Abzena : Final Results

Abzena plc

Full year results: a year of transition - revenue growth driven by investment programme

Cambridge, UK, 4 June 2018- Abzena plc (AIM: ABZA, 'Abzena' or the 'Group'), a life sciences group providing services and technologies enabling the development and manufacture of biopharmaceutical products, has published its full year results for the year to 31 March 2018.

Corporate summary

· FY18 was a year of transition; ambitious growth targets set at start of year missed, but significant investment and progress has been made to broaden and integrate the Group's offering

· Increasing customer engagement with integrated discovery, development and manufacturing service offering

· Investment programme implemented to create state-of-the-art biopharmaceutical manufacturing facilities

· Consolidation of UK scientific operations into new purpose-built facility

· Preferred supplier agreement with leading biomanufacturing process solution provider has enabled upgrading of platform for biopharmaceutical process development and manufacturing

· ABZENA Insidelicence deals secured with a US biotech company, OBI Pharma and Telix Pharmaceuticals

· ABZENA Insideproduct, BIVV009, progressed into Phase III clinical studies

Financial summary

· Revenue increased 18% to £22.0 million (FY17: £18.7 million)

- 60% increase in biomanufacturing revenues (FY18: £8.5 million; FY17: £5.3 million)

- 15% increase in chemistry revenues (FY18: £8.0 million; FY17: £7.0 million)

- 14% decrease in biology research services revenue (FY18: £4.9 million; FY17: £5.7 million)

- Second half revenue stronger (H2 18: £12.3 million; H1 18: £9.6 million)

· Operating loss increased to £14.9 million (FY17: £9.7 million)

· Adjusted EBITDA loss increased to £12.0 million (FY17: £7.5 million)

- Reduced adjusted EBITDA loss in second half (H2 18: £5.0 million; H1 18: £7.0 million)

· Reported loss increased to £14.2 million (FY17: £9.1 million)

· £23.9 million (net) additional funding raised in April 2017

· £6.0 million property & equipment capital expenditure (FY17: £4.2 million)

· Cash at year end of £6.8 million (FY17: £4.1 million)

Post-period events

· Appointment of Interim Chief Operating Officer to drive operational effectiveness as Group pursues path to profitability

· Implementation of cost reduction programme, anticipated to reduce operating costs by circa £2.0 million (8%) on an annualised basis.

· J. Smith, CFO, will leave the Group during 2018, stepping down from the Board in July 2018.

John Burt, Abzena's CEO, commented:

'This year has been one of transition for Abzena. Although our original ambitious growth targets for the year were not achieved, we are starting to see the benefits of our capital investment programme, the current phase of which has now been substantially completed.

'With an experienced COO in place, we are actively driving operational efficiencies and a planned reduction in capital expenditure whilst focusing on aligning the Group's resources and infrastructure to match customer demand.

'We have seen increased customer engagement in the second half of the year with our expanded service offering which leaves us well positioned for the coming year with a significant volume of committed forward contracts. The strong revenue growth in our manufacturing division is particularly encouraging and validates our strategy to provide partners with seamless discovery, development and manufacturing services.

'Momentum from the second half continuing into 2019, with growth in this current year expected to be second half weighted as projects mature through the Group's combined service offering.

'We are focused on driving revenue and margin growth to become a sustainable service business. We are pleased to offer our combined services to a fast-growing industry, creating an ever more varied portfolio of biopharmaceutical products.'

-Ends-

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About Abzena

Abzena (AIM: ABZA) provides proprietary technologies and complementary services to enable the development and manufacture of biopharmaceutical products.

The term 'ABZENA Inside' is used by Abzena to describe products that have been created using its proprietary technologies and are being developed by its partners, and include Composite Human Antibodies™ and ThioBridge™ Antibody Drug Conjugates (ADCs). Abzena has the potential to earn future licence fees, milestone payments and/or royalties on 'ABZENA Inside' products.

Abzena offers the following services and technologies across its principal sites in Cambridge (UK), San Diego, California (USA) and Bristol, Pennsylvania (USA):

· Biology research services, including immunogenicity assessment of candidate biopharmaceutical products and bioassay development;

· Protein engineering to optimise biopharmaceutical product candidates, including humanization and deimmunization of antibodies and other therapeutic proteins;

· Cell line development for the manufacture of recombinant proteins and antibodies;

· Contract process development and GMP manufacture of biopharmaceuticals, including monoclonal antibodies and other recombinant proteins for preclinical and clinical studies;

· Contract synthetic chemistry and bioconjugation research services, focused on antibody-drug conjugates (ADCs);

· Proprietary site-specific conjugation technologies and novel payloads for ADC development;

· GMP manufacturer of ADC linkers, payloads & combined linker-payloads; and

· GMP analytical services for biopharmaceutical manufacturing projects.

Chairman's statement

Introduction

Enabling better biopharmaceuticals is core to Abzena and its long-term strategy. Abzena has therefore supported its organic growth with a series of acquisitions over recent years - from the combination of PolyTherics and Antitope in the UK to the acquisition of PacificGMP and TCRS (The Chemistry Research Solution) in the US - to create the shape and structure of the business as it stands today.

