Final Results

Abzena plc

Full year results: integration and growth seen across the Group, with 41% underlying increase in revenues

Cambridge, UK, 13 June 2017 - Abzena plc (AIM: ABZA, 'Abzena' or the 'Group'), a life sciences group providing services and technologies enabling the development and manufacture of biopharmaceutical products, has published its full year results for the year to 31 March 2017.

Corporate highlights

· Integration of Abzena's service offering for biopharmaceutical development and manufacturing across three sites in UK and US delivering expected revenue synergies

· Licence deal with US biopharma for ThioBridge™ ADC technology for up to 10 products, with potential to deliver $300m in licence fees and milestone payments plus royalties

· Maturation of ABZENA Inside clinical stage partner product portfolio with five Phase II products, including three with major biopharma companies, in addition to Gilead's andecaliximab (formerly GS-5745) in Phase III gastric cancer study as well as Phase II studies in two further indications

· Executive management team strengthened with appointment of Chief Business Officer and President, Abzena (US)

Financial summary

· Revenue increased 89% to £18.7 million (FY16: £9.9 million)

· Underlying revenue growth of 41% (Proforma FY16: £13.3 million)

· Increased administrative expenses due to expansion of the Group, particularly in US

· Research & development expenditure reduced to £3.8 million (FY16: £4.2 million) as business increases focus on service business

· EBITDA loss reduced 17% to £7.9 million (FY16: £9.5 million)

· Reported loss reduced 6% to £9.1 million (FY16: £9.7 million)

· Cash at year end of £4.1 million (FY16: £13.7 million)

Post-period events

· Raised £23.9 million (net of expenses) to fund investment and growth plan to accelerate transition to profitability

· Composite Human Antibody licence deal signed with public US biotech company with potential to deliver$19 million milestone payments

· Bioverativ's agreement to acquire True North Therapeutics and its ABZENA Inside product TNT009, for consideration of up to $825 million

John Burt, CEO of Abzena, commented:

"The past 12 months have been a combination of integration and preparing the Group for significant growth.

"Integration of our US sites into the Abzena Group is starting to deliver the expected revenue synergies. We are increasingly seeing our partners utilise our services on a repeat basis and engage with the range of services across the domains of biology, chemistry and manufacturing. The business now has a solid platform from which to expand.

"The recent fund raising from current and new investors gives us the means to establish the capacity to meet the increasing demand for our integrated services and will accelerate our progress towards profitability."

Enquiries:

About Abzena

Abzena (AIM: ABZA) provides proprietary technologies and complementary services to enable the development and manufacture of biopharmaceutical products.

The term 'ABZENA Inside' is used by Abzena to describe products that have been created using its proprietary technologies and are being developed by its partners, and include Composite Human Antibodies™ and ThioBridge™ Antibody Drug Conjugates (ADCs). Abzena has the potential to earn future licence fees, milestone payments and/or royalties on 'ABZENA Inside' products.

Abzena offers the following services and technologies across its principal sites in Cambridge (UK), San Diego, California (USA) and Bristol, Pennsylvania (USA):

· Immunology research studies, including immunogenicity assessment of candidate biopharmaceutical products;

· Protein engineering to create humanized antibodies and deimmunised therapeutic proteins;

· Cell line development for the manufacture of recombinant proteins and antibodies;

· Contract process development and GMP manufacture of biopharmaceuticals, including monoclonal antibodies and recombinant proteins for preclinical and clinical studies;

· Contract synthetic chemistry and bioconjugation research services, focused on antibody-drug conjugates (ADCs);

· Proprietary site-specific conjugation technologies and novel payloads for ADC development; and

· GMP manufacturer of ADC linkers, payloads & combined linker-payloads.

For more information, please see www.abzena.com

Chairman's Statement

This has been a year of integration and growth across Abzena, both internally and in terms of the Group's broader corporate offering.

During the period, there has been significant organic revenue growth across each of the business divisions with increasing demand from customers to utilise multiple aspects of the Group's services and technologies.

There has been the need to increase the investment in Abzena's sites to meet the growing demand for its services and technologies. The steps put in place during the year and since will enable Abzena to manage this demand more effectively and provide a clearer trajectory to profitability through this demand-led growth plan.

With this significant advance of the business, the opportunity was taken to further build the Group's executive management team. In October 2016, John Manzello and Sven Lee took up senior executive appointments in the US as President, Abzena US and Chief Business Officer, respectively. Both John and Sven have made an immediate and meaningful impact upon the business as members of the executive management team.

The evolution of the ABZENA Inside portfolio has continued apace. There are now 12 clinical products within the portfolio: one at Phase III stage with another five in Phase II. Most importantly, the Group expects to see multiple data points across the portfolio in the next 12 months. The quality of these companies and their products strongly validates the quality of Abzena's technology and know-how which is incorporated. Further validation comes when companies developing ABZENA Inside products are acquired as with Bioverativ's acquisition of True North Therapeutics, and its ABZENA Inside product TNT009, at a price of up to $825 million. This acquisition is the fourth such deal in which a developer of ABZENA Inside products has been acquired in deals now totalling in excess of $2.3 billion.

Whilst the Abzena Inside portfolio is generally progressing, Gilead's decision to terminate the development of simtuzumab was, of course, disappointing. The nature of biopharmaceutical development means that not all development candidates will demonstrate the efficacy, safety and quality required to progress through to product registration. Abzena's business model anticipates that there will be attrition amongst its partners' products, including ABZENA Inside products from which the Group could derive licence fees, milestone payments and/or royalties. However, without requiring investment by Abzena in their development, the Group has the potential to share in their future success as these products progress through development, approval and commercialisation although the value and timing of future licence revenues is uncertain.

The significantly strengthened balance sheet with the post-period end fundraise of £23.9 million (net of expenses) enables the Group to pursue its investment plans across its three sites in the UK and US. Execution of these plans will enable the Group to realise its growth ambitions and accelerate the transition to profitability.

The Group appreciates the support of its institutional investors and their commitment to the recent fundraise and is pleased to welcome several new institutional investors as the shareholder register expands.

With the continued increase in top line revenues and the added strength in depth and geography of Abzena's team, the progress shown across the Group allows the Board to be confident that Abzena has a bright future as it continues its journey to profitability.

Last, but not least, I thank Abzena's staff for their commitment to the Group and the value that they provide to its partners as they develop the next generation of innovative biopharmaceutical products.

K. Cunningham

Chairman

12 June 2017

Chief Executive Officer's Review

Introduction

Abzena is a fast growing provider of specialist services and proprietary technologies to the biopharmaceutical market. The services part of the business comprises a range of biology and chemistry research and biomanufacturing services to enable our customers to pursue clinical development of their innovative biopharmaceutical product candidates.

