23rd Aug 2011 07:00
23 August 2011
Source BioScience plc ("Source BioScience" or "the Company" or "the Group") HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2011
The Board of Source BioScience plc the international genetic analysis and diagnostics business, presents its half yearly report for the six months ended 30 June 2011.
Financial highlights
* Revenue increased by 10% to £7.6 million (2010: £6.9 million), with a major contribution from LifeSciences which showed a 31% increase in revenue in the period * Loss before tax of £0.2 million (2010: £0.1 million profit) after £0.4 million of non-recurring and restructuring costs associated with the planned integration of the acquired imaGenes business * EBITDA of £0.5 million (2010: £0.6 million) * Annualised cost savings of approximately £0.5 million identified and will benefit the Group during H2 2011 * Cash balance of £3.0 million (31 December 2010: £4.2 million)
Operational highlights
* Major developments in LifeSciences business driving growth: + Launch of the world's largest clone and antibody portfolio, combining over 20 million clones and integrated antibody library + Release of GenomeCube, a proprietary search engine and bioinformatics tool enabling researchers to access the entire portfolio quickly and easily + SpeedREAD rapid data delivery service for DNA sequencing launched, providing the world's fastest turnaround times for sequencing data of less than three hours; also, leading Overnight Service launched + Installation and commissioning of the Company's second HiSeq2000 high throughput sequencing platform in the Berlin facility to meet increasing customer demand for genetic sequencing services * New competitive advantage created for the Healthcare outsourcing business through direct connection to the NHS' internal IT network * Awarded European Union Framework 7 grant to study genetic causes of dementia in children, worth in excess of £0.2 million
Post period events
* Important revenue growth opportunity for Healthcare with NHS approval for the use of the BD FocalPoint "No Further Review" technology for cervical cancer screening in the UK with potential sales increase by up to 25% in the long term * Won prestigious international competitive bid to provide DNA sequencing to Trinity College Dublin and University College Dublin - expected to generate revenue of at least £0.3 million per annum
Laurie Turnbull, Chairman of Source BioScience, said:
"In this period, we have seen significant growth in our LifeSciences business, boosted by the integration of the imaGenes acquisition and the growing demand for sequencing and genomic services in the life sciences research sector. This division will continue to be the major driver of growth for the business. We are also seeing longer term growth opportunities in the Healthcare division which has always been a solid performer. We have a significant competitive advantage following our approval to link in to the NHS hospitals IT network and from the approval of our BD FocalPoint "No Further Review" technology. This technology represents a major breakthrough in automation of cervical cancer screening and we are the sole provider. As a leader in the provision of genetic and diagnostic services, the business is cost-efficient, restructured and well-positioned to meet the growing demands of the European healthcare and life sciences sectors."
---ENDS--- For further information,Source BioScience plcDr Nick AshChief Executive OfficerTel: +44 (0) 115 973 9010www.sourcebioscience.com
For investor and media enquiries:
Singer Capital Markets Limited (Financial Advisor and Broker)Shaun Dobson/Claes Sp¥ngTel: +44 (0) 203 205 7500www.singercm.comCollege Hill (PR Agency)Melanie Toyne-Sewell/Dimithri WignarajahTel: +44 (0) 207 457 [email protected]
Cautionary statement
This business review contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Source BioScience plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in this business review should be construed as a profit forecast.
CHAIRMAN'S STATEMENTIntroduction
The first half of 2011 has been another period of sustained growth and development for Source BioScience. In our interim management statement issued on 17 May 2011 we reported a robust first quarter performance and this has been sustained for the full six months to 30 June 2011.
Financial Review
Revenue for the six months ended 30 June 2011 increased by 10% to £7.6 million (2010: £6.9 million) and the aggregate gross margin has remained consistent at 43% (2010: 43%).
A key component of the increase in revenue was from LifeSciences which grew by more than 30% to £3.7 million (2010: £2.8 million) and benefited from the positive impact of the acquired imaGenes business. Healthcare revenue of £3.6 million was consistent with the same period last year (£3.5 million) whereas PharmaBiotech revenue decreased slightly to £0.4 million (2010: £0.5 million).
All three divisions continue to be profitable and the aggregate operating profit for the three divisions, before central costs, increased by 6% to £1.6 million (2010: £1.5 million).
The cost base remained tightly controlled. `Normal' administrative expenses were £2.3 million (2010: £2.1 million) and represented 30% of revenue (2010: 31% of revenue). In addition, £0.4 million of non-recurring and restructuring costs were incurred associated with the planned integration of the acquired imaGenes business. Following a review of the acquisition, annualised cost savings of approximately £0.5 million have been identified and the benefit should be seen during the second half of the year. After adjusting for these non-recurring and restructuring costs, unallocated central costs were £1.5 million, representing 19% of revenue which compares favourably with the prior year (2010: 22% of revenue).
