7th Feb 2007 07:02
Stem Cell Sciences plc07 February 2007 Stem Cell Sciences plc Preliminary Results for the year ended 31 December 2006 ("Stem Cell Sciences", "SCS, "the Company" or "the Group") 7 February 2007 Stem Cell Sciences plc, the global biotechnology company focused on thecommercialisation of stem cells and stem cell technologies in research and novelcell-based therapies, is pleased to announce preliminary results for the yearended 31 December 2006. Highlights • Revenues generating in three of four SCS business units: - SC Proven(R) - supply of growth formulations and other reagents for stem cell-based research - SC Services - custom engineering and supply of cells for drug discovery and development - SC Licensing - provides access to proprietary SCS technologies • SC Therapies - stem cell-based therapeutics - Programmes to test SCS' proprietary stem cells in animal models of spinal cord injury and age-related macular degeneration initiated and in preparation respectively. • Exclusive license agreement signed with Millipore Corporation to develop and market the Company's serum free media for the growth of human embryonic stem cells ("hESCs") - a further licensing deal between the two companies. HEScGRO medium is the first commercially available animal component free medium for human ES growth. • Two new licensing deals signed with major pharmaceutical companies including one evaluation license and one non-exclusive research license. Both licenses provide SCS with up-front fees, the latter also providing milestone payments and SCS technology licensing options to improvements in SCS technology. • Opening of the new automated stem cell production facility at the Babraham Research Campus in Cambridge (UK), enabling the Company to grow and supply its novel stem cell based drug discovery and development assays for the world pharmaceutical industry. The facility also includes a state of the art robotic cell culture machine, the CompacT SelecT(TM). • Strengthening of the Board with appointment of Jeremy Scudamore and David Dodd as Non-Executive Directors. Subsequent to his appointment, David Dodd was appointed Non-Executive Chairman effective 1 January 2007 with Michael Dexter continuing to serve as Senior Independent Non-Executive Director. David's significant commercial and corporate life sciences experience, having held a number of executive positions with companies such as Serologicals Corporation, Solvay Pharmaceuticals, Wyeth, Bristol-Myers Squibb and Abbott Laboratories, and excellent track record in US commercial and financial markets will be instrumental in taking Stem Cell Sciences forward to the next stage of its development. • Expansion of US academic and commercial networks via U.S. subsidiary SCS llc (San Francisco, CA). SCS llc is focused on building sustainable academic and commercial collaborations throughout North America. • Successful co-applicant in the European Commission approved 'ESTOOLS' programme, a world leading €12 million stem cell research programme involving both academic and commercial researchers. Stem Cell Sciences is one of three commercial partners taking part in this Framework Programme (FP) VI initiative which is being led by the University of Sheffield. • Shareholders' approval of proposed dual listing on the Australian Stock Exchange ("ASX") in the first half of 2007 to raise up to AUS$10m, whilst continuing to trade on the Alternative Investment Market of the London Stock Exchange ("AIM"). Peter Mountford, President and CEO of SCS, commenting on the outlook for 2007,said: "The Company made significant progress in pursuing its strategy, particularly strengthening the infrastructure and business development. Importantly, with these solid foundations, and the successful in-licensing of several new products, SCS expects to see revenue growth in the coming year. The Board continues to be optimistic on the opportunities available to SCS and looks forward to an exciting 2007." - Ends- For further information, please contact: Stem Cell Sciences plcPeter Mountford, President and CEO 0131 662 9829Hugh Ilyine, Vice President and Chief Operating OfficerSue Furber, Director of Finance & Company Secretary Weber Shandwick FinancialLouise Robson or James White 020 7067 0700 About Stem Cell Sciences plc Stem Cell Sciences plc (SCS, AIM: STEM) is a global biotechnology company,established in Melbourne, Australia in 1994, providing products in theburgeoning stem cell research and drug discovery markets, in addition to thetargeted development of cell-based therapies for neurodegenerative disease andinjury. The Company has established a leading intellectual property (IP) and technologyportfolio that enables the commercial application of stem cells in drugdiscovery, providing the Company with early-stage revenue streams and technologydevelopment for at scale cell production of SCS cell-based therapeutics. SCSprincipal focus is in neurological disease. Revenues in the neurotech market,including pharmaceuticals, devices and diagnostics, grew 10% in 2005 to US$110billion Neurotech Insights, Volume 2/3 April 30 2006. SCS operates as a group of independent operations with laboratories in Scotland,Japan and Australia, each