Financial Review
The following review is based on the Group's consolidated financial statements which are prepared under UK generally acceptable accounting principles ('GAAP'). Those financial statements for prior periods have been restated to reflect the Group's revised accounting policy for revenue recognition as described below. Comparative figures in this review have been restated where appropriate.
Revenues increased to 7.1 million pounds in the 2001 financial year from 7.0 million pounds in the 2000 financial year.
As a result of CAT's reliance on collaboration arrangements, CAT's revenue profile has historically fluctuated from period to period, because the majority of revenue to date has been in the form of license fees and milestone payments. The Group has now changed its accounting policy for revenue recognition, the principal impact of which is that license fees, which were previously recognised as income when received, will be deferred and recognised over the term of the license. Revenues recognised in prior periods have been restated and therefore the receipt of a license fee will be a less significant factor in revenue volatility. CAT anticipates that over time and with the revised policy on revenue recognition, the profile of revenues is likely to become more regular as the number of collaborations increases, and ultimately as royalty income from product sales is realised.
The increase in revenue from the 2000 financial year to the 2001 financial year resulted from an increase in license revenues recognised and contract research fees offset by a decrease in milestone payments. CAT received non-recurring license fees in the 2001 financial year pursuant to CAT's collaborative arrangement with Immunex and in the 2000 financial year pursuant to collaborative arrangements with HGSI and for the grant of a product license for amyloid beta to Wyeth-Ayerst. These revenues will be recognised over the term of the license granted. Revenues recognised from license fees increased from 0.7 million pounds for the 2000 financial year to 1.6 million pounds for the 2001 financial year, reflecting revenues recognised from the new license fees received in the 2001 financial year in addition to license fees recognised in both periods which were received in the 2000 and prior financial years. CAT recognised 0.1m pounds of milestone or other revenues in the 2001 financial year compared to 1.8 million pounds in the 2000 financial year. Milestone payments are typically earned based on achievements in research and product development and may not be comparable from period to period. In the 2000 financial year the Group received a milestone payment from Knoll following the entry of D2E7 into phase III clinical trials, and a milestone pursuant to its arrangement with Astra Zeneca. CAT recognised 5.4 million pounds of revenues from contract research fees in the 2001 financial year compared to 4.5 million pounds in the 2000 financial year. The increase resulted from increased activity or a first full year of activity from the Group's collaborative arrangements with Pharmacia and HGSI offset by a reduction in activity with Wyeth-Ayerst following the completion of the functional genomics element of that arrangement.
CAT's direct costs are typically fees payable as a percentage of its revenues. Substantially all of the direct costs reported in these financial statements are Drug Royalty Corporation's share of revenues. In future periods, when CAT receives royalties on product sales under its various licenses and collaboration agreements, direct costs will also include royalties payable to Medical Research Council and other licensors.
Operating expenses for the 2001 financial year were 27.8 million pounds compared to 20.6 million pounds in the 2000 financial year reflecting the increasing scale and complexity of CAT's activities.
Staff numbers rose over the 2001 financial year from 180 to 247 (the average over the year was 224). There was a credit during the 2001 financial year of 0.4 million pounds for employer's National Insurance payable on the exercise of certain options granted in December 1999, compared with a charge of 0.5 million pounds in the 2000 financial year, and a charge for the cost of shares to be allocated under the employee share scheme of 0.6 million pounds, compared with 0.5 million pounds in the 2000 financial year.
Research and development expenses increased to 21.4 million pounds in the 2001 financial year from 15.7 million pounds in the 2000 financial year. The increase reflects an increase in the scale of CAT's activities, research and development staff numbers increasing to 212 at the end of the 2001 financial year, and increased expenditures for laboratory and general supplies. The increase also reflects a commitment to CAT's product development activities and the resulting expenditures with external suppliers on pilot manufacture and clinical trials. Research and development expenditures in the 2000 financial year were also affected by payments of 1.1 million pounds for access to intellectual property, primarily to The Burnham Institute and Integra Life Sciences, Stratagene and The Whittier Institute for Diabetes and Endocrinology.