The Group also has a portfolio of ABZENA Inside products. This term is used to describe partners' products that have been created using Abzena's proprietary technologies and which are undergoing preclinical and clinical development. These products include Composite Human Antibodies™ and ThioBridge™ ADCs. Abzena has the potential to earn future licence fees, milestone payments and/or royalties on these ABZENA Inside products, as well as further service revenues as these products progress through development.

Abzena has grown significantly in recent years, both organically and through acquisitions. The Group has expanded across three sites, San Diego, California (CA) and Bristol, Pennsylvania (PA) (both located in USA) and Cambridge, UK. In San Diego, the focus is on GMP manufacture of biopharmaceuticals, in Bristol, chemistry research and manufacture of ADCs and in Cambridge, research across biology and chemistry.

The integration and growth across Abzena has delivered an underlying increase in Group revenues of 41%. The investment and growth plan now being pursued is targeting compound annual revenue growth of 40% over the period of the next three years. Combined with increasing gross margins and benefits of operational leverage for the growing Group, the path to profitability becomes clearer.

Strategy

The focus for the year has been to drive greater engagement, including by cross-selling and encouraging longer term relationships, through an increasingly comprehensive offering. The response from customers and partners has been very positive.

Abzena has been able to offer a greater range of products and services to its customers, enabling more cross-selling and extended customer engagement for future business development. The offering of GMP manufacturing has also been a major draw.

In the broader marketplace, there is considerable activity and investment underway to keep pace with increasing demand for biopharmaceutical discovery, development and manufacturing services. There has been consolidation within the outsourced biopharmaceutical services sector as companies seek to broaden their offerings and establish scale efficiencies.

As Abzena has sought to meet the demand for its services, the growth of the business has been constrained by a lack of capacity. This has required investment to expand capacity and to improve efficiency and future scalability across the sites. Increased investment across the Group's facilities has necessitated increased managerial capability and business support functions to deliver the growth plan, whilst seeking the operational leverage required to progress to Group profitability. Therefore, as previously reported, the administrative expenses have increased, particularly in the US, as the Group sets itself up for delivery of the investment and growth plan.

The rationale behind the recent, post period, fund raising was to pursue a demand-driven investment plan to create critical mass across the business, driving revenue growth margin improvement and operational gearing to accelerate profitability for the Group.

Biology research services

The Biology services division provides a range of services across immunology, protein engineering and bioassay. The revenue for this division has increased by 8% for the year to £5.7 million (FY16: £5.3 million), representing 32% of the Group's service revenues.

Over the year, the Group has continued to develop its immunology research services capabilities whilst working on92 studies for a broad range of international clients, including multiple studies for several major biopharma companies. Increasingly, the Group's customers are working with Abzena to address research questions beyond the core EpiScreen immunogenicity assessment platform. The immunology group is pursuing the opportunity to increase the standardisation and robustness of immunogenicity assessment assays. Abzena is a leader in this field and benefits from being an active contributor to the industry-wide dialogue on immunogenicity assessment assays as part of the drug development process.

Increasingly, the immunology group works in collaboration with the newly established bioanalytical group within the Chemistry division to establish immunopeptidomics capabilities and, with the bioassay group, in developing in vitro immunological assays, for research applications within the immuno-oncology field.

In a similar integrated manner, the bioassay group works closely with the chemistry and biomanufacturing groups to support broader customer programmes, including the development of potency assays alongside biomanufacturing process development for customers such as Faron Pharmaceuticals, and conducting cytotoxicity assays for ADC projects, including for the Group's two major ThioBridge™ licence partners.

The protein engineering group has completed six Composite Human Antibody projects during the year with five further projects ongoing at the end of the year, with these projects contributing to the Group's licence revenues through technology access fees being earned in addition to the service revenues for each project.

As part of the integrated offering from Abzena to enable development programmes to progress from research to clinical development, the Group has also been developing its manufacturability assessment capability to increase the probability of successful development for its partners.

As previously announced, UCL's magacizumab progressed from a Composite Human Antibody project through to cell line development and is now in manufacturing process development at Abzena's San Diego facility. This represents the first programme to progress through these three significant project phases from discovery through to clinical development. Two further Composite Human Antibody projects for an international customer have also progressed through to cell line development. These are further examples of the utilisation of Abzena's integrated discovery, development and biomanufacturing capabilities.

Abzena's protein engineering group has previously applied the Composite Human Antibody technology to create its own superior antibodies against validated clinical targets. Although not being developed further by Abzena, these antibodies exemplify the technology and have value in their own right. Examples of this value creation are the agreements with Trieza Therapeutics and a recent deal with a public, but undisclosed US biotech, which, when combined, have the potential to deliver in excess of $50 million of license fees and milestone payments, plus royalties. These Composite Human Antibody deals require no further investment from the Group and have been secured after limited investment by Abzena in the creation of the licensed intellectual property.

Chemistry research services

The Chemistry research services business comprises custom synthesis, ADC linkers, payloads, bioanalytical fields and bioconjugation using ThioBridge™ and other technologies. Underlying revenue growth in chemistry was 48%, delivering revenue of £7.0 million (Proforma 2016: £4.7 million), representing 39% of the Group's service revenues.

The growth of this business was achieved through expanded long-term customer-funded chemistry programmes, multiple bespoke custom synthesis projects and extensive evaluation and process development programmes for the Group's proprietary ThioBridge™ ADC linker technology. Growth was achieved by both UK and US chemistry groups (based in Cambridge and Bristol PA respectively) as the chemistry division benefited from its first full year together since the acquisition of TCRS completed in December 2015.

ThioBridge™ is the linker technology which links antibodies and other proteins to drugs. The technology platform offers the Group's ADC partner the ability to maintain the stability of the antibody and a consistent Drug-to-Antibody Ratio (DAR), which is important in the creation and development of the drug.

Following an extensive technology evaluation programme with a US biopharmaceutical company, Abzena signed a major licensing deal with this partner in January 2017. The licence agreement allows ThioBridge™ to be included in up to 10 ADCs across a wide range of indications. Abzena has the potential to receive over $300 million in licence fees and milestone payments. There would also be further royalties on sales of any approved products incorporating Abzena's ThioBridge™ technology. As well as the financial benefits to Abzena, this collaboration is further validation of its proprietary ADC technology and expertise.

R&D investment continued in 2017 to establish GMP manufacturing capability for ADC linker-payloads, which in time will support both ThioBridge™ licensees and programmes for further improvements in ADC linker technology and novel cytotoxic ADC payloads. In Bristol, PA, GMP capability for manufacturing of ADC linker-payloads is now operational and the Group is able to manufacture linker-payload reagents for its current and prospective ThioBridge™ partners.

Increasingly, Abzena's chemistry groups are requested to support customers with more complex custom synthesis and conjugation projects. These projects can be particularly challenging, but the breadth and depth of the experience within the chemistry group makes Abzena a good partner for these types of projects.

