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RNS Number:7144U M.L. Laboratories PLC 28 January 2004 Embargoed until 0700 28 January 2004 ML Laboratories PLC ("ML" or "the Group") Preliminary Audited Results for the Year Ended 30 September 2003 Highlights * Restructuring of business completed: - Disposal of Icodextrin manufacturing business in April 2003 produced net proceeds of #5.7m - Disposal of entire stake in Cobra Bio-Manufacturing PLC raised #5.25m - Research activities downsized and refocused - 56.6 million shares owned by the co-founder of the Group placed with institutional investors/sold removing share overhang * Innovata Biomed secures new commercial agreements with Otsuka and Pliva for CLICKHALER * Significant progress with clinical pipeline: - Extraneal launched in US and Japan by Baxter following successful regulatory approvals - US pivotal Phase III trial of ADEPT moves into final stage - Phosphate binding product completes Phase I trial and commences Phase II - CTL102 commences Phase II study in prostate cancer - CTL901 commences Phase I clinical trial in skin cancer * Rights Issue and Issue For Cash to raise approximately #14.3m net of expenses being announced separately today Enquiries: ML Laboratories PLC (28/01/04) 020 7067 0700 Peter Shennan, Chief Operating Officer (Thereafter) 01925 844 700 Stuart Sim, Executive Chairman Weber Shandwick Square Mile 020 7067 0700 Kevin Smith/Cass Helstrip Embargoed until 0700 28 January 2004 ML Laboratories PLC ("ML" or "the Group") Preliminary Audited Results for the Year Ended 30 September 2003 CHAIRMAN'S STATEMENT Having effectively completed the refocusing of the Group and the associated divestment of our non-core activities by the interim reporting stage I am pleased to inform you that, in the subsequent period, we have benefited from our much simplified group structure and the resulting significantly reduced cost base. Throughout the period under review, namely, the financial year ended 30 September 2003 and the subsequent period to date, we have continued to progress the development and commercialisation of our portfolio of pharmaceutical products and technologies which is our primary objective. We have today announced our preliminary results for the year ended 30 September 2003 which show turnover of #6.5m and a loss for the financial year of #2.6m. The financial results are fully described in the Financial Review which forms part of this preliminary announcement. On 21 January 2004, we announced that the Company had reviewed its current working capital requirements and, as a result of the delays in receipt of milestone income, had concluded that it could no longer have a reasonable expectation that anticipated milestone income in the short term would be sufficient to fund its existing development plans and that it had therefore concluded that it should explore ways of raising additional funds. We are therefore pleased to announce an underwritten Rights Issue, and an Issue for cash, (together "the Issues") to raise #14.3m, net of expenses, The Company is of the opinion that, taking into account the net proceeds of the Issues, the working capital available to the Group is sufficient for its present requirements, that is, for at least the next twelve months from the date of this document. Full details of the Issues are set out in a document sent to Shareholders today. Divestments In April 2003 we completed the disposal of our Icodextrin manufacturing business for a gross consideration of #6.8m which produced net proceeds of #5.7m. The turnover and profit before tax attributable to that business in the previous financial year to 30 September 2002 were #2.9m and #0.4m respectively and the net assets at that date were #1.5m. Consequently we consider the sale proceeds achieved for the business represent acceptable value. The operating results of that business in the financial year under review have been included in the financial statements in discontinued activities. In May 2003 we were presented with the opportunity to reduce our 46% shareholding in Cobra Biomanufacturing PLC ("CBM"), our former biological manufacturing business, which we divested by flotation on AIM in June 2002. The shareholding has been subject to the lock-in arrangement that we entered into on flotation which restricted the timing and quantum of disposals until June 2004. We disposed of approximately 83% of our holding realising gross disposal proceeds of #4m before expenses. The aforementioned disposals produced a combined profit on divestments in the period of #5.7m. The balance of the holding of one million CBM shares has been sold since the end of the financial year realising a further #1.2m, net of expenses. This increases the total gross sum realised from the divestment of non-core manufacturing businesses to circa #15m. In addition to generating working capital the divestments have relieved the Group of the requirement to incur the capital expenditure necessary to further develop those businesses. Research refocusing In February 2003 we completed the downsizing of our early stage research activities as part of the implementation of our strategy to focus research on the development of products and technologies with the potential to produce income in the relatively near term. This resulted in a reduction in research department headcount of approximately 50% and a consequent annual saving of circa #1m in personnel costs and other costs associated with the research activity. The output of our research effort is monitored against performance targets which are regularly reviewed. Clinical and regulatory progress In the period under review the principal achievements were: * Extraneal The worldwide licensee of our dialysis solution, Baxter Healthcare, launched the product in the US in the period and subsequently in Japan. Launch in these two large markets offers the prospect of significant royalty income and has resulted in Extraneal being commercially available in the world's major pharmaceutical markets. * ADEPT In August 2003, following a review of the data at the defined interim stage of the pivotal Phase III US multi-centre clinical trial of our adhesion reduction therapy, the independent Data Monitoring Committee reported that there were no concerns related to the safety of ADEPT and recommended continuation of the study through to completion. The data from the remaining patient set are required to confirm the safety profile of ADEPT and to provide evidence of efficacy to the satisfaction of the US regulatory authorities. 80% of the total number of patients have been entered into the study which is expected to report in Q3 2004. * Phosphate binder Our collaboration with Ineos Silicas Limited to develop their patented compound for the treatment of hyperphosphataemia in kidney failure patients saw the Phase I clinical study completed in which it was demonstrated that healthy volunteers were able to tolerate the drug in doses sufficient to result in a significant reduction in phosphate absorption from the diet, which is an important measure of clinical efficacy. The results of the study were presented at the November 2003 meeting of the American Society of Nephrology and generated considerable interest. The plans for the Phase II studies have been finalised and the process of recruiting patients has commenced. * CTL 102 In November 2003 we announced that our Phase II study to evaluate the efficacy and safety of our novel treatment of prostate cancer had entered the treatment phase. The trial is the first of its kind in prostate cancer in the UK and we anticipate reporting the outcome in H2 2005. * CTL 901 In December 2003 the first patient was entered into the Phase I clinical trial of our treatment of skin cancer (advanced melanoma). The product is comprised of the patient's own dendritic cells, a component of their immune system, which have been modified by our proprietary gene delivery system, CL22. We consider that CL22 is a platform technology which could potentially be used to modify dendritic cells for the treatment of other advanced forms of cancer for which no effective treatments are available. * Formoterol CLICKHALER The filing of the application for marketing authorisation in Europe in November 2002, which triggered a significant milestone receipt from our licensee, was followed by the filing for marketing authorisation with the