General and administrative expenses increased to 6.4 million pounds in the 2001 financial year from 4.8 million pounds in the 2000 financial year. These expenses include fees relating to patent litigation of 2.0 million pounds in the 2001 financial year compared to 1.7 million pounds in the 2000 financial year. The remaining increase in the 2001 financial year was primarily caused by costs associated with increased personnel, larger facilities and more complex operations.
Total depreciation expenses increased from 1.8 million pounds in the 2000 financial year to 2.1 million pounds in the 2001 financial year. This reflected a substantial investment in fixed assets in recent years, particularly fitting out and equipping the Franklin Building during the 2001 financial year. Amortisation expenses amounted to 0.4 million pounds in the 2000 and 2001 financial years reflecting the amortisation of the Aptein patents.
Net interest income increased to 9.3 million pounds in the 2001 financial year from 5.6 million pounds in the 2000 financial year. In the 2000 and 2001 financial years, cash and investments in liquid resources increased due to ordinary share issues in connection with strategic collaborations in December 1999, April 2000 and October 2000 and a share offering in April 2000. These resulted in increased interest income during those periods.
Liquidity and Capital Resources
During the 2001 and 2000 financial years, CAT's net cash used by operating activities was 19.2 million pounds and 3.6 million pounds respectively, in each case resulting principally from operating losses, offset by depreciation and amortisation. In the 2000 financial year, operating losses were also offset by increases in deferred income resulting from income received during that year which will be recognised as turnover in future periods.
CAT made capital expenditures of 3.8 million pounds and 1.0 million pounds in the 2001 and 2000 financial years, respectively. CAT's capital expenditures are primarily for laboratory equipment, laboratory facilities and related information technology equipment. CAT also invests in office and administrative facilities. The increase in capital expenditures from the 2000 financial year to the 2001 financial year primarily resulted from the fitting out and equipping of 20,000 sq. ft. of specialist laboratory and office facilities at the Franklin Building at Granta Park.
CAT's net cash inflow from financing activities during the 2001 and 2000 financial years was 15.4 million pounds and 132.3 million pounds respectively, in each case primarily resulting from the issue of ordinary shares. During the 2001 financial year, CAT completed one significant financing transaction: in October 2000, CAT issued 307,942 ordinary shares to Genzyme for US$20 million (or approximately 13.4 million pounds net of expenses) in connection with a strategic collaboration.
As at 30 September 2001, CAT had net current assets of 153.4 million pounds. CAT does not currently borrow to finance its operations. CAT's creditors at the end of the 2001 financial year included a total of 10.5 million pounds of deferred income, representing non-refundable income received which will be recognised in future periods. The corresponding amount in the 2000 financial year was 11.4 million pounds.
CAT has incurred net losses of 11.8 million pounds and 8.3 million pounds in the 2001 and 2000 financial years respectively. As of 30 September 2001 CAT had an accumulated loss of 56.0 million pounds. CAT's losses have resulted principally from costs incurred in performing research and development on human monoclonal antibody product candidates, and from general and administration costs associated with CAT's operations.
As at 30 September 2001, CAT had cash and marketable securities of approximately 156.8 million pounds. CAT has invested funds that are surplus to its requirements in highly liquid short term securities.
Financial Outlook for 2002
Recurring revenues, representing contract research revenues and income from licensing arrangements entered into this and prior periods, are expected to be in the range of 6 to 7 million pounds for the 2002 financial year. Additional revenues may arise from technical and clinical milestone payments and any further licensing arrangements.
A further significant increase in operating costs are expected over the level in the second half of the 2001 financial year. This reflects in particular additional spending on clinical trials and further increases in staff and infrastructure costs. Staff numbers are expected to increase to approximately 300 during the 2002 financial year.
Capital expenditure over the year is expected to be above last year's level, in particular because of the anticipated spending on CAT's further new facilities at Granta Park. Total expenditure is expected to be of the order of 10 million pounds.
It is anticipated that CAT's net cash burn rate for the current year, taking account of expected revenues, will be in the range 2.5 to 3.0 million pounds per month.