Building on a long-standing collaboration between Abzena and Professor Anisur Rahman at University College London (UCL), a £3.5 million grant has been awarded to UCL's Centre for Rheumatology through the Medical Research Council's Developmental Pathway Funding Scheme to progress the development of a novel treatment for anti-phospholipid syndrome (APS) using Abzena's proprietary half-life extension conjugation technology.

During the last year, a bioanalytical group has been established at the Group's Cambridge facility as a focus for the Group's bioanalytical capabilities and to leverage recently acquired sophisticated mass spectrometry equipment. The bioanalytical group works closely with the chemistry group on characterisation of complex products such as ADCs. It works closely with the immunology group in the development and delivery of immunopeptidomics assays and the cell line development group for Product Quality Attribute (PQA) characterisation of biosimilars. The collaboration between these groups illustrates the integration of Abzena's customer-facing research services and the benefit of Abzena's broad offering.

As demand for the Group's chemistry services grows, particularly for larger scale custom synthesis, process development and with the full GMP capabilities coming on stream, the Group expects to expand its chemistry research services and manufacturing group in Bristol PA (US).

Biomanufacturing

Abzena's biomanufacturing division comprises the cell line development group in Cambridge as well as the facilities in San Diego. Revenues have grown at an underlying rate of 74% for the past year, generating revenues of £5.3 million (FY16: £2.1 million), representing 30% of the Group's service revenues.

The Group's biomanufacturing offering represents an integration of manufacturing cell line development, process development and GMP manufacturing. Cell line development services and early process development are provided by the group in Cambridge and further process development and GMP manufacturing services are provided in San Diego. During the year, there were seven GMP programmes underway, all with repeat customers, which was more than twice the number undertaken during the previous year.

Through its expertise in biomanufacturing, there is demand for Abzena to provide clinical trial materials for its partners. In this way, it is having an impact on improving the quality of healthcare by enabling superior therapeutic options for patients. This contribution was recognised recently when the Group received an endorsement from Dr. Cheung of Memorial Sloan Kettering Cancer Center (New York) for its contribution in supplying the Hu3F8 antibody for a neuroblastoma clinical study funded by the non-profit, Band of Parents organisation.

Similarly, the Group's biomanufacturing services also continue to be utilised by Armagen, Inc. to supply AGT-181 and AGT-182 for clinical studies for the lysosomal storage diseases, Hurler syndrome and Hunter syndrome respectively. These diseases mainly affect children who suffer severe and progressive neurological complications in addition to the underlying metabolic deficiency.

With the San Diego biomanufacturing facility integrated into the Group's offering, existing customers such as Faron Pharmaceuticals and UCL, developing ABZENA Inside products for cancer and ophthalmic indications respectively, are now utilising the biomanufacturing capabilities in San Diego having started their engagement with the Group's Cambridge-based research scientists. These relationships are examples of the cross-group engagement by Abzena's customers that the Group expects to be delivering more of in the future.

Whilst customers increasingly see the benefit of the integrated biomanufacturing offering, which can also extend to include the ADC chemistry manufacturing capabilities as they become established, some customers seek to utilise solely the services at either end of the biomanufacturing continuum.

Customers such as Armagen have come directly to Abzena for biomanufacturing services, whilst companies intending to develop biosimilar products are utilising the Group's cell line development services before taking biomanufacturing to their own production facilities.

Furthermore, there are cross-selling opportunities for biomanufacturing services arising from customers whose initial engagement with the Group has been focused on the ADC chemistry offering.

Combining these factors, there is considerable demand for the Group's biomanufacturing capabilities. The Group has now embarked on a programme to upgrade the manufacturing platform to stirred tank single use bioreactors, expand capacity to three manufacturing "trains" and enhance process development capabilities as the bridge between cell line development and GMP manufacturing. This investment programme has been enabled by the recent fundraising and 40% compound annual growth in revenues over the period of the next three years is targeted. Investment in the biomanufacturing facilities, equipment and increasing headcount has been initiated, although the full programme will not be completed until the second half of 2018.

Abzena Inside portfolio

The Abzena Inside portfolio has been an area of consistent growth for the Group since IPO, with the portfolio now including 12 products in clinical development. Technology licence agreements within the ABZENA Inside portfolio provide the Group with the potential to earn up to $0.5 billion in technology access licence fees, milestone payments and/or royalties on its partners' development of products incorporating the Group's proprietary Composite Human Antibody™ and ThioBridge™ technologies. Abzena also has the opportunity to earn further service revenues from its ABZENA Inside partners as they continue the development of these products.

The most advanced of these products is Gilead Sciences' Phase III asset andecaliximab (formerly GS-5745) for the treatment of gastric cancer. Gilead has announced that an interim analysis is expected in the third quarter of 2017. Two further Phase I and II studies in gastric cancer patients are ongoing, and the product is also being evaluated in Phase II studies in cystic fibrosis and rheumatoid arthritis patients which initiated in the second half of 2016.

Set against the progression of andecaliximab's development was Gilead's termination of the development of simtuzumab. This is a reminder of the uncertainties of drug development. However, programmes in the hands of major biopharma companies benefit from the depth of experience these companies have as well as the capital to pursue development of novel biopharmaceuticals to maximise their clinical and commercial value as their efficacy and safety is established.

The continued evolution of the  ABZENA Inside portfolio now includes five Phase II assets, in addition to the Phase II indications under investigation with andecaliximab, and three of these products, including Roche's RG-6125 (initially developed by Adheron Therapeutics) and two products for neurodegenerative conditions, are being developed by major biopharmaceutical companies having acquired the products through M&A or licensing from Abzena's original partner.

As well as Composite Human Antibodies™ created for the Group's partners from their candidate antibodies as part of research programmes initiated by the partner, Abzena has secured two licence agreements for Composite Human Antibody™ sequences that it has created for validated clinical targets. These antibodies were created to exemplify the Composite Human Antibody™ technology, and required minimal investment from the Group, but have created potential commercial value through the agreement with Trieza Therapeutics and an undisclosed public US biotech company. The deal announced with Trieza in December 2016 has the potential to provide Abzena with up to $35 million in development and commercialisation milestone payments, as well as royalties on sales of licensed products incorporating Abzena's antibody sequence, whilst the other licence agreement has the potential to yield up to $19 million in development and commercialisation milestone payments.

The ThioBridge™ ADC linker technology has been developed over several years by Abzena's UK chemistry group. The technology is now subject to three licence or option agreements, including a licence option agreement with a major pharmaceutical company to utilise the technology for up to 10 products.