Canadian regulators in November 2003. European marketing approval and launch of this product are anticipated in H2 2004, both of which will trigger further significant milestone receipts, as will the launch of the product in Canada which is anticipated in H2 2005. * Budesonide CLICKHALER The application for European marketing authorisation was filed in November 2003 triggering a significant milestone receipt from our licensee. European marketing approval and launch of this product are anticipated in H1 2005, both of which will trigger further significant milestone receipts. Commercialisation progress Innovata Biomed ("IB"), our respiratory drug delivery subsidiary, achieved several successes in the period: * In March 2003 IB granted Otsuka Pharmaceutical Co. Ltd., a leading Japanese healthcare company, an exclusive licence to deliver Meptin in CLICKHALER in Japan and Spain. In consideration, IB becomes entitled to milestone receipts and further revenue from supplying CLICKHALERs to Otsuka. The product is currently in the clinic generating the data necessary to file an application for marketing approval with the Japanese regulators during H1 2004, with launch anticipated in 2005. Whilst this agreement adds further accreditation to CLICKHALER generally, it does so particularly in Japan as evidenced by the increased level of enquiries from other potential licensees of CLICKHALER in that country. * In December 2003 IB entered into an agreement with Pliva, a multi-national pharmaceutical company, to develop a novel asthma medication based on Pliva's new chemical entity ("NCE") steroid and CLICKHALER. In consideration, IB will receive development fees, milestone receipts and royalties on sales and, in addition, IB will supply CLICKHALERs on commercial terms. This agreement is significant in that it represents the first agreement for an NCE to be delivered in CLICKHALER and sets IB on the pathway to achieve its objective of becoming a leading independent provider of dry powder inhalation technologies for the delivery of NCE respiratory compounds. Panos acquisition Our interest in DEVACADE, our product for enhancing the pain relief produced by morphine, is licensed from Panos Therapeutics Limited ("Panos") under a collaborative agreement for the joint development and marketing of the product, entered into in 1998. We have agreed an arrangement whereby we may, in due course, acquire Panos for a consideration of 15.7m, (subject to adjustment), ordinary shares in ML. This acquisition, if completed, would mean that the whole of Panos' interest in DEVACADE, which Panos has licensed from Merck & Co. Inc, and Panos' potential income from its commercialisation, would be brought into the Group and ML would be relieved from the requirement to pay future milestone payments to Panos, as provided for in the 1998 agreement. Co-founders' shareholding In October 2003 we were pleased to announce that our brokers had successfully placed with institutional investors 54.4m of a block of 56.6m shares, formerly held by a company owned by ML's founders, which had been under the control of a creditor bank for over a year. Subsequently the remaining 2.2m shares of that block have also been sold. Those transactions finally removed the overhanging uncertainty surrounding that very large block of shares and, as a result, provided ML with a broader investor base. Many of the participating institutional investors are new shareholders in ML and we look forward to working with them over the long term. Prospects ML is a business already generating income from products we have successfully developed and licensed to other pharmaceutical companies. Following the restructuring of the Group, we have focused our core skills in clinical development, regulatory affairs and product commercialisation on the development of our portfolio of pharmaceutical products in both early and late stages of development. Our potential for growth is supported by our established track record of sourcing a development pipeline through in-house initiatives, in-licensing and joint development agreements, all of which we will continue actively to pursue. In view of the above we believe that the business is capable of achieving profitability in the near term and delivering value to shareholders over the long term. The Directors continue to believe that the Group's products and technologies have an acceptable risk profile and accordingly have a reasonable probability of being successful in the clinic and with regulators and licensees in generating income for the Group. Therefore, the Directors view the future prospects of the Group with confidence. S.W. Sim Executive Chairman 28 January 2004 OPERATIONAL REVIEW OPERATIONAL STRUCTURE The Group's activities are organised into two principal operations - ML Pharmaceuticals and Innovata Biomed, the Group's respiratory subsidiary. ML Pharmaceuticals is a pharmaceutical product development business with a track record of successful clinical development, regulatory approval and licensing of pharmaceutical products and a development pipeline of future products targeted at specialist markets. Its activities are supported by revenue streams from products which have been successfully developed and licensed to other pharmaceutical companies. The business also generates income by licensing patented technologies resulting from its research to third parties for use in the discovery and manufacture of biotechnology products. Innovata Biomed designs and develops technologies for delivering compounds to the lung for licensing to third parties. Existing licence agreements generate royalty income together with milestone receipts which provide support for the business's ongoing development programmes. Both businesses operate as separate divisions with their own research, clinical development and business development capabilities, supported by centrally provided services which include regulatory affairs, intellectual property management, finance and administration. PRODUCT DEVELOPMENT REVIEW ML PHARMACEUTICALS EXTRANEAL - an Icodextrin solution for use in Peritoneal Dialysis Icodextrin solution is used in peritoneal dialysis ("PD") for the treatment of renal failure patients, wherein waste products and excess fluid pass from the patient's blood into a dialysis solution infused into the abdominal cavity, all of which is subsequently drained out. ML holds patents in all major pharmaceutical markets over Icodextrin, the active ingredient. The product has been licensed to Baxter Healthcare on an exclusive worldwide basis. Baxter, a market leader in renal disease treatments, has launched the product under its trade name, Extraneal, firstly in the UK in 1996 and subsequently in a further 31 countries. Currently more than 10,000 patients worldwide are using the solution on a daily basis. Extraneal received US marketing approval in December 2002 and was launched in that market in April 2003. Japanese approval was received in April 2003 and the product was launched in that country later that year. Extraneal is now commercially available in all of the world's major pharmaceutical markets. Sales of Extraneal in the major US and Japanese markets are expected to have a significant impact on our future royalty income. ADEPT - an Icodextrin solution for the reduction of post-operative adhesions Adhesions are a serious and frequent complication following abdominal and gynaecological surgery and are acknowledged as a major surgical problem. Adhesions are expensive to treat, often requiring further surgery and hospitalisation. Currently available treatments are both more expensive and difficult to administer than ADEPT. ADEPT offers significant advantages in that it is an easy to use, low viscosity solution which can be delivered via a laparoscope in minimally invasive (keyhole) surgery and is readily incorporated into routine surgical procedures. Furthermore, we anticipate ADEPT will be significantly less expensive. In October 2001 the exclusive right to manufacture and sell ADEPT throughout Europe was licensed to Shire Pharmaceuticals PLC ("Shire"), who, following our initial launch of the product in the UK in 2000, completed launches in the other main EU countries (France, Spain, Italy and Germany). Shire is now achieving widespread use of this product with gynaecologists and with general surgeons carrying out colorectal operations. The