Vernalis contd...
Consolidated profit and loss account for the year ended 31 December 2001
Note 2001 2000
Pounds '000 Pounds '000
Turnover 13,828 2,928
Research and development expenses (20,431) (18,617)
Administrative expenses
- Goodwill amortization (1,791) (1,995)
- Other (3,178) (4,469)
- Total (4,969) (6,464)
Other operating income/ (expenses) 164 (20)
Group operating loss (11,408) (22,173)
Share of operating loss in associate -- (256)
Total operating loss (11,408) (22,429)
Profit on disposal of associate -- 737
Costs of restructuring -- (2,609)
Loss before interest and taxation (11,408) (24,301)
Interest receivable and similar income 833 1,401
Interest payable and similar charges (607) (39)
Loss on ordinary activities before taxation (11,182) (22,939)
Tax on loss on ordinary activities (4) 1,291 1,719
Loss for the financial year (9,891) (21,220)
Basic loss and diluted loss per ordinary share (3)(23)p (53)p
There is no difference between the loss on ordinary activities before taxation and after taxation stated above, and their historical cost equivalents.
All results arise from continuing activities, except for the share of operating loss in associate in the year ended 31 December 2000.
The Company has no recognized gains and losses other than the losses above and therefore no separate statement of recognized gains and losses has been presented.
Consolidated balance sheet as at 31 December 2001
2001 2000
Note Pounds '000 Pounds '000
Fixed assets
Intangible fixed assets 5 22,400 7,014
Tangible fixed assets 2,435 2,332
Investments 82 222
24,917 9,568
Current assets
Debtors 6 3,120 3,558
Investments 7 17,921 20,800
Cash at bank and in hand 50 7
21,091 24,365
Creditors: amounts falling due
within one year 8 (16,256) (5,275)
Net current assets 4,835 19,090
Total assets less current liabilities 29,752 28,658
Creditors: amounts falling due after
one year 9 (14,135) (3,569)
Net assets 15,617 25,089
Capital and reserves
Called up share capital 4,285 4,252
Share premium account 86,875 86,572
Other reserves 20,716 20,633
Profit and loss account (deficit) (96,259) (86,368)
Equity shareholders' funds 10 15,617 25,089
Consolidated cash flow statement for the year ended 31 December 2001
2001 2000
Note Pounds '000 Pounds '000
Net cash outflow from operating activities 11 (8,395) (22,658)
Returns on investments and servicing of finance
Interest received 946 1,703
Interest paid -- (11)
Interest element on finance lease rental payments (115) (28)
Net cash inflow from returns on investments and
servicing of finance 831 1,664
Taxation 1,573 --
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,061) (999)
Sale of tangible fixed assets 9 38
Net cash outflow from capital expenditure and
financial investment (1,052) (961)
Acquisitions and disposals
Cash at bank and in hand acquired with subsidiary -- 84
Sale of investment in associate -- 2,500
Investment in associate -- (1,000)
Net cash inflow from acquisitions and disposals -- 1,584
Net cash outflow before management of liquid
resources and financing (7,043) (20,371)
Management of liquid resources 2,879 11,298
Net cash outflow before financing (4,164) (9,073)
Financing
Net proceeds of shares issued and options exercised 419 5,192
Repayment of principal under finance leases (277) (341)
New finance leases 548 282
New loans 3,517 3,405
Net cash inflow from financing 4,207 8,538
Increase/(Decrease) in cash 43 (535)
Basis of preparation
The financial information for the year ended 31 December 2001 has not been audited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. This preliminary announcement was approved by the Board on 18th March 2002. The statutory accounts for the year ended 31 December 2001 have not yet been filed with the Registrar of Companies, nor reported on by the Company's auditors. They will be circulated to shareholders in April 2002 and the Annual General Meeting is scheduled to take place on 24 May 2002.
The comparative results for the year ended 31 December 2000 and the balance sheet at that date have been extracted from the statutory accounts for the year ended 31 December 2000 which have been filed with the Registrar of Companies and on which the auditors made an unqualified report under Section 235 of the Companies Act 1985.
The financial information in this announcement has been prepared on the basis of the accounting policies as set out in the most recently published set of annual financial statements. There have been no changes to the Group's accounting policies in 2001.
FRS 18 (Accounting policies) has been adopted in the current year, but this has not resulted in any changes being made to the Group's accounting policies and estimates.
2 Dividend
The Directors do not recommend payment of a dividend (2000: Pound nil).
3 Basic loss and diluted loss per ordinary share
The basic loss per share has been calculated by dividing the loss for
the year by the weighted average number of shares of 42.560 million in
issue during the year ended 31 December 2001 (2000: 40.169 million)
excluding those held in an employee share trust which are treated as
cancelled.
The Group had no dilutive potential ordinary shares in either year
which would serve to increase the loss per ordinary share. There is
therefore no difference between the loss per ordinary share and the
diluted loss per ordinary share.
4 Tax on loss on ordinary activities
From April 2000 the Group is entitled to claim tax credits for certain
research and development expenditure. The amount included in the
financial statements for the year ended 31 December 2001 of
1.291 million pounds (2000: 1.719 million pounds) represents the credit
receivable by the Group. The level of tax credit is lower in this
period due to the impact on the results of the income generated from
the approval of frovatriptan. These amounts have not yet been agreed
with the Inland Revenue.