EBITDA remained broadly consistent at £0.5 million (2010: £0.6 million) and loss before, and after, tax was £0.2 million (2010: £0.1 million profit).
The financial position of the Company remains strong with net assets of £15.2 million (31 December 2010: £15.4 million). The Group's cash balance was £3.0 million at 30 June 2011 (31 December 2010: £4.2 million) and borrowings were £ 0.4 million (31 December 2010: £0.4 million) which were acquired with imaGenes. Deferred consideration of £0.1 million remains on the acquisition and is due for settlement in March 2012.
Net cash outflow in the period was £1.2 million (2010: £1.5 million) and this was after capital expenditure of £1.3 million. This expenditure reflected enhancements to our technology platforms and e-commerce infrastructure and included the investment in the HiSeq2000 and GenomeCube.
LifeSciences
In LifeSciences, we provide ultra-fast sequencing services and products to academic research groups either as a standalone service or via our international network of laboratories. The division delivered the greatest growth with revenue increasing by more than 30% to £3.7 million (2010: £2.8 million) and delivered an operating profit of £0.5 million (2010: £0.3 million).
A primary focus for the first half of 2011 was the integration of the imaGenes business acquired at the end of 2010 to create one of Europe's strongest and most comprehensive businesses for genetic services and products. This process has progressed to plan with non-recurring and restructuring costs to date of approximately £0.4 million incurred as expected in delivering the integrated business. The programme of planned investment in the Berlin operation has progressed well, including the installation and commissioning of the Company's second HiSeq2000 high throughput sequencing platform. The market for next generation sequencing is growing strongly and we continue to experience increasing demand for our services. In the first half of 2011, revenue from this activity was more than double the same period last year.
The launch of our new LifeSciences website during 2010 has been key in supporting and promoting growth in the life sciences market. This is now delivering tangible benefits and commercial advantage. The Company's online portfolio of products now extends to a unique offering of over 20 million DNA clones and integrated antibody library. Each of these products is provided with comprehensive scientific and technical support, both online and via the technical helpdesk. Our e-commerce solution was enhanced further in June with the launch of GenomeCube, a proprietary search engine and bioinformatics tool enabling researchers to access the world's largest clone and antibody portfolio. GenomeCube represents a significant investment by the Company, with over £1.0 million committed to the platform since its inception. These initiatives, and the consolidation of the existing imaGenes website, has resulted in web traffic increasing by over 100% compared with the period immediately prior to launch.
SpeedREAD was also launched at the start of the year; this is the fastest data delivery service for DNA sequencing with a turnaround time for sequencing data in under three hours. Uptake by customers was strong, with over 95% selecting automated data delivery. On this foundation, our Overnight Service was launched in June, enabling customers to drop-off samples at the end of their working day and receive their results before 9am the following morning.
In July, Source BioScience was selected by Trinity College Dublin and University College Dublin as a preferred supplier of DNA sequencing following a competitive tender process. The terms of the agreement, worth an expected minimum of £0.3 million per year, are to provide DNA sequencing for two years with an option to extend the contract for a further year. This service will be delivered from our Dublin-based DNA sequencing laboratory, the only commercial sequencing facility of its kind in Ireland.
As other companies have reported, there is evidence of more cautious spending amongst academic researchers in the UK and the rest of Europe, most likely due to uncertainty around government plans for publicly funded research expenditure. We do not believe this has impacted our sales growth to date nor in the near future, due to the services and product offering we provide, and the projects we have in our pipeline.
Healthcare
The Healthcare division comprises our diagnostic and screening activities including cervical cancer screening and cancer diagnostic testing services. Revenue of £3.6 million was broadly consistent with the same period last year (2010: £3.5 million) with divisional operating profit also maintained at £1.0 million (2010: £1.0 million), which was in line with management expectations.
Demand for our liquid based cytology (`LBC') consumables, which underpin 48% of the cervical cancer screening programme in England and Wales, was strong during the period, with opportunities presenting themselves for the medium to longer term growth of this business.
From a business development focus, Source BioScience has been approved by the NHS for direct connection to the N3 network, the NHS national IT infrastructure which links hospitals, medical centres and GPs in England and Scotland. We are the first company of its kind to be granted such a connection and this provides a significant advantage over our competitors.
For the long term growth of this division, an important milestone was the recently announced decision by the NHS Cancer Screening Programme to approve the use of the BD FocalPoint "No Further Review" automated imaging technology for cervical screening in the UK. This is the only automated cervical screening technology which has been approved and is the only one of its kind. The "No Further Review" technology can analyse and identify up to 25% of screening samples that can be reported as "all clear", requiring no human examination. With over 3.6 million tests per annum being undertaken across England and Wales during 2009/10, this represents a significant reduction in laboratory workload and full adoption of this technology by our existing customers could increase the annual revenue from our cytology activities by up to 25%. The NHS expects to be in a position to begin the roll out of this technology into the screening programme towards the end of this year; therefore we anticipate generating revenue from this opportunity during 2012.
