'…A World-Class Vaccines Company'
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‘…a world-class vaccines company’ Annual Report 2001 04 Chairman’s statement 10 Operating review 26 Reference section 30 Board of Directors 32 Financial review 34 Report of the Remuneration Committee 39 Corporate governance 41 Report of the Directors 43 Report of the auditors 44 Consolidated profit and loss account 44 Statement of total recognised gains and losses 45 Consolidated and company balance sheets 46 Consolidated cash flow statement 47 Notes to the financial statements 63 Glossary of terms Professional advisers Front cover Evans Vaccines’ manufacturing facilities in Speke, UK. 01 PowderJect Pharmaceuticals plc 2001 With a broad portfolio of marketed vaccines and a strong pipeline of new products based on its proprietary powder injection technology, PowderJect is a world-class vaccines company. Turnover £m Loss before tax £m R&D expenditure £m Cash and short-term Net cash (outflow)/inflow investments £m from operating activities £m 40.0 20.6 30.9 84.1 18.4 70.5 62.0 21.6 9.4 14.2 4.7 7.4 20.5 3.6 5.8 2.4 2.5 3.1 2.8 5.0 0.5 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 (2.7) (7.1) (6.9) (20.2) Sixth highest vaccines sales in the world With a range of products marketed under its Evans Vaccines and SBL Vaccin brands, PowderJect is now a major player in the vaccines field. Based on sales, PowderJect is the world’s sixth largest vaccines business and Europe’s fourth largest biotech company. As a fully integrated vaccines company with significant research, development, manufacturing, marketing and distribution capabilities, PowderJect has built the foundations on which to grow its business rapidly. Its Fluvirin® franchise in the influenza field demonstrates this growth potential. As the UK’s flu vaccine market leader, with a significant proportion of the US market, PowderJect is well positioned to capitalise on this expanding worldwide market of approximately $500 million. 04 PowderJect Pharmaceuticals plc 2001 The last year has seen PowderJect undergo an exciting and extremely positive transformation. With the acquisition of Chairman’s statement Medeva’s vaccines business (rebranded under the established Evans Vaccines name) we are now a major player in the vaccines field. Indeed, PowderJect is the sixth largest vaccines company in the world, and the fourth largest biotechnology company in Europe. We have a range of products sold under our Evans Vaccines brand, one of Europe’s largest biologics manufacturing facilities and an exciting pipeline of next generation medicines based on our unique delivery technology, powder injection. This change is also reflected in the strengthening of our financial performance. The Evans Vaccines business contributed to PowderJect’s finances for the final six months of the financial year, with revenues of £34.7 million. For the full year turnover climbed significantly to £40.0 million (2000: £2.8 million), cash and short-term investments moved ahead of last year’s position to £70.5 million (2000: £62.0 million) and net assets also increased, reaching £88.0 million (2000: £67.2 million). Loss for the year was contained at £19.6 million (2000: £18.4 million) despite a more than 40% increase in R&D investment, which totalled £30.9 million (2000: £21.6 million). Cash inflow from operating activities also improved significantly to £2.4 million (2000: outflow of £20.2 million) and capital expenditure decreased to £4.0 million (2000: £4.7 million). In addition to strengthening our business financially, we have moved ahead scientifically, achieving successful clinical results with our most advanced powder injection product, lidocaine. By demonstrating that we can meet our product specification, combining effective local anaesthesia with favourable tolerability, we have achieved the appropriate characteristics to progress into a phase III development programme. This major achievement is strategically important. In addition to providing clinical validation of our platform delivery technology, we now have a great opportunity to pursue our vision of becoming a leading global vaccines and immunotherapeutics company. The vaccine marketplace is extremely attractive, with estimates showing the market growing from $6.5 billion to $20 billion in the next 10 years. The development of immunotherapeutics, which harness the power of the immune system to treat rather than protect against disease, is predicted to account for significant market growth. To capitalise on this opportunity we are following a two-fold strategy, which is designed to increase our focus on the vaccines and immunotherapeutics field, where our powder injection technology adds most value. Dr Paul Drayson, Chairman 3 July 2001 Firstly, we are