Interim Results
Intl. Biotechnology Trust PLC
28 April 2006
For release 28 April 2006
International biotechnology trust plc
The Board of International Biotechnology Trust plc ('IBT') today announces its
unaudited Interim Results for the six months ended 28 February 2006.
Summary
• Net asset value per share rose by 20.1% to 145.70p
• Both the quoted and unquoted portfolios outperformed the NASDAQ biotech
index
• Valuation changes of unquoted companies resulted in a rise in net assets
of £4.1m
• KuDOS realisation to AstraZeneca added £2.0m to NAV
• Micromet merger with Cancervax added £3.0m to NAV
• Two IPOs from the unquoted portfolio (Sunesis in the US and Genosis in
the UK)
• Two new unquoted investments (GlycoFi and Spinal Kinetics)
• 22.7% of net assets invested in unquoted companies at 28 February 2006
(28 February 2005: 23.0%)
Andrew Barker, Chairman, commented:
'The IBT portfolio is constructed to give shareholders exposure to global
biotechnology and medical technology through investments in both quoted and
unquoted companies. The focus of IBT is on quoted mid and small-capitalisation
stocks, and the unquoted universe. When these components perform well as they
did in the six months under review, investors will benefit and indeed have
benefited from the out-performance in the market capitalisation strata where IBT
focuses, augmented by the excellent realisation-driven performance of the
unquoted portfolio.
'Recent mergers and acquisitions have already brought the biotechnology sector
into focus for many investors and as the pace of these transactions increase,
the positive outlook of the sector should continue to improve.'
For further information, please contact:
International Biotechnology Trust plc
Andrew Barker, Chairman 020 7658 3206
SV Life Sciences Managers LLP
Kate Bingham/Josee Gray 020 7421 7070
Lansons Communications
Amy Fisher/Charlotte Edgar 020 7490 8828
Website: www.internationalbiotrust.com
Chairman's statement
Performance
International Biotechnology Trust plc (IBT) has made good progress. It is
pleasing to report the continued increase in net asset value (NAV) per share of
IBT of 20.1% from 121.30p (restated in accordance with IFRS) to 145.70p during
the six months to 28 February 2006. Over the same period the share price of IBT
rose 26.6%, the NASDAQ Biotech Index (NBI) rose by 13.9%, the Merrill Lynch
Small Cap Biotech Index (MLSCI) rose by 7% (or 18.9% before a significant
re-balancing of the index) and the Bloomberg UK Biotechnology Index (BUKBI) rose
by 17.7%, all in sterling terms.
Over the six months under review the discount of the IBT share price to NAV was
volatile narrowing from 14.1% (restated) to 9.4% but as realisations from the
unquoted portfolio increased NAV on a number of occasions during the six months,
the widest discount was 15.1% and at its narrowest was 5.5%.
Net assets rose by £10.6m during the reporting period. The major contributors to
this rise were KuDOS Pharmaceuticals (+£2.0m) and Micromet (+£3.0m). There was
one write-down in the unquoted portfolio in the reporting period. The holding in
Affibody was written down to reflect an impending funding event (-£0.9m). These
movements include the impact of currency changes which increased net assets by a
total of £1.1m during the six months under review.
The performance of IBT's quoted portfolio calculated on a time-weighted return
basis (assuming mid-month cash flows) showed an increase of 19.3%. On an
unweighted basis (ignoring the timing of transactions) the return was 14.6%.
During the period under review, there have been two movements from the unquoted
to the quoted portfolio by way of IPOs (Sunesis in the U.S. and Genosis in the
U.K.), one acquisition from the unquoted portfolio (KuDOS by AstraZeneca) and
the announcement (which has still to complete) of the merger of an unquoted
portfolio company (Micromet) with a quoted portfolio company (Cancervax).
At 28 February 2006, the level of cash, money market instruments and other net
assets was £7.1m or 10.3% of net assets of which, £1.3m or 1.9% of net assets,
was uncommitted cash. This total cash level had decreased from £8.8m or 15.1% of
net assets at 31 August 2005 and had recently been increased by the receipt of
most of the proceeds of the sale of KuDOS. Prior to this partial realisation, at
the end of January 2006, the uncommitted cash was £0.2m.
Valuations
Throughout the interim period, IFRS and the International Private Equity and
Venture Capital valuation guidelines have been applied and no discounts were
applied to quoted holdings. The proposed merger of Micromet and Cancervax was
announced in January 2006. This has resulted in the valuation of Micromet (which
remains in the unquoted portfolio, and IBT's largest holding at the interim
period end) being linked to the share price of Cancervax while a full valuation
will only be recognised when shareholders approve the merger. Once the merger
has been approved, the Micromet holding will move to the IBT quoted portfolio.
During the reporting period the net effect of the changes in the Directors'
valuations of unquoted companies was a rise in net assets of £4.1m. At 28
February 2006, 22.7% of net assets were invested in unquoted companies. The
Board continues to believe that the guideline that up to 40% of net assets may
be invested in unquoted companies is appropriate. The unquoted exposure of IBT
will vary depending on the point in the market cycle, realisations and deal
flow.
