3 Accounting policies

 

The accounting policies, including the classification of financial instruments, applied in these interim financial statements are consistent with those of the annual financial statements for the year ended 31 December 2023, as described in those financial statements except for the new policies detailed below:

 

Business combinations

 

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

 

Judgements

 

Acquisition date of OXB France

The acquisition date of ABL Europe (renamed OXB France) has been deemed to be 29 January 2024 and is the date that control passed to OXB. This is due to multiple substantive conditions which existed in the Sae and Purchase Agreement, which were not all fully completed until this date.

 

Impairment assessment of OXB US Cash Generating Unit (CGU)

OXB US has been identified as a CGU (cash generating unit) of the business. During 2023, an impairment trigger was identified as it was assessed that the CGU did not meet the original revenues forecasted as part of the acquisition and an impairment assessment and adjustment was made at 31 December 2023.

 

The Group has performed an impairment indicator assessment of OXB US as at 30 June 2024 and determined that there are no triggers which indicate any further impairment and, as such, a full impairment assessment is not required at 30 June 2024.

 

Estimations

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The nature of estimation means that actual outcomes could differ from those estimates.

 

Fair value assumptions on acquisition of OXB France

The estimations for the fair value of the Plant, Property and Equipment has been made using a Depreciated Replacement Cost. This cost has then been adjusted for economic obsolescence to determine the fair value adjustments to the opening acquisition balance sheet, refer to Note 19.

 

Percentage of completion of bioprocessing batch revenues

Bioprocessing of clinical/commercial product for clients is recognised on a percentage of completion basis over time as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the bioprocessing process. Revenues are recognised on a percentage of completion basis and as such require judgement in terms of the assessment of the correct stage of completion including the expected costs of completion for that specific bioprocessing batch. The value of the revenue recognised with regards to the bioprocessing batches which remain in progress at period end is £29.3 million. If the assessed percentage

of completion was 10 percentage points higher or lower, revenue recognised in the period would have been

£3.9 million higher or £3.3 million lower.

 

Percentage of completion of fixed price process development revenues

As it satisfies its performance obligations the Group recognises revenue and the related contract asset with regards to fixed price process development work packages. Revenues are recognised on a percentage of completion basis and as such require judgement in terms of the assessment of the correct percentage of completion for that specific process development work package. The value of the revenue recognised with regards to the work packages which remain in progress at period end is £18.3 million. If the assessed percentage

of completion was 10 percentage points higher or lower, revenue recognised in the period would have been

£3.4 million higher or £3.8 million lower.

 

Provision for out of specification bioprocessing batches

Bioprocessing of clinical/commercial product for clients is recognised on a percentage of completion basis over time as the processes are carried out. Progress is determined based on the achievement of verifiable stages of the process.

 

As the Group has now been bioprocessing product across a number of years, and also in a commercial capacity, the Group has assessed the need to include an estimate of bioprocessed product for which revenue has previously been recognised and which may be reversed should the product go out of specification during the remaining period over which the product is bioprocessed. In calculating this estimate the Group has looked at historical rates of out of specification batches across the last five years and has applied the percentage of out of specification batches

to total batches produced across the assessed period to the revenue recognised on batches which have not yet completed the bioprocessing process at period end. The Group makes specific provisions for product batches where it is considered that the average overall historical failure rate does not adequately cover the perceived risk of revenue recognised on those specific batches having to be subsequently reversed.

 

This estimate, based on the historical average percentage as well as certain specific provisions, may be significantly higher or lower depending on the number of bioprocessing batches actually going out of specification in future. The estimate will increase or decrease based on the number of bioprocessing batches undertaken, the percentage of completion of those bioprocessing batches and the number of batches which go out of specification over the assessment period.

 

Consequently, bioprocessing revenue of £2.8 million (31 December 2023: £1.1 million) has not been recognised during the six months ended 30 June 2024 with the corresponding credit to contract liabilities. This revenue will be recognised as the batches complete bioprocessing.

 

Amortisation of intangibles assets (developed technology)

The estimated useful life of developed technology acquired by the Group is 15 years as the Group expects the technology to generate cash flows for a total of 15 years. The estimate of 15 years is based on management's experience of the time period over which the technology acquired as part of the acquisition of OXB US will become fully obsolete. Over time as the platform technology is improved, parts of the technology become obsolete as

they are superseded by new technology until after 15 years the original technology is expected to have been fully replaced by newer/improved technology.

 

Following the impairment in December 2023, if the estimated useful life of the assets had been 10 years, the estimated amortisation for the six months ended 30 June 2024 would be £0.4 million higher (2023: £1.8m); whilst, if the estimated useful life of the assets had been 20 years, the estimated amortisation for the six months ended 30 June 2024 would be £0.4 million lower (H1 2023: £0.9m).

