelheim, the UK Cystic Fibrosis Gene Therapy Consortium and Imperial Innovations, through which it has long-term economic interests in other potential gene and cell therapy products. Oxford Biomedica is based across several locations in Oxfordshire, UK and employs more than 430 people. Further information is available at www.oxb.com
Principal risks and uncertainties
Oxford Biomedica operates in the gene and cell therapy biotechnology sector which, by its nature, is relatively high risk compared with other industry sectors. Only a few gene and cell therapy products have been approved for commercial use so there are significant financial and development risks in the sector, and the regulatory authorities have shown caution in their regulation of such products. Risk assessment and evaluation is therefore an integral and well-established part of Oxford Biomedica's management processes. The Group is exposed to a range of risks. Some of them are specific to Oxford Biomedica's current operations, others are common to all development-stage biopharmaceutical companies. The Directors have carried out a robust assessment of the risks facing the company, including those which could threaten its business model and future performance.
Risk management framework
The Group's risk management framework is as follows:
- Board of Directors - the Board has overall responsibility for risk management, determining the Group's risk tolerance and for ensuring the maintenance of a sound system of internal control. The Board reviews key risks within the Group at each of its formal meetings, of which there at least six annually. However, twice a year in March and September a full presentation to the Board on Risk is expected. The risk management processes are the responsibility of the Senior Executive Team but the Audit Committee monitors the processes and their implementation as well as reviewing the Group's internal financial controls and the internal control systems. The Audit Committee also monitors the integrity of the financial statements of Oxford Biomedica and any formal announcements relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them. During 2018, we received external assistance from PwC LLP to develop our risk framework appropriate for our larger Group.
- Senior Executive Team - the SET generally meets twice monthly to discuss current business issues and considers relevant risks on each occasion. At least four times a year, the SET meets with representatives from the Risk Management Committee to consider the operational risk management processes and risks identified.
- Key management committees - the Group currently has three key management sub-committees which meet monthly and through which much of the day-to-day business is managed. These are the extended Operational Leadership Team (incorporates the Quality and Manufacturing Operations Committee), the Product Development Committee and the Technical Development Committee. SET members attend these meetings and risk management is a key feature of each sub-committee.
- Risk Management Committee - Oxford Biomedica has a Risk Management Committee comprising senior managers from key areas of the business and chaired by the Director of Corporate Activities & Strategy. This Committee meets quarterly with a remit to identify and assess risks in the business and to consider mitigation and risk management steps that can be taken. The risk register is regularly reviewed by SET and key risks are highlighted to the Board at each formal meeting.
- Standard Operating Procedures - all areas of the business have well established Standard Operating Procedures which are required be followed in order to minimise the risks inherent in the business operations. Where these are required for GMP, GCP and GLP any deviations from the SOPs must be identified and investigated. Compliance with such SOPs are routinely subject to audit by the relevant regulators and customers. Other SOPs, such as financial processes, are also subject to audits.
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 (USA), EMA (Europe), and MHRA (UK). During the development stage, regulatory reviews of clinical trial applications or amendments can prolong development timelines. Similarly, there can be no assurance of gaining the necessary marketing approvals to commercialise products in development. Regulatory authorities may impose restrictions on a product candidates use or may require additional data before granting approval. If regulatory approval is obtained, the product candidate and bioprocessor will be subject to continual review and there can be no assurance that such an approval will not be withdrawn or restricted. The Group's laboratories, bioprocessing facility and conduct of clinical studies are also subject to regular audits by the MHRA and FDA 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 protocols which specify how the trials should be conducted. Protocols specify the number of patients to be recruited into the study and the characteristics of patients who can and cannot be accepted into the study. The risk exists that it proves difficult in practice to recruit the number of patients with the specified characteristics, potentially causing delays or even abandonment of the clinical study. This could be caused by a variety of reasons such as the specified characteristics being too tightly defined resulting in a very small population of suitable patients, or the emergence of a competing drug, either one that is approved or another drug in the clinical stage of development. The threats from the above product development risks are inherent in the pharmaceutical industry and have not changed fundamentally over the last year. The Group aims to mitigate these risks by employing experienced staff and other external parties, such as Contract Research Organisations to plan, implement and monitor its product development activities and to review progress regularly in the Group's Product Development Committee.