In diagnostics, as anticipated, we are seeing a shift in demand away from the more traditional histopathology-based services towards gene-based diagnostic testing which, with our expertise in this arena, is growing strongly. During the first half of this year, gene-based testing represented around 20% of our diagnostic activity, compared with just over 10% for the same period last year. The significant majority of these gene-based tests are being used as companion diagnostics, testing to provide information about whether a particular therapy may, or may not, work. Demand is primarily in relation to breast cancer, testing for the HER2 gene to determine whether a patient may respond to Herceptin. However, there is growing demand for K-RAS mutation testing in relation to patients with colorectal cancer and their suitability for anti-EGFR drugs such as Erbitux and Vectibix.
Demand is increasing for targeted therapies with accompanying companion diagnostics. In response to the demand for greater information about the genetics of a disease, we have enhanced our portfolio of companion diagnostic testing services and have been working to develop, and validate, proprietary assays for the most important genetic tests. These proprietary assays improve our laboratory efficiency, reduce our costs and provide a competitive advantage. As part of this, Source BioScience, in partnership with Barts Cancer Institute and Illumina Inc. is collaborating to develop a novel approach to cancer diagnosis and personalised treatment for patients. The collaboration has won a grant of £0.5m through the Technology Strategy Board's `Tumour Profiling and Data Capture to Improve Cancer Care' funding competition.
PharmaBiotech
PharmaBiotech is the smallest division and offers reference laboratory testing services and clinical trials support to the pharma and biotech industry to help with the discovery and development of new therapies. In the first half of 2011, it had revenue of £0.4 million (2010: £0.5 million); divisional operating profit remained consistent with last year at £0.1 million (2010: £0.1 million).
We have entered into a number of new agreements with large pharma companies to provide laboratory services in support of clinical trials and have a pipeline of clinical trial contracts worth in excess of £1.0 million over the next 12 to 18 months. However, as with any clinical trial support contract, the value to the Company depends on successful recruitment of patients onto a trial and, to some extent, early indications of the efficacy of the therapy being trialled both of which are outwith our control.
As we have referred to previously, we have restructured elements of our commercial and operational infrastructure, and have been working to align our PharmaBiotech and LifeSciences activities more closely. In future we will present our PharmaBiotech activities as part of our LifeSciences division.
Outlook
The Group has demonstrated sustained growth during the first half of the year which has continued to the date of this report. This underpins confidence in the ongoing improvement in the performance of the Group for the full year, in line with management expectations.
In LifeSciences, we believe that we have significant untapped potential within our product portfolio, with our unique portfolio of clones and antibodies. With the launch of our improved e-commerce platform and, most recently, GenomeCube we have made access to our entire portfolio more straightforward, significantly enhanced the technical information available to researchers and made the sales process more user friendly for customers. We expect to report further progress in marketing and sales in the second half of the year.
In Healthcare, we continue to hold a dominant position in England and Wales in support of the cervical cancer screening programme. This is a mature market which is highly cash generative and the barriers to entry are significant. As noted above, opportunities exist with the adoption, and roll out of automated imaging in the UK, which will be additive to our existing offering. In addition, the NHS plans to introduce HPV testing within the screening programme before the end of 2011. Source BioScience already offers HPV testing and this service can be adapted to suit the demands of the NHS. We anticipate that initially up to 20% of screening samples will be referred for HPV testing which equates to approximately 700,000 additional HPV tests per annum in England and Wales. In addition, with our unique offering of histopathology and increased outsourcing by the NHS, plus cutting-edge genomics, we are well placed to capitalise on the increasing demand for genetic testing and companion diagnostics.
The solid first half performance, and initiatives underway, underpins confidence in the maintained improvement in the performance of the Group for the full year.
