29th Mar 2007 07:02
Tissue Science Laboratories PLC29 March 2007 29 March 2007 Tissue Science Laboratories plc Preliminary Results for the year ended 31 December 2006 Tissue Science Laboratories plc (LSE: TSL), the medical technology companyspecialising in biologic tissue replacement and repair products, today announcesits Preliminary Results for the year ended 31 December 2006. Operational Highlights • Year of transition: o Expansion of US direct sales team drives strong growth in general surgery sales; o Reduced reliance on major marketing/distribution partners; • Increasing Permacol's competitive positioning: o Improved reimbursement rates from Medicare; o Logistics partnership signed for same day delivery across the US; o Increased Permacol product range to include larger patch sizes. • Excellent progress in R&D Pipeline for new porcine tissues: o Proof of principle established for Vascular and Bone graft products; o Ligament graft proof of principle announced today (separate release); Financial Highlights • Turnover up 5% to £10.7m (2005: £10.2m), up 3% in constant currency; o US direct sales up 69% to $9.8m (2005: $5.8m), o Sales through partner channels down 41% at $5.9m (2005: $10.0m); • Improved gross margins at 68% (2005: 50%) as a result of direct sales model and increased productivity in UK manufacturing; • Loss before tax £3.5m (H1 2005: Loss of £2.4m) in line with management expectations and previous guidance; • £2.8m Placing completed in November 2006 (oversubscribed) provides additional working capital headroom; Year end cash of £4.8m (2005: £6.8m). Commenting on the results, Martin Hunt, CEO of TSL, said: "2006 was an important year for TSL, with significant progress in the evolutionof our business model from sole dependence on marketing partners anddistributors, to the addition of direct access to market through our own salesteam. We are confident that this strategy will result in significant revenuegrowth in the near term. "We have also made good progress in our new product development pipeline, withproof of principle now established in porcine bone, vascular and ligamentgrafts. This progress offers exciting prospects for longer term value growth andthis, together with the near term prospects from our direct sales team, gives usconsiderable confidence in the future." -Ends- There will be a conference call for analysts this morning at 10.00am. Pleasecontact Sarah Richardson at Hogarth Partnership Ltd on 020 7645 3965 to requestpresentation materials and dial-in details. Enquiries: TSL plc Tel: 01252 369 603Martin Hunt, Chief ExecutiveDavid Jennings, Finance Director Hogarth Partnership Limited Tel: 020 7357 9477James Longfield / Sarah Richardson www.tissuescience.com. Tissue Science Laboratories plc Preliminary Results Statements - Year Ended 31 December 2006 CHAIRMAN'S STATEMENT Overview 2006 was a transitional year for TSL as we implemented our key strategicobjective of reducing reliance on major marketing partners and distributors andestablishing a direct sales model in our core US general surgery market. Asreported in our interim results, the impact of this transition is evident in thefinancial performance for the year. I am pleased to report, however, thatsignificant progress has been made in building our US sales team and we enter2007 strongly positioned to increase our share of this rapidly developing marketsegment. Whilst Group revenues increased by 5% overall to £10.7m (2005: £10.2m), thismasked the strong performance of our US general surgery business which grew by69% as we completed the transition from distributors and independent commissionreps to a direct sales team. This change gives us significantly greater controland focus of our sales effort in this important market. Our growth in generalsurgery was offset by a decline in urology/gynaecology revenues through C R Bard('Bard') of 44% and lower than planned sales through our other marketingpartners in orthopaedics and head and face. We have seen strong gross margin progression in the year, influenced by our moveto a direct sales model and by increased productivity in our UK manufacturingoperations. In conjunction with increased investment in sales and marketinginfrastructure and new product development, the net loss for the businessincreased to £3.5m (2005: loss £2.4m), in line with our expectations. The basicloss per ordinary share for the year was 11.8p (2005: 8.4p) We have made exciting progress in our product development pipeline and thedevelopment of new products using our core technology remains a key value driverof our business. We have increased investment in