Press Release

 

Osmetech plc ('Osmetech' or the 'Company')

Annual Report and Accounts 2006 - 20 March 2007

 

 

Osmetech today


Transforming molecular diagnostics into practical, cost-effective, FDA cleared testing solutions.


As the demand for and acceptance of molecular diagnostic tests multiplies, so does the rate of testing decentralization. The movement of molecular diagnostic testing into the clinical laboratories of midsize
hospitals requires greater simplicity, flexible testing capabilities, and cost-effectiveness.


Osmetech Molecular Diagnostics is focused on providing cuttingedge, cost-effective molecular diagnostic technologies and tools that enable a broader range of hospitals and laboratories to offer molecular diagnostic services for improved patient care.

 

Contents

 

1    Highlights
2    Chairman’s statement
3    Chief executive officer’s review
8    Board of directors
9    Report of the directors
15  Independent auditors’ report
17  Consolidated profit and loss account
17  Consolidated statement of total recognised gains and losses
18  Consolidated balance sheet
19  Company balance sheet
20  Consolidated cash flow statement
20  Reconciliation of net cash flow to movement in net funds
21  Notes to the consolidated cash flow statement
23  Notes forming part of the financial statements
42  Notice of annual general meeting
45  Form of proxy
IBC Directors and advisers

 

 

Highlights


2006

  • Sales for 2006 of £10.6m (8 months ended 31 December 2005 – £5.6m) – increase of 28%
    on the corresponding 12 month period
  • Operating losses of £12.4m (8 months ended 31 December 2005 – £5.5m) reflects our
    significant investment in our Molecular Diagnostics Division including the first full
    reporting period since Clinical Micro Sensors Inc. was acquired in 2005
  • FDA clearance for eSensor® Cystic Fibrosis screening test
  • Successful launch of first molecular diagnostics products and commencement of sales
  • July 2006 share placing raises £12.8m before expenses

 

Current period

  • Strategic partnership with EPIDAUROS Biotechnologie AG to develop pharmaceutical
    companion diagnostics and novel molecular diagnostic products
  • Sale completed of Critical Care Division (“CCD”) for $44.9m in cash representing a
    substantial return on the original acquisition price of $2.7m
  • Cash resources increased significantly on 31 January 2007 to £27.5m following the sale of
    CCD
  • Agreement to buy-back warrants over 7.8m shares from Motorola (representing 3.85% of
    the issued share capital) for £469,000
  • First pharmacogenetics assay for Warfarin testing and second generation instrument
    platform, the eSensor® XT-8, planned for clinical trials and FDA submission in the third
    quarter of 2007

 

Chairman’s Statement


I am pleased to report that 2006 has been another year of considerable achievement for Osmetech.
Our Molecular Diagnostics Division received FDA clearance for its eSensor® Cystic Fibrosis screening
test and has achieved its first sales of diagnostics products in this rapidly developing and strategically
important market.


In December 2006 we announced that the sale of our Critical Care Division to our veterinary partner,
IDEXX Laboratories, Inc. for $44.9m in cash had been agreed. This sale was completed at the end of
January 2007, crystallising a considerable gain in the value of this business under Osmetech’s ownership
and management since its acquisition from Roche Diagnostics in April 2003.


I would like to take this opportunity to thank all of our Critical Care Division employees for their
dedication, enthusiasm and commitment over the past few years in helping to create a strong and
successful business in the blood gas market. The Board wishes them well for the future as they enter an
exciting new chapter under IDEXX’s ownership.


The sale of the Critical Care Division has demonstrated the skill of the Osmetech management team in
acquiring and developing underexploited assets and now management is focussed solely on the major
opportunities available in Molecular Diagnostics market. We are confident that we can deliver similar
success with our Molecular Diagnostics business, which is now appropriately funded, and I look forward
to updating shareholders on further progress in due course.


Gordon Hall
Chairman
20 March 2007

 

 

Chief Executive Officer’s review


Introduction
Through the recent sale of its Critical Care Division, Osmetech has capitalised on the considerable value
created in that business since its acquisition from Roche Diagnostics, Inc. in 2003. Following its sale, the
Group is now wholly focussed on its Molecular Diagnostics business operating in Pasadena and Boston
in the US.