Bioprocessing revenue risk
The Group receives significant revenues from bioprocessing lentiviral vectors for third parties and in particular for Novartis. Bioprocessing of lentiviral vectors is complex and bioprocessing batches may fail to meet the required specification due to contamination or inadequate yield. Failure to deliver batches to the required specification may lead to loss of revenues. Furthermore, the Group relies on third parties, in some cases sole suppliers, for the supply of raw materials and certain out-sourced services. If such suppliers perform in an unsatisfactory manner it could harm the Group's business. As the Group's revenues from bioprocessing are growing the risk to the Group has increased in the last twelve months. The Group mitigates the risk of failing to meet required specifications by investing in high quality facilities, equipment and employees and, in particular, in quality management processes. The Group is also endeavouring to mitigate the risk of being overly reliant on Novartis by seeking bioprocessing contracts with other parties.
Collaborator and partner risk
The Group has entered several collaborations and partnerships, involving the development of product candidates by partners in which the Group has a financial interest through IP licenses. 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 is seeking to out-license or spin-out its in-house product development programmes into externally funded vehicles and may seek to arrange strategic partnerships for developing the Group's other product candidates. The Group may not be successful in its efforts to build these third party relationships which may cause the development of the products to be delayed or curtailed. The Group is building a revenue generating business by providing its LentiVector platform to third parties in return for revenues derived from process development, bioprocessing and future royalties. The Group may be unsuccessful in building this business for reasons including a) failing to maintain a leadership position in lentiviral vector technology, b) becoming uncompetitive from a pricing perspective, c) failure to provide an adequate service to business partners and collaborators. The Group is continuing to invest in the LentiVector platform in order to reduce this risk, and it also takes extremely seriously customer relationship management to ensure that customers and partners receive the service they expect.
Attraction and retention of highly skilled employees
The Group depends on recruiting and retaining highly skilled employees to deliver its objectives and meet its customers' needs. The market for such employees is becoming increasingly competitive and the failure to recruit staff from the EU due to Brexit or to retain staff with the required skills and experience could adversely affect the Group's performance. The Group mitigates this risk by creating an attractive working environment and ensuring that the remuneration package offered to employees is comparable with competing employers.
Broader business risks which are applicable to Oxford Biomedica
Gene and cell therapy risk
The Group's commercial success, both from its own product development and from supporting other companies in the sector, will depend on the acceptance of gene and cell therapy by the medical community and the public for the prevention and/or treatment of diseases. To date only a limited number of gene therapy products have been approved in Europe, and only three in the USA. Furthermore, specific regulatory requirements, over and above those imposed on other products, apply to gene and cell therapies and there can be no assurance that additional requirements will not be imposed in the future. This may increase the cost and time required for successful development of gene and cell therapy products.
Rapid technical change
The gene and cell therapy sector is characterised by rapidly changing technologies and significant competition. Advances in other technologies in the sector could undermine the Group's commercial prospects.
Longer-term commercialisation risks
In the longer term, the success of the Group's product candidates and those of its partners will depend on the regulatory and commercial environment several years into the future. Future commercialisation risks include:
- The emergence of new and/or unexpected competitor products or technologies. The biotechnology and pharmaceutical industries are subject to rapid technological change which could affect the success of the Group's product candidates or make them obsolete;
- Regulatory authorities becoming increasingly demanding regarding efficacy standards or risk averse regarding safety;
- Governments or other payers being unwilling to pay for/reimburse gene therapy products at a level which would justify the investment. Based on clinical studies to date, the Group's LentiVector platform product candidates have the unique potential to provide permanent therapeutic benefit from a single administration. The pricing of these therapies will depend on assessments of their cost-benefit and cost effectiveness;
- The willingness of physicians and/or healthcare systems to adopt new treatment regimes.
Any or all of these risks could result in the Group's future profitability being adversely affected as future royalties and milestones from commercial partners could be reduced.
Intellectual property and patent protection risk
The Group's success depends, amongst other things, on maintaining proprietary rights to its products and technologies and the Board gives high priority to the strategic management of the Group's intellectual property portfolio. However, there can be no guarantee that the Group's product candidates and technologies are adequately protected by intellectual property. Furthermore, if the Group's patents are challenged, the defence of such rights could involve substantial costs and an uncertain outcome.
Third party patents may emerge containing claims that impact the Group's freedom to operate. There can be no assurance that the Group will be able to obtain licences to these patents at reasonable cost, if at all, or be able to develop or obtain alternative technology. Where copyright, design right and/or "know how" protect the Group's product candidates or technology, there can be no assurance that a competitor or potential competitor will not independently develop the same or similar product candidates or technology.