Intangible assets
Goodwill Other intangibles Total
Pounds '000 Pounds '000 Pounds '000
Cost
At 1 January 2001 8,954 -- 8,954
Additions (see below) -- 17,177 17,177
At 31 December 2001 8,954 17,177 26,131
Aggregate amortization
At 1 January 2001 1,940 -- 1,940
Charge for year 1,791 -- 1,791
At 31 December 2001 3,731 -- 3,731
Net book amount at
31 December 2001 5,223 17,177 22,400
Net book amount at
31 December 2000 7,014 -- 7,014
The goodwill is being amortized on a straight line basis over five years, being the period over which the Directors estimate that the value of the underlying business acquired is expected to exceed the value of the underlying assets.
Other intangibles represents the capitalization of payments conditionally due to GlaxoSmithKline (GSK) to buy out royalties due to GSK on sales of frovatriptan (note 9). These will be amortized from the date of launch of frovatriptan to the end of the patent life in 2014 which is considered by the directors to be the useful life of the asset.
6 Debtors
2001 2000
Pounds '000 Pounds '000
Amounts falling due within one year
Trade debtors 925 460
Corporation tax receivable 1,437 1,719
Other debtors 336 823
Prepayments and accrued income 422 556
3,120 3,558
Current asset investments
2001 2000
Pounds '000 Pounds '000
Term deposits 6,174 7,151
Negotiable bank and building society certificates
of deposit 11,747 13,649
17,921 20,800
These investments have been valued at the lower of cost and market value at the balance sheet date. They are all capable of realization within three months.
8 Creditors: amounts falling due within one year
2001 2000
Pounds '000 Pounds '000
Loan 7,363 --
Trade creditors 1,415 1,359
Obligations under finance leases 259 171
Tax and social security costs 272 246
Other creditors 3,435 --
Accruals and deferred income 3,512 3,499
16,256 5,275
The loan relates to a total loan facility of $10 million from Elan Corporation, the Company's North American licensee for frovatriptan, together with accrued interest thereon. 50% of this loan facility was drawn down in December 2000, with the remaining 50% drawn down in March 2001. Elan may, within a certain time period after regulatory approval of frovatriptan in the United States, waive the Group's obligation to repay the loan and accrued interest in return for a reduction in the royalty due by Elan to the Group on North American sales of frovatriptan. At the balance sheet date, the loan and interest was otherwise repayable in November 2002, consequently for 2001, this has been reclassified into Creditors: amounts falling due within one year.
Subsequent to 31 December 2001, the companies agreed to extend the repayment date for the loan, in the event that the option is not exercised, from November 2002 to May 2003.
Creditors: amounts falling due after one year
2001 2000
Pounds '000 Pounds '000
Loan (note 8) -- 3,359
Obligations under finance leases 393 210
Other creditors 13,742 --
14,135 3,569
Amounts included within other creditors relate to payments conditionally due to GlaxoSmithKline (GSK) under the agreement of December 2000 to buy out royalties due to GSK on sales of frovatriptan (note 5). Conditional on US launch of the product the Company is committed to make four annual payments to GSK of $5 million the first commencing 90 days after the launch in the United States and the following three on each anniversary of the first payment. A fifth payment of $5 million dollars is due in 2006 if cumulative global sales of frovatriptan exceed $300 million on that date, or 90 days after cumulative global sales exceed $300 million. The full liability for $25 million (17,177,000 pounds) has been recognized as the directors believe it is probable that cumulative global sales will exceed $300 million.
10 Reconciliation of movements in shareholders funds
2001 2000
Pounds '000 Pounds '000
Loss for the year (9,891) (21,220)
Issue of shares -- 4,960
Net proceeds from exercise of share options 336 105
Premium on shares issued by subsidiary 83 127
Net change in shareholders' funds (9,472) (16,028)
Opening shareholders' funds 25,089 41,117
Closing shareholders' funds 15,617 25,089
11 Net cash flow from operating activities
2001 2000
Pounds '000 Pounds '000
Operating loss (11,408) (22,173)
Depreciation 958 1,296
(Profit)/loss on sale of tangible fixed assets (9) 6
Write-down of investment in own shares 140 270
Amortization of goodwill 1,791 1,995
Decrease in debtors
(excluding accrued interest income) 41 555
Increase / (decrease) in creditors
(excluding non-operating liabilities) 565 (3,251)
Exchange adjustments (3) (46)
Payments made in respect of restructuring costs (470) (1,310)
(8,395) (22,658)
12 Reconciliation of net cash flow to movement in net funds
2001 2000
Pounds '000 Pounds '000
Movement in cash in the period 43 (535)
Decrease in capital element of finance lease 277 341
New finance leases (548) (282)
New loans (3,517) (3,405)
Net disinvestment in liquid resources (2,879) (11,298)
Changes in net funds resulting from cash flows (6,624) (15,179)
Other non cash items:
accrued interest on loan (490) --
exchange adjustments 3 46
Movement in net funds in the period (7,111) (15,133)
Net funds at 1 January 17,067 32,200
Net funds at 31 December 9,956 17,067
13 Analysis of net funds
At 1 Cashflow Non cash Exchange At 31
January movements adjustments December
2001 2001
(pounds) '000 '000 '000 '000 '000
Cash at bank and in hand 7 43 -- -- 50
Other current asset
investments /
liquid resources 20,800 (2,879) -- -- 17,921
Short term investments
and
Cash 20,807 (2,836) -- -- 17,971
Finance leases (381) (271) -- -- (652)
Debt due within one year -- (3,517) (3,849) 3 (7,363)
Debt due after one
year (3,359) -- 3,359 -- --
Net funds 17,067 (6,624) (490) 3 9,956
14 Contingent asset
The Group has stocks of frovatriptan with original cost of approximately 0.7 million pounds (2000 : 1.2 million pounds) which have previously been expensed. Once the compound is launched in its major markets, these stocks, which have a significant remaining shelf life, will be capable of realization at a value in excess of cost. No amounts have been recognised in these financial statements in respect of these stocks. 