of which is affiliated with an academic centre ofexcellence. These include the Institute of Stem Cell Research (ISCR), Edinburgh,UK, RIKEN Centre for Development Biology, Kobe, Japan and the Australian StemCell Centre, Melbourne, Australia. SCS has four business units focused on key sustainable business strategies. SC Proven(R) provides cell culture media (liquid formulations) and reagents thatenable the growth and differentiation of stem cells. The first commerciallyavailable product, a novel, serum free, stem cell growth medium, has beenexclusively licensed for manufacture and marketing to Chemicon, part ofMillipore Corporation. SC Licensing licenses SCS proprietary technologies, such as Internal RibosomeEntry Site (IRES) and Stem Cell Selection, for application in laboratory-basedresearch and discovery. SCS has licensed technology to major pharmaceutical andbiotechnology companies including Pfizer, Sanofi Aventis, GSK, Deltagen Inc andLexicon Genetics Inc. SC Services provides specialised stem cell production for basic research anddrug discovery, including high-throughput applications. SC Therapies' goal is to develop safe and effective cell-based therapies forcurrently incurable diseases. SCS is conducting preclinical evaluations of itsneural stem cell lines in a number of therapeutic applications. The firstpreclinical programme being undertaken by SCS is in spinal cord injury repair.Its Japanese affiliate SCS KK will conduct preclinical studies for the treatmentof Duchenne Muscular Dystrophy in 2007-8. For further information on the companyplease visit: www.stemcellsciences.com Stem Cell Sciences plc Preliminary Results for the year ended 31 December 2006 ("Stem Cell Sciences", "SCS", "the Company" or "the Group") 7 February 2007 Chairman's Statement I am pleased to provide you with this update on the continued successfuldevelopments of Stem Cell Sciences during 2006, our first full year as a publiccompany. SCS is focused on the commercial application of stem cell biology, achievingcurrent revenues through the application of our technologies in stem cellresearch and drug discovery, while continuing to invest our efforts long-terminto the development of novel stem cell therapies for targeted neurologicaldiseases. This year has been highly significant for SCS operationally and in terms ofgrowing the business. During the year the Company met a number of milestonesincluding new agreements and collaborations, the launch of the first commercialproduct and the opening of new sites in Cambridge, UK and California, USA. The opening of the new automated stem cell production facility in December 2006 at the Babraham Research Campus in Cambridge enables the Company to grow and supply its novel stem cell-based drug screens and assays for the world pharmaceutical industry using state of the art robotic cell culture equipment. The Company also established a U.S. subsidiary in San Francisco, Californiawhich is focused on building sustainable research, development and commercialcollaborations throughout North America in order to expand its global presenceand pursue further developments in the US market. Under the Company's exclusive license agreement with Millipore Corporation, the first commercial product, ESGRO(R) Complete, was launched in February 2006. Later in the year the Company signed a second exclusive agreement with Millipore to develop and market the Company's serum free media for the growth of human embryonic stem cells ("hESCs"). This product, HEScGRO(R) was launched in January 2007. In November the SC Therapies unit commenced the Company's therapeutic programmein spinal cord injury signing a collaboration with the Regenerative MedicineInstitute at the National University of Ireland, Galway, with the Group's NScells entering preclinical testing for spinal cord injury at the Institute. As part of Stem Cells Sciences' ongoing involvement in Government initiativesthe Company announced its participation in the European Commission approved'ESTOOLS' programme, a world leading €12 million stem cell research programmeinvolving both academic and commercial researchers. Stem Cell Sciences is one ofthree commercial partners taking part in this Framework Programme ("FP") VIinitiative which is being led by the University of Sheffield. Stem cells hold great promise to deliver longer-term potential as safe andeffective treatments for a variety of human illnesses that are currently withoutcures. The Company aims to be a key provider of the cellular materials neededfor these therapies. By using stem cells, scientists are already able toinvestigate and better understand normal body processes and those of humandisease, by testing specific genes to identify their role in cells, and todiscover and test new drugs in a representative 'human' environment. The abilityto grow and use stem cells in the laboratory is accelerating basic research andwill ensure faster and more successful drug discovery and development. The keychallenges for the successful application of stem cells are robust andreproducible growth and differentiation (generation of pure populations of thedesired cell type). Stem Cell Sciences has developed, and continues tomethodically