 

Valuation of put option liability

Where a put option with non-controlling shareholders exists on their equity interests, a liability for the fair value of the exercise price of the option is recognised. On 10 March 2022, the Group recognised a put option liability to acquire the remaining 20% of OXB US that it doesn't already own, from Homology (now Q32 Bio). As a result of refinancing of OXB US in H1 2024 Q32 Bio's ownership reduced to 10%. The option is subsequently recognised at amortised cost taking account of adjustments to the present value of the estimated future contractual cash flows. At 30 June 2024 the put option liability was adjusted to £2.8 million (Dec 2023: £9.3m).

 

The Group estimates the value of the put liability using a Monte Carlo simulation which calculates the expected future exercise value of the put option, taking into consideration OXB US' forecasted revenues over the period up until the expected exercise date along with the expected volatility of those revenues over that same period. The expected future exercise value is then discounted to the present using a discount rate in order to capture the counter party risk of the expected payment.

 

 

Key estimation uncertainty inputs which directly impact the valuation of the put option liability are assessed to be:

•   Revenues of OXB US - the revenues of OXB US are based on the management approved forecast up until the end of the option period. Should the forecast change or the actual results vary this may impact the value of the put option liability.

•   Expected volatility of revenues - should the expected volatility of OXB US's revenues vary, this may impact the value of the put option liability.

•   Discount rate - the discount rate may be impacted by economic and market factors, as well as changes to the risk free rate of return which impacts debt borrowing rates. Should the discount rate calculated by management be adjusted, this may impact the value of the put option. Management has calculated the discount rate based on the risk free rate, the expected return from similar companies and the Group's cost of debt.

 

Fair value
Put option liability	Increase	Decrease
30-Jun-24	£'000s	£'000s
Revenues of Oxford Biomedica (US) LLC 20% higher or lower	316	(633)
Discount rate 2% lower or higher	-	79

4 Segmental analysis

 

From December 2023, the composition of the Senior Executive Team (SET) changed to align with the transformation of the Company to a pure-play CDMO. The SET became known as the Corporate Executive Team (CET) and became responsible for the global management of the Company.

 

In 2023 the SET monitored the performance of the Group in two business segments:

 

1. Platform - this segment consists of the revenue generating bioprocessing and process development activities undertaken for third parties. It also includes internal technology developments and the costs involved in developing platform related intellectual property;

2. Product - this segment consists of the clinical and preclinical development of in vivo and ex-vivo gene and cell therapy products which are owned by the Group.

 

During 2023 the Group ceased its Product segment and has concentrated solely on pure-play CDMO. As such, in 2024, the Group considers there to only be one segment.

 

Disaggregation of revenue

Revenue is disaggregated by the type of revenue which is generated by the commercial arrangement. Revenue shown in the table below is denominated in sterling and is generated in the UK and US.

 

For the six months ended 30 June

 

	Platform	Product	Total
2024	£'000	£'000	£'000
Bioprocessing/ Commercial development	46,859	-	46,859
Licence fees & incentives	3,947	-	3,947
Total	50,806	-	50,806

 

	Platform	Product	Total
2023	£'000	£'000	£'000
Bioprocessing/ Commercial development	40,446	86	40,532
Licence fees & incentives	2,529	-	2,529
Total	42,975	86	43,061

 

 

Revenue by geographical location

 

Revenue by client location	30 June 2024	30 June 2023
	£'000	£'000
UK	4,677	1,292
United States	31,932	29,460
Europe	14,197	12,309
Total revenue	50,806	43,061

 

In the first half of 2024, 4 clients (H1 2023: 5) each generated more than 10% of the Group's revenue.

 

5 Basic earnings and diluted earnings per ordinary share

 

The basic loss per share of 30.88p (H1 2023: 49.74p) has been calculated by dividing the loss for the period attributable to the owners of the company by the weighted average number of shares in issue during the six months ended 30 June 2024, being 105,194,129 (H1 2023: 96,521,209).

 

As the Group made a loss in the current and prior periods, there were no potentially dilutive options therefore there is no difference between the basic loss per ordinary share and the diluted loss per ordinary share.

