25th May 2006 07:02
BTG PLC25 May 2006 BTG plc: Preliminary Results for the Year Ended 31 March 2006 London, UK, 25 May 2006: BTG plc (LSE: BGC), the medical innovations company,today announced its preliminary results for the year ended 31 March 2006. Financial highlights • Revenue 31% higher at £50.2m (04/05: £38.3m), reflecting strong growth in recurring royalties and litigation settlements• Revenue net of revenue sharing 31% higher at £29.5m (04/05: £22.6m)• Additional gains from sale of patents and investments, less provisions, of £7.4m (04/05: £1.2m)• Operating & administrative costs reduced by 23% to £24.3m (04/05: £31.6m) o Expected to be below £21m in the current financial year• Research & development expenses at £9.1m (04/05: £16.8m), reflecting lower Varisolve(R) expenses and more focused investment in BTG's pipeline• Profit before tax of £1.5m (04/05: loss of £34.8m)• "Free" cash of £44m (04/05 £34.5m) with over £9m generated in the year• Group operating from a sustainable platform with the capacity to invest in the pipeline Operating highlights • Six programmes added to pipeline• Clinical studies initiated on BGC20-1259 (Alzheimer's disease) and BGC20-0166 (sleep apnoea); BGC 9331 - plevitrexed (gastric cancer) phase II study arm fully enrolled• Progress in licensees' programmes: encouraging phase II results for Campath(R) in multiple sclerosis and TRX4 in type 1 diabetes• Successful commercialisation of physical science assets: Teleshuttle, RFID, WebNav, NQR• Preparations made for Varisolve(R) phase II safety study and partnering discussions continuing Louise Makin, BTG's Chief Executive Officer, commented: "We are delighted toreport these strong financial results and excellent progress in delivering onthe strategy announced last May. With increasing revenues, reduced costs and ahealthy cash balance, we can move forward with confidence and continue to buildvalue by investing in our life sciences pipeline." Contacts: BTG Financial DynamicsChristine Soden, Chief Financial Officer Ben Atwell+44 (0)20 7575 1591 +44 (0)20 7831 3113Andy Burrows, Director of Investor Relations+44 (0)20 7575 1741 Notes A presentation will take place today for analysts at 9.30am at BTG plc, 10 FleetPlace, Limeburner Lane, London EC4M 7SB. The presentation will be webcast liveon www.btgplc.com. High resolution images are available for the media to viewand download free of charge from www.vismedia.co.uk. Chairman's statement BTG's results for the year to 31 March 2006 show a major improvement over theprior year with the net result being a profit before tax for the year of £1.5m(04/05: loss of £34.8m). Cash at the year end was £51.0m (04/05: £34.5m net ofoverdraft) of which we consider some £44m is "free" cash after allowing forknown commitments on the sale of the Teleshuttle patents, an increase of over£9m in the year. Revenues of £50.2m (04/05: £38.3m) generated net revenues after revenue sharing31% higher at £29.5m (04/05: £22.6m). Underlying royalty revenues from marketedproducts including BeneFIX(R) and the two-part hip cup grew strongly and theGroup generated non-recurring revenues, being one-off settlements andmilestones, of £10.7m gross (04/05: £9.1m) including the settlement with Zimmerover the two-part hip cup patents. The sale of investments and patents,including the sale of the Teleshuttle patents at the end of the year, resultedin net profits of £11.6m (04/05: £2.2m). Investment in the development of Varisolve(R) reduced as expected to £4.5m (04/05: £9.2m). Overall investment in BTG's drug development pipeline was lower at£3.6m (04/05: £6.6m) reflecting the clearer focus on key products. The significant restructuring costs incurred last year set the scene for a 23%reduction in operating and administrative expenses to £24.3m (04/05: £31.6m).Further restructuring costs of £3.7m were incurred to align operations with thenew strategy and maintain cost control. Disappointing progress in two investee companies has resulted in write-offs of£4.2m with the major losses arising when SAMSys Technologies, Inc., the Canadianlisted RFID company, went into liquidation reflecting the difficult environmentin that technology space. The Directors do not recommend payment of a dividend for the year. Outlook We have started the new financial year with a much lower cost base, a strongcash position and a clear focus. We expect that revenues from royalties onmarketed products will cover operating and administrative costs. The anticipatedrevenues from future licensing deals, milestones and the ongoingcommercialisation of non-core assets, together