Share buy-backs and Extraordinary General Meeting
In the period since 31 August 2005, the Board has purchased 750,000 shares for
cancellation. The discount to NAV to which the shares of IBT have traded is
constantly under review and the Directors continue to consider share buy-backs
to be one of a number of tools that may be used to enhance shareholder value. To
provide additional flexibility in our use of share buy-backs, we have decided to
seek approval from shareholders for IBT to repurchase its shares and to hold
them in treasury for subsequent reissue. The Board believes that this will give
IBT flexibility by providing an additional source of liquidity for the secondary
market. A Circular to shareholders setting out our detailed proposals
and convening an Extraordinary General Meeting will be distributed with the
Interim Report.
International Financial Reporting Standards (IFRS)
From 1 September 2005, IBT has prepared its financial statements under IFRS, as
adopted for use in the European Union. These accounts are the first set of IBT's
results prepared exclusively on this basis. Details on the impact of the move to
IFRS are set out in the notes to these accounts.
Prospects
The IBT portfolio is constructed to give shareholders exposure to global
biotechnology and medical technology through investments in both quoted and
unquoted companies. The focus of IBT is on quoted mid- and small-capitalisation
stocks, and the unquoted universe. When these components perform well, as they
did in the six months under review, investors will benefit and indeed have
benefited from the out-performance in the market capitalisation strata where IBT
focuses, augmented by the excellent realisation-driven performance of the
unquoted portfolio.
The quoted portfolio is comprised of investments in companies which our Manager,
SV Life Sciences, expects to have positive clinical, regulatory or commercial
events over the next six to eighteen months. The unquoted portfolio consists of
relatively recent investments, including two made in the period under review,
close to cash assets (such as Aderis and KuDOS), and other unquoted investments,
the prospects for which the Board believes are good. Recent mergers and
acquisitions have already brought the biotechnology sector into focus for many
investors and as the pace of these transactions increases, the positive outlook
of the sector should continue to improve. IBT has already benefited from this
activity in the period under review, and with its focus on the small- and
mid-capitalisation strata, is further positioned for an advantage as the focus
of investors continues to move from the largest capitalisation names.
Andrew Barker
Chairman
28 April 2006
Investment Manager's Review
Market Review
At the start of our year in August 2005, U.S. and European biotechnology indices
paused before a decline that lasted until early November. While no one factor
appeared to explain this decline, in retrospect a sensitivity to risk driven by
higher commodity prices, combined with the U.S. mutual fund year-end appeared to
be the general market pressures. More specifically in biotechnology, changes at
the FDA and negative clinical and regulatory events seemed to have been the key
sector drivers. Previously, over the early summer 2005, the largest U.S.
biotechnology companies reported quarterly sales and profits which were better
than expected resulting in the out-performance of, for example Amgen and
Genentech (whose market capitalisations briefly exceeded $100 billion), compared
to small- and mid-capitalisation names, where this company has its focus.
However, from early November 2005, the U.S. and European biotechnology indices
advanced at a similar rate to the broad technology indices although in
biotechnology the focus has been away from the largest capitalisation names,
towards the small- and mid-capitalisation space. The components of this
appreciation which, at the time of writing extends about four months to the end
of our interim period, have been merger and acquisition (M&A) activity by both
pharmaceutical and biotechnology companies, and positive clinical and regulatory
events.
M&A activity by pharmaceutical companies has been the result of the increasing
pressures of drug safety concerns, generic competition to their larger products,
and a tougher regulatory environment for primary care medicines. This has led
pharmaceutical companies to view the biotechnology sector as a source of
specialty products with long patent lives where the drug safety review is likely
to be less costly. In early 2005, this resulted in anti-infective companies such
as Vicuron in the U.S. being acquired by Pfizer and vaccine companies Corixa and
ID Biomedical being acquired by GlaxoSmithKline. Towards the year-end 2005 this
emphasis seemed to have shifted towards earlier stage companies with portfolio
company KuDOS being acquired by AstraZeneca.
The Medicare Part D initiative in the U.S., designed to give senior citizens
greater access to cheaper prescription medicines was initially thought to be
positive for pharmaceutical companies from higher volume sales. It is however
now becoming apparent that this may be another pressure for the pharmaceutical
industry as low cost generic medicines with average wholesale prices, not their
higher cost branded counterparts with average selling prices are favoured by
lower co-payments from Part D participants.
The larger biotechnology companies are also not without their pressures with the
approval in late January 2006 of Europe's first biosimilar (follow-on, or
generic biologic), Omnitrope (recombinant human growth hormone) by Novartis.
This is perhaps another reason for the shift from larger capitalisation, to mid-
and smaller capitalisation biotechnology companies, particularly in the U.S..
Outlook
The record of IBT's portfolio companies in the last six months has been
excellent with significant drug approvals, clinical success and commercial
agreements signed in the quoted portfolio together with IPOs and M&A exits in
the unquoted portfolio. There seems now to be a different type of IPO window in
both the U.S. and Europe where market participants no longer talk of a window
being 'open' or 'closed', rather than conditionally open at a 'basal' level.
This means that fewer companies will be able to list than in the peak times of
1999 to 2000, and those that do manage to list will be at reasonable valuations
and with viable, later stage businesses. This has to be contrasted with the
current situation on London's Alternative Investment Market (AIM) where it seems
biotechnology companies unable to list on their home market are joined with
domestic start-ups and spin-outs from U.K. universities many years away from
clinical development. It is for this reason that IBT has very little exposure to
the AIM market and with its global focus has found better, lower risk investment
propositions in the U.S., Australia and Canada which have shown significant
returns in the last six months.