 

6 Finance Costs

	Six months ended 30 June 2024	Six months ended 30 June 2023
	£'000	£'000
Finance income:
Bank interest receivable	1,759	2,217
Total finance income	1,759	2,217
Finance costs:
Unwinding of discount in provisions	(319)	(225)
(Loss)/gain on foreign exchange	(358)	1,672
Interest payable on loan	(2,264)	(2,261)
Interest payable on finance leases	(2,316)	(2,999)
Total finance costs	(5,257)	(3,813)
Net finance costs	(3,498)	(1,596)

 

 

7 Intangible assets & goodwill

 

	Goodwill	Developed technology	Patents	Total
Note	£'000	£'000	£'000	£'000
Cost
At 1 January 2024	628	105,889	1,811	108,328
Effects of movements in exchange rates	-	819	-	819
At 30 June 2024	628	106,708	1,811	109,147
Amortisation and impairment
At 1 January 2024	628	74,914	1,805	77,347
Charge for the period	-	1,304	-	1,304
Effects of movements in exchange rates	-	505	-	505
At 30 June 2024	628	76,723	1,805	79,156
Net book amount at 30 June 2024	-	29,985	6	29,991
Net book amount at 31 December 2023	-	30,975	6	30,981

 

The Cash-generating unit (CGU) identified is the manufacturing and process development operation of OXB US located at the Bedford, Massachusetts site in the United States. The Group has completed an assessment and determined that there are no indicators of impairment identified and as such further impairment of OXB US is not required at 30 June 2024.

 

Due to a tax deduction not being available on a portion of the developed technology intangible asset, there is

a deferred tax liability of £2.1 million at June 2024. £7.3 million was recognised at the acquisition date, reduced to £2.2 million after the December 2023 impairment, with the liability expected to unwind in line with the 15 year useful life of the developed technology intangible asset.

 

8 Property, plant & equipment

 

			Office equipment	Bio- processing and
	Freehold property	Leasehold Improvements	and computers	Laboratory equipment	Right-of-use               assets	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2024	-	61,063	10,371	54,960	50,766	177,160
Additions at cost	-	229	143	4,440	-	4,812
Acquisitions through business combinations	1,414	-	205	686	1,545	3,850
Disposals	-	(407)	(121)	(152)	(1,131)	(1,811)
Change in Estimate	-	-	-	-	(747)	(747)
Effects of movements in exchange rates	(14)	203	(4)	54	183	422
At 30 June 2024	1,400	61,088	10,594	59,988	50,616	183,686
Depreciation & Impairment
At 1 January 2024	-	33,901	8,182	34,982	24,403	101,468
Impairment	-	-	-	-	178	178
Charge for the period	155	3,123	722	4,487	1,691	10,178
Effects of movements in exchange rates	(2)	148	6	77	94	323
Disposals	-	-	0	(57)	-	(57)
At 30 June 2024	153	37,172	8,910	39,489	26,366	112,090
Net book amount at 30 June 2024	1,247	23,916	1,684	20,499	24,250	71,596

 

 

9 Inventory

 

	30 June 2024	31 Dec 23
	£'000	£'000
Raw materials	16,569	12,872
Total Inventory	16,569	12,872

 

Inventories constitute raw materials held for bioprocessing, research and development purposes.

 

During 2024 the Group wrote down £1,188,000 (2023: £781,000) of inventory which is not expected to be used in production or sold onwards.

 

10 Trade and other receivables

 

	30 June 2024	31 Dec 23
Current	£'000	£'000
Trade receivables	14,829	8,114
Contract assets	10,834	5,228
Other receivables	1,487	2,081
Other tax receivable	9,342	4,962
Prepayments	4,339	4,356
Total trade and other receivables	40,831	24,741

 

Non-current trade and other receivables constitute other receivables of £4,506,000 (Dec 23: £4,340,000) which are deposits held in escrow as part of the Oxbox and Patriot's Park lease arrangements.

 

11 Cash and cash equivalents

 

	30 June 2024	31 Dec 23
	£'000	£'000
Cash at bank and in hand	81,409	103,716

 

Cash and cash equivalents includes £1.5 million in relation to improvement works at Harrow House agreed under the sale and leaseback arrangement.

 

12 Trade and other payables

 

	30 June 2024	31 Dec 23
	£'000	£'000
Trade payables	13,007	6,052
Other taxation and social security	1,969	1,478
Accruals	11,945	10,272
Total Trade and other payables	26,921	17,802

 

 

13 Leases

 

The Group leases many assets including Property. Information about leases for which the Group is a lessee is presented below:

 

Right-of-use assets

 

	Property	Cars	IT	Total
	£'000	£'000	£'000	£'000
Balance at 1 January 2024	26,363	-	-	26,363
Acquisitions	1,430	60	54	1,544
Disposals	(1,131)	-	-	(1,131)
Impairment of assets	(178)	-	-	(178)
Change in estimate	(747)	-	-	(747)
Depreciation charge for the period	(1,674)	(10)	(7)	(1,691)
Effects of movements in exchange rates	90	-	-	90
Balance at 30 June 2024	24,153	50	47	24,250