with strong cash reserves, meanthe Company is well placed to continue to build value by further developing ourcurrent portfolio and by in-licensing new, high potential programmes to add toour development pipeline. Discussions are progressing with potential partners for Varisolve(R), and theBoard continues to believe this product is capable of achieving significantsales and generating future returns for BTG. Sir Brian FenderChairman Operating review During the past year we continued our process of transforming BTG into a focusedmedical innovations company. During a period of considerable change, we havealso delivered strong financial results. At the start of the year we set out our goals: • Position BTG for profitability and sustainable growth• Reduce costs• Realise value from the physical sciences portfolio• Progress the development and partnering of Varisolve(R)• Continue to build value by investing in the pipeline We have achieved a pre-tax profit for the year of £1.5m and, thanks to growingrecurring revenues and reduced costs, we can build the business in a sustainablemanner. Operating and administrative costs reduced by 23% from £31.6m to £24.3mand going forward we anticipate these costs will be below £21m. We have realisedvalue from several physical sciences technologies including WebNav, RFID, NQRand, at the end of the year, Teleshuttle. This last deal generated an immediatenet profit of £9.0m and also provides the opportunity for additional significantreturns and brings to an end the major litigation activities. We continued toinvest in the pipeline, adding six new programmes and spending £9.1m ondeveloping existing programmes, including Varisolve(R). Building value in the pipeline Six programmes were in-licensed during the year, including a series of selectiveEP4 receptor antagonists designed to treat painful conditions such as migraineheadache. The lead compound, BGC20-1531, is completing preclinical studies inpreparation for its first clinical study. Three acquisitions were made for theDrug Repositioning portfolio, two dermatology opportunities targeting head liceand fungal infections, and a novel oral formulation for an asthma product. Twoearlier stage programmes were in-licensed for the oncology portfolio. Good progress was made in developing existing programmes. In BTG's pipeline,enrolment was completed for the phase II part of the phase I/II gastric cancerstudy of Plevitrexed (BGC 9331), in which 19 additional patients are expected tobe dosed at the recommended level for follow-on studies. BGC20-1259 completed preclinical development and commenced a phase I clinicalstudy. To date, two cohorts of eight volunteers have been treated with singleascending doses. Dosing of the third cohort is expected to begin shortly, andplanning for a multiple ascending dose study, which should begin aroundmid-year, is under way. BGC20-1259 is a unique multifunctional compound designedto act on the cognitive impairment, associated psychiatric symptoms such asdepression and neurodegenerative aspects of Alzheimer's disease. A clinical proof of mechanism study commenced with BGC20-0166, a combination oftwo compounds shown in preclinical studies to alleviate sleep apnoea, a commoncondition in which sleep is interrupted by cessation of breathing and for whichthere is currently no pharmacological treatment. Ten patients have been treatedand all 36 planned patients should have finished treatment by the end of theyear. In the current financial year we anticipate the completion of the plevitrexed(BGC9331) phase I/II trial, phase I for BGC20-1259 and the sleep apnoea proof ofmechanism study. Several licensees made advances with their development programmes. GenzymeCorporation is continuing the development of Campath(R), its 3rd line treatmentfor chronic lymphocytic leukaemia (CLL), in a range of additional oncologyindications and reported positive interim efficacy results of a phase II trialcomparing Campath(R) with interferon beta-1a in multiple sclerosis. Genzymeanticipates commencing phase III studies in MS in the second half of 2006. TolerRx, Inc. showed in a phase II trial in new-onset type-1 diabetes that themonoclonal antibody TRX4 significantly reduced the trial subjects' requirementsfor insulin over the 18 months of follow-up. TRX4 was granted orphan drug statusfor this indication, which confers benefits including data exclusivity ifsuccessfully approved. Cougar Biotechnology progressed its European phase Istudy of abiraterone acetate, an inhibitor of testosterone biosynthesistargeting prostate cancer, and was