Laurie TurnbullChairman23 August 2011
Unaudited Condensed Consolidated Statement of Comprehensive Income For the six months ended 30 June 2011
Six months Six months Year ended ended ended 30 June 30 June 31 2011 2010 December 2010 Note £'000 £'000 £'000 Continuing operations Revenue 2 7,572 6,857 13,487 Cost of sales (4,315) (3,888) (7,666) Gross profit 3,257 2,969 5,821 Selling and distribution expenses (555) (675) (1,231) Research and development (125) (95) (220) Administrative expenses: - normal (2,286) (2,092) (4,024) - amortisation of intangibles arising (135) (90) (176)from acquisitions - non-recurring and restructuring costs (353) - - - acquisition costs - - (159) Administrative expenses (2,774) (2,182) (4,359) Operating (loss) / profit from continuing (197) 17 11operations Finance income 13 37 72 Finance costs (15) - (9) (Loss) / profit before tax from c (199) 54 74ontinuing operations Taxation 20 16 34 (Loss) / profit after tax but before loss (179) 70 108from discontinued operations Discontinued operations Loss from discontinued operations - - (15) (Loss) / profit attributable to equity (179) 70 93holders of the Company Other comprehensive income Exchange differences on translation of (5) - (1)foreign operations Total comprehensive (expense) / income (184) 70 92attributable to equity holders of the Company Earnings per share:
Basic (loss) / profit per ordinary share 3 (0.09)p 0.03p 0.05p
Diluted (loss) / profit per ordinary 3 (0.09)p 0.03p 0.04p share
Unaudited Condensed Consolidated Statement of Changes in Shareholders' EquityAs at 30 June 2011 Attributable to equity holders of the Parent Company Share Merger Special Translation Profit Total capital and reserve reserve and equity other loss reserves reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2010 4,075 2,408 10,788 - (2,072) 15,199 Profit for the period - - - - 70 70 Total comprehensive income - - - - 70 70for the period Transactions with owners, recorded directly in equity Employee share option scheme: - value of services provided - - - - 49 49 Balance at 30 June 2010 4,075 2,408 10,788 - (1,953) 15,318 Balance at 1 July 2010 4,075 2,408 10,788 - (1,953) 15,318 Currency translation - - - (1) - (1)adjustments Net expense recognised - - - (1) - (1)directly in equity Profit for the period - - - - 23 23 Total comprehensive - - - (1) 23 22(expense) / income for the period Transactions with owners, recorded directly in equity Employee share option scheme: - value of services provided - - - - 28 28 Balance at 31 December 2010 4,075 2,408 10,788 (1) (1,902) 15,368 Balance at 1 January 2011 4,075 2,408 10,788 (1) (1,902) 15,368 Currency translation - - - (5) - (5)adjustments Net expense recognised - - - (5) - (5)directly in equity Loss for the period - - - - (179) (179) Total comprehensive expense - - - (5) (179) (184)for the period Transactions with owners, recorded directly in equity Employee share option scheme: - value of services provided - - - - 24 24 Balance at 30 June 2011 4,075 2,408 10,788 (6) (2,057) 15,208Unaudited Condensed Consolidated Statement of Financial PositionAs at 30 June 2011 As at As at As at 30 June 30 June 31 2011 2010 December 2010 £'000 £'000 £'000 Non-current assets Goodwill 8,346 6,617 8,345 Other intangible assets 1,154 661 992 Investment in associate - 223 - Property, plant and equipment 2,697 2,304 2,818 12,197 9,805 12,155 Current assets Inventories 747 490 716 Trade and other receivables 3,356 2,841 2,527 Cash and cash equivalents 2,987 5,518 4,170 7,090 8,849 7,413 Current liabilities Trade and other payables 3,450 3,209 3,522 Financial liabilities - borrowings 135 3 130 Deferred consideration 77 - - 3,662 3,212 3,652 Net current assets 3,428 5,637 3,761 Total assets less current liabilities 15,625 15,442 15,916 Non-current liabilities Financial liabilities - borrowings 268 - 302 Deferred consideration - - 77 Deferred tax 149 124 169 417 124 548 Net assets 15,208 15,318 15,368 Equity Issued share capital 4,075 4,075 4,075 Special reserve 10,788 10,788 10,788 Other reserves 2,402 2,408 2,407 Profit and loss reserve (2,057) (1,953) (1,902) Total equity 15,208 15,318 15,368
Unaudited Condensed Consolidated Statement of Cash Flows For the six months ended 30 June 2011
Six Six Year months months ended ended ended 31 30 June 30 June December 2011 2010 2010 £'000 £'000 £'000 Cash flows from operating activities (Loss) / profit for the period (179) 70 93 Adjustments for: Depreciation of tangible fixed assets 524 390 792 Recognition of grant income (6) (6) (13) Amortisation of capitalised development 44 9 40costs Amortisation of other intangibles 135 91 177 Impairment of assets held for sale - - 223 Profit on sale of property, plant and (24) - (39)equipment Profit on sale of discontinued operations - - (224) Interest payable 15 - 9 Interest receivable (13) (37) (72) Share-based payments - value of employee 24 49 77service Change in working capital (690) (404) (137) Cash (used in) / generated from operations (170) 162 926 Interest paid (15) - (9) Net cash (used in) / generated from (185) 162 917operating activities Cash flows from investing activities Acquisition of subsidiaries - (750) (2,449) Cash acquired with subsidiaries - - (111) Purchases of property, plant and equipment (918) (788) (872) Proceeds from sale of property, plant and 304 - 10equipment Purchases of intangible assets (336) (123) (265) Interest received 7 4 49 Net cash used in investing activities (943) (1,657) (3,638) Cash flows from financing activities Repayment of borrowings (24) - (107) Finance lease principal repayments (5) (1) (4) Net cash used in financing activities (29) (1) (111)
Net decrease in cash and cash equivalents (1,157) (1,496) (2,832)
Cash and cash equivalents at beginning of 4,170 7,014 7,014period Exchange losses on cash and cash (26) - (12)equivalents Cash and cash equivalents at end of period 2,987 5,518 4,170
Responsibility Statement
We confirm that to the best of our knowledge:
* The condensed consolidated interim financial statements for the six months ended 30 June 2011 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and * the half year report includes a fair review of the information required by: + DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) + DTR 4.2.8R (disclosure of related party transactions and charges therein) By order of the BoardLaurie Turnbull Nick AshChairman Chief Executive Officer
Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June 2011
1. Basis of preparation
Source BioScience plc is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the Group).