 

Lease liabilities

 

	30 June 2024
	£'000
Maturity analysis - contractual undiscounted cash flows
Less than one year	9,798
One to five years	41,855
Six to ten years	39,384
More than ten years	17,262
Total undiscounted cash flows	108,299

 

	30 June 2024
	£'000
Lease liabilities included in the Statement of Financial Position
Current	4,260
Non-current	66,307
Total lease liabilities at 30 June 2024	70,567

 

	30 June 2024
	£'000
Amounts recognised in statement of comprehensive income
Interest on lease liabilities	2,264
Expense relating to short-term leases	224

 

	30 June 2024
	£'000
Amounts recognised in the statement of cash flows
Total cash outflow for leases	4,990

14 Provisions

 

The dilapidations provisions relate to the anticipated costs of restoring the leasehold Oxbox, Yarnton, Wallingford Warehouse, Windrush Court and Harrow House properties to their original condition at the end of the lease terms ending between 2024 and 2037 respectively.

 

The future anticipated costs of restoring the properties are calculated by inflating the current expected restoration costs using the 3 year historic UK Consumer Price Inflation rate, up to the end of the lease term.

 

 

15 Loans

 

	30 June 2024	31-Dec-23
	£'000	£'000
At 1 January	38,534	39,780
Acquired through business combination	757	-
Interest accrued	2,265	4,570
Interest paid	(2,037)	(4,136)
Foreign exchange movement	245	(2,003)
Amortised fees	159	323
Loan repayment	(183)	-
At reporting period end	39,740	38,534

 

The Oaktree facility, expiring October 2026, was secured by a pledge over substantially all of the Group's assets. The terms include financial covenants including holding a minimum of US$20 million cash at all times, restrictions on the level of indebtedness the Group may enter into or distributions made by the Group.

 

As part of the Oaktree loan facility, the Company also has access to draw down a further US$25 million from Oaktree to fund certain permitted acquisitions, subject to the same commercial conditions as the amended facility and available for a three-year period.  If this were to be exercised, it would be assessed against meeting the substantial modification requirements under IFRS 9.

 

16 Put option liability

 

	30 June 2024	31-Dec-23
	£'000	£'000
At 1 January	9,348	38,182
Revaluation	(6,580)	(28,834)
At reporting period end	2,768	9,348

 

In June 2024, the Group increased its ownership by a further 10% to 90% of OXB US, as a result the put option liability to acquire the remaining 10% has been revalued.

 

17 Share capital and Share premium

 

At 31 December 2023 and 30 June 2024 Oxford Biomedica had an issued share capital of 96,804,353 and 105,304,986 ordinary 50 pence shares respectively.

150,152 shares were created as a result of the exercise of options by employees during the period. Between January and June 2024, the Group issued 8,350,481 new ordinary shares to Institut Mérieux.

 

18 Cash flows from operating activities

 

	Six months ended 30 June 2024	Six months ended 30 June 2023
	£'000	£'000
Continuing operations
Loss before tax	(35,736)	(52,344)
Adjustment for:
Depreciation	10,178	11,208
Amortisation of intangible assets	1,304	3,627
Loss on disposal of property, plant and equipment	-	29
Gain on sale and leaseback	-	(472)
Net finance costs	3,498	1,596
Charge in relation to employee share schemes	431	2,532
Negative goodwill on acquisition	(1,721)	-
Other non-cash losses / (gains)	57	(8)
Changes in working capital, net of effects from purchase of controlled subsidiary:
(Increase)/ decrease in contract assets and trade and other receivables	(13,126)	23,991
Decrease/ (increase) in trade and other payables	2,905	(6,536)
(Increase)/ decrease in contract liabilities	(6,185)	8,374
Decrease in provisions	-	4
(Increase) in inventory	(804)	(917)
Net cash used in operations	(39,199)	(8,916)

 

19 Acquisition of subsidiary

 

On 29 January 2024, the Group acquired 100% of the shares and voting interests in ABL Europe, now renamed OXB France. As a result, the Group's equity interest granted it control of OXB France. The acquisition significantly enhances the Group's capacity to meet growing client demand. This move has transformed the Group's operational footprint, which now spans three key regions: UK, US and France. The acquisition further solidifies OXB's position as a world-leading quality and innovation-led CDMO in the cell and gene therapy field. The Group's capabilities have expanded significantly, complementing its established expertise in Adenovirus,

Lentiviral vectors and AAV with OXB France's advanced capabilities in Pox viruses, including MVA and Vaccinia.