In January 2017, the latest ThioBridge™ licence agreement was struck with a private US biotech company which can cover up to 10 ADC products. The deal has the potential to yield up to $300 million of licence fees and milestone payments, as well as royalties on ThioBridge™ ADC products, although at this stage a lead ThioBridge™ ADC candidate has not yet been nominated for development.

Under the the deal announced in January 2016 with Halozyme Therapeutics for use of the ThioBridge™ technology for products against up to three targets, Halozyme's has progressed development of the lead ADC product HTI-1511, which targets epidermal growth factor receptor (EGFR) to treat solid tumours, including those with drug resistant mutations. Data for this product was presented at both the 2016 and 2017 American Association for Cancer Research meetings. Halozyme recently disclosed that it is exploring potential collaboration or partnership interest in HTI-1511 prior to making additional investments in toxicology studies and manufacturing that would be required to support an IND filing ahead of clinical trials.

The next 12 months are set to be a period of potential value creation for the  ABZENA Inside portfolio. Multiple data points are expected across the portfolio, as well as further products entering clinical development, and further deals are under negotiation for utilisation of the ABZENA Inside technologies.

IP portfolio

During the year Abzena has had 24 patents granted, covering aspects of its services and technologies across the immunology, protein engineering (including specific Composite Human Antibodies) and ADC fields.

The Group has also filed five new patent applications related to Composite Human Antibodies and the ADC technology platform, as continued investment in service and technology innovation maintains Abzena's competitive position and provides valuable licensable technologies to feed the  ABZENA Inside portfolio.

Abzena's IP portfolio now stands at 21 patent families, covering a wide array of the Group's services and technologies. This adds further weight to the significant innovation and know-how underpinning Abzena's offering.

Management & operations

To support the organic growth of the business and to realise the Group's investment and growth plan, Abzena has added to the executive management team with the appointment in October 2016 of Sven Lee and John Manzello as Chief Business Officer and President Abzena (US) respectively. Both individuals bring substantial commercial experience in the biopharmaceutical industry and are making a considerable impact in enriching the executive management team as well as towards achievement of the Group's commercial targets. Both Sven and John are based in the US, reflecting the importance of the US market to the Group and this strengthening of the US operations will help with client retention and growth going forward.

The Group plans include consolidation of the Cambridge operations into a single building on the Babraham Research Campus, being developed by Imperial College Thinkspace. The move has been delayed due to issues with the building's air handling systems. These are expected to be resolved and the move completed around the end of 2017.

In San Diego, additional office space has been leased to accommodate the expanding team and as space is required for remodelling of the facility to expand clean room capacity. Additional space has been leased in the Torrey Pines area of San Diego, seven miles from the existing facility, to accommodate the expansion of the process and analytical development groups.

At the Bristol PA facility, the chemistry group now has the entirety of the building available to accommodate the expanding chemistry research services team, in addition to the existing GMP suite for ADC linker-payload synthesis and the planned GMP conjugation suite.

Investment & growth plan

The Group experienced constraints to capacity in the past year which has limited the growth of the business. However, the post-period fundraise of £23.9 million (net of expenses) in April 2017 is key to increasing capacity across the Group's three sites.

The investment plan is targeting 40% CAGR revenue growth over a period of three years and significant improvement in gross margin, along with driving operational leverage to accelerate the transition to profitability.

At the Group's biomanufacturing facility in San Diego, the manufacturing platform upgrade has been initiated with equipment for the first single-use disposable stirred tank (STR) bioreactor train to 500L on order. Facility plans are being finalised to enable the capacity expansion to three manufacturing STR trains. The full investment programme for biomanufacturing in San Diego is expected to be completed in second half of 2018.

In Bristol PA, detailed facility planning for the GMP ADC conjugation suite is ongoing with equipment on order so that this capability is expected to be operational and delivering customer projects by the first quarter of 2018.

The investment in technology development and equipment for the Group's cell line development offering in Cambridge is underway in Cambridge.

The impact of the investment programmes to deliver the increased capacity and enhanced capabilities is anticipated to become fully evident over the next couple of years.

Current Trading and Outlook

As demand for Abzena's services increases and the investment is made to increase capacity, the aim is to support more customers across the range of the Group's capabilities and through their development process as research projects are translated into clinical stage development programmes.

Increasingly, the Group's prospective customers are looking to Abzena to offer a more comprehensive service from lab bench to clinic. This provides the opportunity for more significant and longer-term integrated service contracts.

These business development opportunities may be subject to partners' progress and/or funding situations which may be less predictable in the short term. Also, revenue recognition for higher value, longer term multi-phase contracts is more difficult to forecast. However, contracted revenue for the current year already exceeds 50% of revenue reported for the year to March 2017. The repeat customer and intra-Group cross-selling seen between the divisions is also increasing.

As the visibility and validation of the Group's Composite Human Antibody and ThioBridge™ technologies increases, further ABZENA Inside licences are also expected to be secured.

Overall, for the coming year, the Group anticipates a substantial increase in revenue as new capacity comes online and anticipates a less significant increase in combined R&D and administrative expenses.

With the continuation of organic growth, the speed at which the acquisitions have been integrated, and the additional funding that can be allocated to the three sites, the Group looks to the next year with confidence.

Conclusion

Over the last year, Abzena has achieved the next stage of its transformation and is rapidly establishing itself as a preferred partner for its customers as they pursue their biopharmaceutical discovery, development and manufacturing programmes.

Progress in scaling up, integrating and maximising efficiencies and capacity of the three sites has been good. There is also a strengthened team of management driving the businesses on the ground in the UK and US. The benefits of the increasing capacity and the enhanced Group capabilities to meet the ever increasing demand is already bearing fruit. Abzena should benefit from the integrated offering across the Group's service groups in the UK and US which is now enabling a broader capability suite to be offered to its customers and partners as they progress along the discovery and development pathway.

Abzena's rapid growth in the past year has been implemented on the back of the dedication of its staff. The ease with which three sites in three different time zones have come together to form a holistic organisation is a credit to the professionalism of Abzena's staff.

As an international, multi-disciplinary and multi-cultural organisation, the success of the Group is dependent on the significant contribution of all its staff. The Group is committed to their personal and professional development, as they drive Abzena to achieve its vision "to improve the quality of healthcare by providing innovative discovery, development and manufacturing solutions to enable superior therapeutic options for patients".

J. Burt

Chief Executive Officer

12 June 2017

Financial report

The following section should be read in conjunction with the Financial Statements and related notes included in this Annual Report.

During the year the businesses performed solidly with revenue growing 41% on a proforma aggregated basis1.

The post year-end equity raise of £25 million (gross) in April 2017 increased the Group's cash reserves of £4.1 million to £28.1 million to invest in the growth of the business and further establishment of the aligned customer focused businesses.

Group revenues increased 89% to £18.7 million (FY16: £9.9 million) for the full year because of continued organic growth from the existing businesses and the contribution from the two acquisitions. The increase in revenue was 41% compared with the proforma aggregated figures for the year to March 2016.