While the pace of biotechnology IPO exits may be slowing, M&A activity (in the
sector in general, and in the IBT portfolio specifically) seems to be increasing
to compensate, due to the various pressures on the pharmaceutical industry
outlined above. We see two implications from this for IBT and the biotechnology
sector over the next six to eighteen months. Firstly M&A activity may continue
to increase as the pressures on the pharmaceutical sector continue and there is
competition for the best biotechnology assets. Secondly, as generalist investors
come to appreciate the biotechnology sector as a high beta but increasingly
profitable sector, we expect to see an increase in the flow of funds to the
biotechnology sector.
SUMMARY PORTFOLIO COMPANY NEWS
Quoted Companies
During the period under review there have been three FDA approvals for new drugs
at portfolio companies Nektar, OSI Pharmaceuticals, and Celgene. In late January
2006 Nektar and partner Pfizer received approval in the U.S. and Europe for the
first inhaled insulin for patients with either type I or type II diabetes, while
OSI Pharmaceuticals received an additional approval for its oncology drug
Tarceva in pancreatic cancer. In late December 2005 Celgene received a first
approval for its oncology drug Revlimid in myelodysplastic syndromes, a type of
blood cancer. Celgene followed the initial approval by an application for a
further approval in the larger indication of multiple myeloma in early March
2006. This brings to three the new drug applications (NDAs) submitted by
portfolio companies which are under review at the FDA and are expected to be
approved before the end of IBTs year in August. The other two NDAs have already
received approvable letters and complete response notifications from the FDA to
portfolio companies Noven and MGI Pharma.
In addition there have been further NDA submissions by portfolio companies
Pozen, New River Pharmaceuticals and Shire which are expected to have a standard
eleven month review cycle. Further regulatory filing activity is expected before
the IBT year end has been due to positive clinical trial events in the interim
period with NDAs expected to be filed by portfolio companies Progenics and
Alexion.
At the end of the interim period, Progenics Pharmaceuticals was the largest
quoted holding and as expected, the company reported a second positive phase III
clinical trial for its lead product methylnaltrexone for the relief of the
side-effects of opiates in cancer patients. The more unpredictable, but
nevertheless positive news from Progenics came at the end of December 2005 when
they announced a global commercialisation collaboration with Wyeth worth $60m in
up-front payments plus milestones and royalties.
Other commercial agreements signed by IBT portfolio companies since the year-end
in August 2005 were at portfolio companies GPC Biotech, Jerini and Sonus
Pharmaceuticals. In mid-December 2005, GPC Biotech and Pharmion announced a
marketing and development agreement whereby GPC licensed European marketing
rights for Satraplatin, its phase III oncology product for hormone-refractory
prostate cancer, to Pharmion for $37.1m up-front plus royalties and milestone
payments. This particular licensing deal marks an interesting development where
a German biotechnology company licensed European rights to its drug to a US
company whilst retaining U.S. rights for itself.
Jerini, a recent German IPO (in November 2005) announced the licensing of its
lead product Icatibant, in phase III for hereditary angiodema, to Kos
Pharmaceuticals of the U.S. for €12m in up-front payments, a €10m equity
investment, plus royalties and milestones, a week after its IPO. Paradoxically
the stock traded down on this news and we were happy to invest in a Phase III
clinical stage company after this commercial milestone, at a cheaper price than
at the IPO.
Unquoted Companies
Positive developments in the unquoted portfolio have been the main driver of NAV
performance since the year-end in August. In late December 2005, AstraZeneca
announced that they were acquiring portfolio company KuDOS at a 2.3 multiple to
our carrying value or £3.6m, less transaction costs. The first tranche of the
proceeds was received at the end of February and increased IBT's cash position
to £7.1m or 10.3% of NAV at the end of the period under review.
In early January 2006 the merger of portfolio companies Cancervax (quoted) and
Micromet (unquoted) was announced. The valuation of Micromet has been written up
by the Directors to reflect the link to the Cancervax share price although a
full valuation will not be recognised until any uncertainty has been removed by
shareholder approval of the transaction. This initially resulted in a valuation
increase of £0.9m (from £2.3m to £3.2m), after which the appreciation of the
Cancervax share price resulted in the valuation of the Micromet holding at the
end of the period under review being £5.3m.
In early 2006, the Board approved a write-down in Affibody from £1.5m to £0.6m
reflecting an impending funding event.
Portfolio Summary at 28 February 2006
At the end of our interim period, IBT had investments in 46 companies - 35
quoted companies (representing 67.0% of NAV) and 11 unquoted companies
(representing 22.7% of NAV). The remaining 10.3% was made up of cash, money
market instruments and other net current assets (£7.1m) increasing a few days
before the period end by the partial realisation proceeds of the KuDOS sale to
AstraZeneca.
Members of SVLS sat on the Boards of nine portfolio companies at the end of the
period under review, these were Affibody, Archemix, Cancervax, Dynogen, GlycoFi,
Micromet, PowderMed, Spinal Kinetics and Trine.