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as endorsed and adopted for use in the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010, which have been prepared in accordance with IFRS adopted by the European Union.
These condensed consolidated interim financial statements have been prepared on the basis of accounting policies consistent with those applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2010 except as noted below.
The Group has adopted improvements to various standards within the `Improvements to IFRS' programme, none of which have had a significant effect on the reported results or financial position of the Group.
The condensed consolidated interim financial statements for the six months ended 30 June 2011 have neither been audited nor reviewed by the Group's auditor in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board.
The comparative figures for the financial year ended 31 December 2010 are not the Company's statutory consolidated accounts for that financial year but represent an extract from those accounts. Statutory accounts for the year ended 31 December 2010 were approved by the Board on 28 April 2011 and delivered to the Registrar of Companies. The report of the auditor on those financial statements was (i) unqualified, (ii) did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The consolidated financial statements of the Group as at and for the year ended 31 December 2010 are available on request from the Company's registered office at 1 Orchard Place, Nottingham Business Park, Nottingham NG8 6PX or at www.sourcebioscience.com.
The condensed consolidated interim financial statements are presented in pounds sterling, rounded to the nearest thousand pounds. They are prepared on the historical cost basis except for the valuation to fair value of certain assets as indicated.
The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key source of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2010.
There have been no related party transactions or changes in related party transactions described in the latest annual report that could have a material effect on the financial position or performance of the Group in the first six months of this financial year.
The condensed consolidated interim financial statements for the six months ended 30 June 2011 were approved by the Board of Directors on 23 August 2011.
Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June 2011
2. Operating segments
Information about reporting segments
At 30 June 2011, the Group's trading operations were organised into three main operating divisions:
* LifeSciences * Healthcare (comprising the business units of Cytology and Diagnostics) * PharmaBiotech
During the period there were immaterial sales between business segments (six months ended 30 June 2010: immaterial; year ended 31 December 2010: immaterial) and where these do occur they are at arm's length pricing.
Unallocated costs represent corporate expenses and common operating costs. Segment assets include intangible assets such as goodwill, together with plant and equipment, stocks and debtors. Unallocated assets include property, central debtors and prepayments and operating cash. Segment liabilities comprise operating liabilities and exclude borrowings. Segment capital expenditure comprises additions to plant and equipment and capitalised development costs.
Six months ended 30 June 2011 Life Healthcare Pharma Unallocated Group Sciences Biotech £'000 £'000 £'000 £'000 £'000 Revenue 3,650 3,554 368 - 7,572 Segment result 484 1,027 106 (1,814) (197) Finance income 13 13 Finance costs (15) (15) Loss before tax (1,816) (199) Taxation 20 20 Profit / (loss) for the 484 1,027 106 (1,796) (179)period Segment assets 11,808 2,626 101 - 14,535 Unallocated assets - property, plant and 643 643equipment - intangible assets 45 45 - debtors and prepayments 1,077 1,077 - cash and cash 2,987 2,987equivalents Total assets 11,808 2,626 101 4,752 19,287 Segment liabilities 1,328 778 31 - 2,137 Unallocated liabilities - creditors and accruals 1,942 1,942 Total liabilities 1,328 778 31 1,942 4,079 Other segment items Capital expenditure - tangible assets 473 89 - 69 631 - intangible assets 247 44 - 45 336 Depreciation 339 57 2 126 524 Amortisation of 149 30 - - 179intangible assets Other non-cash expenses - share option scheme - - - 24 24
All results derive from continuing operations.Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June 2011
2. Operating segments (continued)