The UK-based businesses performed well, increasing revenues by 35% to £9.7 million (FY16: £7.2 million) demonstrating the continued resilience of their offering. The two US acquisitions, completed in the second half of 2015, generated revenue of £8.9 million growing by 44% on the prior year on a proforma basis.

R&D investment to broaden and enhance the services and technologies offered by the Group decreased by 8.7% to £3.8 million (FY16: £4.2 million). This reflects an increased focus on the service business and maintenance of cutting edge technical services in the drive towards future growth in service and licence revenues and on to sustainable profitability.

Operating expenses were £14.6 million, up by £5.6 million (61.5%) on the prior year (FY16: £9.0 million). On a proforma basis, there was a 22% underlying increase of £2.7 million in operating expenses (FY16: £12.0 million).

This increased proforma cost base reflects an increased size and quality of organisation required to provide the platform for growth over the next three years.

The adjusted consolidated loss for the year, before charging non-recurring exceptional items for the Group for the year ended 31 March 2017 was £9.1 million, compared with £7.2 million in the previous year.

1 A proforma aggregated basis is used to set out the underlying financial changes for the Group, had it existed in its current form in the prior reporting period.

Summary Consolidated Statement of Comprehensive Income

Proforma analysis of summary consolidated statement of consolidated income

The proforma aggregated figures for the year to March 2016 is used to set out the underlying financial changes for the Group had it existed in its current form for all of the prior reporting period.

Revenues

Total revenues for the year ended 31 March 2017 were £18.7 million (FY16: £9.9 million).

Total revenues include both service and licences revenues.

The established UK business lines maintained the rate of service revenue growth seen in prior years showing 31% annual growth of £2.1 million (FY16: £1.5 million).

The US business lines arising from the revenues of PacificGMP and TCRS from completion of the acquisitions on 11 September 2015 and 11 December 2015 respectively are included in the analysis above.

Biology research services carried out in Cambridge (UK) increased by 7.9%. Chemistry research services performed in Cambridge (UK) and Bristol PA (USA) grew by 220% on a reported basis and £2.3 million (48% on a proforma basis).

Biomanufacturing services predominantly carried out in San Diego CA (USA) with cell line development services based in Cambridge (UK) increased by 154% on a reported basis to £5.3 million, representing an increase of £2.3 million (74%) on a proforma basis.

Licence revenue increased 131% to £0.7 million. Licence revenue includes amounts received under licences of the technologies of the UK-based businesses, with protein engineering patents held by Antitope Limited and antibody drug conjugation patents owned by PolyTherics Limited.

Key to the ongoing success of the Group and providing an indicator on the value of the services and its technology, is the number of repeat customers buying additional services from the Group. The Group has historically retained a high level of repeat customers, particularly for the Episcreen™ immunogenicity assessment studies.

Revenue generated from repeat customers for the year ended 31 March 2017 was £14.6 million, 78% of the total revenue, compared with £5.2 million, 52% of the total revenue, in the prior year.

The Group does not rely on just a few large customers and worked with 121 customers during the year ended March 2017 (FY16: 113 customers). The top 10 customers represented £9.0 million in revenue (48%), compared with the prior period when the top 10 customers represented £4.2 million (43%) demonstrating the spread of the customer base.

Gross Profit

Group cost of sales rose to £10.6 million (FY16: £5.3 million) due to the revenue increases in all business lines in the Group.

Gross profit generated by the Biology research services was £3.1 million (FY16: £3.0 million) broadly the same as the prior year. The Chemistry research services generated gross profit of £2.5 million (FY16: £1.0 million).

Biomanufacturing services made a gross profit margin of £1.8 million 34.6% (FY16: £0.3 million 16.3%). The planned investment in the manufacturing facilities is expected to improve the gross margin percentage with upgraded bioreactor and purification equipment being installed and greater capacity utilisation.

Operating income and expenditure

Total R&D costs were £3.8 million (FY16: £4.2 million). The costs mainly relate to scientists' payroll costs, materials, reagent, laboratory costs and payments to external research service providers.

During the year these costs were incurred in the development of the Group's own technology to support the ADC licensing activities, the process development and implementation for the chemistry GMP manufacturing in Bristol, PA (USA); and biology research service development in Cambridge (UK).

Administrative expenses on a reported basis rose to £14.6 million (FY16: £9.1 million). On a proforma aggregated basis the administrative expenses rose by £1.7 million from a proforma aggregated cost in the prior year of £12.8 million.

The principal increases are due to an increase in staff, property and travel costs as a result of the acquisition of the US business during the prior year and the recruitment of appropriate quality and senior management staff to manage and operate these business units.

The non-recurring exceptional costs from the prior year of £2.5 million, associated with the US acquisitions in year ended 31 March 2016 and the impairment of intangible assets and goodwill in respect of Warwick Effect Polymers and Antitope, were not repeated this year.

Adjusted earnings before interest, taxation, depreciation & amortisation.

The Group is focusing on growing the operations towards a cash generative service business absent any cash received from royalties arising from the ABZENA Inside portfolio. The Group's adjusted EBITDA, removing share based payments and exceptional items, for the year was a loss of £7.5 million compared to the prior year of £6.8 million.

Depreciation and amortisation costs at £1.9 million increased by £0.5 million year on year as a result of increased capital expenditure in the current year and amortisation of intangibles arising on consolidation of £0.7 million (FY16: £0.6 million).

The Group reported a pre-tax loss of £9.5 million (FY16: £10.7 million).

Basic loss per share was 7p for the year ended 31 March 2017 (FY16: loss per share 9p). This movement is the result of the combined effect of the fund-raising which took place in December 2015, increasing the average share capital and increased annual losses. See note 7 for further details.

Taxation

The Group is entitled to receive R&D tax credits on its UK operations and as such the Group does not pay UK corporation tax. The R&D tax credit is first used to offset any tax payable in the year and any excess is surrendered for a repayable tax credit. The Group received income from taxation in the year ended March 2017 amounting to £0.3 million (FY16: £1.0 million).

The Group also receives a R&D Expenditure Credit (RDEC). This is shown within Other Operating Income, in both the current and the prior year. The US operations did not incur a tax charge during the year.

Financial Position

The Group made investments in capital equipment and its facilities during the year ended 31 March 2017, with additions of short-term leasehold property and fixtures, fittings and equipment totalling £4.2 million (FY16: £2.0 million). The Group financed £0.8 million of these asset purchases with finance leases with entities associated with the equipment vendors.

This investment has been made to enable the Group to continue to provide a wide range of services to its customers and to support R&D into broadening the application of the technologies of the Group.

Total current liabilities increased to £6.3 million (FY16: £5.9 million). These arise largely as a result of deferred income associated with the timing of project invoicing.