Sale of Critical Care Division
2006 was another year of strong profitable growth for the Critical Care Division. Sales of the blood gas
and electrolyte product range increased to £10.5m ($19.4m) in 2006 from £5.6m ($9.9m) for the 8 month
period ended 31 December 2005. Sales increased by 29% when compared to the equivalent 12 month
period in 2005 of £8.1m, benefiting in particular from VetStat sales to our veterinary distribution partner,
IDEXX Laboratories, Inc. (‘IDEXX’).


Notwithstanding the highly satisfactory operating performance of the Division this year, on 18 December
2006, we announced the proposed sale of the Critical Care Division to IDEXX for $44.9m in cash. This
sale was approved by shareholders at an Extraordinary General Meeting on 9 January 2007 and the
transaction was completed on 31 January 2007.


The Critical Care Division was originally acquired by Osmetech in April 2003 for $2.7m before costs.
During the period of Osmetech’s ownership, sales more than doubled and a loss making business was
transformed into profitability. This was achieved principally through selective new product investment
and the launch of the VetStat in the veterinary market with IDEXX. Osmetech’s developing commercial
relationship with IDEXX presented an opportunity to sell the Division at an attractive price, representing
a substantial return on investment.


Your Board considered that this divestment was in the best interests of the Group as a whole, delivering
the following benefits:

  • Realises excellent value creation for shareholders
  • Removes any shareholder concerns over the Group’s funding requirements and strengthens its
    balance sheet
  • Provides the necessary funding to enable the continued development of a successful Molecular
    Diagnostics business
  • Osmetech is now well positioned in a high growth market sector with potentially high returns

 

Molecular Diagnostics Market
The molecular diagnostics market is expected to continue to be the fastest growing segment within In
Vitro Diagnostics (IVD). With an estimated global market worth of $2.6bn in 2006, it is approaching 10%
of the total IVD market and exhibiting annual growth rates of approximately 20%. Infectious disease and
genetic testing are the two most rapidly growing areas for molecular diagnostics accounting for
approximately half of the overall market segment.


Osmetech is primarily targeting genetic testing, which can be divided broadly into three areas:

  • Diagnosis and Monitoring – evaluating genetic sequences to confirm the presence or progress of
    disease
  • Susceptibility – evaluating genetic mutations to determine susceptibility to a future condition (e.g.,
    cystic fibrosis)
  • Pharmacogenetics – evaluating genetic variations to predict a patient’s response to a particular drug

 

Pharmacogenetics or ‘personalised medicine’ is widely anticipated to grow rapidly as treatments are
more closely tailored to a patient’s genetic make-up. For example, Osmetech is developing a genetic
test relevant for the anticoagulant Warfarin where the market opportunity is substantial. Optimal doses
of Warfarin vary among patients with incorrect starting dosages prescribed for 20% of patients, resulting
in either insufficient or excessive blood thinning.


Warfarin testing is expected to lead to a reduction in the 85,000 cases of severe bleeding and 17,000
strokes occurring annually in the US and could decrease national healthcare spending by $1.1bn per
year as estimated by the American Enterprise Institute and the Brookings Institute. More than 30m
prescriptions for Warfarin are given annually in the US alone with 3m new patients each year suffering
from a heart attack or stroke. The total annual number of patients worldwide with conditions for which
Warfarin could potentially be prescribed is 8.5m.


Pharmacogenetics is also expected to play a larger role in drug development through the identification
of genetic mutations and creation of “companion” diagnostics.

 

Molecular Diagnostics Division
Osmetech is developing a strong, complementary portfolio of FDA-approved and development-stage
products that address the rapidly growing molecular diagnostics market.
We plan to expand and develop the Division through the following means:

  • Progress with the development and commercialisation of the Group’s existing product pipeline
    including the second generation instrument platform, the eSensor® XT-8
  • Secure licensing agreements that will add assay content, and therefore revenues, for the Group’s
    instrument platforms
  • Continue to explore selective acquisition opportunities which will strengthen and expand the
    Group’s presence in the molecular diagnostics market
  • Negotiate licensing agreements and enter into strategic partnerships in non-healthcare markets, thereby
    leveraging the strength of the Group’s instrument platforms, technology and intellectual property

 

Osmetech’s two instrument platforms, eSensor® and GeneSensor™ (previously known as OPTI GENE)
are directly targeting the demand for decentralised testing by providing practical, cost effective
molecular diagnostic technologies and tools that will enable a broader range of hospitals and
laboratories to offer molecular diagnostic services. Our strategy has been to design low cost products
specifically for the diagnostics market rather than by adapting complicated high cost research
products.