granted approval to commence clinical studiesin the US. Abiogen Pharma completed phase I studies of ABIO 08-01 (BTG1640) andis currently planning a phase II proof of concept study in anxiety. Varisolve(R) The IND for Varisolve(R), BTG's novel microfoam sclerosant treatment forvaricose veins, was released from clinical hold and a phase II study protocolwas approved in the US in July 2005. BTG initiated new partnering discussionsfrom September with a number of pharmaceutical, specialist and medical devicecompanies. Discussions are proceeding as expected. In anticipation of securing a commercialisation agreement and followingconstructive dialogue with the FDA, preparations for the agreed phase II studyhave been progressed so that it can start without delay to the developmenttimetable. Clinical trial materials have been sourced and eight varicose veincentres have been identified to take part in the study, which aims to show,using sensitive MRI techniques, that the presence of microbubbles in the middlecerebral artery that may result from treatment with Varisolve(R) does not causesubclinical damage. It is intended that a partner is signed up prior tocommencing the study because there is a potential regulatory pathway that allowsphase II and phase III to overlap. BTG has also continued to add value to this programme through further IPdevelopment, and patent coverage for Varisolve(R) now extends to 2024. Capturing value from non-core assets We are delighted with the progress made over the year in monetising some of thephysical science assets such as Teleshuttle, WebNav and RFID. This work isongoing and we are seeking to sell or license a number of other physical sciencetechnologies, in fields such as telecommunications and flash memory, over themedium term. We will also continue to simplify the portfolio and reduce costs by: • renegotiating terms on marginal licences to reassign or return the IP• terminating contracts for non-viable assets• managing our ventures investments such that we can maintain an economic and management interest in key assets while allowing dilution of holdings in non-core assets. Maintain cost control Operating and administrative costs for the business reduced to £24.3m and we aretargeting ongoing costs of less than £21m per annum. In achieving these savingswe incurred restructuring charges of £3.7m this year. The restructuring of thebusiness is now complete although focus remains on maintaining tight costcontrol throughout the business. Positioning BTG In support of the new strategy and to promote our capabilities to potentialpartners we have increased our presence at industry conferences and partneringevents. We moved from the FTSE support services sub-sector to the biotechnologysub-sector, and to help promote the new strategy to a wider group ofinternational investors we appointed Piper Jaffray as joint broker and adviseralongside Credit Suisse. Priorities for the year ahead Our priorities for the year ahead continue the work we have commenced this year.The focus continues to be to: • Build value in the pipeline through in-licensing and development activities• Secure a development and commercialisation partner for Varisolve(R)• Capture full value from the ongoing monetisation of non-core assets• Maintain cost control across all areas of the business• Further establish BTG within the industry as a credible and preferred development and licensing partner Financial review The year ended 31 March 2006 saw a major shift in BTG's strategy and financialresults. Revenues grew significantly, cash generation was strong and costs werereduced. As a result the difference in financial performance from last year tothis was very pleasing, with the Company moving from a loss after tax of £35.0min 04/05 to a profit of £1.4m in 05/06. Whilst achieving this result the Companycontinued to invest to build its pipeline of R&D programmes set to generatefuture earnings for the business. Revenues and gains BTG's revenues fall into two main categories, royalty revenues from marketedproducts and the proceeds of one-off deals, settlements or milestones. Royalty revenues in 05/06 were £39.5m (04/05: £29.2m) an increase of 35%. Mostof BTG's intellectual property is assigned to us on the basis that BTG pays aproportion of the royalty revenues it earns from the IP back to the licensor orsource after deduction of certain costs. These payments, referred to asrevenue-sharing, averaged 41% of royalty income in the year (04/05: 41%)although the terms vary patent by patent and by territory and technology from10% to around 70%. As