the year, as planned, inbroadening out our Permacol(R) product range and developing new variants ofPermacol(R) for other clinical applications. In addition, we also progressedthree projects started in 2005, applying our core manufacturing process toporcine bone, ligament and vascular grafts with a view to developing implantmaterials with superior performance characteristics to currently marketedproducts. Our initial objective for these tissues was to demonstratepre-clinical proof of principle and I am pleased to report that this hassuccessfully been achieved in each case on or ahead of plan. In November 2006 we completed a top-up financing round, which was heavilyoversubscribed, raising £2.8m (before expenses) to provide additional workingcapital headroom for the business. We remain in a robust financial position withcash at the year-end of £4.8m (2005: £6.8m) and net funds of £3.0m (2005: £5.0m)at the year-end. Business Model Evolution Our historic business model of working through marketing partners anddistributors was an important first stage for the Group, as it gave us access totarget surgeons and helped establish our products in the market place,particularly in the US. Whilst there are many positives to this approach, it left us vulnerable tochanges in the sales focus of distributors and our partner's own marketingpriorities. During 2006 the board continued to make progress with its strategyto reduce the Group's reliance on this model by further developing our own salesforce in the US general surgery market. We believe that this dual direct/partnerapproach offers us greater control, better growth potential and increasedopportunities for the commercialisation of our technology, through selecting themost appropriate marketing strategy to maximise sales. The experience we havegained in the year in building our own sales team and its supporting salesinfrastructure in the US will stand us in good stead as we progress thecommercial development of the business. Summary and Outlook The expansion of our sales and marketing team in the US will drive revenuegrowth in the near term as we pursue our goal of profitability. Investment inour new product development programme is already yielding successful results andoffers the potential for significant future value. Achievement of our business objectives is critical to the future success of TSLand this can only be delivered by the skill and enterprise of TSL staff. I thankthe TSL team for their continued enthusiasm and commitment and look forward tofurther success in 2007. Our challenge is to deliver on the opportunitiesafforded to us and we look forward to the future with confidence. Patrick Paul Chairman Tissue Science Laboratories plc Preliminary Results Statements - Year Ended 31 December 2006 Chief Executive's Report The trading year was categorised by a strong growth in our core general surgerybusiness offset by disappointments in our partner-led sales channels. Ourlimited ability to influence the direction and effort that marketing partnersput behind our products underlines the importance of building a direct sales andmarketing model in the general surgery business that is within our own control.With the progress we have now made in 2006 we believe we are very wellpositioned to make more substantial progress in revenue growth in the currentfinancial year. Sales and Marketing General Surgery - US In 2005 we began to establish a direct sales team of 20 representatives in keymetropolitan areas of the US. This was in place by the middle of 2006 and basedon the early impact of this team the decision was taken to expand the sales teamto 43 representatives plus associated management and marketing support.Identifying and recruiting salespeople with the requisite skill sets andexperience provided numerous challenges, but by the end of the year we hadacquired and deployed a total of 38. Allowing for sales force turnover incertain territories at the end of the year and further recruitment at thecommencement of the current year, this number increased to 42 by February 2007.During the period of recruitment and training of the expanded team, we alsomanaged the transition from our previous network of independent distributors andcommission reps. This transition was successfully completed by the end of theyear. Despite the loss of some business that would have been generated throughthe distributor channel in the second half of the year, sales from the generalsurgery segment of our business increased in the year by 69% to $9.8m (2005:$5.8m). The use of biologic materials in general surgery remains at an early stage. Weare