FY18 has been a year of transition; where significant investment and progress has been made to broaden and integrate the Group's offering across the biopharmaceutical development pathway. Ambitious growth targets were set at the start of the year, but as outlined in the Company's trading update of 16 April 2018, although overall double-digit revenue growth was achieved, it was not to the level originally anticipated. At the divisional level, manufacturing and chemistry research services grew, but this growth was offset by weaker performance in the first half of the year from biology research services.

Revenue growth for the Group started to come through in the second half of the financial year and the way in which the business is developing reflects the positive impact of the investment programme. Remedial actions have also been taken with respect to costs and optimising alignment of resources to match customer demand. New business activities have generated a good pipeline of forward contracts and the Board anticipates a slightly higher annual revenue growth rate in FY19 to FY18. The Board remains confident of the longer-term prospects for the business.

Good growth but a challenging year managing rapid expansion

Revenues increased by 18% to £22.0 million (FY17: £18.7 million), reflecting the growth in customer demand for Abzena's integrated services, particularly manufacturing and chemistry - these increased revenues by 60% and 15% respectively. At the same time, some manufacturing contracts took longer than anticipated to commence, and with higher operational expenses, the adjusted EBITDA loss increased 61% to £12.0 million (FY17: £7.5 million). A reconciliation of the adjusted EBITDA is set out in note 5.

In April 2017, the Company raised £23.9 million (net of expenses) via a placing for a specific investment programme to increase capacity and enhance capabilities across the Group's three sites. As at 31 March 2018, Abzena had a cash position of £6.8 million (30 September 2017: £16.9 million) reflecting the Group's continued investment in its facilities, equipment and services, and its working capital requirements during the year.

Current trading and FY19 outlook

The focus for FY19 is to keep driving revenue growth through expanding uptake of the Group's integrated services to new and existing customers whilst at the same time, exerting firm discipline around resource management and cost control. Following the investment in laboratory and manufacturing facilities and equipment the Group now has equipment and laboratory capacity to generate revenue in excess of £60 million per annum, particularly through the increased capacity in chemistry and biomanufacturing.

There has been an increase in interest from customers in the range of integrated products and services that Abzena offers, validating the Group's strategy. The value of contracts secured in the second half of FY18 was £15.4 million, up 42% from the first half's total of £10.8 million, resulting in the Group starting the current financial year with committed forward contracts of £11.4 million. Revenue growth increased in the second half of FY18 compared to the first half, and the Group is targeting annual revenue growth in FY19 at a slightly higher rate to that seen for FY18.

Brian Johnson, former CEO of Metropolitan Housing Partnership, has been appointed as interim Chief Operating Officer to work with management to identify and implement initiatives to increase the Group's efficiency and effectiveness through increasing performance accountability and realignment of the Group's business development function to the service offerings delivered from the Group's three locations.

As reported in the trading update, the current phase of capital expenditure for the investment programme is complete, except for phase two of the Lusk Blvd facility (San Diego) build-out for the manufacturing operations discussed below. As a result, capital expenditure in the first half of FY19 will be significantly lower than during the second half of FY18.

The implementation of the cost efficiency actions is progressing, which will reduce the Group's operating expenses by c.£2 million (8%) on an annualised basis. Along with the reduction in capital expenditure, these actions have extended the Group's cash runway significantly. However, as stated in the trading update of 16 April 2018, additional working capital will be required to support the Group within the next twelve months for funding manufacturing operations as revenues grow from projects progressing along the cell line development, process development, scale-up and GMP manufacturing pathway as well as for the general working capital requirements for chemistry and biology research services. In due course, the Group will separately explore further funding (equity, debt and/or royalty monetisation) for the second phase of the build-out of the biomanufacturing facility at Lusk Blvd, San Diego.

Board

At Board level, Lotta Ljungqvist was appointed as a non-executive director, bringing her extensive biopharmaceutical development and manufacturing experience to the Group. Tony Brampton has decided to step down from the Board at the forthcoming annual general meeting. On behalf of the Board, I would like to thank Tony for sharing his wisdom and experience over the last eleven years.

Julian Smith, Abzena's CFO, will be leaving the Group in July to pursue other opportunities. I would like to thank Julian for the significant contribution he has made to the Group starting with the financing to enable the combination of PolyTherics and Antitope in 2013 and subsequently through the IPO and further acquisitions and organic growth of Abzena.

Whilst the evolution of the business and the journey to establish Abzena as a successful, sustainable biopharmaceutical development services business continues, I would like to thank the staff for their contribution to the business and their continued loyalty. It is through their intellect, rigour and dedication that Abzena enables our customers to achieve their biopharmaceutical development objectives, and in so doing, to bring innovative products to patients.