The total current assets of the Group decreased to £11.3 million (FY16: £22.1 million). This was primarily due to the decrease in cash and cash equivalents of £9.6 million to £4.1 million.

Foreign Exchange

The Group's customers and a significant proportion of its operations are not in the United Kingdom.

During the year ended 31 March 2017, the Group's customers based in the USA, or for whom their contracts are priced in USD, represented £12.0 million (64 %) of the total revenue. (FY16: £5.1 million (52 %).

During the year ended 31 March 2017 the Group's total costs in the USA or costs where the Group's supplier contracts were denominated in USD represented £13.9 million (83 %) of the total cost incurred in the Group (FY16: £6.1 million (50 %).

Operational expenses during the year ended 31 March 2017 contracted in USD represented £7.1 million (48 %) of the total operational costs incurred in the Group (FY16: £2.6 million 28 %).

The average number of employees during the year was 200, with 115 (58%) employed in the UK; and 85 (42%) in the USA.

Cash and cash equivalents

The Group ended the year with £4.1 million (FY16: £13.7 million) in cash or cash equivalents. The movement arises as a result of the funding of losses, working capital movement and capital expenditure during the year.

Post year end on 24 April 2017 the Group completed a financing raising £23.9 million after expenses through the issue of new ordinary shares in the Company. On a proforma basis if this fund raising had completed prior to the year end, cash and cash equivalents would have been £28 million.

The Group invests cash not required for short term working capital requirements in short-term deposits, across a number of banks with a focus on capital preservation rather than interest generation.

J. Smith

Chief Financial Officer

12 June 2017

Consolidated Financial Statements

Consolidated Income Statement

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Comprehensive Income

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Financial Position

Company Registered Number: 08957107

The financial statements were approved by the Board and are signed on its behalf by:

J. Smith

12 June 2017

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

For the year ended 31 March 2017

Attributable to owners of the parent

For the year ended 31 March 2016

Attributable to owners of the parent

(i) £20.9 million of this amount was issued for cash with a further £2.4 million arising from issue of shares as partial consideration for the acquisition to acquire The Chemistry Research Solution LLC.

Notes to the Summary Financial Information.

The summary financial information set out above, which was approved by the Board on 12 June 2017, is derived from the Consolidated Financial Statements for the year ended 31 March 2017 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Consolidated Financial Statements on which the auditors have given an unqualified report, and which does not contain a statement under section 498(2) or (3) of the Companies Act 2006, will be delivered to the Registrar of Companies in due course.

Copies of the Company's Annual Report will be available on the Company's website at www.abzena.com/results-and-presentations shortly.

1. Summary of significant accounting policies

Abzena plc is a public limited company incorporated and domiciled in England and Wales with registered number 08957107. The Company's registered office is Babraham Research Campus, Babraham, Cambridge, CB22 3AT.

The principal activity of the Group is that of life science R&D and the provision of services and technology licensing to the biopharmaceutical industry. The consolidated financial statements comprises of a consolidation of the Company and the following subsidiary companies:

All the subsidiaries of the Group, with the exception of Denceptor Therapeutics Limited, are 100% owned by the Group and have been included in the consolidated Financial Information from the date of acquisition. The Group owns 3,750 ordinary shares (88.2%) in Denceptor Therapeutics Limited, Matthew Baker and Kevin Fitzgerald both owning 250 (5.9%). The non-controlling interest in respect of Denceptor Therapeutics Limited is not material and it has been included in the consolidated Financial Information from date of acquisition.

The Group's Financial Information presented is as at 31 March 2017 and 31 March 2016 and for the year ended 31 March 2017 and the year ended 31 March 2016.

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all of the financial periods presented, unless otherwise stated.

The consolidated Financial Statements have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs), the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for certain financial instruments that have been measured at fair value.

The preparation of the Financial Statements in conformity with IFRS as endorsed by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of signing of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the accounts.

The directors made this assessment based on future cash flow projections of the Group considering the cash raised from the allotment of equity securities on 21 April 2017. This assessment demonstrated the ability of the Group to meet expected future financial liabilities as they fall due for a period of at least 12 months from the date of signing of the financial statements.

On 23 May 2014 Abzena plc acquired the entire issued share capital of PolyTherics Limited in a share for share exchange, in an exact replication of the pre-existing share capital. Reorganisations involving entities under common control are outside the scope of IFRS 3, and there is no other specific IFRS guidance that applies in these circumstances. Accordingly, the Directors have used their judgement to develop an accounting policy that is relevant and reliable and therefore the Group reconstruction has been accounted for using the merger method of accounting in accordance with FRS 6, which treats the merged entities as if they had been combined throughout the current and comparative accounting periods. Under merger accounting, the results for the Group have been reported as if the Group had been in existence in its current form through the current and previous financial years. No purchased goodwill was created in the transaction and the assets and liabilities of PolyTherics Limited were not adjusted to reflect their fair value.

Revenue, which excludes value added tax, represents the income generated by the Group from services provided to external parties, licensing activities and grants. Revenue is recognised only when it is reasonably certain that the economic benefits associated with the transaction will flow to the Group.

Revenue in respect of service contracts, where the Group's contractual obligations are performed gradually over time, is recognised as the contracted activity progresses, to reflect the Group's partial performance of its contractual obligations. The stage of completion requires a degree of estimation and judgement by management, although typically obligations are discharged evenly over the performance period and revenue is therefore typically recognised on a straight-line basis. This is not necessarily in line with the stage payments specified within contractual agreements, resulting in accrued and deferred revenue, as appropriate. Where the substance of a contract is that a right to consideration does not arise until the occurrence of a critical event, revenue is not recognised until the event occurs. Consideration for options and similar contingent receipts are recognised when the contingency is resolved or from the point the option is exercised.

Revenue in respect of licensing activities typically comprises an initial up-front fee receivable on signature of the agreement, followed by subsequent payments when certain milestone conditions are met. In addition, future sales royalties may also be due under licence agreements. The initial up-front fee receivable on the signature of a licence agreement is generally recognised in full on the date the agreement is executed, as long as all of the Group's obligations required to enter into the licence have been completed and at the point that the up-front fee becomes non-refundable.

Milestone payments are recognised only when all the conditions stipulated in the agreement are satisfied for the particular milestone payment and all the Group's obligations have been met. Future sales royalties receivable under a licence would generally be recognised on receipt of a royalty statement unless accurate sales information is available to accrue revenue for royalty over the financial period. To date, the Group has not received nor recognised any royalty income.

Grant income is typically claimed quarterly in arrears and is recognised on a straight-line basis throughout each quarter. Where a grant claim has not been made, grant income is accrued on a straight-line basis. Grant income is disclosed as Other Operating Income on the face of the Consolidated Statement of Comprehensive Income. Government grants received relating to property, plant and equipment are treated as deferred income and released to the Consolidated Statement of Comprehensive Income over the shorter of the period of the grant, or the life of the asset.