develop, the products and technologies needed to overcome thesechallenges. During 2006, the Company initiated the therapeutic evaluation of itsproprietary NS cells in several areas of neurological diseases including,collaborations and evaluations to test cells in animal models of spinal cord injury, age-related macular degeneration and Duchenne's Muscular Dystrophy. The Company recognises that the development of new cell-based therapies willrequire the support and participation of multiple organisations and individualsincluding governments, universities, clinicians, financiers, patients andpatient support groups, on a world-wide and collaborative basis. To thispurpose, the Company continues to build a global network of operations tofacilitate interaction and access to key contributing academic and commercialorganisations around the world. In addition to achieving commercial progress and in several areas of researchand development, the Company continued to strengthen its board of Directorsthrough new additions and organising for the long-term commercial success. InJuly 2006, Jeremy Scudamore joined our board as a Non-Executive Director, whichwas followed by my joining in October, 2006 and subsequent appointment asNon-Executive Chairman on 1 January 2007. It is an honour to work with my fellow board members and the management team incontinuing to successfully develop Stem Cell Sciences. On behalf of the board, Iwould like to thank Dr Mike Dexter for his leadership and service as Chairmanover the past 3 1/2 years. We are pleased that Mike will continue to serve on the board as Senior Independent Non-Executive Director. Finally, the Board would like to thank the Company's employees for theircontinued commitment in building the success of SCS, as well as, thank you, ourshareholders, for your continued support of this exciting company. It is theBoard's focus to build increased shareholder value, while developing a highlycompetitive organisation, serving customers world wide through the successfulapplication of our products, technologies and services in stem cell biology. David A Dodd 6 February 2007Chairman Operating and Financial Review Stem Cell Sciences was pleased to celebrate numerous significant milestones in2006 including several new collaborative research and licensing agreements,additional technology in-licensing and the openings of our new US office and ourautomated cell production facility in Cambridge, UK. Our agreements with organisations such as NeuroDiscovery Ltd, the RegenerativeMedicine Institute ("REMEDI") at the National University of Ireland, Galway,Millipore Inc., the University of Nice, Sophia Antipolis, the Centre National dela Recherche Scientifique ("CNRS") and additional new technologies in-licensedfrom the University of Edinburgh, provide a mixture of revenue generatinglicenses, new product opportunities and technology development programmes forSCS. Importantly, our achievements in 2006 are consistent with the Company's businessplan and efforts to further expand Stem Cell Sciences' position as a leader inthe stem cell field. A delay in anticipated revenue flow, in part due tothe delay in commissioning our automated production facility and the lateclosure of a recent pharmaceutical company out-licensing deal have limited SCStotal revenues (including other operating income) to a marginal increase over our 2005 figures. Financial Review The Company reports turnover of £0.7m (2005: £0.8m) for the year ended 31December 2006, comprising £0.5m project deliverables and royalties and £0.2m product sales. The delay in anticipated revenue flow has resulted in a slight decrease over our 2005 figures. However, we were pleased to report an increase in royalties received and an associated broadening of our revenue base from our core business units, SC Proven and SC Services. Other operating income of £0.4m (2005: £0.2m) represents grant income from theUK and European research consortia. Expansion to Research and Developmentactivities led to an increase in operating costs of 12% to £3.7m. Capitalexpenditure for the year of £0.6m represented the considerable investment madein the Cambridge automated cell-production facility. Net cash outflow from operations was £2.4m and, after allowing for cash inflowsfrom investment returns and taxation received, the cash outflow before newfinancing was £2.8m. The overall decrease in cash in the year was £2.8m; netfunds at the end of the year were £2.5m. Cash balances held are invested ininterest bearing accounts. The current cash resources are forecast by thedirectors to be sufficient to enable the Group to continue to trade until August 2007. In October 2006, SCS announced it was considering a dual listing on theAustralian Stock Exchange to raise up to AUS$10m which will be used to fund andaccelerate current business development and research activities. As the shares were trading at below nominal value in order to facilitate the fundraising the Company undertook a capital reorganisation which was approved by shareholders at the EGM held on 1 November 2006. Each of the issued and unissued Ordinary Shares of £0.50 each in the capital of the Company were subdivided into one Ordinary Share of £0.01 and