Future Reporting
The Group will, with effect from the 2002 financial year, report financial results and issue a review of operations on a quarterly basis. The reports for the first and third quarters will be made available as a press release and through the Group's web site. For the half year the Group will continue its customary practice of additionally posting a printed statement to all shareholders.
CAMBRIDGE ANTIBODY TECHNOLOGY GROUP plc
Preliminary Statement of Results for the Year ended 30 September 2001
Consolidated Profit and Loss Account
2001 2000 1999
For the year ended 30 unaudited restated restated
September 2001 '000 pounds '000 pounds '000 pounds
Turnover 7,121 7,018 2,165
Direct costs (351) (381) (81)
Gross profit 6,770 6,637 2,084
Research and development
expenses (21,393) (15,728) (13,574)
General and administration
expenses (6,443) (4,842) (2,684)
Operating loss (21,066) (13,933) (14,174)
Interest receivable (net) 9,295 5,644 1,810
Loss on ordinary activities
before taxation (11,771) (8,289) (12,364)
Taxation on loss on
ordinary activities -- -- (1)
Loss on ordinary activities
after taxation and retained
loss for the financial year (11,771) (8,289) (12,365)
Loss per share -- basic and
fully diluted (pence) 33.3p 27.5p 50.9p
Consolidated Statement of Total Recognised Gains and Losses
2001 2000 1999
unaudited
'000 pounds '000 pounds '000 pounds
Loss for the financial year (11,771) (5,161) (12,731)
Loss on foreign exchange
translation 1 (7) (1)
Total recognised losses
relating to the year (11,770) (5,168) (12,732)
Prior year adjustment (6,594)
Total recognised losses since
last annual report and
financial statements (18,364)
The losses for all years arise from continuing operations.
CAMBRIDGE ANTIBODY TECHNOLOGY GROUP plc
Preliminary Statement of Results for the Year ended 30 September 2001
Consolidated Balance Sheet
2001 2000
At 30 September 2001 unaudited restated
'000 pounds '000 pounds
Fixed assets
Intangible assets 4,075 4,448
Tangible fixed assets 6,642 5,008
10,717 9,456
Current assets
Debtors 4,940 3,452
Investment in liquid resources 156,228 156,502
Cash at bank and in hand 585 26
161,753 159,980
Creditors
Amounts falling due within one year (8,335) (9,627)
Net current assets 153,418 150,353
Total assets less current liabilities 164,135 159,809
Creditors
Amounts falling due after more than one year (8,085) (7,369)
Net assets 156,050 152,440
Capital and reserves
Called-up share capital 3,546 3,477
Share premium account 195,017 179,706
Other reserve 13,451 13,451
Profit and loss account (55,964) (44,194)
Shareholders' funds -- all equity 156,050 152,440
CAMBRIDGE ANTIBODY TECHNOLOGY GROUP plc
Preliminary Statement of Results for the Year ended 30 September 2001
Consolidated Cash Flow Statement
2001 2000 1999
For the year ended 30 unaudited restated restated
September 2001 '000 pounds '000 pounds '000 pounds
Operating loss (21,066) (13,933) (14,174)
Depreciation charge 2,146 1,808 1,627
Amortisation of patents 373 374 389
Loss/(profit) on disposal
of fixed assets 1 (5) --
(Increase)/decrease in debtors (515) (1,159) 264
(Decrease)/increase in creditors (89) 9,306 706
Net cash outflow from
operating activities (19,150) (3,609) (11,188)
Returns on investments and
servicing of finance
Interest received (net) 8,322 4,245 2,100
Taxation -- -- (1)
Capital expenditure and financial investment
Purchase of tangible
fixed assets (3,485) (1,018) (2,672)
Sale of tangible fixed assets 4 44 --
(3,481) (974) (2,672)
Net cash outflow before
management of liquid resources
and financing (14,309) (338) (11,761)
Management of liquid resources 274 (133,729) 12,051
Financing
Issue of ordinary share capital 15,380 132,302 539
Capital elements of finance
lease rental payments -- (9) (4)
15,380 132,293 535
Increase/(decrease) in cash 1,345 (1,774) 825
Notes to the financial information
Accounting policies
This financial information has been prepared on a basis consistent with the accounting policies set out in the annual report for the year ended 30 September 2000 with the exception of the policy for revenue recognition. This policy was changed during the year in accordance with emerging best practise. The Directors believe that the revised policy provides a fairer presentation of the results and financial position of the Group because under the revised policy, where contractual performance is incomplete, despite the Group having received non-refundable payments, revenue is only recognised to the extent that the Group has performed its obligations and such performance has resulted in benefits accruing to the customer. The impact of this change in accounting policy is summarised below.