clinical development of ADEPT has been concentrated in the US where we are carrying out a pivotal Phase III clinical trial, the PAMELA study, to determine the efficacy and safety of ADEPT in the reduction of post surgical adhesions after laparoscopic surgery. The PAMELA study is a clinical evaluation of ADEPT solution as an adjunct to adhesiolysis surgery, being conducted in 15 gynaecology units in the US. The total proposed patient number (410) is based on statistical analysis of a previous five centre Phase II study. PAMELA is a double blind comparison of ADEPT and Ringer's lactate solution. The protocol of the PAMELA study included a provision for an independent interim analysis of the data after completion of 50% (205) of the patients. This analysis was conducted by an independent external organisation and passed, with the appropriate information blinded, to an independent Data Monitoring Committee ("DMC"). The DMC completed its evaluation of the data in August 2003 when it reported that there were no concerns relating to the safety of ADEPT and recommended that the study should continue. The data from the remaining patient set are required to confirm the safety profile of ADEPT and to provide sufficient evidence to demonstrate its efficacy to the satisfaction of the FDA. The study is anticipated to complete in Q3 2004. We anticipate appointing a licensee for the US market in the event of a successful outcome to the US trial and we are in discussion with potential licensees for the Japanese and other Asian markets. We consider it is likely that Japanese marketing approval will be facilitated by positive data generated by our US study. Our estimated earliest launch date of the product in the US is 2007. Our view is that uptake of the available treatments has been hampered by their complexity of use and cost. Consequently we are excited by the prospects for ADEPT in this market where we consider it has the potential to become a leading product due to its safety profile, ease of use and price advantage and, as such, it could be used routinely in all abdominal surgery. EMMELLE - an Icodextrin based intra-vaginal gel to prevent HIV transmission The majority of new HIV infections occur in women and the transfer of virus during sexual intercourse is the major cause of such infection. The availability of a barrier microbicide such as EMMELLE, which is self-administered, would put prevention under the control of women. Female controlled microbicide products such as EMMELLE gel are considered a vital part of the worldwide effort to minimise the spread of HIV. EMMELLE has been the subject of a number of Phase II safety clinical investigations, both in Europe and Africa, and we consider it to have the potential to provide women with protection against viral transfer. In February 2002 the Department for International Development ("DFID") and the Medical Research Council ("MRC") jointly announced a #16m microbicide development programme in which EMMELLE would be one of only two late stage products to be evaluated in a large Phase III clinical trial to be conducted in Africa, under MRC supervision. The trial is in the final stages of planning under the direction of an international committee of experts. If the results of the trial are successful, ML will be able to use the data as part of the application for marketing authorisation in all of the major pharmaceutical markets. The low probability for the development of effective vaccines in the near future has increased the public health need for rapid development of products such as EMMELLE, which could limit the spread of HIV disease in developing countries and at the same time fulfil the potential requirement for products for personal protection in developed markets. The requirement for such a product has been receiving increasing publicity and independent surveys have concluded that the market could be very large. Our estimated earliest launch date is 2010. We are also considering the application of EMMELLE in the prevention of other important sexually transmitted diseases and we have commenced in vitro studies of its potential in the prevention of chlamydia infection. DEVACADE - for enhancing the pain relief produced by morphine Pre-clinical studies with DEVACADE demonstrated that this new chemical entity has the ability to enhance the pain relieving properties of drugs such as morphine without increasing the disturbing and dangerous side-effects experienced with such drugs. The double blind crossover dose response Phase II clinical study which we conducted in patients with severe neuropathic pain demonstrated that DEVACADE offers beneficial levels of pain reduction for patients on maximum doses of strong opioid analgesics and other ancillary analgesic agents when given as an adjunct to those drugs. Many of these patients are very long term pain sufferers. As well as reducing their pain levels, patients also reported reduced levels of sleep disturbance from their pain and reduced interference in activities owing to pain. We continue actively to seek a licensee who is able to complete the required clinical programme and market this product. A Phase III programme has been designed to provide more extensive safety and efficacy data to meet the requirements of the regulatory authorities and to provide data to expedite the commercialisation of the product. We anticipate this study would take approximately two years and our estimated earliest launch date is 2007. PHOSPHATE BINDER - Treatment of Hyperphosphataemia Abnormally high and damaging levels of phosphate in the blood occur when damaged kidneys are unable to rid the body of excess phosphate absorbed from food. Patients suffering from end-stage renal failure usually need to take a phosphate binding product to prevent absorption of phosphate and reduce blood concentrations. The novel compound we are co-developing with Ineos Silicas Limited has been shown in pre-clinical tests to have substantial phosphate binding activity. Furthermore, the product does not contain aluminium or calcium ions which could cause safety concerns in long term use and may therefore also render it applicable for use in pre-dialysis renal failure patients. This product meets our product selection criteria ideally, as its efficacy can be readily demonstrated in a relatively small number of kidney failure patients, which is a body of patients of whom we gained considerable experience during the successful development of our kidney dialysis solution. A Phase I study has demonstrated that healthy volunteers were able to tolerate the drug in doses sufficient to cause a significant reduction in phosphate absorption from the diet, which is an important measure of clinical efficacy. The results of this study were presented at the November 2003 meeting of the American Society of Nephrology in San Diego where it generated considerable interest. The clinical development plans for Phase II trials have been finalised and the process of recruiting patients has commenced. We anticipate completing the study in early 2005 and our estimated earliest launch date is 2007. We are excited by the prospects for this product in this rapidly growing market segment. Gene Therapy Cancer Products * CTL102 in Prostate Cancer The mode of action of this product is the delivery of the gene for a bacterial enzyme, nitroreductase, to cancer cells such that a separately administered, relatively harmless drug, CB1954, will be activated in the tumour to kill the cancer cells. Having demonstrated gene expression in prostate tumours, we determined to concentrate exclusively on developing a treatment for prostate cancer, as we will be able to deliver multiple injections of CTL102 to the tumours and to monitor effects on tumour size by measuring an established serum marker, prostate specific antigen. In November 2003 we announced the commencement of the treatment stage of our Phase II clinical trial in prostate cancer, which is the first of its kind in the UK. The purpose of the trial is to determine whether the treatment is both safe and efficacious. We expect to report the outcome of the trial in H2 2005 and our estimated earliest launch date is 2009. We are hopeful that the novelty of the product could establish a marketable platform from which gene therapy products can be developed by third party licensees for the treatment of other tumours. * CTL901 