encouraged by increasing signs that surgeons are appreciating the clinicaladvantages offered by biologic materials over synthetics, particularly incomplex abdominal wall repair procedures. We now have extensive clinicalevidence and surgeon advocacy to support the use of Permacol(R) in this rapidlydeveloping field and are making good progress in our goal of establishingPermacol(R) as the 'gold standard' in complex and recurrent hernia repair. The increasing involvement of plastic surgeons in abdominal reconstruction andtherefore their exposure to Permacol(R), was a key factor in our decision tolaunch our Permacol(R) head & face product through our direct sales team earlyin 2007. To enhance our competitive position and in response to surgeon led demand, inNovember 2006 we launched two new larger sizes of Permacol(R) (20cm x 40cm and20cm x 50 cm) for use in massive ventral hernia procedures. There are no otherbiologic products of this size available in the market and this furtherdifferentiates our product offering. We have also made important progress in respect of the reimbursement of Permacol(R) in the US, which substantially increase from January 2007 through Medicare,the federal government health insurance plan. This gives us a level playingfield with allograft dermal tissue for the first time. Having successfully completed a pilot study in the last quarter of 2006, TSL hasentered into an agreement with one of the largest US healthcare logistics/distribution companies and will now be able to offer same-day delivery ofPermacol(R), for the first time, to all areas of the US. This exclusivearrangement represents a significant enhancement to our customer servicecapabilities. We begin the current financial year with a fully trained and deployed sales teamwith an enhanced product range and well developed marketing support. We lookforward to achieving further substantial growth in this segment in 2007. General Surgery - EU/ROW Our general surgery business in Europe and Korea also performed strongly in theyear. In the UK our direct sales team increased sales by 25% to £1.5m (2005:£1.2m) and in Europe and Korea sales to our general surgery distributorsincreased by 100% to £0.4m (2005: £0.2m). Urology/Gynaecology Bard has worldwide distribution rights in respect of our sheet material in thefield of urology/gynaecology, marketed under the PelviCol, PelviSoft andPelviLace brands. Bard has built a position of market leadership in the use ofbiologic materials in pelvic floor reconstruction and the surgical treatment ofincontinence. An extensive clinical platform and loyal customer base has beendeveloped since marketing began in Europe in 2000 and in the US in 2001. As reported in our interim statement, however, there have been changes in thecompetitive environment and Bard's own product portfolio in this field with theintroduction of new synthetic kit products. The initial impact of this resultedin a realignment in the level of stocks of our products held by Bard, to reflectthese market changes. This adjustment had a significant impact on product ordersfrom Bard in the year with total revenues reducing to $5.3m (2005: $9.5m). Product orders from Bard have now stabilised at these lower levels. We areconfident that our material, which has an established clinical performancerecord developed over more than five years, has significant potentialopportunity in this area, and it is our objective to ensure this is fullyrealised. Orthopaedics Zimmer Inc. has worldwide distribution rights for the use of our sheet materialin rotator cuff repair of the shoulder. The adoption of biologic materials inthe orthopaedic sector remains at a very early stage and, whilst considerableinterest has been shown in biologic materials by the large orthopaedic playerssuch as Zimmer, investment in promoting the use of these products has beenlimited. Until this position changes, our sales to Zimmer are likely to remainat modest levels. This has clearly been a significant disappointment in the yearand we are in discussions with Zimmer about their future plans. During the yearour sales increased to $0.4m (2005: $0.3m). Clinical Studies Parastomal studies There are approximately 1.4 million active stomas in the US and EU and up to 44%of these patients may develop a hernia around their stoma (parastomal hernia).Progress continues to be made in our multicentre, randomised, controlledclinical study to demonstrate the effectiveness of Permacol(R) for the repair ofparastomal hernia. Patient recruitment in the UK for this study is active andongoing. In the US 70,000 new stomas are created every