IFRS 3 (revised)"Business Combinations" requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other intangible assets at acquisition. The assumptions involved in valuing these intangible assets requires the use of estimates and judgements which may differ from the actual outcome. These estimates and judgements cover future growth rates, expected inflation rates and the discount rate used. Changing the assumptions selected by management could significantly affect the allocation of the purchase price paid between goodwill and other acquired intangibles.

The Group's consolidated Financial Information consists of Abzena plc and all of its subsidiaries.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The Group controls an entity when the Group is expected to, or has the rights to, variable returns from its involvement with the entity and has the ability to effect those returns through its power over the entity. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

The cost of acquisition is measured at fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed, in a business combination are initially measured at their fair values at acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiary undertakings have been changed where necessary to ensure consistency with the policies adopted by the Group.

The consolidated Financial Statements are presented in pounds sterling, which is the Group's presentational currency. The Group determines the functional currency of each entity. Transactions undertaken in foreign currencies are translated into the functional currency of the subsidiary at the exchange rate prevailing on the date of the transaction. Foreign currency assets and liabilities are translated into the functional currency at the rates of exchange ruling at the year-end date. Any exchange differences arising are included within 'Administrative expenses' in the Consolidated Income statement, except for foreign exchange gains and losses that relate to borrowings and cash and cash equivalents which are presented in the Consolidated Income Statement within 'Finance income' or 'Finance expense' This also applies to sterling-based entities with foreign currency transactions, assets and liabilities.

The Group has subsidiaries where the functional operating currency is United States dollars. The results of these subsidiaries are translated monthly at the prevailing rate of exchange. At each reporting period end, the assets and liabilities are translated at the closing rate of exchange.

Gains or losses on translation are recorded in the Consolidated Statement of Comprehensive Income and as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of the US subsidiaries are treated as assets and liabilities of the US subsidiaries and translated at the closing rate. Exchange differences are recognised in the Consolidated Statement of Comprehensive Income. Such gains or losses are transferred to the Consolidated Income statement on disposal or liquidation of the relevant subsidiary.

Inter-group loans denominated in US dollars are translated at the prevailing exchange rate at the year end. Gains on the retranslation of these loans form part of the net investment in the foreign operations and are taken to reserves and shown in the Consolidated Statement of Comprehensive Income.

The Group uses financial instruments comprising cash and cash equivalents and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the Group.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Consolidated Statement of Comprehensive Income within administrative expenses.

Trade payables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method.

Cash and cash equivalents include cash in hand, deposits held with banks, bank overdrafts and other short-term highly liquid investments with original maturities of less than 3 months. Short term liquid investments with a maturity of over three months would be included in a separate category, 'Short term liquidity investments'.

Research costs are written off to the Consolidated Income Statement in the year in which they are incurred. All research costs, whether funded by grant or not, are included within R&D costs on the face of the income statement.

All ongoing development expenditure is currently expensed in the year in which it is incurred. Due to the regulatory and other uncertainties inherent in the development of the Group's programmes, the criteria for development costs to be recognised as an asset, as prescribed by IAS 38, "Intangible assets", are not met until the product has been submitted for regulatory approval, such approval has been received and it is probable that future economic benefits will flow to the Group. The Group does not currently have any such internal development costs that qualify for capitalisation as intangible assets.

Inventories are stated at the lower of cost and net realisable value. Cost includes all expenditure directly attributable to bringing each product to its present location and condition on a first in first out basis, unless separately identified. Net realisable value is based on estimated selling price, or value in use less further costs expected to be incurred to completion and disposal. Where necessary, provision is made for obsolete, slow moving and defective inventories.

Income tax on the result for the year comprises current and deferred tax. Income tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the period of the lease.

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period of the lease.

The Group leases certain equipment. The Group has substantially all the risks and rewards of ownership and these are classified as finance leases, which are capitalised at the leases' commencement dates at the lower of fair value and the present value of minimum lease payments. Each lease payment is allocated between the liability and finance charge. The corresponding rental obligations, net of finance charges, are included in other long term payables. The interest element of the finance charge is charged to the income statement over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

Where the Company issues shares and equity-classified warrants in the same transaction, the Group estimates the fair value of the warrant instruments. If material, the fair value of the warrants is recorded as a separate component of equity.

Goodwill arising on the acquisition of a subsidiary represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate potential impairment. The carrying value of goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense, separately disclosed in the intangible fixed asset note to the financial statements, and is not subsequently reversed.

The carrying value of non-current assets is reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Intangible assets initially recognised during the current annual period which are not yet available for use are also tested for impairment by reference to the asset's recoverable amount at the balance sheet date.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows over the remaining useful economic life of the asset in question are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

The Group discloses separately items of income or expenditure which are by nature not expected to recur as part of the normal operational activity of the business. Such items are shown separately on the face of the Consolidated Statement of Comprehensive Income.

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics.

All the classes of the Group's share capital are classified as equity. Share capital is determined using the nominal value of shares issued.

The share premium account represents premiums received on the initial issuing of share capital. Incremental costs directly attributable to the issue of new share capital are shown as a deduction, net of tax, from the share premium account.

The share based payment reserve represents the cumulative amount which has been expensed in the Consolidated Statement of Comprehensive Income in connection with equity settled share based payments, less any amounts transferred to the profit and loss account on the exercise of share options.

Retained earnings include all current and prior results as disclosed in the Consolidated Statement of Comprehensive Income.

Where, as part of a business combination, the Group enters into an agreement which includes a contingent element that is classified as equity, these amounts are fair valued at the date of acquisition and held in a separate equity reserve. These amounts are not subsequently re-measured but are transferred to share capital and share premium on settlement of the contingent consideration.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements are as follows:

Where the Company issues restricted stock units classified as equity instruments, the Group estimates the fair value of the RSU's at the date of issue and records the value as a separate component of equity under deferred consideration. Where the Company issues restricted stock units classified as liabilities, the Group estimates the fair value of the RSU's at the date of issue and records this as a financial liability. At each subsequent balance sheet date the Group revalues the liability using observable market based data wherever possible and applying estimates where not possible. Fair value gains and losses are recorded in the income statement under financial income.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Employees (and Directors) receive remuneration in the form of equity-settled share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed on a straight-line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets).

The share options are valued using the Black-Scholes option pricing model. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each Balance Sheet date to allow for forecast leaving employees and the difference is charged or credited to the Consolidated Statement of Comprehensive Income, with a corresponding adjustment to reserves.

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit ("CGU") to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows of the CGU, and a suitable discount rate, in order to calculate present value. Similar calculations are required in respect of other acquired intangibles. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group's impairment evaluation.