The geographical split of the portfolio at the end of the period under review
was mainly invested in the U.S. where 55.3% of NAV was invested. IBT had one
investment each in Australia and Canada (2.5% and 4.6%, respectively of NAV),
while in continental Europe and the UK, 14.8% and 12.5% of NAV was invested,
respectively. By sub-sector, 71.1% of NAV was invested in biopharmaceuticals,
4.6% in drug delivery, 5.5% in medical devices and 8.5% in other areas, with
cash, money market instruments and other net assets making up the balance.
Despite IBT's focus on the small to mid-capitalisation space most of the
investments have products in late stage clinical development. At the end of the
interim period, fifteen companies had a product on the market, three had filed
for approval, thirteen had products in phase III clinical development while five
had products in phase II development. Only two companies had a product in the
earliest stage of clinical development (phase I) and seven companies were
classified as other with either platforms or devices in development.
In terms of the cash positions of the portfolio companies, it was estimated at
February 28 2006 that twenty-six were either profitable, or have two or more
years of cash remaining, fourteen had more than one, but less than two years of
cash remaining and six had less than one year of cash remaining. Of those six
with less than one year of cash, five were unquoted with impending funding
events in which IBT may participate and one (Micromet) is merging with a quoted
cash shell (Cancervax).
At the end of the period under review, the quoted portfolio contained of 35
investments. There have been eleven divestments from the quoted portfolio since
the previous year end in August 2005 and these have mostly been due to instances
where negative clinical, regulatory or commercial news were expected. A case in
point is Canadian company QLT which IBT fully divested in since September 2005
and since that time the CEO has left and there have been a clinical trial
failure, a regulatory disappointment, a patent challenge and a profits warning.
To balance the divestments, further investments have been made in portfolio
companies such as AnorMED, Cambridge Antibody Technology and Progenics, where
valuation or the expectation of positive clinical news prompted an increase in
net assets. New investments have been made in, for example Pozen and the
Medicines Company in the U.S., Actelion in Switzerland, and GPC biotech and
Jerini in Germany.
Valuation
At 28 February 2006 the IBT unquoted portfolio (value £15.6m) represented 22.7%
of net assets, compared to 28.6% the prior year. Two new unquoted investments
were made during the period under review, adding £1.4m to the unquoted
portfolio. These investments were GlycoFi and Spinal Kinetics. GlycoFi is a
platform company based on technology which enables therapeutic proteins to be
produced in yeast which have the same sugar pattern as those produced by human
cells. Yeast cell production has significant cost advantages to mammalian cell
production of, for example monoclonal antibodies. In addition, therapeutic
proteins which do not have the correct human sugar (or glycosylation) pattern
are recognised as foreign by the immune system and are rapidly cleared from the
body. In addition to the cost savings in manufacturing, appropriately
glycosylated therapeutic proteins have a longer life in the body and require
lower doses to be effective than the same protein produced in bacteria or
non-human cell lines. In the last six months GlycoFi has signed deals with Eli
Lilly and Merck.
Spinal Kinetics is a medical device company developing a new generation
replacement spinal disc. Follow-on investments were made or committed to in the
period under review in Archemix, Micromet, Oxagen and Dynogen, adding a total of
£1.6m to the unquoted portfolio.
During the period under review, the net effect of the change in the Directors'
valuations of unquoted companies was an increase in NAV for the period of £4.1m,
representing 7.1% of net assets at the start of the period.
The valuation of KuDOS was written up by £2.0m (including dividend distribution)
at the end of December 2005 to reflect the acquisition by AstraZeneca which
completed at the end of February 2006 and a portion of the proceeds remain in
escrow. The valuation of Affibody was written down by £0.9m in early January
2006 to reflect a future funding event. Also in early January 2006, Micromet was
written up to reflect the announced merger between it and portfolio company
Cancervax. The valuation of Micromet at 28 February 2006 was £5.3m (having been
£2.1m at August 31 2005) and reflects a prudent valuation of the expected
proceeds prior to shareholder approval of the merger and is derived from the
Cancervax share price which doubled after the proposed merger was announced.
SV Life Sciences Managers LLP
28 April 2006
Ten Largest Equity
Holdings
at 28 February 2006
Company Value of % of Group Country Business Activity
Holdings Shareholders
£'000 Funds
---------------- ------ --------- ------- ---------------------
1 Micromet * 5,291 7.7 Germany Micromet designs and
--- --------------- ------ --------- ------- develops novel antibody
derived therapies for the
treatment of severe human
diseases. Micromet has
two clinical candidates
and partnerships with
Serono, Enzon and
MedImmune
---------------------
2 Progenics 3,308 4.8 USA Progenics is a
--- Pharmaceuticals ------ --------- ------- biopharmaceutical company
--------------- focusing products for the
treatment and prevention
of cancer and viral
diseases. The company's
lead drug,
methylnaltrexone has
successfully completed
two phase III studies for
patients with advanced
cancer.
---------------------
3 AnorMED 3,130 4.6 Canada AnorMED discovers and
--- --------------- ------ --------- ------- develops small molecule
therapeutics for the
treatment of HIV
infection and cancer. The
company has one product
in phase III and one in
phase II.
---------------------
4 Aderis 2,855 4.2 USA Aderis is a small
--- Pharmaceuticals* ------ --------- ------- molecule discovery and
--------------- development company with
investigational compounds
in CNS, cardiovascular
and renal therapeutic
areas. Aderis has
partnerships with Schwarz
Pharma AG and King
Pharmaceuticals.