K. Cunningham

Chairman

3 June 2018

Strategic report

Introduction

Abzena's aim is to provide an integrated offering of biology, chemistry and manufacturing services to support the discovery and development of its customers' biopharmaceutical drug candidates. As customers are engaging with Abzena at more points along the drug discovery and development journey, the quality of customer engagement is higher, bringing higher value and longer duration contracts. As revenues grow and utilisation increases, the Group can manage its staff and resources more effectively, thereby improving margins. By providing a broad offering to a range of customers across many projects, Abzena aims to build a diverse income base and reduce the risk of revenue volatility arising from the successful progression of a small number of projects.

The Group has been building up its capabilities and capacity to operate within the $10 billion biopharmaceutical R&D services industry (which is growing at c.10% per annum). This industry supports the development of innovative new biopharmaceutical therapies through to a market which is forecast to reach $580 billion by 2026.

Over the last four years, the Group has expanded substantially across three sites, San Diego and Bristol, Pennsylvania (PA), USA and Cambridge, UK. In San Diego, the focus is on process development and GMP manufacture of biopharmaceuticals; in Bristol, on chemistry services and manufacture of antibody drug conjugates (ADCs) and, in Cambridge, on biology and chemistry research services.

The aim for the past financial year has been to attract new and existing customers across more points of their drug discovery and development pathway. At the same time, management has been executing a substantial investment programme across all three sites to be able to deliver these services more efficiently and to extend capacity to meet customers' requirements.

The Group's investment programme has progressed well, with £6.0 million invested across the Group in facilities and equipment through the past year, and is mostly complete at the Cambridge and Bristol PA facilities. Having decided against pursuing further significant investment into the existing San Diego facility that had been home to the PacificGMP manufacturing operations, a lease has been secured on a new 50,000 sq. ft building in the same area.

The first phase of the investment programme at this new site to create a state-of-the-art process and analytical development facility is almost complete. Planning for the second phase of the fit out of the facility for manufacturing operations is now underway, and subject to confirmation of customer demand and availability of further funding, will then be progressed.

In the meantime, manufacturing operations continue at the existing facility and, with the installation of a 500L Sartorius stirred tank bioreactor, sufficient capacity is available to meet current contracted demand, to achieve the Group's manufacturing revenue objectives for the current year and provides sufficient capacity for the Group to achieve profitability.

As has been previously stated, sales in FY18 started more slowly than expected, which impacted the full year results. However, the sales pipeline and contract conversion was stronger in the second half. Overall revenues for the year were lower than originally expected, which impacted the immediate revenue growth trajectory. As a result, the Board has taken actions to reduce capital expenditure and operational costs are being closely monitored and managed actively.

FY18 has been a challenging, 'transitional' year. The Group has seen an encouraging uplift in performance in H2 18 and is anticipating the changes made as part of the investment programme to contribute further to the growth in FY19.

Financial & investment summary

Group revenues increased 18% to £22.0 million (FY17: £18.7 million) compared with proforma aggregated revenue growth of 40% for the prior year, as outlined in the trading update in April 2018. The increase was driven by growth in the biomanufacturing and chemistry research services divisions which together grew by 34%, partially offset by the disappointing performance of the biology research services division which contracted by 14% although biology research services revenues were stronger in the second half of the year (H2 18: £2.6 million; H1 18 £2.3 million). Despite percentage revenue growth in the double digits, it was not as significant as anticipated at the start of the year. 60% growth in manufacturing revenues was lower than anticipated due to delays and cancellation of manufacturing contracts compounded by delayed installation of the stirred tank bioreactor equipment reducing the pull-through of contracts in the business development pipeline.

The Group's revenue continued to be dominated by customers in North America, contributing 68% (£14.8 million) of the overall total, which as a percentage was down from the prior year's 76% (£14.3 million). This decrease reflects a doubling of UK-generated revenue to 7% (£1.5 million) from 4% (£0.8 million). The proportion of business from non-UK European customers remained broadly flat at 15% (£3.3 million) compared with the prior year, contributing 14% of Group's revenues (£2.7 million). Revenue derived from customers across the rest of the world, predominately Asia, increased significantly to 11% (£2.3 million) from 5% (£1.0 million) in the prior year.

Gross margin on service revenues was 43% (FY17: 42%). Gross margin on chemistry services increased to 58% (FY17: 36%), whilst gross margins for biology research services and manufacturing decreased to 46% and 26% respectively (FY17: 54% and 35% respectively).

R&D investment to broaden and enhance the services and technologies offered by the Group increased 24% to £3.6 million (2017: £2.9 million). This reflects the time and resource requirement to establish the Group's GMP synthetic chemistry capabilities at the Bristol facility as well as gaining experience with the stirred tank bioreactor manufacturing platform in San Diego, R&D expenditure is expected to decline in future years with the increased focus on the service business, although R&D investment will be required to maintain cutting edge technical services in the drive towards future growth in service and licence revenues and on to sustainable profitability.

Laboratory operating costs increased to £2.6 million (FY17: £1.6 million) due to the lease costs associated with the San Diego Torrey Pines facility (vacated in April 2018), and lease costs commencing for the new Babraham Research Campus (Cambridge) and Lusk Blvd (San Diego) facilities from December. Sales and marketing costs increased by £0.5 million to £2.9 million (FY17: £2.4 million) due to expansion of the business development and marketing teams. Other administrative expenses were £15.7 million, (FY17: £11.6 million), due to increases in non-scientific staff costs and non-laboratory property costs.