At the date of acquisition of a subsidiary, intangible assets that are separately identifiable and that arise from contractual or other legal rights are capitalised and included within net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic benefits embodied in the asset will flow to the entity, and are amortised as follows:

They are subsequently measured at cost less accumulated amortisation and impairment. At each balance sheet date, these assets are assessed for indicators of impairment and, in the event that an asset's carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately through the Consolidated Statement of Comprehensive Income.

All property, plant and equipment are stated at historical cost less accumulated depreciation, together with any incidental costs of acquisition. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight line basis over its expected useful life, as follows:

Leasehold property improvements: over the life of the lease

Fixtures, fittings and equipment: 20%-33% straight line

The assets' residual lives are reviewed annually and adjusted as appropriate.

2. Segmental reporting

The Group has adopted IFRS 8, "Operating Segments". IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Chief Executive Officer.

Segmental reporting has been reviewed and considered in light of the development of the Group's businesses over the year ended 31 March 2017 and the Directors are of the opinion that under IFRS 8 the Group has three operating segments; Biology research services, Chemistry research services and GMP manufacturing. However, the results of the segments are only reported and assessed to a "contribution level". The contribution analysis considered by the CEO represents cash generated by the laboratory based staff and direct management. The costs include the direct customer related and internal research and development material costs. Salary costs include total salary costs of the scientists carrying out customer related work or supporting research and development activity and directly attributable scientific management. Central costs are not allocated to segments.

Assets and liabilities are currently not reported on a fully segmental basis and it is the opinion of the Directors that, presently, it would not be relevant or appropriate to do so. Segmental reporting will continue to be reviewed and considered in light of the on-going development and growth of the Group's businesses.

The Group had no single significant customer which alone contributed more than 7% of Group revenue in 2017 (FY16: largest customer contributed 7%). An analysis of the revenue from all sources is as given below:

Contribution by segment for the year ended 31 March 2016 is not available because the business was not managed on this basis in the prior year.

3. Employees and Directors

Average monthly number of persons (including Executive Directors but excluding non-executive Directors) employed:

The Parent Company has no employees other than the directors, who did not receive any remuneration from the Parent Company.

The Group considers all members of the Board (including Non-Executive Directors) and the senior management team to be key management. Total compensation paid for the year ended 31 March 2017 amounted to £1,618,000 (FY16: £1,521,000).

The Group contributes to defined contribution money purchase pension schemes for its Executive Directors and employees. Contributions of £Nil (included in other payables) were payable to pension funds for the benefit of Directors at the year-end (FY16: £2,000). The details of Directors who received emoluments from the Group are shown in the tables contained in the Directors' Remuneration Report.

4. Taxation

The Group is entitled to claim tax credits in the United Kingdom for certain R&D expenditure. The amount included in the financial information represents the credit receivable by the Group for the year. The 2017 amounts have not yet been agreed with the relevant tax authorities. 

Additionally, included in other operating income is £231,000 (FY16: £193,000) in respect of a R&D expenditure credit.

There is no current tax charge in the year as the Group has utilised losses brought forward and is entitled to a cash tax credit in the United Kingdom for certain R&D expenditure. The repayable tax credit for the year is lower (FY16: lower) than the credit that would be repayable at the standard rate of corporation tax in the UK of 20% (FY16: 20%). The differences are explained in the following table:

Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted on 26 October 2015 as part of the Finance Bill (2015). These include reductions in the main rate of corporation tax to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020.The overall effect of that change, if it had been applied to the deferred tax balance at the balance sheet date, would not be material.

As at 31 March 2017, the unrecognised deferred tax asset amounted to £3,130,000 (FY16: £2,860,000). This deferred tax asset is in respect of cumulative losses incurred to date. The Directors have not recognised this asset as they are not sufficiently certain with regards to the recoverability of the asset.

5. Loss per share

Basic loss per share is calculated by dividing the loss for the financial year by the weighted average number of Ordinary Shares in issue during the period. The losses and weighted average number of shares used in the calculations are set out below:

As net losses were recorded in 2017 and 2016, the potentially dilutive share options and restricted stock units are anti-dilutive for the purposes of the losses per share calculation and their effect is therefore not considered.

6. Intangible Fixed Assets

The amortisation charge for the period has been included in Administrative expenses in the Consolidated Statement of Comprehensive Income.

The goodwill arose on the purchase of 100% of the share capital of each of Antitope Limited on 25 July 2013 as to £1,856,000; Warwick Effect Polymers Limited on 19 January 2012 as to £176,000 (now fully impaired), PacificGMP on 11 September 2015 as to £6,203,000; and TCRS on 11 December 2015 as to £7,001,000. The goodwill represents the excess of the fair value of the consideration over the fair value of assets acquired. The detailed analysis of the assets acquired is disclosed in note 24.

The Group tests annually whether goodwill and intangible assets have suffered any impairment and tests more frequently when events or circumstances indicate that the current carrying value may not be recoverable.

The Directors consider there to be four Cash Generating Units (CGUs) at the level below the one operating segment. These are the legacy businesses of Antitope Limited, PolyTherics Limited, PacificGMP and TCRS.

In considering the goodwill and other intangible asset impairment reviews the Directors have considered the legacy operations individually within the Group as conducted by Antitope Limited, PolyTherics Limited, PacificGMP, TCRS and Warwick Effect Polymers Limited.

The goodwill arising on the consolidation of the US subsidiaries in the books of the immediate US holding companies has been revalued at the exchange rate prevailing at the year end of £1:$1.248, increasing the value of goodwill in the Consolidated Statement of Financial Position to £18,017,000 (March 2016: £15,060,000 ); the corresponding entry of £2,957,000 going to the Foreign Exchange Reserve.

Goodwill has been allocated to the legacy operations as follows:

The range of key assumptions used for value in use calculations are as follows:

The budgeted gross margin represents management's best estimate of gross margin based on past performance of each business segment as a percentage of service revenue. The growth rate is consistent, for UK operations, with past experience and management expectations for US operations given the planned level of investment. The discount rate applied to the cash flows reflects the weighted average cost of capital of the Company using the industry standard formula.

Goodwill and intangibles associated with Warwick Effect Polymers and the Antitope trade name, previously identified as a separate intangible asset were considered impaired at 31 March 2016 and charged under exceptional items in the Consolidated Statement of Income in the year ended 31 March 2016.

7. Property, plant and equipment

Included in additions above, are £766,940 (FY16: nil) of assets acquired under finance lease.

As at 31 March 2017, the NBV of assets under finance lease was £710,195 (31 March 2016: nil).

The Parent Company has no property, plant and equipment.

8. Inventories - Group

9. Trade and other receivables

The gross value above reflects the fair value of the trade receivables and there were no indicators of impairment.