---------------------
5 Cambridge 2,554 3.7 UK CAT discovers and
--- Antibody ------ --------- ------- develops monoclonal
Technology antibodies (MAbs). The
--------------- company's MAbs are used
in human therapeutics and
the drug discovery
process. CAT's
development partners and
licensees include Abbott
Laboratories, AstraZeneca
and Human Genome
Sciences.
---------------------
6 Genosis 2,527 3.7 USA Genosis is a medical
--- --------------- ------ --------- ------- device company with
proprietary technology
for the diagnosis of
reproductive disorders.
The company's first
product offering is an
over-the-counter in vitro
diagnostic for screening
male and female fertility
has received regulatory
approval and is marketed
by Boots in the UK.
---------------------
7 OSI 2,087 3.0 USA OSI is a research and
--- Pharmaceuticals ------ --------- ------- development company
--------------- focused in the areas of
oncology and diabetes.
OSI has one approved drug
Tarceva, developed and
commercialised in
collaboration with
Genentech.
---------------------
8 Pozen 2,031 3.0 USA Pozen is a specialty
--- --------------- ------ --------- ------- pharmaceutical company
focused in the area of
innovative drug
development for pain and
migraine. The companies
lead product is under
review by the FDA and has
been developed in
collaboration with GSK.
---------------------
9 Sunesis 1,804 2.6 USA Sunesis is a
--- Pharmaceuticals ------ --------- ------- clinical-stage
--------------- biopharmaceutical company
focused on the discovery,
development and
commercialisation of
novel small molecule
therapeutics for oncology
and other unmet medical
needs.
---------------------
10 Alexion 1,770 2.6 USA Alexion discovers and
--- Pharmaceuticals ------ --------- ------- develops compounds for
--------------- the treatment of
autoimmune and
cardiovascular diseases.
The company develops C5
complement inhibitors and
Apogens, two classes of
potential therapeutics
designed to target
disease-causing segments
of the immune system.
---------------------
Total 27,357 39.9
--- --------------- ------ --------- ------- ---------------------
* Unquoted investments
Unaudited Consolidated income statement
For the six months ended For the six months ended
28 February 2006 28 February 2005
(unaudited) (Unaudited and restated)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
------------- -------- -------- -------- -------- -------- --------
Gains on - 11,620 11,620 - 3,921 3,921
Investments held at
fair value
Exchange losses on - - - - (285) (285)
currency balances
Dividends and other
Income 547 - 547 289 - 289
------------- -------- -------- -------- -------- -------- --------
Administrative (691) - (691) (648) - (648)
expenses
------------- -------- -------- -------- -------- -------- --------
(Deficit)/return
before (144) 11,620 11,476 (359) 3,636 3,277
taxation
Taxation - - - - - -
------------- -------- -------- -------- -------- -------- --------
(Deficit)/return on
ordinary activities
after taxation (144) 11,620 11,476 (359) 3,636 3,277
------------- -------- -------- -------- -------- -------- --------
Earnings per (0.30)p 24.38p 24.08p (0.75)p 7.61p 6.86p
ordinary share
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS.
The supplementary revenue return and capital return columns are both prepared
under guidance published by the Association of Investment Trust Companies.
All revenue and capital items in the above statement derive from continuing
operations.
All income is attributable to the equity holders of International Biotechnology
Trust plc, the parent company. There are no minority interests.
Consolidated Balance Sheet
28 February 31 August 2005
2006
(unaudited) (audited and
restated)
£'000 £'000
------------------------ ------------- ------------
Non-current assets
Investments held at fair value 61,489 49,227
Current assets
Debtors 65 61
Investments 3,630 7,110
Cash at bank 4,340 2,336
------------------------ ------------- ------------
8,035 9,507
------------------------ ------------- ------------
Current liabilities
Creditors: amounts falling due (947) (731)
within one year
------------------------ ------------- ------------
Net current assets 7,088 8,776
------------------------ ------------- ------------
Net assets 68,577 58,003
------------------------ ------------- ------------
Capital & reserves
Called up share capital 11,766 11,954
Capital redemption reserve 11,231 11,043
Share purchase reserve 65,565 66,467
Capital reserve (8,896) (20,516)
Revenue reserve (11,089) (10,945)
------------------------ ------------- ------------
Equity shareholders' funds 68,577 58,003
------------------------ ------------- ------------
Net asset value per share 145.70p 121.30p
Consolidated Statement of Changes in Equity
Capital Share
Share redemption purchase Capital reserve Revenue
capital reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- -------- -------- -------- ------- -------- ------- -------
Balance
at 31
August
2005 11,954 11,043 66,467 6,737 (27,253) (10,945) 58,003
Buy back
of
ordinary
shares (188) 188 (902) - - - (902)
Net
(loss)/
profit
for the
period - - - (5,792) 17,412 (144) 11,476
--------- -------- -------- -------- ------- -------- ------- -------
Balance
as 28
February
2006 11,766 11,231 65,565 945 (9,841) (11,089) 68,577
--------- -------- -------- -------- ------- -------- ------- -------
Capital Share
Share redemption purchase Capital reserve Revenue
capital reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- -------- -------- -------- ------- -------- ------- ------
Balance at
31 August
2004 11,954 11,043 66,467 7,899 (28,777) (10,213) 58,373
Net
(loss)/profit
for the year - - - (1,162) 1,524 (732) (370)
--------- -------- -------- -------- ------- -------- ------- ------
Balance
as 31
August
2005 11,954 11,043 66,467 6,737 (27,253) (10,945) 58,003
--------- -------- -------- -------- ------- -------- ------- ------
Capital Share
Share redemption purchase Capital reserve Revenue