in Melanoma A Phase I clinical trial is being conducted by our collaborators at the Cancer Research UK Institute for Cancer Studies at Birmingham University on our treatment for malignant melanoma. This treatment is based on the delivery of genes encoding tumour associated antigens to antigen presenting cells known as dendritic cells. In the trial, dendritic cells isolated from the patients' blood are modified using our proprietary antigen delivery system, CL22. The modified dendritic cells are returned to the patients by injection in order to induce the patients' immune system to attack tumour cells. Pre-clinical data suggest that this treatment will specifically attack skin cancers as well as the cancerous cells which leave the tumour and spread the disease throughout the body. We consider that our CL22 system is a platform technology that may prove to be capable of being used to modify dendritic cells for the treatment of other advanced forms of cancer. We estimate the earliest launch date is 2012. Gene Expression Technology Agreements continue to be signed with a number of biotechnology and pharmaceutical companies to evaluate the UCOE technology for facilitating gene expression and thereby increasing the efficiency of therapeutic protein production. In addition we have an agreement with Medarex to apply our UCOE gene expression technology for antibody production. Polymer Drug Delivery We have been applying our expertise and patented technology in the field of glucose polymers to several applications which result in improved drug efficacy: *Our DEXEMEL solution, which has been approved for marketing in Europe, has been shown to provide anti-cancer drugs with prolonged and more extensive coverage of the abdominal cavity. *In conjunction with our research partner, Canji Inc, a subsidiary of Schering-Plough, we have demonstrated that gene vector stability is maintained in an Icodextrin solution. Each of the above is the basis for patent applications and is potentially applicable to a wide variety of existing and novel drug therapies. It is our intention to commercialise them by partnering with other pharmaceutical companies using their novel compounds. INNOVATA BIOMED CLICKHALER - a fast-to-market dry powder inhaler for new asthma therapies. CLICKHALER is a proven, industrialised dry powder inhaler ("DPI") with many established advantages over standard asthma inhalers. CLICKHALER has been extensively studied and shown to be highly acceptable to patients, regulators and potential licensees. Furthermore, it is marketed by Celltech PLC with standard asthma therapies (salbutamol and beclomethasone) in the UK, Ireland and France, In September 2002 we announced that we had entered into an exclusive licence agreement with a major global pharmaceutical group for the rights to market the two asthma therapy molecules, budesonide and formoterol, in CLICKHALER in Europe and a number of other territories. This agreement provides for the payment to Innovata Biomed of up to #10m in access fees and milestone receipts plus double digit royalties on future product sales. In November 2002 the first application for marketing authorisation for formoterol CLICKHALER in Europe was submitted, which was followed by application to the Canadian regulators in November 2003. We anticipate reaching the European and Canadian markets though IB's licensee in 2004 and 2005 respectively. The application for European marketing authorisation for budesonide CLICKHALER was filed in November 2003 with launch expected in 2005 and we anticipate our licensee filing in Canada in 2004, with a launch two years later. Revenues from both budesonide and formoterol CLICKHALER are expected to flow from sales for the commercial life of the products. Negotiations were completed in March 2003 for the delivery of Otsuka Pharmaceutical Company's established drug, Meptin, using IB's CLICKHALER, in Japan and Spain. This drug is already being sold by Otsuka in a CFC metered dose inhaler format and they expect to be able to commence substitution of sales of their existing product with CLICKHALER once approval is granted by the Japanese regulators. The product is currently in the clinic generating the necessary data for marketing approval with filing expected in 2004 and launch anticipated in 2005. In December 2003 an agreement was entered into with Pliva to develop a novel asthma medication based on Pliva's NCE steroid and CLICKHALER. The agreement is significant as it represents the first agreement for an NCE in CLICKHALER which sets IB on the pathway to becoming a leading independent provider of DPI technologies for the delivery of NCE respiratory compounds. Our estimated earliest launch date is 2010. In addition, further formulation and clinical studies have been undertaken by IB, both alone and with potential partner companies, to evaluate the performance of CLICKHALER in the laboratory and in the clinic with compounds for asthma and other indications. These studies include the assessment of novel and established molecules as well as new formulation technologies designed to enhance the performance of the device with certain drugs. IB continues to build a library of data on the capabilities of its own device and formulation technologies, as well as third party formulation technologies, to enable it to provide an enhanced offering to the global pharmaceutical industry. These platform technologies are the subject of negotiations and feasibility studies with a number of companies for delivery of their existing and pipeline products. C200 Device - building on the CLICKHALER technology IB has recognised the tremendous opportunity offered by developments in the treatment of asthma by combining two drugs in the same inhaler. Patents have already been published on the C200 device, which is a novel adaptation of the proven dose-metering 'engine' of CLICKHALER, whereby, in the same device, two drug reservoirs feed two drug formulations to separate metering chambers from which they are delivered to the patient in the same breath. The development of this novel approach to the delivery of inhaled drugs has been facilitated by the expertise of IB's in-house development team in Tewkesbury. The ability to formulate the drugs separately permits optimisation of each individually, thereby offering the potential to overcome significant formulation challenges. This technology is designed to help speed a number of established and new drugs to compete in the lucrative combination inhaled drug sector using device and formulation technologies being developed by IB. During the period under review, IB has worked with a number of drug formulations and device iterations in order to be able to complete the necessary pre-clinical work towards using the device in human clinical trials in early 2005. Our estimated earliest launch date is 2008. Innovata Biomed's growing library of CLICKHALER-compatible formulations make this a low risk, versatile and fast-to-market delivery option. We believe that this advance in the core technology offering of IB presents an exciting opportunity to partner companies by providing a device which can deliver either more or larger doses or can deliver a novel molecule in combination with an established drug to address the rapidly growing inhalation market. P.J. Shennan Chief Operating Officer and Finance Director 28 January 2004 FINANCIAL REVIEW For the Year Ended 30 September 2003 The operating results of the Group for both the year and the comparative year have been analysed in the consolidated profit and loss account between continuing activities and those discontinued as a result of divestments, namely, the Icodextrin and DNA manufacturing businesses disposed of in April 2003 and June 2002 respectively. Turnover and gross profit Turnover includes income from royalties and pharmaceutical product sales - which are stated net of the entitlements of Paul Capital Royalty Acquisition Fund ("PCRAF") where appropriate - and fee income from licensing, evaluation and development agreements. Total turnover in the year was #6.5m (2002 : #13.2m) of which #1.6m (2002 : #3.6m) related to discontinued businesses. The reduction in turnover from continuing activities was due principally to a decrease in licensing, evaluation and development fees which were #0.9m (2002 : #5.0m). These milestone receipts are typically triggered by regulatory or commercial