The adjusted EBITDA loss for the year was £12.0 million (FY17: £7.5 million) due to the reduced contribution from research and manufacturing services, as well as lower licence revenue and reduced other income, combined with the increased overhead expense. The EBITDA loss was lower in the second half of the year (H2 18: £5.0 million) compared to the first half (H1 18: £7.0 million) due to revenue growth, increased gross margin and reduced non-property overheads. However, to achieve positive EBITDA, half year revenue for the Group of c. £19 million would be required.

The adjusted consolidated loss for the year, before charging non-recurring exceptional items for the Group for the year ended 31 March 2018 was £14.1 million (2017: £9.1 million).

As at 31 March 2018, Abzena had a cash position of £6.8 million (30 September 2017: £16.9 million). In April 2017 the Group raised £23.9 million (net of expenses) through a share placing for the investment programme. In addition to £14.9 million used in funding the Group's operations during the year, £6.0 million was invested into the Group's facilities and on scientific, manufacturing and office equipment. The majority of the equipment investment was in San Diego to upgrade the manufacturing platform and enhance the process development capability.

At the Bristol PA facility, an investment programme has been pursued to increase the capacity of the GMP synthetic chemistry suite, establish additional process chemistry capacity and create a GMP bioconjugation suite to complete the Group's ADC manufacturing offering. During the year a total of £2.6 million was invested and the physical construction of the laboratories and cleanroom suite was completed. Qualification of the GMP conjugation suite is expected to be completed in the early summer 2018, which will substantially complete the investment programme in Bristol. Two significant contracts, for delivery in FY2019, are already committed to this facility and the Group anticipates significant future contracts to utilise this integrated ADC manufacturing capability.

In December 2017, a lease was secured for a 50,000 sq. ft. facility in San Diego at Lusk Blvd to house the larger stirred tank bioreactors and an optimally designed two train facility bringing all process development and manufacturing operations into a single building. The first stage of this consolidation of the Group's San Diego biomanufacturing operation is on track, with the transfer of the Group's biomanufacturing process and analytical development group to the new facility completed in May 2018 following a $1.3 million (£1.0 million) construction programme, of which £0.3 million falls into FY19.

The Group has commissioned the design work for stage two of the manufacturing operation at the Lusk Blvd facility. The initial design phase has been completed and the detailed design phase will, in due course, determine the additional funding requirement to complete the build-out which is anticipated to cost approximately $10 million. The funding for the Lusk Blvd facility build-out will be in addition to the working capital required for the Group. Landlord contribution towards development of the Lusk Blvd facility and further equipment financing options are being explored to reduce the balance of additional funding, beyond the Group's working capital requirements. This additional funding could be sourced via equity, debt or partial monetisation of the ABZENA Insideportfolio, all of which will be explored by the Board.

Following the substantive investments made in FY18, the Directors believe that the Group's current infrastructure is sufficient for its current needs and no further substantial capital commitments are envisaged in the remainder of the 2018 calendar year. In April 2018, the Board has taken actions to implement a cost reduction programme to reduce operating costs. Under this programme, total operating costs (including R&D) are expected to be approximately £2 million (8%) lower on an annualised basis. This programme has been designed to ensure that Abzena's resource base and infrastructure are optimised to meet customers' needs.

Operational overview - investment driven growth and expanded capability validating long term strategy

Biomanufacturing

Abzena's biomanufacturing division comprises the cell line development and early process development group in Cambridge as well as the further process development and GMP manufacturing services facilities in San Diego.

Biomanufacturing was the fastest growing division, with revenues growing by 60% to £8.5 million (FY17: £5.3 million). Gross margin earned across manufacturing contracts was down 26% (FY17: 34%) due to the resource intensity required for large-scale manufacturing perfusion runs utilising WAVE bioreactors, which are now being superseded by the Sartorius stirred tank reactors installed over the last year. With the transformation of the Group's biomanufacturing platform, the Board sees a strong pipeline of contract opportunities for this division.

Success in driving growth in this division has been helped by the expansion of the Group's bioassay and bioanalytical services capabilities. However, an important factor for growth in the coming year will be the integrated plan for GMP analytical services across the three sites, to leverage the centres of excellence within the Group.

Cell line development revenues were flat compared to the prior year at £1.2 million, but are expected to grow over the coming year because of additional capacity now available following the relocation of the group into the new Babraham Research Campus facility as well as the investment into improvements to the Group's proprietary Composite CHO host cell line and vector system.

One contract won during the year provides a good example of Abzena's integrated approach to enabling progression of a customer's development programme towards the clinic. As part of the Group's complete offering for ADCs, a manufacturing cell line development project was completed in the first half of the year and following successful development of the linker-payload and conjugation chemistry by the Group's Bristol chemists, Abzena secured a significant $5 million ADC manufacturing contract for the process development and manufacture of both the antibody and linker-payload components, and their subsequent combination as an ADC.