BTG moves forward and invests more significantly in the R&D assets it acquires, these revenue-sharing percentages should reduce but theimpact on the net revenue "margin" will not be apparent for some years. Net royalty revenues after revenue sharing increased from £17.8m in 04/05 to£23.0m this year, an increase of 29%. This significant increase in the yearreflected the fact that Zimmer is now paying royalties on its sales of theartificial hip-cup design over which BTG holds patents, generating new netroyalty income of £1.7m. Without this income, the increase would have been 20%on a like-for-like basis. Revenues were also boosted by a particularly strongperformance from BeneFIX(R) (recombinant Factor IX sold by Wyeth and Baxter)where net royalties increased by 23% in the year. Other key products include Genzyme's Campath(R), where sales of the product as athird-line treatment for CLL are growing steadily. Future sales may besignificant should Genzyme's development activities allow for this product to beused in second and first-line CLL, other cancers or in multiple sclerosis. BTGalso earns low-level royalties on certain antibody humanisation patentscommercialised through the Medical Research Council. These patents apply to aselected range of monoclonal antibody products now reaching market. BTG'sroyalties from these patents are anticipated to increase gradually over thecoming years. The Group also earns good royalties from sales of artificial kneeproducts and a range of other drug and device products. The patents underlyingBTG's royalties provide coverage over periods from 6 to 15 years. Net royalties have increased by an average of around 10%-12% pa over theprevious 5 years. Forecasts for 06/07 show some sales growth although shifts inrevenue-sharing agreements on BeneFIX(R) would counteract likely sales increaseson that product. As such the aggregate increase over the two years to 31 March2008 is likely to return to the average annual range achieved in the recentpast. 05/06 04/05 Increase/ Patent Gross Gross decrease Coverage revenues revenues through £m £m £mTechnologyBeneFIX(R) 15.8 13.0 2.8 2011Hip-cup 6.2 2.6 3.6 2019Campath(R) 4.6 4.0 0.6 2017MRC humanisation IP 1.6 1.2 0.4 2015Artificial knee 1.8 1.2 0.6 2011Other 9.5 7.2 2.3 av. 2011 _____ _____ _____Royalty revenues 39.5 29.2 10.3Other revenues 10.7 9.1 1.6 _____ _____ _____Total revenues 50.2 38.3 11.9 _____ _____ _____ In addition, BTG earned significant revenues and generated gains from thelicensing, sale or settlement of certain assets and transactions. Withinlicensing deals and settlements, BTG generated revenues of £7.5m from thesettlement in May 2005 with Zimmer with related revenue sharing costs of £3.4m.Milestone receipts and licences granted on other patents generated a further£3.2m gross and £2.4m net. Gross Net revenues revenues or or proceeds profits £m £m Zimmer settlement 7.5 4.1Other settlements & milestones 3.2 2.4 _____ _____Revenues from one-off transactions 10.7 6.5 _____ _____RFID/Zebra 3.0 1.6NQR/QRS 1.1 0.2Teleshuttle/Twin Tech 20.0 9.0Other 0.1 0.1 _____ _____Sale of fixed assets 24.2 10.9 _____ _____Kudos Limited & other 1.1 0.7 _____ _____Sale of investments 1.1 0.7 _____ _____Total 36.0 18.1 _____ _____ During the year BTG concluded the sale of three sets of assets within thephysical sciences portfolio. Patents relating to radio-frequency ID tagging weresold to Zebra for gross proceeds of £3.0m and a net gain of £1.6m. QRS took andexercised an option to acquire rights to an explosives detection technology,NQR. The gross proceeds for this transaction could total $15m but given the longtime period over which these revenues would be generated (12-14 years) andconsequent uncertainty over collecting such proceeds, only $2m (£1.1m) has beenrecognised at this time. The largest transaction completed in the year was thesale of patents licensed from Teleshuttle to Twin Tech EU for gross proceeds of$35m (£20.0m). Costs, being revenue sharing and amounts due to advisers pluswriting off the net book value of the assets, resulted in a net gain of £9.0m. The other main one-off transaction was the sale of shares held in a privatecompany, Kudos, to AstraZeneca for a gain of £0.7m. Overall, one-off transactions in the year generated net revenues and gains of£18.1m with cash generated of some £20m once all liabilities are settled. These revenues and gains were pleasing in that they demonstrated the Company'sability to exit in an orderly and profitable way from the physical scienceassets. Further exits are anticipated in the next 12-24 months. Cost