one Deferred Share of £0.49. On 9 November 2006 the Company issued one Ordinary Share for £0.46 and used part of the proceeds received from that issue to buy back all of the Deferred Shares that were in issue. Following the buyback of the Deferred Shares by the Company all of the Deferred Shares were cancelled. The proposed flotation, which has received the approval of shareholders of the Company in a general meeting, is at an advanced stage and has been publicly announced. Costs of £230,000 are held in prepayments in relation to work carried out by professional advisers in relation to the flotation to the extent that these are costs which will be treated as issue costs in relation to the new shares to be issued on the proposed flotation. While there can be no certainty either that the proposed flotation will be successful or that it will raise the required funds, the Directors are of the opinion that, taking into account existing facilities available to the Company and the expected proceeds from theAustralian flotation, the funds available to the Group will be sufficient fortrading requirements for at least twelve months from the date of these financialstatements. The Company is progressing with the Listing and a further update will be provided in due course. Share Based PaymentsDuring the year the Company has implemented FRS20 Share Based payments, whichincreased administrative expenses by £130,000. This represents a notional chargein respect of employee and director share options. The notional charge has notimpacted on the reported net assets, since the charge in the profit and lossaccount is balanced by a credit to the reserves. Group cash flow is alsounaffected. Performance of SC Business Units SC Proven(R): Supply of growth media and reagents SC Proven is responsible for the development and commercialisation of stem cellculture media, cell lines and other reagents required to grow, differentiate andapply stem cells to a variety of research applications. SC Proven(R) is aregistered trademark of the Company and products released under this trademarkgenerate trade mark fees, upfront licensing and renewal fees, milestone paymentsand royalty income for SCS. In 2005 the Company's SC Proven(R) business unit established a manufacturing anddistribution channel with Chemicon Inc., now part of Millipore Corporation, forits serum free stem cell culture media products. The first SC Proven(R) productfor growth of mouse embryonic stem cells, ESGRO(R) Complete, was launched inFebruary 2006 and has been well received and broadly adopted by thoseorganisations trialling the product. A further agreement for HEScGRO(R), a serum free cell culture media to enableimproved growth of human embryonic stem cells, was announced with Chemicon inOctober 2006 and commercial sales commenced in January 2007. SCS believes thatthis product is the first commercially available animal component-free medium inthe industry that offers improved methods for growing human embryonic stem cellswithout the need for animal serum. The current world market for cell culture media and reagents has been estimatedat US$950m, rising to US$1.8bn by 2010. Stem cell media products represent asmall component of this market although this is expected to grow as research inthis relatively new area of science expands through increasing governmentresearch investment. The Company is continuing to develop new cell culture media products suitablefor use with its mouse and human NS cells, and is also refining and developingmedia for the production and differentiation of human multi-potentadipocyte-derived stem ("hMADS") cells into fat, bone and muscle cells. SCS will continue to source new discoveries to improve and expand on its SC proven(R) range. SC Licensing: Providing access to proprietary stem cell technologies This SC business unit sub-licenses the Company's proprietary portfolio of stemcell technologies to the biotechnology and pharmaceutical industries. Over the course of the year SCS continued to develop and strengthen its existinglicensing arrangements, signing two pharmaceutical licencing deals, as well asseeking additional avenues for out licensing its technology. To develop marketpenetration in the USA, SCS established a U.S. subsidiary in San Francisco,California, and expanded its global business team with the addition of a GroupBusiness Development Manager. The Company completed two pharmaceutical licensing deals in 2006 including itsfirst out-licensing evaluation programme for NS cells and a non-exclusivelicensing agreement. Both licenses provide SCS with up-front fees, the latter also providing milestone payments and SCS technology licensing options to improvements in SCS technology. In July 2006, the Company in-licensed a novel human stem cell, hMADS cell, fromthe University of Nice, Sophia Antipolis and the Centre National de la RechercheScientifique ("CNRS"). The cells are capable of producing fat and bone at veryhigh efficiency, and will be suited for drug discovery in such areas as obesityand osteoporosis. SCS holds world-wide exclusive rights to commercialise thesecells for drug discovery in the field of obesity and an exclusive option in thefield of osteoporosis. SCS