Whilst the majority of the Group's services relate to novel biopharmaceuticals. Abzena continues to provide biosimilar cell line development services, with significant tie-in to the Group's bioanalytical capabilities, and has now started to see interest in continuing these relationships through to process development and initial clinical trial supply.

A significant transformation in the Group's biomanufacturing capability has occurred over the last year with the adoption of stirred tank bioreactors, using single-use disposable process materials, to provide a more efficient, effective and scalable manufacturing solution.

Critical to establishing this platform has been the preferred provider arrangement secured with Sartorius in December 2017 for the stirred tank bioreactors which should result in an improvement of margin earned on manufacturing contracts going forward. The Company's first new 500L Sartorius bioreactor has been installed and is fully operational.

As part of the strategy to broaden the customer base over the year, more of Abzena's customers are emerging biotech companies or academic institutions pursuing translational research programmes into the clinic. Whilst cost is always a key consideration for these companies, they increasingly recognise the value of working with Abzena. This understanding creates and underpins strong relationships with a growing number of organisations, thereby meeting the strategic aim to win larger, longer term programmes.

Chemistry research, development & manufacturing services

The chemistry research services business comprises custom synthesis, process optimisation, ADC linkers, payloads, bioanalytics and bioconjugation, including use of the ThioBridge™ linker technology, developed by the Group, or other linker technologies for attaching drugs, such as cytotoxic compounds for targeted cancer therapy, to antibodies or other proteins.

Chemistry revenues increased 15% to £8.0 million (FY17: £7.0 million), driven by initiation of contracts for ADC process development and manufacturing at the Bristol PA (USA) facility. However, initiation of these first ADC process development and manufacturing contracts for the Group was slower than anticipated. Revenue growth improved in H2 18, driven by progression of manufacturing process development projects in advance of GMP manufacturing projects for linker-payloads and ADCs. Whilst chemistry research services revenues increased 15%, gross margin increased from 36% to 58% due to the higher margin achievable for ADC process development and manufacturing. With reduced R&D investment within the chemistry division, chemistry research and manufacturing services provide £2.5 million contribution, of £3.5 million total Group contribution, from direct scientific and technical operations.

The investment programme at the Bristol site was substantially complete by the end of Q1 18. With the GMP bioconjugation capability and additional process chemistry capacity available, in anticipation of further client demand, growth for this division is expected to continue during the coming year.

Since the acquisition of TCRS, the Group's chemistry services have expanded into process development and GMP manufacturing for ADC linkers and linker-payload reagents, as well as the conjugation process for ADC manufacture. The bioanalytical group has also been firmly established at the Group's Cambridge facility as a focus for the Group's bioanalytical capabilities and to leverage sophisticated mass spectrometry capability.

Current ongoing projects include several longer term Full Time Equivalent (FTE)-funded chemistry research relationships, which have been renewed and expanded. In addition, the Group has concluded many shorter duration custom synthesis and ThioBridge™ technology evaluation agreements, many of which have the potential to lead to further longer-term scale-up, process development and manufacturing projects.

In December 2017, a US biotech company entered into a new $5 million agreement with Abzena to enable the complete process development and manufacturing of a novel ADC. This project extended the existing relationship between the customer and Abzena to a significantly higher level - leveraging Abzena's integrated platform and enabling this customer to expedite its development programme. The majority of the services to be provided under the agreement are due to take place within the current financial year.

The ThioBridge™ platform offers the Group's ADC partners the ability to maintain the stability of the antibody at a consistent Drug-to-Antibody Ratio (DAR), critical quality attributes for this class of drugs. Following an extensive technology evaluation programme, Abzena secured its latest ThioBridge™ licensing deal with OBI Pharma in July 2017. The licensing agreement allows ThioBridge™ to be applied by OBI Pharma across a series of ADCs. Abzena has the potential to receive over $150 million in licensing fees and milestone payments from this agreement, with the potential for additional royalties on sales of any approved products incorporating ThioBridge™. As well as the long-term potential upside of this licensing deal, this collaboration has also moved forwards into process development and GMP manufacturing. This extension is further validation of the decision to strengthen customer relationships and expand service revenues by establishing GMP manufacturing capabilities.

In summary, Abzena's chemistry division is able to support customers with more complex custom synthesis and conjugation projects. These projects can be particularly challenging, but the breadth and depth of the experience within this division makes Abzena a good partner for these types of projects. This appreciation is reflected by recent publications by Cellerant and Regeneron which have cited the contribution of Abzena chemists towards the development of novel ADC payloads. This growing industry recognition is a good platform for future business development activities.

Biology research services

The biology research division provides a range of services across bioassays, immunology and protein engineering.

The revenue for this division decreased during the year to £4.9 million (FY17: £5.7 million). Bioassay and protein engineering revenues improved during the year, but immunology revenues were lower than expected which impacted the overall result. Immunology revenues were stronger in the second half indicating a reversal of the downward trend in this service line as, despite increased competition from new entrants in this field, Abzena's expertise and capability in the immunology research services field is being re-established as exemplified by an FDA presentation at the recent PEGS conference in Boston of results from an immnogenicity assessment collbaoration with Abzena.