Six months ended 30 June 2010 Life Healthcare Pharma Unallocated Group Sciences Biotech Continuing Operations £'000 £'000 £'000 £'000 £'000 Revenue 2,782 3,549 526 - 6,857 Segment result 346 1,036 140 (1,505) 17 Finance income 37 37 Finance costs - - (Loss)/profit before tax (1,468) 54 Taxation 16 16 Profit/(loss) for the 346 1,036 140 (1,452) 70period from continuing operations Discontinued Operations Profit for the year from - -discontinued operations Net profit/(loss) for the 346 1,036 140 (1,452) 70year Segment assets 8,757 2,672 281 - 11,710 Unallocated assets - property, plant and 482 482equipment - debtors and prepayments 714 714 - cash and cash equivalents 5,518 5,518 - discontinued operations 230 230 Total assets 8,757 2,672 281 6,944 18,654 Segment liabilities 598 827 66 - 1,491 Unallocated liabilities - creditors and accruals 1,621 1,621 - discontinued operations 224 224 Total liabilities 598 827 66 1,845 3,336 Other segment items Capital expenditure - tangible assets 106 14 - 82 202 - intangible assets 25 98 - - 123 Depreciation 186 122 2 80 390 Amortisation of intangible 95 - 5 - 100assets Other non-cash expenses - share option scheme - - - 49 49
Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June 2011
2. Operating segments (continued)
Year ended 31 December 2010 Life Healthcare Pharma Unallocated Group Sciences Biotech Continuing Operations £'000 £'000 £'000 £'000 £'000 Revenue 5,596 6,866 1,025 - 13,487 Segment result 727 2,011 277 (3,004) 11 Finance income 72 72 Finance costs (9) (9) (Loss)/profit before tax (2,941) 74 Taxation 34 34 Profit/(loss) for the year 727 2,011 277 (2,907) 108from continuing operations Discontinued Operations Segment Result (15) (15) Loss before tax (15) (15) Loss for the year from (15) (15)discontinued operations Net profit/(loss) for the 727 1,996 277 (2,907) 93year Segment assets 11,500 2,300 193 - 13,993 Unallocated assets - property, plant and 675 675equipment - debtors and prepayments 730 730 - cash and cash equivalents 4,170 4,170 Total assets 11,500 2,300 193 5,575 19,568 Segment liabilities 1,084 809 42 - 1,935 Unallocated liabilities - creditors and accruals 2,265 2,265 Total liabilities 1,084 809 42 2,265 4,200 Other segment items Capital expenditure - tangible assets 571 66 - 337 974 - intangible assets 88 177 - - 265 Depreciation 335 229 4 224 792 Amortisation of intangible 190 22 5 - 217assets Other non-cash expenses - share option scheme - - - 77 77
Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June 2011
3. Earnings / (loss) per share
Basic earnings / (loss) per share amounts are calculated by dividing net profit / (loss) for the period attributable to ordinary equity shareholders of the Parent Company by the weighted average number of shares outstanding during the period. Diluted earnings / (loss) per share amounts are calculated by dividing the net profit / (loss) attributable to ordinary equity shareholders by the weighted average number of ordinary shares outstanding during the period adjusted for the effects of dilutive options.
The calculation of basic and diluted earnings per share for each respective period is outlined in the table below:
Six months Six months Year ended ended ended 30 June 30 June 31 December 2011 2010 2010 (Loss) / Earnings (£'000) (179) 70 93 Basic EPS
Weighted average number of shares 203,765,232 203,765,232 203,765,232
(Loss) / earnings per share (0.09)p 0.03p 0.05p Diluted EPS
Weighted average number of shares 203,765,232 203,765,232 203,765,232
Dilutive options adjustment - 6,638,536 6,620,959
Weighted average number of shares 203,765,232 210,403,768 210,386,191 adjusted
for dilutive options Diluted (loss) / earnings per share (0.09)p 0.03p 0.04p
IAS 33 Earnings Per Share requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. Net loss per share in a loss-making company would only be increased by the exercise of share options which were out of the money. Assuming that option holders will not exercise out of the money options, no adjustment has been made to the diluted (loss) / earnings per share for out of the money share options.
4. Half year report
Copies of the half year report for the six months ended 30 June 2011 will be sent to all shareholders and will be posted on the Company's website at www.sourcebioscience.com. In addition, copies may be obtained from the Company Secretary at Source BioScience plc, 1 Orchard Place, Nottingham Business Park, Nottingham NG8 6PX.
--- ENDS --- About Source BioScience:
Source BioScience plc is an international genetic analysis and diagnostics business serving the healthcare and research markets. The LifeSciences division provides core laboratory research support from conceptualisation to implementation, calling upon a wide range of cutting-edge technology platforms including an online catalogue of biomolecular tools. Its Healthcare operations provide screening and reference laboratory diagnostic testing for cancer and other diseases and additional predictive testing for treatment optimisation for clinicians and patients. The PharmaBiotech division offers support for early stage therapeutic development, offering a 'one-stop shop' from tissue pathology, immunohistochemistry, sophisticated image analysis, biomarker determination and assay development to pharmacogenomics including genotyping and gene expression analysis. The Group has its headquarters in Nottingham, UK. Further information about Source BioScience can be found at www.sourcebioscience.com.