 

eSensor®
The eSensor® instrument and cartridge consumable system is primarily suited to undertaking relatively
complex molecular tests which require the analysis, detection or identification of many different targets
at once. The electrochemical detection technology is protected by strong international intellectual
property, including 70 patents in the US alone, which have benefited from an investment of
approximately $100m by Motorola during its period of ownership.


Earlier this year Osmetech received 510(k) clearance from the US FDA for its Cystic Fibrosis carrier
detection test and its eSensor® 4800 DNA Detection instrument platform. This FDA approval is a first for
a combined instrument and consumable Cystic Fibrosis assay. The system assesses whether an individual
carries mutations in the Cystic Fibrosis gene and is used by adult couples contemplating pregnancy.


The core technology for the instrument platform and microarray consumable forming part of this
approval will also be used for running tests for other conditions to be launched in the future.

 

eSensor® XT-8
Later this year we shall be introducing our second generation instrument, the eSensor® XT-8 with new
consumable cartridge, which will be able to routinely run complex assays including the Cytochrome P450
(“CYP 450”) pharmacogenomics assays described later.
The eSensor® XT-8 system will deliver a number of operational, design and performance benefits
including:

  • Significant reduction in processing time
  • Smaller foot print
  • Modular and expandable with higher throughput potential
  • Integrated CPU
  • Programmable eSensor® cartridge
  • Increased chip density to enable wider analysis of gene mutations
  • Improved data management capabilities

 

A successful third party evaluation for a fully functional prototype XT-8 instrument and our first CYP450
assay for Warfarin testing took place in December 2006. We now plan to exhibit the platform at the
Clinical Virology Symposium in the US next month moving to clinical trials in support of an FDA
submission in the third quarter of 2007. Following FDA approval, we anticipate a launch in the US by the
end of 2007 with an international launch scheduled for 2008.

 

SensiTube™
The SensiTube™ product line, previously known as OPTI TUBE™, consists of plastic tubes and
ergonomically designed sealing caps and carousel for use in the Roche LightCycler, a market leading
instrument used in PCR analysis. SensiTube™ is a cost effective, robust alternative to Roche glass
capillaries that eliminates the dangers of glass breakage and minimises the risk of laboratory personnel
being exposed to potentially dangerous samples and glass shards. The same plastic technology has
been incorporated into consumables to be supplied for use with Osmetech’s GeneSensor™ instrument.


Osmetech has also granted a worldwide non-exclusive license to Roche for the manufacture and sale of
plastic consumable vials using this proprietary plastic tube technology, in respect of which the Company
has recently been granted its first patent.


GeneSensor™
The GeneSensor™ instrument is primarily suited to undertaking relatively simple molecular tests. Whilst
our primary objective is to further develop the commercial potential for our eSensor® system, we plan to
fully launch the GeneSensor™ as a research instrument later this year followed by the introduction of an
FDA-cleared instrument and accompanying Factor V and Factor II IVD tests for thrombophilia in early
2008. In time we expect that the instrument platform and proprietary consumable will be used for
testing a wide range of conditions.


The combination of the eSensor® and GeneSensor™ products should enable both complex and simple
molecular diagnostic tests to be performed accurately by hospitals in a cost effective and easy to use
format. Unlike many competing products, the two products combine both an instrument platform and
proprietary test specific consumables. New tests launched will use the same instrument platform and
consumable format thereby increasing sales revenues for each instrument in use.

 

Future tests
The next Osmetech molecular tests scheduled for FDA submission are the Group’s CYP450
pharmacogenomics assays which are currently in development. The CYP450 family of enzymes provides
relevant genetic information for drug metabolism with the first FDA approved test having been launched
by Roche at approximately $500 per test.