year. Excellent pilot study datapresented in 2006 has demonstrated the potential of Permacol(R) for theprophylactic reinforcement of new stomas to reduce the incidence of parastomalherniation. Our multicentre, randomised, controlled clinical study todemonstrate the prophylactic effectiveness of Permacol(R) for stomareinforcement (PROPHECI) is in the final stages of completing study siteadministrative tasks, prior to initiation of recruitment. To accelerate studyprogress, we have recruited a contract clinical research organisation to runthis study and supplement our in-house staff. To support our US sales & marketing efforts in general and colorectal surgery,we are also actively pursuing targeted clinical research projects in the US. Weexpect to be able to provide further details of this later in 2007. Permacol Injection - UBA and Dermal Filler Following our successful clinical studies for the injectable forms of Permacol(R) for use as a urethral bulking agent and for use as a dermal filler in thecosmetic market, we have undertaken substantial market analysis to complementand further focus our business development activities. For UBA, discussions areongoing with more than one interested party. For dermal filler, our analysis hasidentified a target group of potential partners and we are now seeking toinitiate discussions with them for this exciting opportunity. New Product Development In addition to progress on existing products, we have also seen considerableprogress in the year in our R&D pipeline, as we seek to exploit our technologyplatform across other tissues derived from porcine bone, ligament and vasculargrafts. New colorectal Permacol(R) product Based on encouraging pre-clinical in-vivo data, we have initiated a project todevelop a colorectal product, derived from our clinically successful Permacol(R)technology. The product will be used to repair fistula tracts, a difficult totreat condition, where we believe the clinical attributes of our product willoffer significant benefit to patients. In the US alone there are circa 125,000such procedures per annum. We anticipate that this product will be ready for launch in the first half of2008, and will further enhance our Permacol(R) product offering to general andcolorectal surgeons through our direct sales team. Bone graft We have made excellent progress in the development of our porcine derived bonegraft product during in the year. This market is estimated at c$1.4bn worldwide(source: Datamonitor) and we are seeking to develop a biologic product withsuperior performance characteristics to those of currently available treatmentoptions. As reported in September we achieved proof of principle for the bone graftproject as planned and work has continued with the definitive in-vivo efficacystudy. A 510(k) submission for US clearance will be made in H2 2007. Vascular graft We are developing a porcine derived vascular graft, intended for permanentimplantation, for use as a coronary artery bypass graft (CABG), arterio-venous(AV) access graft or vascular patch. The markets for such products arepotentially very attractive: • 350,000 CABG procedures performed annually in the US • 300,000 patients on dialysis per annum in the US, 60% of whom require an AV access prosthesis • 50,000 patients in the US requiring peripheral vascular grafts annually. As reported in January we have achieved pre-clinical proof of principle for thevascular graft product, ahead of plan. In-vivo functional studies with the TSLprocessed vascular grafts demonstrated excellent biocompatibility and cellresponse leading to a fully patent graft which performed significantly betterthan gold standard vein autograft repairs in the same model. Ligament graft We are seeking to develop a porcine derived ligament that retains strength, postprocessing and sterilisation, for cruciate ligament and other tendon/ligamentrepairs. In the US alone there are some 250,000 anterior cruciate ligament (ACL)repair procedures per annum, 80,000 of which require reconstructive surgery.This represents a market opportunity of c$320m. We are pleased to announce today that our In-vivo study data in a sheep modelfor ACL reconstruction has shown excellent joint stability and biomechanicalperformance and we have achieved pre-clinical proof of principle for theligament graft project. Next steps on the new tissue programmes When we set out our plans for research into these three new tissue projects toshareholders in the spring of 2005, we set some very ambitious targets ofdemonstrating proof of principle within two years. It is very pleasing to beable to report that all