GLOSSARY Antibodies Antibodies are proteins that are found in blood or other bodily fluids; they are used by the immune system to identify and neutralise foreign objects, such as bacteria and viruses. Antibodies are also used as highly specific probes for detecting proteins of interest in tissues. A wide range of antibodies with a large variety of cellular targets is available to research scientists through distributors such as Source BioScience. BRAF The BRAF gene encodes a signalling protein. Mutations of the BRAF gene are quite common in melanoma and colorectal cancer. In colorectal cancer, such mutations make a tumour resistant to inhibitors of the EGFR signalling pathway. Bioinformatics The application of information technology, and computer science, to the field of molecular biology. Common activities in bioinformatics include mapping and analysing DNA and protein sequences, aligning different DNA sequences to compare them and handling and analysing huge data sets generated by the latest sequencing technologies. Biomarkers Biomarkers often refer to substances found in blood, urine or tissue, changes in which may be used to indicate presence of disease or response to treatment. More generally the term biomarker refers to any molecule that can be used to monitor a particular cellular process and may be a protein, DNA or RNA molecule.
Capillary Electrophoresis DNA sequences are determined using a chemical DNA Sequencing
reaction that results in an array of products that
(also known as Sanger terminate in a different fluorescent coloured dye, sequencing or
which vary in size by one nucleotide. The products
conventional sequencing) are separated, like the rungs of a ladder, by passing
them through a capillary with an electric current and determining the order in which they emerge. This method was used for the large DNA sequencing projects of the last 15 years and remains the only way of inexpensively analysing large numbers of small sets of samples (see also Next Generation DNA Sequencing - below). CYP2D6 Breast cancer patients with certain genetic variations in the CYP2D6 gene may be slow metabolisers of the drug tamoxifen to its active metabolite endoxifen. In this case changes to the treatment regime may be indicated because the efficacy of the drug is reduced. Circulating Tumour Cells The identification of small numbers of cancer cells (`CTC') circulating in the blood has been shown to be of potential prognostic significance in breast cancer, colorectal or prostate cancer, and useful for monitoring response to drug therapy. Clinical Pathology CPA is the accreditation body for clinical pathology Accreditation services. Accreditation involves audit of the ability(`CPA') of a laboratory to provide a service of high and consistent quality by declaring a defined standard of practice, which is performed by the CPA accreditation body. Clone A DNA sequence, such as a gene, that is transferred from one organism to another and can be replicated by genetic engineering techniques. Companion Diagnostic A test based on a biomarker (which might be a protein, DNA or RNA molecule), the presence or absence of which is associated with the likely efficacy of a drug or other treatment. Companion diagnostics are useful in stratifying patients into groups which are known to respond in a particular way to a drug. A good example of such a test from the Source BioScience breast cancer portfolio is the HER2 test, which assesses levels of the HER2 protein, expression of which is correlated with response to Herceptinâ„¢. DNA and cDNA DNA (Deoxyribo Nucleic Acid) is a large, complex molecule which, by virtue of a unique sequence of building blocks, contains all the genetic information required to create a cell or organism. cDNA (complementary DNA) can be made from all the genes in a genome, from a single gene, or from part of a gene. cDNA is DNA that has been synthesised artificially using an RNA template (see below) from the gene(s) selected. Duty of Care Review An audit of a specific pathologist's practice. Pathology departments have a duty of care to patients whose treatment or clinical management may need to be changed in the light of revised opinions arising from a review of a pathologist's or team's work. Where good practice is suspected to have broken down it may be necessary to arrange a systematic review of cases to fulfil a department's duty of care to their patients. Source BioScience offers a full duty of care review service to pathology departments that need specialist second opinion in these circumstances. EGFR mutation testing Human EGFR is a cellular transmembrane receptor found on the cell surface of tumour cells. Clinicians wishing to prescribe Gefitinib (Iressa) for lung cancer patients are required to confirm the presence of any mutations found in the tyrosine kinase domain on the EGFR gene. FocalPoint (`FP') An automated imaging system for screening SurePath liquid based cytology slides. It uses complex algorithms to interpret the images of each slide and decide the 10 `fields of view' most likely to have any abnormal cells. It can archive up to 25% as "no further review" (`NFR') which then do not need to be manually screened. Fluorescence In Situ In situ hybridisation (`ISH') is a powerful Hybridisation technique, not unlike immunohistochemistry (below), (`FISH') for visualising the presence of specific sequences of DNA or RNA in tissue sections. The technique uses short synthetic sequences of DNA or RNA which will bind, or hybridise, to the tissue with high specificity for the DNA or RNA of interest. Fluorescent `tags' are attached to these synthetic sequences, allowing them to be visualised with a special microscope, even when present at very low levels (FISH). Genomics Genomics is the study of an organism's entire genome, where the genome of an organism is its whole hereditary information and is encoded in the DNA (see above) and RNA (see below). This includes both the genes and the non-coding sequences of the DNA.
Genomic clone libraries A clone library is a collection of clones containing
complementary DNA (`cDNA') (see above) and is often intended to represent the genes that are expressed within a given cell or tissue type at a given period. Genomic products and In this instance, DNA or RNA extracted and purified reagents from a range of species and provided in a variety of forms for research purposes.