The three tests currently under development are outlined below for the Cytochrome P450 family of enzymes:

  • 2C9/VKORC1: These markers play a specific role in predicting a patient’s response to the
    anticoagulant Warfarin and to the commonly prescribed anti-epileptic drug Phenytoin
  • 2D6: Markers from 2D6 are involved in the metabolism of 25% of the most commonly prescribed
    drugs to date including anti-depressants, anti-psychotics and Tamoxifen
  • 2C19: Markers from 2C19 are involved in the metabolism of many drugs including methadone, antidepressants, NSAIDs, and HIV anti-virals

 

Osmetech recently announced an agreement with Epidauros Biotechnologie AG to allow it to gain
access not only to novel biomarkers but also to pharmaceutical companion diagnostics, potentially
providing Osmetech with an extensive pipeline of pharmacogenomic products.


We have also recently signed an agreement with the University of Washington to license the use of
certain key markers for our 2C9/VKORC1 Warfarin test. This completes our anticipated content licensing
requirements for this important new test.


We anticipate that there will be further commercial agreements with partners enabling us to broaden the
test menu by adding further assay content that can all run on the same instrument platforms.

 

Commercial progress
Sales for the Molecular Diagnostics Division in 2006 amounted to $0.1m (£0.05m). During this early stage
of commercial development, the Group has been successful in securing a number of customers for the
Group’s FDA approved eSensor® Cystic Fibrosis Carrier Detection test and eSensor® 4800 DNA
Detection instrument with a 100% conversion from trial to commercial customer. Sales revenue potential
per instrument is far greater than that experienced in our Critical Care Division. For example, a customer
has recently signed a two year contract with minimum consumable usage rates of approximately $75,000
and we believe that its actual usage rates may soon be in the region of $250,000 per annum.


Following the success in obtaining an FDA California State Manufacturing License we are in the process of
scaling up production and are confident that we have the facilities to meet the demands of our growth plans
for the foreseeable future. We expect to expand sales in 2007 as the installed base of instruments increases
and we introduce the new eSensor® XT-8 system with FDA approved pharmacogenetic tests.


Fund raising
In July 2006 a placing of 71m new ordinary shares at 18 pence per share raised approximately £12.8m
before expenses of £659,000. Institutional shareholders now hold in excess of 60% of Osmetech’s issued
shares.


Financial review
Sales revenues for 2006 totalled £10.6m compared to £5.6m for the 8 month period ended 31 December
2005. Sales increased by 28% in 2006 compared to the equivalent 12 month period for 2005 for which sales
were £8.3m. Of these total sales achieved in 2006, £10.5m related to the Critical Care Division (CCD) which
has been subsequently divested, with the remaining sales of £0.05m attributable to the Molecular
Diagnostics Division. The results for CCD for 2005 and 2006 have been disclosed as ‘discontinued
operations’ in the profit and loss account. CCD reported an operating profit of £0.1m for 2006.

 

The increase in administrative expenses and operating loss for the continuing operations of the Group
for 2006 reflects both the comparison with an 8 month period for 2005 and the inclusion of the results of
Clinical Micro Sensors, Inc for a full 12-month period following its acquisition on 26 July 2005. We
anticipate that administrative expenses for continuing operations will show a marginal increase in 2007
as more of our Molecular Division’s products reach commercialisation.


The operating loss for the period of £12.4m compared to a net cash outflow from operating activities of
£11.2m, with the difference of £1.2m largely explained by the share compensation charge of £0.8m, a
non-cash item accounted for in accordance with Financial Reporting Standards No.20, “Share Based
Payment” (FRS 20). Also in accordance with FRS 20 we have restated the prior year charge for share
compensation charges.


At 31 December 2006, cash and liquid resources were £7.1m. Following the receipt of the proceeds (net
of expenses) from the sale of the Critical Care Division, cash and liquid resources on 31 January 2007
were £27.5m. The majority of our cash and liquid resources are denominated in US dollars and will be
retained as such to meet the anticipated funding requirements of our Molecular Diagnostics Division
arising in the same currency.


We have announced today that we have agreed to acquire the warrants issued to Motorola as
consideration for the acquisition of Clinical Micro Sensors in July 2005. The warrants are over 7,811,428
ordinary shares (representing 3.85% of the issued share capital) and will be cancelled by the Company
thereby removing any dilution effects that would result from their exercise. The cash cost to the
Company is approximately £469,000, representing 6 pence per warrant which were exercisable into
ordinary shares at 17.5 pence.