Gross margin for biology research services declined to 46% (FY17: 54%), but with increasing revenue within this division and a focus on resource utilisation, gross margin is expected to increase again this year.

As Abzena has expanded its immunology research services capabilities, the bioassay group has also become an established part of Abzena's offering. The services provided for assay and analytical services are increasingly a core element of the service capability. Over the last year, the bioassay group has commenced developing potency assays to support process development and manufacturing programmes and is achieving GMP compliance to perform release assays as part of Abzena's integrated development and manufacturing services.

At the earlier stage of the drug discovery process, Abzena has integrated antibody discovery services into its offering through the absorption of the two members of staff from the Babraham Technology Development Laboratory and who are now working alongside the other members of the Group's protein engineering team in Cambridge.

Abzena has pursued effective scientific engagement with its customers during the year. As a result, the biology research services division is increasingly able to find and advise on expedited development pathways for customers' programmes. By deploying its integrated capabilities for discovery, development and manufacturing, Abzena is building strong connections with key biotech customers and certain venture capital groups seeking to leverage this integrated capability.

ABZENA Insideportfolio

The ABZENA Insideportfolio encompasses products that have been created using the Group's proprietary technologies and are undergoing preclinical and clinical development by its partners, and include Composite Human Antibodies™ and ThioBridge™ ADCs. Abzena has the potential to earn future licensing fees, milestone payments and/or royalties on these Abzena Insideproducts, as well as, in some cases, further service revenues as these products progress through development. There are currently 12 ABZENA Insideproducts that have progressed to clinical development, with active clinical trials ongoing for 9 of these (source: clinicaltrials.gov). Vascular Pharmaceuticals' VPI-2690B failed to achieve its primary endpoint in a Phase II diabetic nephropathy study. With rights having reverted to University of North Carolina, further development of this Composite Human Antibody potentially for coronary artery disease in diabetic patients or for peripheral vascular disease is being considered. Although not formally discontinued from development, given that the development of ABZENA Insideproducts is outside of Abzena's control, it is realistic to assume that in some cases products not in active clinical trials may not proceed further.

A significant event around one of the more advanced programmes within the portfolio was the acquisition of True North Therapeutics initially by Bioverativ and then the subsequent acquisition of Bioverativ by Sanofi. These acquisitions occurred whilst BIVV009 (formerly TNT009) progressed into Phase III clinical studies. Two Phase III trials in patients with cold agglutinin disease are now underway and expected to complete in 2019. Analysts at Cowen and company (New York) have forecast peak sales for this product, if successful in development, at more than $1.5 billion. Another programme of note is Gilead's andecaliximab for which a Phase III trial in gastric cancer patients is ongoing.

In July 2017, Abzena signed a new Composite Human Antibodies™ licence agreement with Telix Pharmaceuticals for the development of radiopharmaceuticals for diagnostic (imaging) and therapeutic uses incorporating anti-PSMA antibodies developed by Abzena. The agreement has the potential, subject to successful development, to deliver in excess of US$65 million in licence fees and milestone payments to Abzena over its term. These fees and payments are based on achievement of certain development, regulatory and commercial milestones, in addition royalties on net sales of approved products would be payable to Abzena.

A new ThioBridge™ licence agreement was signed in July 2017 with OBI Pharma (Taiwan) to enable the development of OBI's proprietary ADC, OBI-999, and a series of further ADCs. OBI-999 specifically targets cancer cells overexpressing the cancer antigen Globo H, which is found in 14 different types of cancer. Abzena received a small initial up-front payment from OBI and has the potential, subject to successful development, to receive up to $150 million, in aggregate. Abzena will also receive royalties on sales of any approved ADC products that incorporate the ThioBridge™ technology.

One ThioBridge™ programme fell away when Halozyme decided not to progress with its ADC programme for strategic reasons. The exit of some programmes from the Abzena Inside portfolio is always expected, reflecting the risk of the drug development pathway and infers no downside to the Group.

Both licence agreements with Telix Pharmaceuticals and OBI Pharma were accompanied with service agreements to enable these partners to progress their programmes using Abzena's process development and manufacturing capabilities.

The Board is exploring the potential to partially monetise the value of the current ABZENA Inside portfolio through the sale of an interest in future royalties.

Going concern

As set out in Note 2 to the financial statements, the Group had £6.8 million in cash and cash equivalents as at 31 March 2018. Following the substantive investments made in FY18, the Directors believe that the Group's current infrastructure is sufficient for its current needs and no further substantial capital commitments are envisaged in the remainder of the 2018 calendar year. In April 2018, the Board has taken actions to implement a cost reduction programme to reduce operating costs. Under this programme, total operating costs (including R&D) are expected to be approximately £2 million (8%) lower on an annualised basis. This programme has been designed to ensure that Abzena's resource base and infrastructure are optimised to meet customers' needs.