is currently progressing negotiations to out-licensethe hMADS technology. SC Services: Custom engineering and supply of cells for research and drugdiscovery In December 2006 SCS opened a new automated cell production facility at theBabraham Research Campus in Cambridge, UK, enabling the Company to grow andsupply its novel stem cell based drug screens and assays for the pharmaceuticalindustry using state of the art robotic cell culture equipment. The new facilityis equipped with robotic devices for automated, parallel production of multiplecell lines and the Company will continue to expand services for contractengineering and cell supply of Embryonic Stem ("ES") cells, hMADS and NS cells. This significant investment by SCS is central to the Company's near term revenueflow and longer-term business strategy. So called high throughput screening isapplicable to both drug discovery and discovery of regulatory molecules forenhancing the production of stem cells in the laboratory; indeed one of SCS'most promising media products is based on a combination of three molecules firstidentified as drug candidates. By up-scaling cell based screening capability forthe drug discovery industry, SCS also enhances its ability to identify theregulatory molecules which underpin the Company's core competency - stem cellregulation. In July 2006, the Company announced a collaborative agreement withNeuroDiscovery Limited through its UK-based subsidiary, NeuroSolutions Limited.The collaboration aims to provide high-value contract services tobiopharmaceutical companies and to supply them with native human neurones,validated for known ion channels and receptors that are tuned to their drugdiscovery needs. The initial focus of the collaboration will be on targets thatare relevant to the future treatment of major neurological diseases. A recent report stated that about half of all pharmaceutical company screeninggroups in lead discovery recently expressed an interest in obtaining primary,stem and progenitor cells for cell-based screening. Under the NeuroSolutionscollaboration, the stem cell derivation, cell growth and differentiation skillsof SCS will be combined with NeuroDiscovery's specialised electrophysiologytechniques. The companies will combine their automated cell production andhigh-throughput patch-clamping equipment to produce functionally validated cellssuited for industry's current drug discovery needs. SC Therapies: Stem Cell-based Therapeutics The use of stem cells to repair diseased or damaged tissue (termed "RegenerativeMedicine") is expected to lead to significant new therapeutic opportunities inmedicine in the next decade or so. It is thought that many intractable diseasesmay be curable using this technology. SC Therapies is focused on the developmentof cell therapies for central nervous system ("CNS") diseases. Stem cells of theCNS represent a core scientific competency of the Company and its collaboratinginternational network. Initial research is being directed to developing and characterising celllines of potential therapeutic value in the treatment of Parkinson's disease,age related macular degeneration (eye disease), epilepsy and Duchenne's MuscularDystrophy ("DMD"), the latter through its Japanese affiliate, SCS KK. In November 2006 the Company signed a collaborative agreement with theRegenerative Medicine Institute ("REMEDI") at the National University ofIreland, Galway. SCS' NS cells have commenced preclinical testing for spinalcord injury at the Institute. The initial study will examine the ability of theNS cells to provide functional improvements in models of spinal cord injury.Results from the initial study are expected in the first quarter of 2007. Ifthis study proves successful, SCS and REMEDI plan to expand the collaborationwith more extensive testing. Intellectual Property Stem Cell Sciences has secured exclusive rights to a high quality intellectual("IP") portfolio for efficient production, genetic engineering and the selectionof stem cells for use in drug discovery. In January 2006 the Company signed a technology transfer agreement with theUniversity of Edinburgh, which provides the basis for continued formalcollaboration in the area of stem cell research. SCS continues to enhance its IP portfolio through in-licensing and internal development. As mentioned above, the Company secured exclusive rights to hMADS cell for usein drug discovery in the field of obesity and an exclusive option in the fieldof osteoporosis. This patent pending technology is expected to have immediateand significant benefits when used for drug discovery. Major Government and Not-for-profit Initiatives Stem Cell Sciences recognises the importance of collaborating with governmentand not-for-profit funded initiatives in the stem cell field. The Company hasestablished itself on a global basis with operations in Europe, Asia andAustralia participating in collaborative research programmes of this nature. Aprinciple objective of the Company's foundation and on-going operations is totry to return benefit to those that invest, including regional governmentsseeking to build wealth on local innovation. In August 2006 the Company announced its participation in the