Prior Year Adjustment
2001 2000 1999
'000 pounds '000 pounds '000 pounds
Profit and Loss account
Turnover:
Revised accounting policy 7,121 7,018 2,165
Previous accounting policy 9,595 10,146 1,799
(Increase)/decrease in loss
for the financial year (2,474) (3,128) 366
Balance sheet
Creditors:
Amounts falling due within
one year -- deferred income (1,564) (1,200) (655)
Amounts falling due after more than
one year -- deferred income (7,504) (5,394) (2,811)
Decrease in net assets (9,068) (6,594) (3,466)
Loss per share
Potentially dilutive issueable shares are only included in the calculation of fully diluted earnings per share if their issue would decrease net profit per share or increase net loss per share. The Group's basic and fully diluted loss per share are therefore equal.
Loss per ordinary share (basic and fully diluted) is based on the loss for the financial year of 11,771,000 pounds (2000: loss, restated 8,289,000 pounds, 1999: loss, restated 12,365,000 pounds) and a weighted average number of ordinary shares of 35,313,260 (2000: 30,179,818, 1999: 24,314,191).
Analysis and reconciliation of net funds (unaudited)
1 October Cash Exchange 30 September
2000 flow movement 2001
'000 pounds '000 pounds '000 pounds '000 pounds
Cash at bank 26 559 -- 585
Overdrafts (949) 786 -- (163)
1,345
Liquid resources 156,502 (274) -- 156,228
Net funds 155,579 1,071 -- 156,650
2001 2000 1999
unaudited
'000 pounds '000 pounds '000 pounds
Increase/(decrease) in cash
in the year 1,345 (1,774) 825
Decrease/(increase) in
liquid resources (274) 133,729 (12,051)
Decrease in lease financing -- 9 4
Change in net funds resulting
from cash flows 1,071 131,964 (11,222)
Exchange movement -- 2 4
Movement in net funds in year 1,071 131,966 (11,218)
Net funds at 1 October 2000 155,579 23,613 34,831
Net funds at 30 September 2001 156,650 155,579 23,613
Reconciliation of movements in group shareholders' funds
2001 2000
unaudited
'000 pounds '000 pounds
Loss for the financial year (11,771) (5,161)
Other recognised gains and losses relating
to the year 1 (7)
(11,770) (5,168)
New shares issued 15,380 132,302
Net increase in shareholders' funds 3,610 127,134
Opening shareholders' funds as
previously stated 159,034 31,900
Prior year adjustment (6,594) --
Opening shareholders' funds as restated 152,440 31,900
Closing shareholders' funds 156,050 159,034
Financial Statements
The preceding information does not constitute the Company's statutory financial statements for the year ended 30 September 2001 within the meaning of section 240 of the Companies Act 1985. The auditors have not yet reported on the financial statements for the year ended 31 September 2001. Those financial statements will be delivered to the Registrar of Companies after the Company's Annual General Meeting.
The annual report and financial statements for the year ended 30 September 2001 will be posted to shareholders by 22 December 2001 and will be available shortly thereafter from:
The Company Secretary
Cambridge Antibody Technology Group plc
The Science Park
Melbourn
Cambridgeshire
SG8 6JJ, UK
Tel: +44 (0) 1763 263233
This preliminary announcement was approved by the Board on 23 November 2001. |