 

Outlook
The importance of the developing global Molecular Diagnostics market with high product margin
potential is becoming increasingly recognised by healthcare companies, for example GeneOhm and TM
BioSciences were recently acquired by larger players. Furthermore, healthcare giant Abbott Laboratories
recently announced that it was to sell its core laboratory diagnostics business to GE Healthcare but
would retain its Molecular Diagnostics and Diabetes Care (glucose monitoring) businesses. It is also
likely that the growth of “companion” diagnostics in the pharmacogenomics market segment will lead
to closer alliances with pharmaceutical companies.


The sale of our Critical Care blood gas and electrolyte analyser business has enabled Osmetech to
become a ‘pure play’, well funded molecular diagnostics business operating in a high growth market.
The Company’s recent business development activities have given Osmetech the financial flexibility to
execute its strategy of building a portfolio of commercial-stage molecular diagnostic products. We
expect to be able to add further content in order to develop a pipeline of new molecular diagnostic
tests to be run on the Company’s instrument platforms. In addition, we anticipate that we will be able to
secure license agreements and partnerships to leverage the Company’s assets in non-healthcare
diagnostic markets, where predicted growth rates are similarly attractive.


We have a growing presence in this exciting market. With our experienced management and a proven
product technology backed by a strong intellectual property portfolio, Osmetech has considerable
scope to build significant value in its Molecular Diagnostics Division.


James White
Chief Executive Officer
20 March 2007

 

 

Board of directors
for the 12 months ended 31 December 2006


Gordon James Hall,
Non-Executive Chairman
Gordon Hall, aged 64, was Managing Director of Shield Diagnostic Group plc (now Axis-Shield plc) until October 1997 and prior to this held senior positions at Abbott Laboratories. He was appointed to the Board as executive Chairman on 24 September 1998, becoming non-executive Chairman on 1 February 2001.


James Nicholas Gerald White,
Chief Executive Officer
James White, aged 36, was previously a senior consultant in Arthur D Little Limited’s corporate finance practice, where he specialised in advising venture capitalists on investments in small and medium sized companies. He was Operations Manager of Osmetech from September 1998 until appointed to the Board as Chief Operating Officer on 1 October 1999. He was appointed Chief Executive Officer on 22 December 2000.


David Anthony Sandilands,
Chief Financial Officer
David Sandilands, aged 45, was Group Financial Director at Bluebird Toys plc, until its take-over by Mattel Inc. of the USA. Mr Sandilands qualified as a Chartered Accountant with Price Waterhouse and was appointed to the Board as Chief Financial Officer on 1 July 1999.


Gordon Bruce Kuenster,
Non-Executive
Gordon Kuenster, aged 73, has founded and developed major medical diagnostic companies. He was appointed Group Vice President and a director of Squibb Corporation, following its acquisition of Advance Technology Laboratories Inc. He is Chairman of UMD Technology Inc, a medical technology company. He was appointed to the Board on 3 February 1998 as Director of Development and was appointed Chief Technology Officer on 1 October 1999, becoming a non-executive director on 3 September 2002.


Alfred Marek
Executive (resigned 31 January 2007)
Alfred Marek, aged 61, was President of Osmetech’s Critical Care Division based in Atlanta, having joined the Company at the time of the OPTI acquisition in April 2003. He was previously with AVL and was instrumental in developing their entire blood gas business prior to its sale to Roche in 2000. Mr Marek was appointed to the Board on 21 April 2004 and resigned on 31 January 2007 following the sale of the Critical Care Division to IDEXX Laboratories, Inc.


Bruce Allen Huebner
Executive (appointed 12 February 2007)
Bruce Huebner, aged 56, is President of Osmetech’s Molecular Diagnostics Division and joined the Group in May 2005 just prior to the acquisition of Clinical Micro Sensors, Inc. from Motorola Inc. He was previously Executive Vice President and Chief Operating Officer of Gen-Probe and President and Chief Operating Officer of Nanogen, two major international companies in the genetics and infectious diseases markets.

 

 

Report of the directors
for the 12 months ended 31 December 2006


The directors submit their report together with the audited financial statements for the 12 months ended 31 December 2006.


Results and dividends
The results of the Group for the year are set out on page 17.