capital reserve reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- -------- -------- -------- ------- -------- ------- ------
Balance
at 31
August
2004 11,954 11,043 66,467 7,899 (28,777) (10,213) 58,373
Net
profit/
(loss)
for the
period - - - 9,326 (8,909) (359) 58
--------- -------- -------- -------- ------- -------- ------- ------
Balance
as 28
February
2005 11,954 11,043 66,467 17,225 (37,686) (10,572) 58,431
--------- -------- -------- -------- ------- -------- ------- ------
Unaudited Consolidated Cash Flow Statement
For the For the
six months six months
ended ended
28 February 28 February
2006 2005
(unaudited) (unaudited)
£'000 £'000
----------------------- --------------- -------------
Cash flow from operating activities
Profit before tax 11,476 3,277
Adjustments for:
Gains on investments held at fair value (11,620) (3,921)
Exchange losses on revaluation of
currency balances - 285
----------------------- --------------- -------------
(144) (359)
Net cash (outflow)/inflow from net
(purchases)/sales of investments held at
fair value through profit and loss (469) 7,890
(increase)/decrease in receivables (133) (143)
Decrease in payables (592) (215)
----------------------- --------------- -------------
Net cash (outflow)/inflow before
management of liquid resources and
financing (1,338) 7,173
----------------------- --------------- -------------
Management of liquid resources 3,600 (8,750)
----------------------- --------------- -------------
Net cash (outflow)/inflow from operating
activities 2,262 (1,577)
Financing activities
Buy back of ordinary shares (258) _
----------------------- --------------- -------------
Net increase/(decrease) in cash and cash
equivalent 2,004 (1,577)
Cash and cash equivalent at start of the
period 2,336 4,337
Effect of foreign exchange rate changes - (285)
----------------------- --------------- -------------
Cash and cash equivalents at end of the
period 4,340 2,475
----------------------- --------------- -------------
Notes to the financial statements
1. EU law (IAS Regulation EC 1606/2002) requires that the next annual
consolidated financial statements of the Group, for the year ending 31 August
2006, be prepared in accordance with accounting standards adopted for use in the
European Union (EC) further to the IAS Regulation (EC 1606/2002) ('accounting
standards adopted by the EU').
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of accounting standards adopted by the
EU as of 28 February 2006 that are effective at 31 August 2006, the Group's
first annual reporting date at which it is required to use accounting standards
adopted by the EU. Based on these standards, management has applied the
accounting policies, as set out below, which they expect to apply when the first
annual financial statements are prepared in accordance with accounting standards
adopted by the EU for the year ending 31 August 2006.
However, the accounting standards adopted by the EU that will be effective in
the annual financial statements for the year ending 31 August 2006 are still
subject to change and to additional interpretations and therefore cannot be
determined with certainty. Accordingly, the accounting policies for that annual
period will be determined finally only when the annual financial statements are
prepared for the year ending 31 August 2006.
(a) Basis of Accounting
The Group accounts consolidate the accounts of the Company and its wholly-owned
subsidiary, IBT 2004 Limited. These financial statements have been prepared on
the historical cost basis of accounting, modified to include revaluation of
investments. The principal accounting policies adopted are set out below. Where
presentational guidance set out in the Statement of Recommended Practice ('the
SORP') for investment trusts issued by the Association of Investment Trust
Companies ('the AITC') in January 2003 and revised in December 2005 is
consistent with the requirements of IFRS, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the
SORP.
The disclosures required by IFRS 1 concerning the transition from UK GAAP to
IFRS are given further in the notes.
(b) Presentation of income Statement
In order to better reflect the activities of an investment trust company, and in
accordance with guidance issued by AITC, supplementary information which
analyses the Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement.
(c) Investments
Investments are recognised and derecognised on a trade date when a purchase or
sale of an investment is under a contract whose terms require delivery of the
investment within a timeframe established by the market concerned.
All the Group's investments are defined by IFRS as investments designated as
fair value through profit and loss.
Quoted investments are valued at either bid price or the last traded price,
according to the recognised conventions of the relevant market at the balance
sheet date.
In respect of unquoted investments, or where the market for a financial
instrument is not active, fair value is established by using various valuation
techniques, in accordance with International Private Equity and Venture Capital
('IPEVC) Valuation Guidelines. These may include using recent arm's length
market transactions between knowledgeable, willing parties, if available and
reference to the current fair value of another instrument that is substantially
the same. Where there is a valuation technique commonly used by market
participants to price the instrument and that technique has been demonstrated to
provide reliable estimates of prices obtained in actual market transactions,
that technique is utilised. Where no reliable fair value can be estimated for
such unquoted investments, they are carried at cost, subject to any provision
for impairment.
Transaction costs incurred on the acquisition or disposal of investments are
expensed and included in the capital column or deducted from the proceeds of
sale as appropriate.