EuropeanCommission approved 'ESTOOLS' programme, a world leading €12 million stem cellresearch programme involving both academic and commercial researchers. Stem CellSciences is one of three commercial partners taking part in this FrameworkProgramme ("FP") VI initiative which is being led by the University ofSheffield. Stem Cell Sciences brings its technologies and expertise to theproject and plans to use any discoveries to supply improved cell based drugscreening and toxicology options to the pharmaceutical and biotechnologyindustries. In the longer term, all these technologies will mesh together tohelp the Company deliver new stem cell therapies. Strategy The Company's strategy is to expand the product pipeline and accelerate thetechnology development needed to provide high quality cells for therapeutic use,by working in partnership with academia, industry and governments. SCS developsand protects the core technology needed for cell supply in stem cell-basedacademic and pharmaceutical research. The Company intends to continue commercialising its immediate research productopportunities from its SC Proven(R) business unit (cell culture media andsupportive reagents) via manufacturing, marketing and distribution agreementswith major research product providers such as Millipore. SCS retains all rightsto SCS products and technologies for therapeutic applications. SCS is developing further business opportunities in stem cell-based industrialresearch via technology licensing, custom engineering and production of cells,and the provision of collaborative research support for biotechnology andpharmaceutical company partners under its SC Licensing and SC Services businessunits. SCS is also leveraging its technology platform to secure supportive intellectualproperty via cross-licensing of its technology with the biotechnology andpharmaceutical companies. Current trading and outlook The Company made significant progress in pursuing its strategy, particularly strengthening the infrastructure and business development. Importantly, with these solid foundations, and the successful in-licensing of several new products, SCS expects to see strong revenue growth in the coming year. The Board continues to be optimistic on the opportunities available to SCS andlooks forward to an exciting 2007. Peter Mountford 6 February 2007President and CEO - Ends- For further information, please contact: Stem Cell Sciences plcPeter Mountford, President and CEO 0131 662 9829Hugh Ilyine, Vice President and Chief Operating OfficerSue Furber, Director of Finance & Company Secretary Weber Shandwick FinancialLouise Robson or James White 020 7067 0700 Stem Cell Sciences plcConsolidated profit and loss accountfor the year ended 31 December 2006 Note 2006 2005 £'000 £'000 Restated Turnover 2 742 847 Cost of sales (157) - -------- --------Gross profit 585 847 Administrative expenses (2,505) (2,481)Research and development costs (1,197) (836)Other operating income 367 194 -------- --------Group operating loss (2,750) (2,276) Share of operating loss of associate (468) (512) -------- --------Total operating loss (3,218) (2,788) Other interest receivable and similar income 178 130 -------- --------Loss on ordinary activities before taxation (3,040) (2,658) Tax credit on loss on ordinary activities 3 62 139 -------- --------Loss for the financial year (2,978) (2,519) ======== ========Loss per ordinary shareBasic and diluted loss per share 4 (13.3)p (13.6)p ======== ======== Turnover and loss on ordinary activities before taxation for the current andprevious year relate wholly to continuing activities. Consolidated statement of total recognised gains and lossesfor the year ended 31 December 2006 2006 2005 £'000 £'000Loss for the financial year Restated Group (2,510) (2,007)Share of loss of associate (468) (512) -------- --------Total loss for the financial year (2,978) (2,519) Net exchange differences on the retranslation of overseas investments (119) (11)Unrealised gain on dilution of interest in associate 126 776 -------- --------Total recognised gains and losses relating to the financial year (2,971) (1,754) ======== ======== Stem Cell Sciences plcConsolidated balance sheetat 31 December 2006 2006 2006 2005 £'000 £'000 £'000Fixed assetsTangible assets 656 115Investment in associate 284 710 -------- -------- 940 825Current assetsDebtors 646 322Cash at bank and in hand 2,463 5,227 -------- -------- 3,109 5,549 Creditors: amounts falling due within one year (1,142) (737) -------- --------Net current assets 1,967 4,812 -------- -------- Total assets less current liabilities 2,907 5,637 Creditors: amounts falling due after more than one year (111) - Net assets 2,796 5,637 ======== ======== Capital and reservesCalled up share capital 223 11,151Share premium account 2,297 2,297Capital redemption reserve 10,928 -Foreign exchange reserve (144) (25)Merger reserve (1,248) (1,248)Profit and loss account (9,260) (6,538) -------- --------Total shareholders' funds 2,796 5,637 ======== ======== Stem Cell Sciences plcConsolidated cash flow statementfor the year ended 31 December 2006 Note 2006 2005 £'000 £'000Cash flow statement Cash outflow from operating activities 6 (2,396) (1,797)Returns on investments