Genotyping and sequencing DNA sequencing is the process of precisely ordering
the building blocks, or nucleotides, of an organism's DNA. The method can be used to determine short sequences of DNA or, in larger experiments, to sequence the entire genome of an organism. Genotyping, in turn, is the process whereby DNA is characterised and then compared to reference data or, if large numbers of samples are genotyped, the data can be examined for patterns which might lead to discoveries of the fundamental causes of inherited diseases. Genotyping is commonly performed by PCR (below) or DNA sequencing. Good Clinical Practice Good Clinical Practice is an international ethical (`GCP') and scientific quality standard for designing, conducting, recording and reporting clinical trials that involve the participation of human subjects. Compliance with this standard provides public assurance that the rights, safety and well-being of trial subjects are protected, consistent with principles that have their origin in the Declaration of Helsinki. Compliance with the principles of GCP is assured via monitoring by a governmental agency, the Medicines and Healthcare products Regulatory Agency (`MHRA'). Good Laboratory Practice Good Laboratory Practice is a set of principles that (`GLP') provides a framework within which laboratory studies are planned, performed, monitored, recorded, reported and archived. These studies are undertaken to generate data by which the hazards and risks to users can be assessed for pharmaceuticals (only preclinical studies). GLP helps assure regulatory authorities that data submitted is a true reflection of the results obtained during the study and can therefore be relied upon when making risk/safety assessments. Compliance with the principles of GLP is assured via monitoring by the Medicines and Healthcare products Regulatory Agency (`MHRA'). HER2 Human Epidermal Growth Factor Receptor 2 is a protein the over-expression of which within a breast or gastric/gastro-oesophageal tumour sample may indicate a patient is suitable for treatment with Herceptinâ„¢. A test for such over-expression is carried out on all new breast cancer patients or patients with advanced stomach cancer. Histopathology The study of changes in tissues and cells as a consequence of some disease or toxic processes. Human Tissue Authority The Human Tissue Authority licenses organisations (`HTA') that store and use human tissue for purposes such as research, patient treatment, post-mortem examination, teaching, and public exhibitions. The HTA also inspect organisations to check that they maintain good standards and follow appropriate procedures against the legislation of the Human Tissue Act 2004. Immunohistochemistry Immunohistochemistry is a technique for visualising (`IHC') proteins and other molecules in thin sections of tissue. This technique uses antibodies raised in other species against the protein of interest as a tool, and exploits their exquisite sensitivity and specificity for binding to that protein. K-RAS K-RAS is a gene that produces an important cell signalling protein responsible for cell growth. The presence of a mutated form of the K-RAS gene in colorectal cancer may indicate that a patient is unsuitable for new anti-EGFR drugs such as Erbitux and Vectibix. Liquid based cytology Liquid based cytology is a process for collecting and(`LBC') processing cytology samples from epithelial tissues such as the cervix. It produces a cleaner preparation of cells, without the other materials which frequently contaminate the sample such as blood or mucus. Microarray Microarrays are a microscopic series of nucleic acid spots of known sequence which are deposited in a regular array typically onto a glass slide. A DNA or RNA probe can then be hybridised to the slide which results in a DNA or RNA fingerprint of the sample in the probe enabling you to determine the sample nucleic acid sequence. Next Generation DNA Next Generation DNA Sequencing refers generically to Sequencing (`NGS'), a set of recent technologies, in our case Illumina Illumina GAIIx and GAIIx and Illumina HiSeq 2000, in which extremely large numbers of short sequences can be determined inIllumina HiSeq 2000 a single experiment; for example the Illumina HiSeq 2000 selected by Source BioScience can sequence two human genomes in approximately one week.
No further review (`NFR') A unique feature of the FocalPoint automated cytology
imaging platform that can identify up to 25% of cytology slides where there are no abnormal cells present. These slides do not require further manual review, thereby improving the turnaround time and efficiency in the laboratory operations, saving time and cost for the NHS. Proteomics Proteomics is the study of specific amino acids, proteins or the entire proteome (a complete translated genome, see above) of an organism. Proteomic techniques include, for example, surveying complex biological samples for protein content, or determining the level of specific proteins in tissues using techniques like immunohistochemistry (IHC, see above) RNA RNA (RiboNucleic Acid) is a molecule similar to DNA, but is an intermediate product between the DNA of the gene, and the ultimate protein product of that gene. The level of expression of a gene can be gauged by the amount of RNA synthesised from that gene, a process usually measured by quantitative real-time polymerase chain reaction (`Q-PCR'). RNA expression analysis RNA expression analysis measures the activity of a large number of genes simultaneously, generating a global picture of cellular function. The expression analyses, or profiles, can distinguish between cells that are actively dividing, for example, or show how the cells react to a particular treatment.
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