(d) Financial instruments
The Group's activities expose it primarily to the financial risks of changes in
market prices, foreign currency exchange rates and interest rates. Financial
instruments which the Group may enter comprise quoted and unquoted investments.
These are recognised at the balance sheet date at fair value through profit and
loss.
Except for the amendments required in connection with the adoption of IFRS as
listed above the accounting policies have not varied from those described in the
Report and Accounts for the year ended 31 August 2005.
2. Administrative expenses For the six For the six
months to months to
28 February 28 February
2006 2005
(unaudited) (unaudited and
restated)
£'000 £'000
-------------------------------- ----------- -----------
Management fees 396 403
Other administrative expenses 295 245
-------------------------------- ----------- -----------
691 648
-------------------------------- ----------- -----------
3. Earnings per share For the six For the six
months to months to
28 February 28 February
2006 2005
(Unaudited) (Unaudited and
restated)
---------------------------------- ----------- -----------
Revenue deficit on ordinary
activities after taxation (£'000) (144) (359)
Weighted average number
of shares 47,653,865 47,815,467
---------------------------------- ----------- -----------
Revenue deficit per share (0.30)p (0.75)p
---------------------------------- ----------- -----------
Capital return on ordinary
activities after taxation (£'000)
(as restated) 11,620 3,636
Weighted average number of shares 47,653,865 47,815,467
---------------------------------- ----------- -----------
Capital return per share 24.38p 7.61p
---------------------------------- ----------- -----------
Total Earnings per share 24.08p 6.86p
---------------------------------- ----------- -----------
4. Net asset value per share
As at 28 As at 28 As at 31 August
February February 2005
2006 2005
(Unaudited) (Unaudited and (Audited and
restated) restated)
----------------------------------- --------- ----------- -----------
Net assets (£'000) 68,577 58,431 58,003
Number of shares 47,065,467 47,815,467 47,815,467
----------------------------------- --------- ----------- -----------
Net asset value per share 145.70p 122.20p 121.30p
----------------------------------- --------- ----------- -----------
5. (a) Restatement of balances as at and for the year ended 31 August 2005
At 1 September 2005 the Group adopted International Financial Reporting
Standards. In accordance with IFRS1 (First Time Adoption of International
Financial Reporting Standards) the following is a reconciliation of the results
as at and for the year ended 31 August 2005, previously reported under the
applicable UK Accounting Standards and the SORP, to the restated IFRS results.
Previously Restated
reported
Group Balance Sheet 31 August 2005 Adjustment 31 August 2005
£'000 £'000 £'000
---------------------- ------------ ----------- -----------
Non-current assets
Investments held at fair value
through profit and loss 48,680 547 49,227
Investment in subsidiary - - -
undertaking
Current assets
Debtors 61 - 61
Investments 7,110 - 7,110
Cash and cash equivalents 2,336 - 2,336
---------------------- ------------ ----------- -----------
9,507 - 9,507
---------------------- ------------ ----------- -----------
Current liabilities
Creditors: amounts falling due
within one year (731) - (731)
---------------------- ------------ ----------- -----------
(731) - (731)
---------------------- ------------ ----------- -----------
Net current assets 8,776 - 8,776
---------------------- ------------ ----------- -----------
Total assets less current
liabilities 57,456 547 58,003
Creditors: amounts falling due - - -
after more than one year ------------ ----------- -----------
----------------------
Net assets 57,456 547 58,003
---------------------- ------------ ----------- -----------
Capital and reserves
Called up share capital 11,954 - 11,954
Capital redemption reserve 11,043 - 11,043
Share purchase reserve 66,467 - 66,467
Capital reserve (21,063) 547 (20,516)
Revenue reserve (10,945) - (10,945)
---------------------- ------------ ----------- -----------
Total shareholders' funds
-equity 57,456 547 58,003
---------------------- ------------ ----------- -----------
Net asset value per share -
pence 120.16 1.14 121.30
---------------------- ------------ ----------- -----------
Notes to the restatement of opening balances
The effect of revaluation of non-current investments from mid to bid value was
nil. The discounts previously applied to quoted investments have been removed.
5. (b) Reconciliation of the Statement of Total Return to the Income statement
for the year to 31 August 2005 (under IFRS the Income Statement is the
equivalent of the Statement of Total Return reported previously)
£'000 Pence per share
-------------------------------- -------- -----------
Total transfer to reserves per Statement of Total
Return 2,302 4.81
Removal of discounts previously applied to quoted
investments 547 1.14
-------------------------------- -------- -----------
Net income per Income statement 2,849 5.95
-------------------------------- -------- -----------
6 (a) Restatement of balances as at and for the period ended 28 February 2005
At 1 September 2005 the Group adopted International Financial Reporting
Standards. In accordance with IFRS1 (First Time Adoption of International
Financial Reporting Standards) the following is a reconciliation of the results
as at, and for the period ended, 28 February 2005, previously reported under the
applicable UK Accounting Standards and the SORP, to the restated IFRS results.