containment and restructuring BTG's costs in 04/05 were high and included a significant expense relating toreorganising and restructuring decisions taken during that year. In particularthe results included an expense of £6.6m in respect of uneconomic leases.Further reorganisation costs were incurred during 05/06 following the decisionto stop investing in new technologies in the physical sciences segment and adecision to outsource a number of administrative and IT functions. Costsrelating to the salaries of those declared redundant in the current year werearound £4.6m, including certain incentive packages to ensure an orderlywind-down of the asset-realisation. Sub-letting of certain of the company'sunoccupied property allowed some £0.9m of provisions made in 04/05 to be writtenback, giving an overall charge of £3.7m for the year. These changes should lead to significantly lower running rates foradministrative costs in future years. Operating expenses, being patent and litigation expenses, were at a similarlevel to 04/05 with patent renewal fees slightly down, higher litigation costsrelating to actions on the Zimmer, WebNav and Teleshuttle deals which have nowsettled and a high amortisation charge following a full assessment of the likelyvalues achievable from the patents in line with the new strategy. Looking forward, litigation expenses are not expected to be material in thecoming year, although circumstances may cause this to change. Amortisationcharges should reduce considerably following the sale or write-down of certainassets in the year and as such operating expenses for 06/07 are targeted to besignificantly lower than the £7.5m in the current year. Administrative expenses at £18.3m are £5.1m or 22% below the levels of the prioryear and savings achieved through the reorganisation mean that 06/07 operatingand administrative expenses should fall below £21m, some £3m below 05/06 levels. An exchange gain of £1.5m was achieved in the year on the conversion of certainforeign-currency denominated receipts into sterling although average exchangerates used to translate operating activities in the year were similar to thoseapplying in the previous year. In the previous year exchange losses of £0.2mwere incurred. The level of such gains and losses is difficult to forecast andthe effect may well be neutral in future years. Research and development R&D costs for the BTG group as a whole were £9.1m of which £4.5m related toVarisolve(R), £3.3m to BTG pipeline projects, £0.3m and £1.0m in the operationsof BTG's subsidiary and associate companies respectively. This compares to£16.8m in the prior year (£9.2m Varisolve(R), £6.3m BTG directed and £1.3m insubsidiaries and associates). In the case of Varisolve(R) and the othersubsidiary and associate companies these represent the entire costs of theoperations which are dedicated to research and development. In the case of BTGdirected projects, this represents the external R&D costs paid to clinicalresearch organisations and similar. The expenditure of £4.5m on Varisolve(R) in the year related to costs incurredin securing the manufacturing supply chain, including a one-off payment to thelandlords of our Wrexham secondary-manufacturing site for profit mark-upsforegone on contract manufacturing. Activities were also centred on completingwork required by the FDA and preparing for the upcoming phase II safety study.The costs of running Varisolve(R) activities in the 06/07 year excluding thephase II trial are likely to be around half of the 05/06 levels. Progress in BTG's pipeline has been pleasing. The expenditure of £3.3m is inline with budget and the decrease over last year reflects a focusing down into acore portfolio rather than investing small amounts in large numbers ofactivities. BTG's strategy as announced in May 2005 was to move this R&Dinvestment to some £10m pa over the coming 3 years as high-value opportunitiesare recognised and accessed and plans are in place to be in line with thisobjective. Costs within BTG's subsidiaries and associates are monitored actively andcarefully through the arrangements put in place through our investmentagreements. Carrying value of investments Regrettably charges of £4.2m arose in the year upon the impairment in value oftwo investments. The majority of this arose upon the loan creditors of SAMSysTechnologies Inc. calling in their debt. The assets of that company are beingsold but the expectation is that after payment of liabilities there will be noreturn to shareholders. Accordingly the fair value of this investment of £3.7mwas expensed