events and as such are irregular in timing and subject to substantial variation from one period to another. Royalty income, which was adversely affected by movements in the $/# exchange rate, was #2.0m (2002 : #2.1m). Pharmaceutical product sales were #2.2m (2002 : #4.5m), reflecting the effect of the discontinued activities. The reduction in turnover resulted in a decrease in gross profit to #3.9m (2002 : #8.8m) again reflecting principally the reduction in licensing, evaluation and development fees. Operating costs Research and development expenditure at #10.9m (2002 : #10.8m) was at a similar level to the comparative year as were selling, marketing and distribution costs of #0.5m (2002 : #0.6m). Administrative expenses were reduced to #8.5m (2002 : #11.4m) reflecting reductions in the Group's cost base. Other operating income of #7.3m (2002 : #5.6m) included the release to the consolidated profit and loss account of #5.0m of PCRAF funding received during the year ended 30 September 2002, following the satisfaction of an outstanding condition relating to its potential repayment. The balance represents the release of the relevant portion of the deferred element of funds received from PCRAF in the year ended 30 September 2001 and which specifically related to the clinical development of ADEPT in the US. The comparative year included amounts receivable in connection with the termination or amendment of licensing agreements, together with the relevant portion of the deferred element of funds received from PCRAF. Loss for the year before taxation The operating loss was #8.7m net of a profit of #0.2m on the discontinued activities (2002 : loss of #8.3m inclusive of a loss on discontinued activities of #0.7m). The profit on divestments of #5.7m arose on the disposal of the Icodextrin manufacturing business and the sale of five million of the Group's holding of six million Cobra Biomanufacturing Plc ("CBM") shares. The profit on divestments in the comparative year arose on the deemed disposal of the DNA contract manufacturing business of Cobra Therapeutics Limited. After net interest income the loss before tax was #2.8m (2002 : #5.3m). Taxation Tax credits in relation to eligible research and development expenditure estimated to be receivable in respect of the year, less withholding taxes suffered, were #0.2m. Tax credits recognised in 2002 of #2.8m comprised both tax credits receivable in respect of the year to 30 September 2002 and the tax credits in respect of prior years not previously recognised. Loss after taxation The loss for the financial year after taxation was #2.6m (2002 : #2.4m). This represents a loss per ordinary share of 1.64p (2002 : 1.53p). Net assets Net assets at 30 September 2003 were #7.6m, reduced from #10.2m at 30 September 2002 as a result of the loss for the financial year. Intangible assets comprise goodwill which continues to be amortised over 20 years. Expenditure on tangible fixed assets was #0.9m. After taking into account the net book value of fixed assets divested on the disposal of the Icodextrin manufacturing business of #1.2m, depreciation of #1.1m and other disposals, the net book value of fixed assets reduced to #1.9m from #3.3m. Stocks reduced to #0.7m from #1.2m principally as a result of the disposal of the Icodextrin manufacturing business. The decrease in debtors to #3.9m (2002 : #8.3m) included the effects of the disposal of the Icodextrin manufacturing business, the receipts of accrued tax credits and of a significant amount due under an agreement with a third party as at 30 September 2002. The decrease in creditors due within one year to #8.2m from #15.1m reflected the release of the PCRAF #5m, referred to above, and the effects of the disposal of the Icodextrin manufacturing business net of the inclusion of a potentially repayable milestone receipt received prior to 30 September 2003. The reduction in creditors due after more than one year to #0.2m from #0.8m arises from net repayments of finance leases, including those repaid on the disposal of the Icodextrin manufacturing business. Deferred income of #0.8m includes #0.5m in respect of monies received from PCRAF to be released to the consolidated profit and loss account as our spending obligation on the US clinical development of ADEPT is met, as explained above. Cash balances and cash flow Cash consumed in the year by operations (excluding milestone receipts), capital expenditure and net finance lease repayments, offset by net interest income, amounted to #17m. This was offset by cash received in the year from milestone receipts of #3.9m (which forms part of the Net Cash Outflow from Operating Activities in note 11 to the financial statements), divestment proceeds of #9.6m and tax credits of #0.8m which totalled #14.3m, resulting in a net outflow of cash of #2.7m. We ended the year with net cash balances of #6.6m (2002 : #9.3m). P.J. Shennan Chief Operating Officer and Finance Director 28 January 2004 - Ends - Enquiries: ML Laboratories PLC (28/01/04) 020 7067 0700 Peter Shennan, Chief Operating Officer (Thereafter) 01925 844 700 Stuart Sim, Executive Chairman Weber Shandwick Square Mile 020 7067 0700 ML Laboratories Plc Audited Preliminary Results Consolidated Profit & Loss Account For The Year Ended 30 September 2003 NOTES 2003 2003 2003 2002 2002 2002 Continuing Discontinued Total Continuing Discontinued Total # # # # # # Turnover 4 4,927,801 1,602,254 6,530,055 9,639,471 3,610,345 13,249,816 Cost of sales (1,183,922) (1,416,408) (2,600,330) (1,592,053) (2,837,635) (4,429,688) -------------------------------------------------------------------------------------------------------- Gross profit 3,743,879 185,846 3,929,725 8,047,418 772,710 8,820,128 Research and development expenditure (10,913,662) - (10,913,662) (10,092,810) (752,360) (10,845,170) Selling, marketing and distribution costs (466,577) (13,113) (479,690) (515,184) (51,485) (566,669) Administrative expenses (8,535,739) - (8,535,739) (10,663,486) (697,295) (11,360,781) Other operating income 5 7,345,806 - 7,345,806 5,623,796 - 5,623,796 -------------------------------------------------------------------------------------------------------- Operating (loss)/profit (8,826,293) 172,733 (8,653,560) (7,600,266) (728,430) (8,328,696) ======================== ======================== Profit on divestments 3 5,685,849 2,873,899 -------------------------------------------------------------------------------------------------------- Loss before interest (2,967,711) (5,454,797) Interest receivable 254,166 431,926 Interest payable (116,511) (238,066) -------------------------------------------------------------------------------------------------------- Loss on ordinary activities before taxation (2,830,056) (5,260,937) Taxation 6 234,091 2,837,891 -------------------------------------------------------------------------------------------------------- Loss on ordinary activities after taxation (2,595,965) (2,423,046) Minority - - interests -------------------------------------------------------------------------------------------------------- Loss for financial year 9 (2,595,965) (2,423,046) -------------------------------------------------------------------------------------------------------- Loss per ordinary share 10 (1.64)p (1.53)p -------------------------------------------------------------------------------------------------------- There were no recognised gains or losses other than those shown in the above profit and loss account and therefore no separate statement of total recognised gains and losses has been presented. There is no difference between the loss on ordinary activities before taxation and the loss for the year stated above, and their historical cost equivalents. ML Laboratories Plc Audited Preliminary Results Consolidated Balance Sheet At 30 September 2003 NOTES 2003 2002 # # Fixed Assets Intangible assets 7 3,300,444 3,500,471 Tangible assets 1,884,961 3,286,839 Investments 8 476,555 2,859,331 ------------------------------------------------------------------------------ 5,661,960 9,646,641 ------------------------------------------------------------------------------ Current Assets Stocks 736,645 1,217,388 Debtors 3,853,818 8,343,840 Investments 1,039 1,039 Cash and short term deposits 6,580,678 9,748,370 ------------------------------------------------------------------------------ 11,172,180 19,310,637 ------------------------------------------------------------------------------ Current Liabilities Creditors: amounts falling due within one year (8,165,674) (15,118,568) ------------------------------------------------------------------------------ Net Current Assets 3,006,506 4,192,069 ------------------------------------------------------------------------------ Total Assets less Current Liabilities 8,668,466 13,838,710 Creditors: amounts falling due after more than one year (233,037) (767,684) ------------------------------------------------------------------------------ 8,435,429 13,071,026 Deferred income (814,609) (2,854,241) ------------------------------------------------------------------------------ Net Assets 7,620,820 10,216,785 ------------------------------------------------------------------------------ Capital and Reserves Share capital 9 1,581,686 1,581,686 Share premium account 9 36,502,990 36,502,990 Merger reserve 9 8,335,897 8,335,897 Profit and loss account 9 (38,799,753) (36,203,788) ------------------------------------------------------------------------------ Equity Shareholders' Funds 9 7,620,820 10,216,785 Minority interests - - ------------------------------------------------------------------------------ 7,620,820 10,216,785 ------------------------------------------------------------------------------ ML Laboratories Plc Audited Preliminary Results Consolidated Cash Flow Statement For The Year Ended 30 September 2003 NOTES 2003 2002 # # Net Cash (Outflow)/Inflow from Operating Activities 11 (11,277,009) 678,668 ------------------------------------------------------------------------------ Returns on Investments and Servicing of Finance Interest received 289,669 396,545 Interest paid (10,435) (16,502) Interest paid on finance leases (106,052) (222,636) ------------------------------------------------------------------------------ Net Cash Inflow from Returns on Investments and Servicing of Finance 173,182 157,407 ------------------------------------------------------------------------------ Taxation UK Corporation tax recovered 805,675 787,315 ------------------------------------------------------------------------------ Capital Expenditure and Financial Investment Purchase of tangible fixed assets (919,824) (2,534,650) Disposal of fixed asset investment - 125,058 Receipts from sale of tangible fixed assets 90,817 147,655 ------------------------------------------------------------------------------ Net Cash Outflow for Capital Expenditure and Financial Investment (829,007) (2,261,937) ------------------------------------------------------------------------------ Disposals Net proceeds from disposal of manufacturing business 3 (a) 5,735,689 - Net proceeds from disposal of shares 3 (b) 3,850,594 - Disposal of subsidiary undertaking - settlement of overdraft 3 (c) - 3,000,000 ------------------------------------------------------------------------------ Net Cash Inflow from Disposals 9,586,283 3,000,000 ------------------------------------------------------------------------------ Net Cash (Outflow)/Inflow before Management of Liquid Resources and Financing (1,540,876) 2,361,453 ------------------------------------------------------------------------------ Management of Liquid Resources Withdrawals from short term deposits 3,503,753 243,000 ------------------------------------------------------------------------------ Net Cash Inflow from Management of Liquid Resources 3,503,753 243,000 ------------------------------------------------------------------------------ Financing Capital element of finance lease rental payments (1,432,620) (1,658,229) Lease finance acquired 332,768 1,105,234 Capital element of unsecured loan payments (78,951) (67,728) Unsecured loan received - 38,550 ------------------------------------------------------------------------------ Decrease in debt and lease financing 13 (1,178,803) (582,173) ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Net Cash Outflow from Financing (1,178,803) (582,173) ------------------------------------------------------------------------------ Increase in Net Cash in Year 13 784,074 2,022,280 ------------------------------------------------------------------------------ ML Laboratories Plc Audited Preliminary Results Notes To The Financial Statements For The Year Ended 30 September 2003 1.Basis of preparing the financial statements - going concern The financial statements have been prepared on a going concern basis. This basis is supported by the projected cash flow of the Group for the foreseeable future, which takes into account the expected future proceeds of the underwritten Rights Issue and the Issue for Cash announced on 28 January 2004. The projections indicate that, without the proceeds of the Rights Issue and the Issue for Cash, the Group would not have sufficient working capital to meet its requirements for the foreseeable future, unless other actions were pursued successfully. The Rights Issue and the Issue for Cash are conditional on shareholders' approval at an EGM to be held on 20 February 2004. The underwriting agreement contains conditions typical to such agreements and the Issue for Cash is subject to the underwriting agreement becoming unconditional. The Rights Issue and the Issue for Cash are therefore subject to some uncertainty, depending on the satisfaction of these conditions. However the Directors have a reasonable expectation that the Rights Issue and the Issue for Cash will proceed and, therefore, that the Group will have sufficient working capital for the foreseeable future. Consequently they believe that it is appropriate for the financial statements to be prepared on a going concern basis. The financial statements do not contain any adjustments that would arise if the financial statements were not drawn up on a going concern basis. If required these adjustments would be made to the balance sheets of the Company and the Group to increase or reduce the balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify fixed assets and long term liabilities as current assets and liabilities. 2.Discontinued activities On 15 April 2003 the Group disposed of its Icodextrin manufacturing business to Baxter Healthcare Limited. The results of this business have been included in the consolidated profit and loss account up to the date of disposal as a discontinued activity and the discontinued activities comparative figures have been adjusted accordingly. On 12 June 2002 the Group made a deemed disposal of its DNA contract manufacturing business through the flotation on AIM of Cobra Biomanufacturing PLC ("CBM"). The results of this business have been included in the consolidated profit and loss account for the comparative year up to the date of disposal as a discontinued activity. On the flotation of CBM in June 2002 the Group retained its interests in CBM comprising six million shares and representing approximately 46% of CBM's post-flotation issued share capital. On 29 May 2003 the Group sold five million of its holding of six million CBM shares. As referred to in note 15, Post balance sheet events, the Group has sold its remaining balance of one million shares since the year end. 3.Profit on divestments Profits arose during the year on the disposal of the Icodextrin manufacturing business and on the sale of CBM shares referred to in note 2 and, in the comparative period, on the deemed disposal of the DNA contract manufacturing business, also referred to therein, as follows: 2003 2002 # # Profit on disposal of Icodextrin manufacturing business (note (a) below) 4,218,031 - Profit on sale of CBM shares (note (b) below) 1,467,818 - Profit on deemed disposal of DNA contract manufacturing business (note (c) below) - 2,873,899 -------- -------- 5,685,849 2,873,899 -------- -------- 2003 (a) The profit on disposal of the Icodextrin # manufacturing business comprised : Gross disposal proceeds 6,800,135 Less - Payment to Paul Capital Royalty Acquisition Fund (note 5) (637,847) Less - Transaction costs (426,599) -------- (1,064,446) -------- Net proceeds 5,735,689 Less - Net book value of assets disposed of : Tangible fixed assets (1,217,523) Stocks and prepayments (300,135) -------- (1,517,658) -------- Net profit on divestment 4,218,031 -------- 2003 (b) The profit on sale of the CBM shares comprised : # Sale proceeds 4,000,000 Less - Transaction costs (149,406) -------- Net proceeds 3,850,594 Less - Carrying value of investment attributable to shares sold (2,382,776) -------- Net profit on divestment 1,467,818 -------- (c) Deemed disposal of DNA contract manufacturing business The profit on divestments of #2,873,899 on the deemed disposal of the DNA contract manufacturing business represented the increase in consolidated net assets arising on the transaction, full details of which were disclosed in the Group's Annual Report for the year ended 30 September 2002. The cash received relates to the settlement of the subsidiary's overdraft. 