Previously Restated
reported
Group Balance Sheet 28 February Adjustment 28 February
2005 2005
£'000 £'000 £'000
---------------------- ------------ ----------- -----------
Non-current assets
Investments held at fair
value through profit and
loss 40,541 577 41,118
Investment in subsidiary undertaking - - -
Current assets
Debtors 100 - 100
Investments 14,901 - 14,901
Cash and cash equivalents 2,475 - 2,475
---------------------- ------------ ----------- -----------
17,476 - 17,476
---------------------- ------------ ----------- -----------
Current liabilities
Creditors: amounts falling
due within one year (163) - (163)
---------------------- ------------ ----------- -----------
(163) - (163)
---------------------- ------------ ----------- -----------
Net current assets 17,313 - 17,313
---------------------- ------------ ----------- -----------
Total assets less current
liabilities 57,854 577 58,431
Creditors: amounts falling due after - - -
more than one year ------------ ----------- -----------
----------------------
Net assets 57,854 577 58,431
---------------------- ------------ ----------- -----------
Capital and reserves
Called up share capital 11,954 - 11,954
Capital redemption reserve 11,043 - 11,043
Share purchase reserve 66,467 - 66,467
Capital reserve (21,038) 577 (20,461)
Revenue reserve (10,572) - (10,572)
---------------------- ------------ ----------- -----------
Total shareholders' funds
-equity 57,854 577 58,431
---------------------- ------------ ----------- -----------
Net asset value per share -
pence 120.99 1.21 122.20
---------------------- ------------ ----------- -----------
Notes to the restatement of opening balances
The effect of revaluation of non-current investments from mid to bid value was
nil. The discounts previously applied to quoted investments have been removed.
6 (b) Reconciliation of the Statement of Total Return to the Income statement
for the period to 28 February 2005 (under IFRS the Income Statement is the
equivalent of the Statement of Total Return reported previously)
£'000 Pence per share
-------------------------------- -------- -----------
Total transfer to reserves per Statement of Total
Return 2,700 5.65
Removal of discount previously applied to quoted
investments 577 1.21
-------------------------------- -------- -----------
Net income per Income statement 3,277 6.86
-------------------------------- -------- -----------
7. Restatement of opening balances as at 31 August 2004
At 1 September 2005 the Group adopted International Financial Reporting
Standards. In accordance with IFRS1 (First Time Adoption of International
Financial Reporting Standards) the following is a reconciliation of the opening
balances as at 31 August 2004, previously reported under the applicable UK
Accounting Standards and the SORP, to the restated IFRS results.
Previously Restated
reported
Group Balance Sheet 31 August 2004 Adjustment 31 August 2004
£'000 £'000 £'000
---------------------- ------------ ----------- -----------
Non-current assets
Investments held at fair value 43,242 3,219 46,461
Investment in subsidiary - - -
undertaking
Current assets
Debtors 1,935 - 1,935
Investments 6,018 - 6,018
Cash and cash equivalents 4,337 - 4,337
---------------------- ------------ ----------- -----------
12,290 - 12,290
---------------------- ------------ ----------- -----------
Current liabilities
Creditors: amounts falling due
within one year (378) - (378)
---------------------- ------------ ----------- -----------
(378) - (378)
---------------------- ------------ ----------- -----------
Net current assets 11,912 - 11,912
---------------------- ------------ ----------- -----------
Total assets less current
liabilities 55,154 3,219 58,373
Creditors: amounts falling due - - -
after more than one year ------------ ----------- -----------
----------------------
Net assets 55,154 3,219 58,373
---------------------- ------------ ----------- -----------
Capital and reserves
Called up share capital 11,954 - 11,954
Capital redemption reserve 11,043 - 11,043
Share purchase reserve 66,467 - 66,467
Capital reserve (24,097) 3,219 (20,878)
Revenue reserve (10,213) - (10,213)
---------------------- ------------ ----------- -----------
Total shareholders' funds -
equity 55,154 3,219 58,373
---------------------- ------------ ----------- -----------
Net asset value per share -
pence 115.35 6.73 122.08
---------------------- ------------ ----------- -----------
Notes to the restatement of opening balances
The effect of revaluation of non-current investments from mid to bid value was
nil. The discounts previously applied to quoted investments have been removed.
8. Comparative information
The results for the six months to 28 February 2006 and 28 February 2005, which
are unaudited, constitute non-statutory accounts within the meaning of Section
240 of the Companies Act 1985.
The comparative figures for the financial year ended 31 August 2005 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the registrar of companies.
The report of the auditors was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985.
The Interim Report will be mailed to registered shareholders in May 2006 and
from the date of release copies of the Interim Report will be made available to
the public at the Company's Registered Office at 31 Gresham Street, London EC2V
7QA.
9. Note on Merrill Lynch Small Cap Biotech Index (MLSCI) (£ adjusted)
The MLSCI represents Biotech stocks with market capitalisation of under US$1
billion. The movement in the MLSCI from 31 August 2005 to 28 February 2006 in $
terms, based on the data received from Merrill Lynch, is 4.2% (or 15.8% before
re-categorisation). The movement in sterling terms has been calculated using the
prevailing exchange rates at the start and end of the reporting period, sourced
from Factset and Bloomberg.
The data underlying the MLSCI changes regularly in line with changes in the
index constituents, price adjustments and corporate actions. The historic data
is then retrospectively adjusted. As a result the performance for the reporting
period, calculated at a future date, is likely to be different from the
previously published index movement.
Enquiries: Schroder Investment Management Limited
John Spedding 020 7658 3206
28 April 2006
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