in the year. The balance relates to an investment in a privatecompany, Ignios Limited, in which BTG has decided not to invest further. Financial income and tax BTG's cash balances are invested in short-term and call deposits. Interestearned on deposits averaged 4.5% in the year. The tax charge relates to certain withholding taxes on royalty income that arenot relievable under double-taxation treaties. Profit for the year and earnings per share Overall BTG achieved a profit for the period of £1.4m, an improvement of £36.4mover the previous year's loss of £35.0m. Reductions in costs, increases inroyalty income and gains from licences and sales of assets in the year havecombined to generate this turnaround. These profits represent earnings per share of 1.0p compared to a loss per sharein 04/05 of 23.8p based on an average of 146.6m shares in issue (04/05:145.5m). These results include a number of charges that arise under IFRS rather than UKGAAP although the charges in the 05/06 year are broadly comparable to those inthe 04/05 accounts restated under IFRS. Position at the year end At 31 March 2006 BTG's net assets were £42.2m, an improvement of £3.2m in theyear. Non-current assets The value of BTG's non-current assets fell by some £10m in the year to £24.6m.Intangible assets stood at £7.1m with additions of £2.3m being offset bydisposals of £2.2m and amortisation charges of £3.9m. The intangible assetsheld, mostly patents, are written off over the remaining life of the patent ortheir useful economic life if shorter and are subject to regular impairmentreviews. The net book value of the Group's fixed assets reduced by £1.1m from £10.7m to£9.6m through depreciation and currency movements. The major asset held is theWrexham secondary-manufacturing plant for Varisolve(R) which is still in thecourse of construction and as such is not yet depreciated. Investments in associates reduced from £3.6m to £2.7m, reflecting lossesincurred in those companies plus additions and impairment charges. Theassociates are private companies engaged in research and development.Mesophotonics Ltd is developing photonic crystal nano devices, ProtezPharmaceuticals is developing new antibiotics to overcome the problem of drugresistance and Senexis Ltd is developing small molecule drugs in the CNS space.Other investments represent holdings in companies where BTG owns under 20% ofthe share capital and investments in a number of venture capital funds. Thelargest individual investment is in Xention Discovery Limited, a drug discoverycompany focused on ion channels. In total BTG invested £1.8m in these companiesand funds during the year (04/05: £2.7m). Commitments to follow-on funding ofthe investment portfolio stood at £2.9m as at 31 March 2006. Current assets, current and non-current liabilities The trade and other receivables were £10.1m at 31 March 2006 compared to £7.4mat the prior year end, with the increase broadly in line with increasedrevenues. Current liabilities at £30.6m were in line with those at the previous year endof £28.9m although trade payables include some £7.0m in respect of unpaid costson the Teleshuttle deal concluded near the year end. Non-current liabilities at £12.9m include £9.6m in respect of the net deficit onthe company's defined benefit pension plan, together with provisions largelyagainst future lease liabilities on onerous leases. A deficit repair schedulehas been agreed with the trustees of the pension plan that will see the companycontributing £2.2m pa to the fund in addition to the current service chargesover the next 6 years. Cash BTG's cash and cash equivalents as at 31 March 2006 were £51.0m compared to£34.5m at 31 March 2005. This cash balance was reduced shortly after the yearend in settling the £7.0m of unpaid liabilities on the Teleshuttle dealmentioned above. Accordingly the "free cash" balance was around £44.0m, animprovement of over £9m in the year. The Company's profit for the year of £1.4m included non-cash charges of £3.9mfor amortisation and impairment, £0.9m for depreciation, £2.0m of non-cashcharges in reaching the profit on sales of assets, £5.2m in reducing the valueof associates and investments and around £0.8m in respect of charges for shareoptions. The Group invested £2.3m in acquiring intangible assets and £1.8m inadditional investments, spent £2m in reducing the pension scheme deficit andreduced provisions by £3m. £4.3m was also generated from the exercise of shareoptions. These items, with adjustments for working capital changes, account forthe £9m of cash generation. Consolidated income