Although the Board believes that these actions have extended the cash runway of the Group significantly, the Directors believe that additional working capital will be required within the next twelve months to support the continued growth of the Group. The Board is working with its advisers to explore appropriate options, and, based on these discussions, the Directors have a reasonable expectation that the Company will be able to raise sufficient funds within an appropriate timeline, although there can be no certainty of this.

On this basis, the Directors have concluded that it is appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments that may be necessary should the Company be unsuccessful in raising the required finance.

Conclusion

After a slow first half of the year, the growth seen in the second half of FY18 is encouraging and reflects integration of the Group's full suite of biology, chemistry and manufacturing service offerings. The investment that has been made into the facilities, equipment and capabilities will further support this integrated approach and closer collaboration between teams, enabling the delivery of outstanding drug discovery and development projects for customers.

The start to the new financial year has been encouraging as the Group has started the current financial year with committed forward contracts of £11.4 million and a strong and growing business development pipeline that has translated into significant new contracts in the first two months of the year. As a result, the Group is expecting annual revenue growth in FY19 at a slightly higher rate to that seen for FY18, although due to the phasing of significant development and manufacturing contracts, the growth in revenue will principally fall in the second half of the year.

The management team is looking forward to the continued growth of the business through the coming year with an extended suite of services and technology to offer customers from across the three sites. The integration and growth of the Abzena business is translating into a position as a preferred partner for integrated biopharmaceutical discovery, development and manufacturing solutions.

J. Burt

Chief Executive Officer

3 June 2018

Independent auditor's report to the members of Abzena plc

Opinion

We have audited the financial statements of Abzena plc (the 'Company') for the year ended 31 March 2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statement of Financial Position, the Consolidated and Parent Company Cash Flow Statement, the Consolidated and Parent Company Statements of Changes in Equity and the related notes, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards as adopted by the European Union.

In our opinion, the financial statements:

§ give a true and fair view of the state of the Group and Parent Company's affairs as at 31 March 2018 and of the Group's loss for the year then ended;

§ have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

§ in respect of the Parent Company financial statements, have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards of Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further discussed in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standards as applied to listed entities, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter regarding going concern

In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures in note 2 regarding the ability of the Company and the Group to continue as a going concern.

The Group incurred losses for the year of £14.2 million and at 31 March 2018 had cash reserves of £6.8 million. As explained in note 2 to the financial statements, the Group will require significant additional funding to carry on operating for the foreseeable future. The Board are pursuing fundraising opportunities and are confident of raising the required funds, however until such time that the fundraising is complete, this is inherently uncertain.

Further, the Group's forecasts for the current and future years assume both significant revenue growth and cost reductions. The adequacy of the fundraising mentioned above is predicated on these forecasts being achieved, which is again inherently uncertain.

These matters, as further explained in note 2 to the financial statements, are material uncertainties which may cast significant doubt on the Group and Company's ability to continue as a going concern for the foreseeable future. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

§ the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

§ the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the Group and its environment, assessing the risks of material misstatement in the financial statements and planning and performing appropriate audit procedures in response to those risks.

The Group operates via several trading subsidiaries situated in the UK and the USA and, in addition, has a number of intermediate holdings companies in the same jurisdictions. The UK subsidiaries are subject to statutory audit requirements and we are the auditors to all of the UK entities.

The US subsidiaries are not subject to local audit requirements. We carried out the procedures that we considered necessary regarding the US subsidiaries in order to form an opinion on the Group financial statements. The majority of the necessary procedures were undertaken by the Group audit team from the UK. Certain procedures were carried out by local auditors in the USA under our direction and supervision.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Revenue recognition

Risk description

As with most trading businesses, there is a significant inherent risk of misstatement of revenue, whether amounting from fraud or error.

How the scope of our audit responded to the risk

To assess the appropriateness and completeness of revenue recognised in the year we performed the following procedures:

§ examined a sample of revenue transactions by reference to underlying contractual terms and records of work performed;

§ examined a sample of items of accrued and deferred revenue on incomplete projects by reference to contractual terms and stage of completeness;

§ considered the appropriateness and application of the Group's accounting policy for revenue recognition; and

§ considered the disclosures in the financial statements regarding revenue.

Key observations

The results of our procedures were satisfactory.

Valuation of intangible assets

Risk description

The Group Statement of Financial Position includes material intangible assets which are subject to significant impairment risk.

How the scope of our audit responded to the risk

We performed a detailed review of management's impairment reviews and the conclusions drawn therefrom including detailed discussion and review of the key assumptions, uncertainties and sensitivity analysis. We also reviewed the adequacy and appropriateness of the related disclosures in the financial statements.

Key observations

The results of our testing were satisfactory.

Going concern

Risk description

There is some uncertainty about the Group's ability to continue operating as a going concern for the foreseeable future as described in note 2.

How the scope of our audit responded to the risk

We performed audit procedures to assess the appropriateness of the directors' assumptions and conclusions regarding going concern and the adequacy of the disclosures in respect of the inherent uncertainties.