4.Segmental analysis by class of business The analysis by class of business of the Group's turnover, research and development expenditure, other expenses, other operating income, loss before taxation and net assets is set out below : Segmental Reporting Research and Other development Other operating Loss before 2003 Turnover expenditure expenses income taxation Net assets # # # # # # ---------------------------------------------------------------------------------------------------- Licensing, evaluation & development fees 932,556 - - - - - ---------------------------------------------------------------------------------------------------- Royalties 1,977,424 - - - - - ---------------------------------------------------------------------------------------------------- Product sales 2,219,118 - - - - - ---------------------------------------------------------------------------------------------------- Total pharmaceutical activities 5,129,098 (10,859,992) (9,721,024) 7,345,806 (2,357,879) 7,765,092 ---------------------------------------------------------------------------------------------------- Other activities 1,400,957 (53,670) (1,894,735) - (472,177) (144,272) ---------------------------------------------------------------------------------------------------- Total 6,530,055 (10,913,662) (11,615,759) 7,345,806 (2,830,056) 7,620,820 ---------------------------------------------------------------------------------------------------- Research and Other development Other operating Loss before 2002 Turnover expenditure expenses income taxation Net assets # # # # # # ---------------------------------------------------------------------------------------------------- Licensing, evaluation & development fees 5,064,572 - - - - - ---------------------------------------------------------------------------------------------------- Royalties 2,104,208 - - - - - ---------------------------------------------------------------------------------------------------- Product sales 4,492,665 - - - - - ---------------------------------------------------------------------------------------------------- Total pharmaceutical activities 11,661,445 (10,366,659) (13,510,750) 5,623,796 (3,537,639) 12,611,462 ---------------------------------------------------------------------------------------------------- Other activities 1,588,371 (478,511) (2,846,388) - (1,723,298) (2,394,677) ---------------------------------------------------------------------------------------------------- Total 13,249,816 (10,845,170) (16,357,138) 5,623,796 (5,260,937) 10,216,785 ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- Geographical Segments Turnover Turnover Loss before 2003 by destination by origin taxation Net assets # # # # United Kingdom 1,775,984 6,530,055 (2,830,056) 7,620,820 North America 1,102,704 - - - Europe 2,681,841 - - - Rest of the World 969,526 - - - ------------------------------------------------- Group 6,530,055 6,530,055 (2,830,056) 7,620,820 ------------------------------------------------- Turnover Turnover Loss before 2002 by destination by origin taxation Net assets # # # # United Kingdom 7,667,048 13,249,816 (5,260,937) 10,216,785 North America 938,881 - - - Europe 4,255,727 - - - Rest of the World 388,160 - - - ------------------------------------------------- Group 13,249,816 13,249,816 (5,260,937) 10,216,785 ------------------------------------------------- Segmental reporting re discontinued activities Research and 2003 development Other Turnover expenditure expenses # # # Product sales 1,602,254 - - -------------------------------------- Total pharmaceutical activities 1,602,254 - (1,429,521) -------------------------------------- Research and 2002 development Other Turnover expenditure expenses # # # Product sales 3,610,345 - - -------------------------------------- Total pharmaceutical activities 3,610,345 (752,360) (3,586,415) -------------------------------------- Geographical segments re discontinued activities Turnover Turnover 2003 by destination by origin # # United Kingdom 12,085 1,602,254 North America 755,350 - Europe 615,319 - Rest of the World 219,500 - --------------------- Group 1,602,254 1,602,254 --------------------- Turnover Turnover 2002 by destination by origin # # United Kingdom 271,214 3,610,345 North America 803,941 - Europe 2,159,690 - Rest of the World 375,500 - --------------------- Group 3,610,345 3,610,345 --------------------- 5.Other operating income Other operating income includes the release to consolidated profit and loss account of monies received from Paul Capital Royalty Acquisition Fund ("PCRAF") as explained in more detail below and, in respect of the comparative year, amounts received and receivable in connection with the termination or amendment of licence agreements with third parties. In July 2001 the Group entered into an Agreement ("the First Agreement") with PCRAF under which PCRAF paid #17.5m and was to receive a proportion of the royalty and revenue streams arising from ADEPT and two other products in the period to 30 September 2010. Of the sum received from PCRAF under this Agreement, #13,023,963 was treated as "Other operating income" in the year to 30 September 2001 and the balance of #4,476,037 was included in the balance sheet at 30 September 2001 as deferred income as it represented the balance outstanding at that date of our obligation under the First Agreement to apply an agreed portion of the funds received specifically to the clinical development of ADEPT in the US market. Other operating income in the years to 30 September 2003 and 2002 includes, respectively, #2,345,806 and #1,621,796, in respect of the partial release of this deferred income. The balance will be released to the consolidated profit and loss account under "Other operating income" in the year to 30 September 2004. In February 2002 a second transaction ("the Second Agreement") with PCRAF was entered into whereby PCRAF provided a further #5m for which it was to receive an increased proportion of the royalty and revenue streams from two of the three products which were the subject of the First Agreement. This transaction included a condition whereby the Group might have been required to repay the #5m in certain circumstances. As at 30 September 2002 this condition remained outstanding and accordingly this amount was included in "Creditors : amounts falling due within one year". Following the confirmation announced on 9 January 2003 that the outstanding condition had been satisfied, this amount has been taken to the consolidated profit and loss account as other operating income in the year to 30 September 2003. While the risk relating to that proportion of the future royalty and revenue streams receivable by PCRAF under both the First and Second Agreements has effectively been transferred to PCRAF, under certain specified circumstances (including change of control of ML Laboratories PLC, certain major corporate transactions, and events of default material in the context of the PCRAF transaction) PCRAF has the right to require the Group to re-purchase PCRAF's interests in the royalty and revenue streams concerned for a consideration calculated to give PCRAF an agreed minimum rate of return. PCRAF's entitlement to participate in the revenue stream for sales of Icodextrin to Baxter was re-purchased on the disposal of the Icodextrin manufacturing business which was completed on 15 April 2003, further information on which is given in notes 2 and 3. 