three projects have achieved this objective on or aheadof plan. In addition to achieving the technical milestones for each project, we have alsogenerated new data, which we believe we can use to establish new intellectualproperty ('IP'). Our immediate next step, therefore, is to progress the workrequired to secure and protect this new IP for shareholders. Alongside this we have allocated funds from our existing financial resources toprogress with a 510(k) regulatory approval submission in respect of our bonegraft product in the second half of 2007. For the longer term, we are now assessing the range of available options thatwould enable us to progress these projects through to the next stage of theirclinical and commercial development. Such options are clearly influenced by thestrength of our IP position. We anticipate being in a position to provide anupdate on this review at the interim results in September. Manufacturing and Operations During the year the operations team has focused on improving operationalproductivity and achieved some significant increases in product yields incomparison with the prior year. Development work in respect of larger processbaths was also completed during the year giving rise to the potential for asubstantial increase in manufacturing capacity within our current facilities. Wealso renewed the lease on our core manufacturing unit in Leeds for a further 7years. Summary and Outlook 2006 was an important year for TSL, with significant progress in the evolutionof our business model from sole dependence on marketing partners anddistributors, to the addition of direct access to market through our own salesteam. We are confident that this strategy will result in significant revenuegrowth in the near term. We have also made good progress in our new product development pipeline, withproof of principle now established in porcine bone, vascular and ligamentgrafts. This progress offers exciting prospects for longer term value growth andthis, together with the near term prospects from our direct sales team, gives usconsiderable confidence in the future. Martin Hunt Chief Executive Officer Tissue Science Laboratories plc Preliminary Results Statements - Year Ended 31 December 2006 Finance Director's Report Revenue Group reported revenues increased by 5% to £10.7m (2005: £10.2m). US dollarsales revenues were translated at an average rate of £1 = $1.78 in the year(2005: £1 = $1.82). Overall sales growth on a consistent currency basis was 3%. Strong growth in our general surgery business was offset by a decline inrevenues from our marketing partner in urology/gynaecology, Bard. General surgery revenues in the US grew by 69% to $9.8m (2005: $5.8m). Salesfrom our direct team in the US increased seven-fold in the year to $7.1m (2005:$1.0m) as we completed the transition to a direct sales force from independentdistributors and commission reps. Sales from these distributors and commissionreps reduced to $2.7m (2005: $4.8m) as a result of the transfer of territoriesto our direct team and the consequent de-stocking by the distributors. Sales revenues from Bard in the year were $5.3m (2005: $9.5m) as a result of areduction of stocking orders following a change in the competitive environmentin pelvic floor reconstruction. In orthopaedics, sales to Zimmer were $0.4m (2005: $0.3m) and sales to Porex ourdistributor in head and face increased to $0.2m (2005: $0.1m). Gross Margin Gross margins improved to 68% (2005: 50%) benefiting from the increase in highermargin direct sales in general surgery versus partnered revenues principally inurology/gynaecology through Bard. In addition, we increased our manufacturingefficiency leading to improved product yields which contributed to the strongunderlying gross margin progression. Operating Expenses Selling and distribution costs increased to £4.0m (2005 £1.9m) which represents37% of sales (2005: 19%) reflecting the increased investment in our direct USsales team where costs amounted to £3.2m (2005: £1.1m). Administrative expenses (including marketing costs) were £4.8m (2005: £4.6m). Investment in research and development increased to £2.3m (2005: £1.3m).Research and development includes clinical, regulatory and new productdevelopment expenditure, principally in respect of product line extensions forPermacol(R) and the costs of progressing the bone, ligament and vascular graftsthrough pre-clinical proof of principle studies. Results The group made an operating loss of £3.7m (2005: £2.7m). Net interest income was£0.0m (2005: £0.2m) and a tax credit of £0.2m (2005: £0.1m) was received inrespect of the Government's