The directors do not recommend the payment of a dividend (31 December 2005: £NIL)


As the Company has adopted FRS 20 ‘Share-based Payments’, prior year figures have been restated to reflect the impact of equity settled share based compensation plans as set out in notes 1 and 24.


Principal activities, trading review and future developments
The principal activity of the Group is the design, development, manufacture and sale of healthcare diagnostics and medical devices incorporating sensing technology.

The principal activities of the subsidiaries, Osmetech Inc and Clinical Micro Sensors Inc, are the same as Osmetech plc. Osmetech Technology Inc, is a holding Company. Osmetech GmbH was established as a sales operation having exclusive rights to distribute Osmetech’s Critical Care Division products in Germany, prior to the disposal of the Division. Molecular Sensing Limited, Molecular Sensors Limited are dormant companies.The principal activity of the seventh subsidiary, Osmetech AESOP Trustee Limited, is to act as a trustee to an employee share ownership trust.


Enhanced Business Review
Operations
Osmetech is a fast developing, international healthcare diagnostics business with operations in Boston and Pasadena in the US serving the high growth Molecular Diagnostics market targeting hospitals and reference laboratories. Osmetech Molecular Diagnostics has been built through the acquisitions and subsequent development of the businesses of Molecular Sensing plc in 2004 and Clinical Micro Sensors Inc (‘CMS’) in 2005.


On 31 January 2007, the Group’s Critical Care blood gas and electrolyte analyser business based in Atlanta, US was sold for $44.9m representing a significant return on the original investment made when this business was acquired in 2003. Whilst the results for 2006 and 2005 include those of the Critical Care Division (“CCD”), these have been separately disclosed as discontinued operations. Detailed commentary in relation CCD is not relevant to the future performance of the Group and therefore this review concentrates on our Molecular Diagnostics business.


The financial position and performance of the Group is set out on pages 17 to 20. A review of the business, its markets and future developments is included in the Chairman’s Statement and Chief Executive Officer’s Reports set out on pages 2 to 7.


Business risks


The Board considers that the principal risks and uncertainties facing the Group may be summarised as follows:

  • Recruitment and retention of employees: The Group operates in a knowledge based industry employing many highly skilled, specialist staff. The Group aims to provide a challenging and rewarding working environment for its employees and has share options incentives for key staff.
  • Regulatory compliance: Osmetech operates in a regulated industry with its US based operations and market governed by the requirements of the US Food and Drug Administration (“FDA”). We have received FDA 510k Pre-marketing Approval for our Cystic Fibrosis carrier detection test and eSensor®4800 DNA Detection instrument platform and it is our intention to produce other FDA cleared tests in the future. Both of our US sites operate under current Good Manufacturing Practice (cGMP). Securing and maintaining the necessary regulatory approvals, accreditations and quality standards is of fundamental importance to the future success of the Group.
  • Product development: Although the Directors believe that there is a strong and growing demand for the molecular diagnostics products being developed by the Group, the ability of these products to meet the specifications demanded and therefore the speed of market penetration and the achievability of target prices is not certain. Prior to acquisition or license by Osmetech, the Group’s core technologies have received considerable investment and we believe that the principal technological and scientific risks have now largely been overcome. Additional efforts are continuing in production scale up in order to meet
    increasing market demands.
  • Market Acceptance of Osmetech’s Products: Commercial success will be dependent upon on the market acceptance of the Group’s products, including the ability to: convince customers that the Enlarged Group’s technology is an attractive alternative to other technologies; manufacture products in sufficient quantities with acceptable quality and at an acceptable cost; and sell, place and service sufficient quantities of the products. The Group believes that the market opportunities for genetic testing in particular are considerable, driven by improved patient care and healthcare cost management. These benefits have been recognised by the FDA who welcome the prospect of further approved tests to promote the wider use of such testing.
  • Intellectual Property Rights (“IP”). The Group’s success relies in part on maintaining meaningful patent protection on its inventions, technologies and discoveries. To compete effectively the Group will depend on its ability to develop and maintain proprietary aspects of its technology, and to operate without infringing the proprietary rights of others or, if necessary, to obtain rights to third-party proprietary rights. Whilst this is a complex area the Directors believe that Osmetech has a strong IP position, particularly in the field of electro-chemical detection. The molecular diagnostics market is at a relatively early stage of
    development and we believe that Osmetech’s IP will create barriers to entry.