and servicing of finance 7 152 130Taxation 121 102Capital expenditure and financial investment 7 (636) (34) -------- --------Cash outflow before financing (2,759) (1,599) Financing 7 - 5,809 -------- --------(Decrease)/increase in cash in the year (2,759) 4,210 ======== ======== Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in the year (2,759) 4,210 Foreign exchange movements (5) 3 -------- --------Movement in net funds in the year 2,764 4,213 Net funds at the start of the year 5,227 1,014 -------- --------Net funds at the end of the year 8 2,463 5,227 ======== ======== Stem Cell Sciences plc Notes 1 Accounting policies The preliminary financial information has been prepared on the basis of theaccounting policies set out in the most recent set of financial statements for the year ended 31 December 2005 except that in this preliminary financial information FRS 20 'Share-based payments' has been adopted for the first time. The accounting policy under this new standard is set out below together with an indication of the effects of its adoption. Annual accounts The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2006 or 2005. Statutory accounts for 2005 have been delivered to the Registrar of Companies, and those for 2006 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) included a reference to the matters referred to in the Basis of Preparation note below to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. Basis of preparationThe financial statements have been prepared in accordance with applicableAccounting Standards and under the historical cost accounting rules. The financial statements are prepared on a going concern basis which thedirectors believe to be appropriate for the following reasons. The Group is involved in the research, development and commercialisation of stemcells and stem cell technology. At this stage of its development it has limitedrevenue arising from licensing arrangements, contract research and product salesand its costs exceed its revenue. The Group will continue to absorb cash untilits products are commercialised. The Group's current cash resources are forecast by the directors as beingsufficient to enable it to continue to trade until August 2007. The Group isproposing a flotation on the Australian Stock Exchange in H1 2007 to raise up to AUS$10 million which will be used to fund the start up costs of its manufacturing facility, develop its presence in the US and begin pre trials into neural and other cell therapies in addition to supporting its ongoing research and development activities. The proposed flotation, which has received the approval of shareholders of the company in a general meeting, is at an advanced stage and has been announced publicly. Costs of £230,000 are held in prepayments in relation to work carried out by professional advisers in relation to theflotation to the extent that these are costs which will be treated as issuecosts in relation to the new shares to be issued on the proposed flotation. While there can be no certainty either that the proposed flotation will besuccessful or that it will raise the required funds, the Directors are of theopinion that, taking into account existing facilities available to the Group andthe expected proceeds from the Australian flotation, the funds available to theGroup will be sufficient for the Group's trading requirements for at leasttwelve months from the date of these financial statements. However, as noted there can be no certainty in relation to these matters, whichmay cast significant doubt on the Group's ability to continue as a goingconcern. The Group may, therefore, be unable to continue realising its assetsand discharging its liabilities in the normal course of business but thefinancial statements do not include any adjustments that would result fromeither its planned flotation not taking place or raising insufficient funds. Carrying value of investment in associate company The Group holds 24.8% of an associate company, Stem Cell Sciences KK, a company incorporated in Japan, which is equity accounted in the consolidated financial statements. The carrying value of the investment at 31 December 2006 was £284,000. Stem Cell Sciences KK is also involved in research and development and currently its costs exceed its revenues. The associate's cash resources are forecast by the directors of that company to be sufficient to enable it to continue to trade until July 2007. It has carried out several successful fund raisings over the last few years and it proposes to carry out a further fund raising in March 2007. While there can be no certainty that its proposed fund raising will be successful or will raise the required funds, the Directors of the Company are of the opinion that, taking into account existing funds available to the associate and the expected proceeds from its fund raising, the funds available to that company will be sufficient for its trading requirements for at least twelve months from the date of these financial statements and that the carrying value in the Group financial statements is therefore appropriate. Were the associate's fund raising to fail or be insufficient, the Group's investment would have to be