pursuing our strategy to acquire vaccine 05 PowderJect Pharmaceuticals plc 2001 assets to build our portfolio of high value, consumer-focused vaccines. Consequently I am extremely pleased to announce our acquisition of Sweden’s leading vaccines company, SBL Vaccin AB (SBL). This transaction builds on our existing business, further consolidating our position in the premier league of vaccine companies. We now have nine approved products, three vaccines in phase III development, a pipeline of over 10 vaccines, a world lead in next-generation DNA vaccine technology, world-class manufacturing facilities, expertise throughout the entire pharmaceutical value chain from research through to marketing and distribution, and a workforce of highly trained professionals totalling approximately 1,000. Therefore, this acquisition is another step in the realisation of our ambition to become a high growth, high value, vaccines company. Secondly, we aim to divest our drugs business from a position of strength based on our extremely positive lidocaine results. This business encompasses the strategic assets required to develop next generation, needle-free powder injection products in the fields of small molecules and biopharmaceuticals, and includes lidocaine as its lead product. PowderJect will retain its platform delivery technology and focus on the key area of vaccines and immunotherapeutics. This strategy creates an Building on its leading position attractive drugs business for a potential buyer, and allows A considerable body of clinical data on Dukoral® has been PowderJect to significantly reduce its cost base by divesting generated in well over 100,000 subjects, demonstrating its its non-vaccine-focused functions. This strategic divestment efficacy and safety. SBL intends to consolidate this work and has an additional positive upside: the combined PowderJect, conduct limited further trials to pursue filings in the EU and US Evans Vaccines and SBL business is expected to move into profit over the next two years, thereby capitalising on the significant more rapidly. As a consequence of pursuing this strategy, the travel diarrhoea vaccine market. acquisition of SBL and divestment of our drugs business will The world’s only WHO recommended cholera vaccine make PowderJect the world’s largest pure vaccines company. SBL’s cholera vaccine is a drinkable product offering a high Acquisition of SBL Vaccin, Sweden’s leading vaccine company level of protection (85%), and is the only cholera vaccine The acquisition of SBL adds significant strategic vaccines recommended by the WHO. To date SBL has won tenders to assets to our business. Most important of these are a range supply the vaccine to Madagascar, Mozambique and Mayotte of proprietary, consumer-focused vaccines, strong sales and and the company is currently pursuing WHO registration, marketing infrastructure and growing revenues that will further which would permit the World Health Organisation to purchase strengthen our financial base. the vaccine for some of the world’s least developed countries. World lead in travel diarrhoea vaccine market Injectable polio vaccine SBL’s product range is focused on travel vaccines, with the SBL also produces and markets a polio vaccine in Sweden. company leading the world in the travel diarrhoea vaccine The market for polio vaccines is moving away from the oral market. This market is particularly attractive, with increasing to injectable presentation, particularly as a component of numbers of people travelling to the high risk regions of combination vaccines. Consequently, SBL is pursuing wider Latin America, South East Asia and Africa. Of these travellers, approval in Europe to supply its injectable vaccine to potential 10 million per year contract diarrhoea. By the year 2005, partners for inclusion in their multivalent products. the number of travellers worldwide is predicted to reach Strong sales and marketing infrastructure 100 million, representing a travel diarrhoea market of In addition to its range of proprietary vaccine products, SBL approximately $400 million. SBL is well placed to capitalise has built a Nordic sales, marketing and distribution organisation. on this opportunity. Its Dukoral® product is the only travel Indeed, the company has a particularly strong trademark, and diarrhoea vaccine available, and as a consequence, the current is the leading distributor in Sweden, with approximately 60% competition consists of antibiotics taken by travellers after market share. The skills developed by SBL’s team fit particularly becoming ill. Dukoral® is a consumer-friendly drinkable vaccine, well with PowderJect’s marketing strategy, which targets based on SBL’s oral vaccine technology, whose marketing non-traditional marketing channels, such as travel