6.Taxation The current year tax credit represents refundable R & D tax credits less withholding taxes suffered. There is no charge to corporation tax during the year nor is there any provision required for deferred taxation. Accumulated tax losses have not been recognised as deferred tax assets as there is insufficient certainty as to their future recoverability. As at 30 September 2003, the total tax losses in Group companies amounted to #53m (2002 #48m). These losses are available for offset against future profits in the companies concerned, subject to agreement with the Inland Revenue. (a) Analysis of credit in year 2002 2003 UK corporation tax # # R & D tax credit Current year 518,299 1,120,810 Prior years (160,217) 1,717,081 Withholding taxes (123,991) - --------- --------- 234,091 2,837,891 --------- --------- (b) Factors affecting the tax credit for the year # # Loss on ordinary activities before taxation 2,830,056 5,260,937 --------- --------- Loss on ordinary activities at 30% 849,017 1,578,281 Effects of : Adjustments to tax credit in respect of prior periods (160,217) 1,717,081 Carry forward of tax losses (1,545,652) (1,264,500) Other timing differences 27,000 46,593 Amortisation of goodwill (60,008) (81,614) Expenses not deductable for tax purposes (334,516) (13,317) Non taxable income arising on consolidation 785,167 862,170 Adjustment in respect of R & D tax credits 797,291 (6,803) Withholding taxes suffered (123,991) - --------- --------- 234,091 2,837,891 --------- --------- 7.Intangible fixed assets Goodwill relates to the research and development activities originally acquired by the Group on its acquisition of Cobra Therapeutics Limited ("Cobra") which were transferred into the direct ownership of M L Laboratories PLC when Cobra left the Group as a result of the flotation on AIM of Cobra Biomanufacturing PLC, referred to in note 2. Goodwill continues to be amortised over the remainder of the period of 20 years from the original date of the acquisition of Cobra by the Group, this being the Directors' estimate of its useful economic life. GROUP Goodwill COST # At 1 October 2002 4,000,539 Additions - ------------------------------------------------------------------------------ At 30 September 2003 4,000,539 ------------------------------------------------------------------------------ AGGREGATE AMORTISATION # At 1 October 2002 500,068 Charge for the year 200,027 ------------------------------------------------------------------------------ At 30 September 2003 700,095 ------------------------------------------------------------------------------ Net book value at 30 September 2003 3,300,444 Net book value at 30 September 2002 3,500,471 ------------------------------------------------------------------------------ 8.Fixed asset investments Group Investment COST # At 1 October 2002 2,859,331 Disposal (notes 2 and 3(b)) (2,382,776) ----------- At 30 September 2003 476,555 ----------- The Group's investment comprised its investment in CBM which, at 30 September 2003, had a market value of #1,050,000 (2002: #5,070,000) and represented approximately 5% of its issued share capital. ------------------------------------------------------------------------------ 9.Movements in capital and reserves and equity shareholders' funds The movements in capital and reserves during the year were as follows : Share Share Premium Merger Profit & Loss Equity Capital Account Reserve Account Shareholders' Funds Group # # # # # At 1 October 2002 1,581,686 36,502,990 8,335,897 (36,203,788) 10,216,785 Loss for financial year - - - (2,595,965) (2,595,965) ------------------------------------------------------------------------------- At 30 September 2003 1,581,686 36,502,990 8,335,897 (38,799,753) 7,620,820 ------------------------------------------------------------------------------- 10.Loss per ordinary share 2003 2002 Loss on ordinary activities after taxation and minority interests #2,595,965 #2,423,046 ---------- ---------- Average number of ordinary shares 158,168,563 158,168,563 ---------- ---------- Loss per ordinary share (1.64)p (1.53)p ---------- ---------- The calculation of basic earnings per share is based on the loss on ordinary activities after taxation and minority interests of #2,595,965 (2002: #2,423,046) and on 158,168,563 ordinary shares (2002:158,168,563), being the average number of ordinary shares in issue and ranking for dividend during the year, weighted on a time basis. The effect of dilutive share options outstanding and not yet exercised at 30 September 2003 would be to reduce the loss per ordinary share. 11.Reconciliation of operating loss to net cash flow from operating activities 2003 2002 # # Operating loss (8,653,560) (8,328,696) Depreciation of tangible fixed assets 1,075,261 1,614,610 Amortisation of goodwill 200,027 272,047 Provision for impairment of value of current asset investments - 2,521 Net profit on disposal of tangible fixed assets (35,191) (37,755) Decrease in stocks 180,609 505,029 Decrease/(increase) in debtors 3,882,851 (1,223,677) (Decrease)/increase in creditors (5,887,374) 9,496,385 Decrease in deferred income (2,039,632) (1,621,796 ------------------------------------------------------------------------------- Net cash (outflow)/inflow from operating activities (11,277,009) 678,668 ------------------------------------------------------------------------------- 12.Working capital effect of disposal of Icodextrin manufacturing business 2003 # Stocks 269,638 Debtors 30,497 Payment to PCRAF (637,847) ------------------------------------------------------------------------------- (337,712) ------------------------------------------------------------------------------- 13.Reconciliation of net cash flow to movement in funds 2003 2002 # # Increase in cash in year 784,074 2,022,280 Movement in short term deposits (3,503,753) (243,000) Movement in borrowings 1,178,803 582,173 ------------------------------------------------------------------------------- Change in Net Funds Resulting from Cash Flows (1,540,876) 2,361,453 Finance leases transferred on deemed disposal of CBM - 296,629 ------------------------------------------------------------------------------- Movement in Net Funds (1,540,876) 2,658,082 Opening Net Funds 7,558,416 4,900,334 ------------------------------------------------------------------------------- Closing Net Funds 6,017,540 7,558,416 ------------------------------------------------------------------------------- 14.Analysis of net funds 2002 Cash flow 2003 # # # Cash at bank and in hand 370 336,061 336,431 Bank overdraft (448,013) 448,013 - ------------------------------------------------------------------------------ (447,643) 784,074 336,431 Short term deposits 9,748,000 (3,503,753) 6,244,247 Unsecured loans (133,039) 78,951 (54,088) Finance leases due within one year (895,306) 614,592 (280,714) Finance leases due in more than one year (713,596) 485,260 (228,336) ------------------------------------------------------------------------------ 7,558,416 (1,540,876) 6,017,540 ------------------------------------------------------------------------------ The majority of finance leases are arranged in respect of sale and leaseback transactions. Accordingly new finance leases are shown as a separate component of cash flow in the cash flow statement. 15.Post balance sheet events On 10 December 2003 the Group sold its remaining holding of one million CBM shares at a price of #1.25 per share, generating net proceeds, after expenses, of #1,231,249 and a profit for the Group of #754,694. On 28 January 2004, the Company announced an underwritten Rights Issue and an Issue for Cash to raise #14.3m, net of expenses. 16.Preparation of preliminary announcement The financial information for the year ended 30 September 2003 does not constitute the statutory financial statements for that year. Those financial statements have not yet been delivered to the Registrar of Companies and include the Auditors' report which, whilst unqualified, contains reference to the uncertainty regarding going concern disclosed in note 1 above. The Auditors' report does not contain a statement under either section 237(2) or section 237 (3) of the Companies Act 1985. The information for the year ended 30 September 2002 does not constitute the statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included the Auditors' report which, whilst unqualified, contained a modification referring to the uncertainty regarding going concern. The preliminary announcement was approved by the Board on 28 January 2004. 17.Dividend The Directors do not recommend the payment of a dividend. This information is provided by RNS The company news service from the London Stock Exchange END FR BPMFTMMATMFI
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