 

Key performance indicators


The principal key performance indicators (“KPIs”) are detailed below:

  • As reported on page 27, research and development costs in the year amounted to £5,601,000 (8 months ended 31 December 2005 – £2,665,000). Included within these total amounts are £4,768,000 (8 months ended 31 December 2005 – £2,120,000) relating to continuing operations. In addition to the specific comments in the Chief Executive’s Report, we consider that successful progress with product development activities is critical to the future success of the business for which KPIs are difficult to quantify. Product development programmes for our Molecular Diagnostics Division are described in detail in the Chief Executive’s Report.
  • As reported on page 20, operating cash outflows during the period were £11.2m (8 months ended 31 December 2005 – £4.3m), of which £11.2m (8 months ended 31 December 2005 – £4.5m) related to continuing operations.
  • As reported on page 18, the Group had a total of £7,089,000 of cash and liquid resources at 31 December 2006 (2005 – £7,207,000). These balances increased significantly on 31 January following the sale of the Critical Care Division.
  • As reported on page 27, the Group increased its average headcount in the year by 34% to 159 full-time equivalent employees (2005 – 119). Of these totals, average headcount relating to continuing operations was 75 in the year (2005 – 41). Voluntary staff turnover in the year for continuing operations was 15% (2005 – 15%), which we believe to be relatively stable compared with our industry peers.

 

Charitable and political contributions

The Group did not make any charitable or political contributions during the year (31 December 2005: £NIL).

 

 

Directors
The directors of the Company at 31 December 2006 and their interests, all held beneficially, in the ordinary share capital of the Company at the balance sheet date were as follows:

 

Ordinary Shares of 0.10p each
  31 December 2006 31 December 2005
G J Hall 104,965 104,965
J N G White 208,093 208,093
D A Sandilands 61,597 61,597
A Marek 26,190 26,190
G B Kuenster 613,950 33,054

 

Directors’ options are disclosed in note 6.


Mr A Marek resigned as a director on 31 January 2007. Mr B A Huebner was appointed as a director on 12 February 2007


Mr D A Sandilands was granted Long Term Incentive Awards to acquire 253,963 ordinary shares of 0.10p each in the capital of the Company at nominal value on 30 January 2007.


Save as mentioned above, there have been no changes in the directors or movements in the directors’ interests in the Company’s share capital between 31 December 2006 and 20 March 2007.


In accordance with the Articles of Association and, having been appointed since the date of the last Annual General Meeting, Mr B A Huebner retires and, being eligible, offers himself for election as a director at the Annual General Meeting to be held on 3 May 2007. Mr Huebner’s appointment is terminable by up to 3 months’ notice.


In accordance with the Articles of Association, Mr G J Hall will retire by rotation and, being eligible, offers himself for re-election. Mr G B Kuenster, who is 73 years of age will retire and, being eligible, offers himself for re-election. Mr Hall and Mr Kuenster do not have service agreements with the Company. Mr Hall’s and Mr Kuenster’s appointments are terminable by at least 12 months’
notice.

 

Directors’ interests in contracts
No director was, or is, materially interested in any contract subsisting during, or at the end of the financial year which was significant in relation to the business of the Group.


Substantial shareholdings
In addition to the directors’ shareholdings shown above, the directors have been notified or are aware of the following interests in 3 per cent. or more of the issued ordinary share capital of the Company as at 5 March 2007:

Shareholder Number of Shares Per cent
MOFO Nominees Limited 18,000,000 8.88
Chase Nominees Limited (Account USSLEND) 14,050,000 6.93
Vidacos Nominees Limited 2303 Account 13,246,698 6.53
Chase Nominees Limited (Account SUTL) 11,111,111 6.36
Apollo Nominees Limited CRE Account 613,950 5.48
Goldman Sachs Securities (Nominees) Limited ILSEG Account 10,527,497 5.19
BNY GIL Client Account (Nominees) Limited LST Account 7,235,932 3.57
Pershing Keen Nominees Limited PSL981 Account 7,021,501 3.46
HSBC Global Custody Nominee (UK) Limited 934567 Account 6,744,718 3.26

 

 

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