statementfor the year ended 31 March 2006 Year ended 31 March Note 2006 2005 £m £m Revenue 2 50.2 38.3Revenue sharing (20.7) (15.7) _____ _____Revenue net of revenue sharing 29.5 22.6 _____ _____ Operating and administrative expenses 3 (24.3) (31.6)Restructuring costs 4 (3.7) (11.8) _____ _____Operating expenses (28.0) (43.4) _____ _____ Varisolve(R) development (4.5) (9.2)Other research and development (3.6) (6.6)Share of results of associates (1.0) (1.0) _____ _____Research and development expenses (9.1) (16.8) _____ _____ Profit on disposal of assets and investments 5 11.6 2.2Amounts written off associates and investments (4.2) (1.0) _____ _____ 7.4 1.2 _____ _____ Operating loss (0.2) (36.4) _____ _____ Financial income 1.7 1.7Financial expenses - (0.1) _____ _____Net financial income 1.7 1.6 _____ _____ Profit/(loss) before tax 1.5 (34.8)Tax (0.1) (0.2) _____ _____Profit/(loss) for the year 1.4 (35.0) _____ _____ Attributable to:Equity holders of the parent 1.5 (34.7)Minority interest (0.1) (0.3) _____ _____Profit/(loss) for the year 1.4 (35.0) _____ _____ Basic earnings/(loss) per share 7 1.0p (23.8p) _____ _____Diluted earnings/(loss) per share 7 1.0p (23.8p) _____ _____ Consolidated balance sheetas at 31 March 2006 31 March Note 2006 2005 £m £m Non-current assetsIntangible assets 7.1 10.7Property, plant & equipment 9.6 10.7Investments in associates 2.7 3.6Other investments 5.2 9.6 _____ _____ 24.6 34.6 _____ _____ Current assetsTrade and other receivables 10.1 7.4Cash and cash equivalents 51.0 39.2 _____ _____ 61.1 46.6 _____ _____ Total assets 85.7 81.2 _____ _____ EquityShare capital 8 15.0 14.8Share premium account 8 186.3 182.2Other reserves 8 1.4 2.6Retained earnings 8 (160.5) (160.7) _____ _____Equity attributable to equity holders of the parent 42.2 38.9Minority interest 8 - 0.1 _____ _____Total equity 42.2 39.0 _____ _____ Non-current liabilitiesTrade and other payables 0.9 -Employee benefits 9.6 10.1Provisions 9 2.4 3.0Deferred tax liabilities - 0.2 _____ _____ 12.9 13.3 _____ _____ Current liabilitiesBank overdraft - 4.7Trade and other payables 28.4 19.6Provisions 9 2.2 4.6 _____ _____ 30.6 28.9 _____ _____Total liabilities 43.5 42.2 _____ _____ Total equity and liabilities 85.7 81.2 _____ _____ Consolidated cash flow statementfor the year ended 31 March 2006 Year ended 31 March 2006 2005 £m £m Profit/(loss) before tax for the year 1.5 (34.8)Profit on disposal of intangible assets and investments (11.7) (2.2)Amounts written off associates and investments 4.2 1.0Loss on sale of property, plant & equipment 0.1 -Investment income (1.7) (1.7)Interest expense - 0.1Amortisation and impairment of intangible assets 3.9 4.6Depreciation on property, plant & equipment 0.9 2.0Share-based payments 0.8 0.3Pension contributions (2.1) -Increase in debtors (1.8) (0.3)Increase/(decrease) in creditors 2.0 (5.4)(Decrease)/increase in provisions (3.0) 5.6Share of associates losses 1.0 1.0Other (1.0) - _____ _____Cash used in operations (6.9) (29.8)Interest expense - (0.1)Taxation paid (0.1) (0.1) _____ _____Net cash from operating activities (7.0) (30.0) _____ _____ Investing activitiesInterest received 1.6 1.7Purchases of intangible assets (1.3) (2.2)Proceeds on disposal of intangible assets 19.6 1.9Purchases of property, plant & equipment - (3.1)Investment in associates (0.7) (0.9)Expenditure on investments (1.1) (1.8)Proceeds on disposal of investments 1.0 2.4 _____ _____Net cash from/(used in) investing activities 19.1 (2.0) _____ _____ Cash flows from financing activitiesProceeds of share issues 4.3 - _____ _____Net cash from financing activities 4.3 - _____ _____ Increase/(decrease) in cash and cash equivalents 16.4 (32.0)Cash and cash equivalents at start of period 34.5 66.5Effect of exchange rate fluctuations on cash held 0.1 - _____ _____Cash and cash equivalents at end of period 51.0 34.5 _____ _____ Consolidated statement of recognised income and expensefor the year ended 31 March 2006 Year ended 31 March 2006 2005 £m £m Foreign exchange translation differences (0.1) (0.1)Unrealised gain on intangible assets - 0.2Actuarial (loss)/gain on pension liabilities (1.6) 0.3Change in fair value of equity securities available for sale (2.0) (7.4)Deferred tax due on revaluation of equity securities available 0.2 2.2for sale _____ _____Net expense recognised directly in equity (3.5) (4.8) Profit/(loss) for the period 1.4 (35.0) _____ _____ Total recognised income and expense for the period (2.1) (39.8) _____ _____ Attributable to:Equity holders of the parent (2.0) (39.5)Minority interest (0.1) (0.3) _____ _____ (2.1) (39.8) _____ _____ 1. Financial Information The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 March 2006 or 2005. Statutory accountsfor 2005 have been delivered to the registrar of companies, and those for 2006will be delivered in due course. The auditors have reported on those accounts;their report was (i) unqualified, (ii) did not include a reference to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2 Business segments Segment information is presented in respect of the Group's business segmentsbased on the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis. Revenue Year ended 31 March 2006 2005 £m £mMedical innovations 46.4 35.7Technology commercialisation 3.8 2.6 _____ _____ 50.2 38.3 _____ _____ Result Year ended 31 March 2006 2005 £m £mMedical innovations 5.7 (11.2)Technology commercialisation 1.4 (11.0) _____ _____ 7.1 (22.2)Restructuring (3.7) (11.8)Unallocated expenses (3.6) (2.4) _____ _____Operating profit/(loss) (0.2) (36.4)Net financing income 1.7 1.6 _____ _____Profit/(loss) before tax 1.5 (34.8)Income tax expense (0.1) (0.2) _____ _____Profit/(loss) for the year 1.4 (35.0) _____ _____ 3 Operating and administrative expenses Year ended 31 March 2006 2005 £m £mAmortisation and impairment of intangible assets 3.9 4.6Patent renewal fees 0.7 0.8Litigation costs 2.9 2.6 _____ _____ 7.5 8.0Staff costs 11.5 16.4Other administrative expenses 6.8 7.0Exchange (gains)/losses (1.5) 0.2 _____ _____ 24.3 31.6 _____ _____ 4 Restructuring costs Year ended 31 March 2006 2005 £m £mProvision for onerous leases (0.9) 6.6Restructuring costs 4.6 4.7Additional depreciation - 0.5 _____ _____ 3.7 11.8 _____ _____ 5 Profit on disposal of assets and investments Year ended 31 March 2006 2005 £m £mLoss on sale of property, plant & equipment (0.1) -Profit on disposal of investments 0.7 1.3Profit on disposal of patents 11.0 0.9 _____ _____ 11.6 2.2 _____ _____ Loss relief has absorbed the tax due in respect of the profit on disposal. 6 Operating loss Operating loss has been arrived at after charging/(crediting): Year ended 31 March 2006 2005 £m £mAuditors' remuneration: - Statutory audit 0.1 0.2 - Taxation and other advisory services 0.1 0.1Depreciation and other amounts written off property, plant & equipment 0.9 2.0Amortisation and impairment of intangible assets 3.9 4.9Net foreign exchange (gains)/losses (1.5) 0.2Research and development costs 9.1 16.8Staff costs 11.5 16.4Operating lease rentals payable: - property 3.2 2.8 - plant and equipment 0.1 0.3 7 Earnings/(loss) per share The calculation of basic earnings per share at 31 March 2006 was based on theprofit attributable to ordinary shareholders of £1.5m (31 March 2005: £34.7mloss) and a weighted average number or ordinary shares outstanding during theyear of 146.6m (31 March 2005: 145.5m), diluted earnings per share 147.9m (31March 2005: 145.5m), calculated as follows. Year ended 31 March 2006 2005Profit/(loss) after minority interests (£m) 1.5 (34.7)Profit/(loss) per share (p)Basic 1.0 (23.8)Diluted 1.0 (23.8) _____ _____ Number of shares (m)Weighted average number of shares - basic 146.6 145.5Effect of share options on issue 1.3 - _____ _____Weighted average number of shares - diluted 147.9 145.5 _____ _____ 8 Capital and reserves Share Share Retained Other Total Minority Total capital premium earnings reserves interest equity £m £m £m £m £m £m £mAt 1 April 2004 14.8 182.2 (126.7) 7.3 77.6 0.4 78.0Movement in shares held - - 0.2 - 0.2 - 0.2by TrustShare based payments - - - 0.6 0.6 - 0.6Total recognised income - - (34.2) (5.3) (39.5) (0.3) (39.8)and expense _____ _____ _____ _____ _____ _____ _____At 31 March 2005 14.8 182.2 (160.7) 2.6 38.9 0.1 39.0Movement in shares held - - 0.2 - 0.2 - 0.2by TrustShare based payments - - - 0.8 0.8 - 0.8Share capital issued 0.2 4.1 - - 4.3 - 4.3Total recognised income - - - (2.0) (2.0) (0.1) (2.1)and expense _____ _____ _____ _____ _____ _____ _____At 31 March 2006 15.0 186.3 (160.5) 1.4 42.2 - 42.2 _____ _____ _____ _____ _____ _____ _____ 9 Provisions 2006 2005 £m £mAt 1 April 7.6 2.0Provisions made during year 0.1 6.6Provisions utilised during year (2.3) (1.0)Provisions released during year (0.9) -Difference on exchange 0.1 - _____ _____At 31 March 4.6 7.6 _____ _____ Balance due within one year 2.2 4.6Balance due after more than one year 2.4 3.0 _____ _____ 4.6 7.6 _____ _____ These provisions relate to onerous leases and represent the net present value offuture obligations for both the UK and US offices of the Group, subject tofinding tenants for the properties. 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