 

Included in the identifiable assets and liabilities acquired at the date of acquisition are inputs, production processes and an organised workforce. The Group has determined that together the acquired inputs and processes contribute to the ability to create revenue. The Group has concluded that the acquired inputs and processes constitute a business.

 

a. Consideration transferred

 

On acquisition date the fair value of the shares in OXB plc was 180.6p, this represents the fair value of the consideration under IFRS 3. 3,149 million shares were issued giving a consideration of £5.7 million.

 

Consideration transferred:	30 June 2024
	£'000
Fair value of shares in OXB issued to Institut Mérieux	5,700
Total consideration transferred	5,700

 

b. Acquisition related expenses

The Group incurred acquisition related legal and due diligence expenses of £1.5 million which is included in Administrative expenses.

 

 

 

c. Identifiable assets acquired and liabilities assumed

 

Identifiable assets acquired and liabilities assumed:	Acquired net assets	Fair value adj	Fair value of net assets
	£'000	£'000	£'000
Property plant and equipment	8,018	(4,168)	3,850
Intangible assets	832	(832)	-
Long term receivables	191		191
Inventory	2,894	-	2,894
Cash and cash equivalents	9,004	-	9,004
Prepayments and accrued income	2,145	-	2,145
Trade and other receivables	1,384	-	1,384
Lease liabilities	(1,548)	-	(1,548)
Payroll and other taxes	(2,568)	-	(2,568)
Other liabilities	(7,931)	-	(7,931)
Total identifiable net assets acquired:	12,421	(5,000)	7,421

 

d. Goodwill

 

The acquisition of ABL Europe (renamed OXB France) increases access to EU-based clients and broadens the Group's international development, manufacturing and testing presence, whilst increasing its capacity in process and analytical development and early stage manufacturing. Conversely, the vendors have been able to dispose of a business that was not profitable for them. As a result of the mutual benefits of the transaction, the fair value of the net assets acquired is in excess of the fair value of the shares transferred as consideration which has created a negative goodwill.

 

Negative goodwill arising from the acquisition has been recognised through the profit and loss in other operating income as follows:

 

Goodwill	Acquired net assets
	£'000
Consideration transferred	5,700
Fair value of identifiable assets	7,421
Negative goodwill	(1,721)

 

e. Impact of acquisition

 

During the period ended 30 June 2024, the acquisition has contributed £5.7 million revenue and pre-tax loss of

£4.4 million. Had the acquisition taken place on 1 Jan 2024, then the revenue contributed in the period would have been £0.7 million more and a further £0.9 million loss.

 

f.  Acquired receivables

 

The fair value of trade and other receivables is £1,384,000 and includes trade receivables with a fair value of

£1,384,000. The gross contractual amount for trade receivables due is equal to the fair value.

 

 

20 Non-controlling interest ("NCI")

 

The following table summarises the information relating to the Group's subsidiary that has material NCI:

 

31 December
	30 June 2024	2023
	£'000	£'000
NCI percentage	10%	20%
Non-current assets	64,329	50,282
Current assets	22,076	11,813
Non-current liabilities	-	(22,479)
Current liabilities	(36,802)	(20,477)
Net assets	49,603	19,139
Net assets attributable to NCI	4,960	3,828
Revenue	779	26,813
Loss	(19,569)	(133,361)
OCI	(228)	(7,190)
Total comprehensive income	(19,797)	(140,551)
Profit allocated to NCI	(3,914)	(26,672)
OCI allocated to NCI	(46)	(1,438)
Cash flows from operating activities	(4,432)	(15,105)
Cash flows from investment activities	(3,704)	3,077
Cash flow from financing activities (dividends to NCI: nil)	21,906	(3,717)
Net increase in cash and cash equivalents	13,770	(15,745)

 

21 Acquisition of Non-controlling interest

 

On 26 June 2024, the Group acquired an additional 10% interest in OXB US from Q32 Bio (which had acquired Homology in March 2024) for $63 million, increasing its ownership from 80% to 90%, with Q32 Bio holding the remaining 10%. The carrying amount of OXB US NCI's net assets in the Group's consolidated financial statements on the date of the increase in ownership was (£0.1 million).

 

	30 June 2024
	£'000
Carrying amount of NCI acquired	5,077
Consideration paid to NCI	-
Increase in equity attributable to owners of the Company	5,077

 

The increase in equity attributable to owners of the Company comprised solely an increase to retained earnings.

 

22 Capital commitments

 

At 30 June 2024, the Group had commitments of £603,000 for capital expenditure for leasehold improvements, plant and equipment not provided in the financial statements (Dec 2023 £3,476,000).