Rights of ownership over, and rights to license and use, intellectual property depend on a number of factors, including the circumstances under which the intellectual property was created and the provisions of any agreements covering such intellectual property. There can be no assurance that changes to the terms within licence agreements will not affect the entitlement of the Group to the relevant intellectual property or to license the relevant intellectual property from others.
(a) Product liability and insurance risk
In carrying out its activities the Group potentially faces contractual and statutory claims, or other types of claim from customers, suppliers and/or investors. In addition, the Group is exposed to potential product liability risks that are inherent in the research, pre-clinical and clinical evaluation, bioprocessing, marketing and use of pharmaceutical products. While the Group is currently able to obtain insurance cover, there can be no assurance that any future necessary insurance cover will be available to the Group at an acceptable cost, if at all, or that, in the event of any claim, the level of insurance carried by the Group now or in the future will be adequate, or that a product liability or other claim would not have a material and adverse effect on the Group's future profitability and financial condition.
(b) Foreign currency exposure
The Group records its transactions and prepares its financial statements in pounds sterling, but some of the Group's income from collaborative agreements and patent licences is received in US dollars and the Group incurs a proportion of its expenditure in US dollars and the Euro. The Group's cash balances are predominantly held in pounds sterling, although the Group's Treasury Policy permits cash balances to be held in other currencies in order to hedge foreseen foreign currency expenses. The Group also has a US dollar loan facility provided by Oaktree Capital Management. Under that facility the Group is required to maintain $2.5 million in a ring fenced bank account. To the extent that the Group's foreign currency assets and liabilities in the longer term are not matched, fluctuations in exchange rates between pounds sterling, the US dollar and the Euro may result in realised and unrealised gains and losses on translation of the underlying currency into pounds sterling that may increase or decrease the Group's results of operations and may adversely affect the Group's financial condition, each stated in pounds sterling. In addition if the currencies in which the Group earns its revenues and/or holds its cash balances weaken against the currencies in which it incurs its expenses, this could adversely affect the Group's future profitability.
(c) Interest rate exposure
The Group is exposed to interest rate movements, primarily arising on the Oaktree loan facility. the interest rate is 9.0% plus US$ LIBOR, subject to a minimum of 1%. If 3 month LIBOR rises above 1% the Group's interest payments may increase.
The Directors have considered the cash position in the context of going concern and their conclusions are set out in the Financial review page 43, the Director's report page 92 and in note 1 to the Consolidated financial statements (page 108) of the Annual Report.
The Group has a $55 million loan facility provided by Oaktree Capital Management, secured on the Group's assets. Failure to comply with the terms of the loan agreement could potentially place the Group in default, which could adversely affect the Group's business operations, financial position and prospects.
UK departure from European Union ("Brexit")
The impact of the UK's decision to leave the European Union is not yet clear but it may significantly affect the fiscal, monetary and regulatory landscape in the UK, and could have a material impact on its economy and the future growth of its industries, including the pharmaceutical and biotechnology industries. Depending on the exit terms negotiated between EU Member States and the UK following Brexit, the UK could lose access to the single European Union market and to the global trade deals negotiated by the European Union on behalf of its members. Although it is not possible at this point in time to predict fully the effects of an exit of the UK from the European Union, we believe the impact would be minor on Oxford Biomedica with anticipated effects being managed. Key uncertainties relate
to recruitment of individuals from the EU and impact on the regulatory relationships between the UK and the EU. Significant recruitment has taken place over the last year, to the extent the staff base can support growth over the short term. All EU Nationals currently employed will be able to stay in the UK under the "settled status" directive. Short term regulatory impacts include the requirement for QP certification to be performed in an EU member state and as such, we have undertaken steps to establish a subsidiary in Ireland.
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 parent 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;
· state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
· make judgements and accounting estimates that are reasonable and prudent; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. 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 Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and parent company's performance, business model and strategy.
Each of the Directors, whose names and functions are listed below confirm that, to the best of their knowledge:
· the Group and parent company's financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group and parent company; and
· the Directors' Report contained on pages 90 to 95 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.
Chief Executive Officer
Chief Financial Officer
Chief Business Officer (Director, until 01 July 2018)
Deputy Chairman and Senior Independent Director
Non-Executive Director (from 15 March 2018)
In accordance with Section 418 of the Companies Act 2006, 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 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 Company's auditors are aware of that information.
Related party transactions
At 31 December 2018 there was an outstanding balance of £10,767 (2017 £5,000) owed to Lorenzo Tallarigo, the Group's Chairman.
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