research and development tax credit scheme. Net lossfor the year was £3.5m (2005: £2.4m), in line with management's expectations andprevious guidance. Basic and diluted loss per ordinary share was 11.8p (2005:8.4p). Fixed Assets and Capital Expenditure Expenditure on capital items amounted to £0.7m in the year reflecting investmentin our US infrastructure and development of our operational facilities in Leeds.There were no material capital commitments in place at the year end. Working Capital Investment in working capital increased by £1.6m to £4.1m (2005: £2.9m) drivenby an increase in inventory of £1.6m in the year. This investment wasprincipally to support our US sales team in our target general surgery market.We have also increased our product range to include new larger sizes of Permacol(R), offering further differentiation versus our competitors. Cash and Net Funds Cash outflow from operating activities in the year was £4.1m (2005: £3.3m). Cashoutflow increased principally as a result of the higher loss for the year and asa result of investment in product inventory to support our US sales team. At an Extraordinary General Meeting held on 15 November 2006 shareholdersapproved the placing of 5,090,910 new ordinary shares at £0.55p per share,raising £2.8m (before expenses) in new equity finance to provide additionalworking capital headroom for the Group. The Placing was oversubscribed and wellsupported by existing institutional shareholders and management. As at December2006, the Group retained cash at bank and in hand of £4.8m ( 2005: £6.8m) andnet funds of £3.0m ( 2005: £5.0m). Treasury Policy and Financial Risk Management The group operates a risk-averse policy of treasury management in order tominimise exposure to capital loss whilst securing market rates of interest oncash balances. Funds are deposited with UK clearing banks on short tomedium-term deposits, with maturity typically at three to six months, andbearing interest at prevailing rates. During the year cash balances were placedwith more than one UK clearing bank. Currency Risk The group is exposed to currency risk principally in respect of US dollarrevenues. The majority of risk is associated with the translation of therevenues, expenses and net assets of our US subsidiary into sterling onconsolidation. During the year forward-sale hedging contracts amounting to $9.6mmatured at a composite rate of £1 = $1.75. As at 31 December 2006 forward-salehedging contracts amounting to $1.9m at a composite rate of £1 = $1.94 wereoutstanding and due to mature by 31 March 2007. International Financial Reporting Standards (IFRS) The accounts for the year ended 31 December 2006 are prepared in accordance withUK GAAP. As an AIM listed company the preparation of annual accounts under IFRSis mandatory for financial years commencing on or after 1 January 2007. Thefirst financial information to be reported by the Group in accordance with IFRSwill be the interim results for the six months ended 30 June 2007. This willrequire an opening balance sheet to be prepared under IFRS at 1 January 2006(the date of transition) and a full Income Statement, Balance Sheet and CashFlow Statement for the year ended 31 December 2006 for comparative purposes. The Company has conducted an initial review of the potential impact of IFRS onits accounting policies and financial statements and has a detailed programme inplace to manage the conversion to reporting under IFRS. Differences may arise inthe accounting treatment of certain items under IFRS and further amendments toIFRS and interpretations in respect of the new standards may also be issued bythe International Accounting Standards Board before the next financialinformation is reported by the Group. David Jennings Finance Director Tissue Science Laboratories plc Consolidated Profit & Loss Account for the Year Ended 31 December 2006 Note Year Ended Year Ended 31 December 31 December 2006 2005 (Audited) (Restated) £000s £000s TURNOVER: 2 10,683 10,171 Cost of Sales (3,401) (5,071) Gross Profit 7,282 5,100 Selling & Distribution costs (3,969) (1,882) Administrative Expenses Research and development costs (2,269) (1,297)Other administrative costs (4,764) (4,628) (7,033) (5,925) Operating Loss (3,720) (2,707) Interest Receivable 173 293 Interest Payable & similar charges Bank & finance lease interest (149) (94) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,696) (2,508) Taxation 152 140 RETAINED LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (3,544) (2,368) Basic and diluted loss per ordinary share (11.8)p (8.4p) All amounts relate to continuing operations. There