written down to reflect an impairment. Share-based paymentsFRS 20 Share-based payments has been adopted in the current year. As a resultof the introduction of FRS20, a share-based charge has been made to the loss forthe financial year of £130,000 (December 2005: £138,000). There is acorresponding credit to the profit and loss reserves, and accordingly there isno net effect on net assets at the end of each of the periods. The share option programmes allow employees to acquire shares of the Company.The fair value of options granted after 7 November 2002 and those not yet vestedas at 1 January 2006 is recognised as an employee expense with a correspondingincrease in equity. The fair value is measured at the date of grant and spreadover the period during which the employees become unconditionally entitled tooptions. The fair value of the options granted is measured using an optionpricing model, taking into account the terms and conditions upon which theoptions were granted. The amount recognised as an expense is adjusted to reflectthe actual number of share options that vest except where variations are dueonly to share prices not achieving the threshold for vesting. 2 Segmental information Australia Japan UK Total £'000 £'000 £'000 £'000Year ended and as at 31 December 2005 Restated Restated Restated Turnover 835 - 12 847 ======== ======== ======== ========Group operating loss (422) - (1,854) (2,276)Share of operating loss of associate - (512) - (512)Interest receivable 14 - 116 130 -------- -------- -------- --------Group loss before taxation (408) (512) (1,738) (2,658) ======== ======== ======== ========Net assetsSegmental net assets 318 - 4,609 4,927Associate's net assets - 710 - 710 -------- -------- -------- --------Total net assets 2005 318 710 4,609 5,637 ======== ======== ======== =======Year ended and as at 31 December 2006Turnover 651 - 91 742 ======== ======== ======== ========Group operating loss (777) - (1,973) (2,750)Share of operating loss of associate - (468) - (468)Interest receivable 10 - 168 178 -------- -------- -------- --------Group loss before taxation (767) (468) (1,805) (3,040) ======== ======== ======== ========Net assets/liabilitiesSegmental net assets/liabilities (766) - 3,278 2,512Associate's net assets - 284 - 284 -------- -------- -------- --------Total net assets/liabilities 2006 (766) 284 3,278 2,796 ======== ======== ======== ======== 3 Taxation 2006 2005 £'000 £'000Tax on loss on ordinary activities:Current tax:Overseas taxation credit 62 139 ======== ======== The tax credit for the year and previous financial year relates to overseas creditsreceived relating to research and development. 4 Loss per share Loss per share is calculated as follows: 2006 2005 2006 2005 Loss Loss Loss Loss £'000 £'000 pence pence Restated per share per share Restated Basic (2,978) (2,519) (13.3)p (13.6)p ======== ======== ======== ========Diluted (2,978) (2,519) (13.3)p (13.6)p ======== ======== ======== ======== The weighted average number of shares used in each calculation is as follows: 2006 2005 Number of Number of shares shares Average number of shares in issue during the year 22,301,194 18,470,017 ======== ======== The loss attributable to ordinary shares and the number of ordinary shares forthe purpose of calculating the diluted earnings per share are identical to thoseused for basic earnings per share. The exercise of share options would have theeffect of reducing the loss per share and consequently is not taken into accountin the calculation for diluted loss per share. 5 Reconciliation of movements in shareholders' funds 2006 2005 £'000 £'000 RestatedLoss for the financial year (2,978) (2,519) Net proceeds from share issues - 5,814Credit in relation to share based payments 130 138Unrealised foreign exchange gain/(loss) (119) (11)Unrealised gain on dilution of interest in associate 126 776 -------- -------- Net addition to/(reduction) in shareholders' funds (2,841) 4,198Opening shareholders' funds 5,637 1,439 -------- -------- Closing shareholders' funds 2,796 5,637 ======== ======== 6 Reconciliation of operating loss to operating cash flows 2006 2005 £'000 £'000 RestatedGroup operating loss (2,750) (2,276)Charge in respect of share based payments 130 138Depreciation 91 30Increase in debtors (633) (171)Increase in creditors 766 482 -------- --------Net cash outflow from operating activities (2,396) (1,797) ======== ======== 7 Analysis of cash flows 2006 2005 £'000 £'000 Returns on investments and servicing of financeInterest received 152 130 -------- --------Net cash inflow from returns on investment and servicing of finance 152 130 ======== ========Capital expenditure and financial investmentPurchase of tangible fixed assets 636 34 -------- --------Net cash outflow from capital expenditure and financial investment 636 34 ======== ======== FinancingIssue of ordinary share capital - 5,809 -------- --------Net cash inflow from financing - 5,809 ======== ======== 8 Analysis of net funds At beginning Cash flow At end of year of year £'000 £'000 £'000 Cash in hand and at bank 5,227 (2,764) 2,463 ======== ======== ======== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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