is no material difference between the results as disclosed by the Profitand Loss Account and the results on an unmodified historical cost basis. Tissue Science Laboratories plc Consolidated Statement of total recognised gains and losses for the Year Ended31 December 2006 Year Ended 31 Year Ended 31 December December 2006 2005 (Audited) (Restated) £'000 £'000 Loss attributable toshareholders of the Group (3,544) (2,368)Foreign exchange translationdifferences on foreigncurrency subsidiary (42) -Total recognised losses forthe period (3,586) (2,368)Prior period adjustment (72) -Total losses recognisedsince last annual report andfinancial statements (3,658) - Tissue Science Laboratories plc Consolidated Balance Sheet as at 31 December 2006 31 December 31 December 2006 2005 (Audited) (Restated) £000s £000sFixed Assets Tangible assets 2,994 3,340 Current Assets Stocks 3,875 2,301Debtors 2,422 2,713Cash at bank and in hand 4,762 6,842 11,059 11,856 Creditors: amounts falling due within one year (2,170) (2,482) NET CURRENT ASSETS 8,889 9,374 Total assets less current liabilities 11,883 12,714 Creditors: amounts falling due after more than oneyear (1,515) (1,554) NET ASSETS 10,368 11,160 CAPITAL & RESERVES Called up share capital 3,460 2,946 Share premium account 24,247 22,075 Shares to be issued 341 239 Merger reserve 545 545 Profit & loss account (18,225) (14,645) EQUITY SHAREHOLDERS' FUNDS 10,368 11,160 Tissue Science Laboratories plc Consolidated Cash Flow Statement for Year Ended 31 December 2006 Note Year Ended Year Ended 31 December 31 December 2006 2005 (Audited) (Audited) £000s £000s Net cash outflow from operating activities 4 (4,144) (3,301) Returns on investment and servicing of Finance 48 196 Taxation 152 (32) Capital expenditure & financial investment (432) (2,144) Cash outflow before use of liquid resources &financing (4,376) (5,281) Financing Net cash inflow from financing 2,346 8,651 (Decrease)/Increase in cash in the period (2,030) 3,370 RECONCILIATION OF NET CASHFLOW TO MOVEMENT INNET FUNDS (Decrease)/Increase in cash in the period (2,030) 3,370 Cash outflow from movement in debt & leasefinancing 340 343 Change in net funds resulting from cash flows (1,690) 3,713 New finance leases (244) (393) Bank loan - (1,300) Currency translation difference (50) 18 Movement in net funds in the year (1,984) 2,038 Net funds brought forward 4,966 2,928 Net funds carried forward 2,982 4,966 Tissue Science Laboratories plc Notes 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 31 December 2006 or for the yearended 31 December 2005, but is derived from those accounts. Statutory accountsfor the year ended 31 December 2005 have been delivered to the Registrar ofCompanies and those for the year ended 31 December 2006 will be deliveredfollowing the Company's annual general meeting. The auditors have reported onthose accounts; their reports were unqualified and did not contain statementsunder s237(2) of (3) Companies Act 1985. The accounting policies adopted are consistent with those adopted in theprevious period with the exception of the adoption of FRS20 "Share basedpayment". The adoption of FRS 20 has resulted in a restatement of the retainedloss for the year to 31 December 2005 of £64,000, and a restatement to shares tobe issued and profit and loss account at 31December 2005 of £72,000. 2. TURNOVER A geographical analysis of turnover by destination is as follows: Year Ended Year Ended 31 December 31 December 2006 2005 (Audited) (Audited) £000s £000sA geographical analysis of turnover by destination isas follows:United Kingdom 1,495 1,201Europe 516 1,465USA 8,492 7,413Rest of World 180 92 10,683 10,171 An analysis of turnover by class of business is asfollows: Product sales 10,683 10,117Milestone income - 54 10,683 10,171 3. LOSS PER SHARE Loss per ordinary share has been calculated based on the weighted-average ofordinary Shares in issue during the period. Year Ended Year Ended 31 December 31 December 2006 2005 (Audited) (Restated) £000s £000s Loss for the period (3,544) (2,368)Weighted average number of ordinary shares 30,131,492 28,296,310Basic and diluted loss per share (11.8)p (8.4)p 4. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES Year Ended Year Ended 31 December 31 December 2006 2005 (Audited) (Restated) £000s £000s Operating loss (3,720) (2,707)Depreciation of tangible fixed assets 1,023 922Decrease/(Increase) in debtors 266 (633)Increase in stocks (1,574) (751)Decrease in creditors (255) (178)Foreign exchange loss/(gain) 8 (18)Other non-cash charges 108 64 (4,144) (3,301) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TSL.L