Key observations

Our conclusions are described in the 'emphasis of matter regarding going concern' section above.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement we determined materiality for the financial statements as a whole to be £440,000. The key driver for the materiality calculation was 2% of revenue but we also considered the appropriateness of this figure in the context of the reported loss for the year and the Group and Parent Company Statements of Financial Position.

We agreed with the directors that we would report all audit differences in excess of £22,000 as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Other information included in the annual report

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit of otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement in the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

§ the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

§ the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to the financial statements which the Companies Act 2006 requires us to report to you if, in our opinion:

§ adequate accounting records have not been kept, or returns adequate for the audit have not been received from branches not visited by us; or

§ the financial statements are not in agreement with the accounting records and returns; or

§ certain disclosures of directors' remuneration specified by law are not made; or

§ we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 22 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors' either intend to liquidate the Company or to cease operating, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statement.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: frc.org.uk. This description forms part of our auditors' report.

Alan Poole BA (Hons) FCA (Senior Statutory Auditor)

For and on behalf of

James Cowper Kreston

Statutory Auditors

2 Chawley Park, Cumnor Hill, Oxford, OX2 9GG

Date: 3 June 2018

Consolidated Financial Statements

Consolidated Income Statement

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Other Comprehensive Income

The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statement of Financial Position

Company Registered Number: 08957107

The financial statements were approved by the Board and are signed on its behalf by:

J. Smith

3 June 2018

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

For the year ended 31 March 2018

Attributable to owners of the parent

For the year ended 31 March 2017

Attributable to owners of the parent

Company Statement of Financial Position

Company Registered Number: 08957107

The financial statements were approved by the Board and are signed on its behalf by:

J. Smith

3 June 2018

Company Cash Flow Statement

Company Statement of Changes in Equity

For the year ended 31 March 2018

For the year ended 31 March 2017

Notes to the consolidated financial statements

Notes to the Summary Financial Information.

The summary financial information set out above, which was approved by the Board on 3 June 2018, is derived from the Consolidated Financial Statements for the year ended 31 March 2018 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Consolidated Financial Statements on which the auditors have given an unqualified report, and which does not contain a statement under section 498(2) or (3) of the Companies Act 2006, will be delivered to the Registrar of Companies in due course. The Auditors report on the Consolidated Financial Statements is reproduced above.

Copies of the Company's Annual Report will be shortly available on the Company's website at www.abzena.com/results-and-presentations.

1. Summary of significant accounting policies

General information

Abzena plc is a public limited company incorporated and domiciled in England and Wales with registered number 08957107. The Company's registered office is Babraham Research Campus, Babraham, Cambridge, CB22 3AT.

The principal activity of the Group is that of life science R&D and the provision of services and technology licensing to the biopharmaceutical industry. The consolidated financial statements comprise a consolidation of the Company and the following subsidiary companies:

All the subsidiaries of the Group are 100% owned by the Group and have been included in the consolidated Financial Information from the date of acquisition.

The Group owns 3,750 ordinary shares (88.2%) in Denceptor Therapeutics Limited, Matthew Baker and Kevin Fitzgerald both owning 250 ordinary shares (5.9%). The non-controlling interest in respect of Denceptor Therapeutics Limited is not material and it has been included in the consolidated Financial Information from date of acquisition.

The Group's Financial Information presented is as at 31 March 2018 and 31 March 2017 and for the year ended 31 March 2018 and the year ended 31 March 2017.

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the financial periods presented, unless otherwise stated.

Basis of preparation

The consolidated Financial Statements have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs), the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared on a going concern basis and under the historical cost convention, except for certain financial instruments that have been measured at fair value.

The preparation of the Financial Statements in conformity with IFRS as endorsed by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

The Financial Statements are rounded to the nearest thousand pound sterling.

Recent accounting developments

New standards, amendments and interpretations

(a) Standards, amendments and interpretations effective from 1 April 2017 and applied by the Group:

The Company has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the period beginning 1 April 2017.

§ IFRS 2 Share-based Payment - Definitions of vesting conditions

§ IFRS 3 Business Combinations - Accounting for contingent consideration in a business combination

§ IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Changes in methods of disposal

§ IFRS 7 Financial Instruments: Disclosures - Servicing contracts

§ IFRS 7 Financial Instruments: Disclosures - Applicability of the offsetting disclosures to condensed interim financial statements

§ IFRS 8 Operating Segments - Aggregation of operating segments

§ IFRS 8 Operating Segments - Reconciliation of the total of the reportable segments' assets to the entity's assets

§ IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28

§ IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS 28

§ IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11

§ IFRS 14 Regulatory Deferral Accounts

§ IAS 1 Disclosure Initiative - Amendments to IAS 1

§ IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38

§ IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets - Revaluation method - proportionate restatement of accumulated depreciation/amortisation

§ IAS 19 Employee Benefits - Discount rate: regional market issue

§ IAS 24 Related Party Disclosures - Key management personnel

§ IAS 27 - Equity Method in Separate Financial Statements - Amendments to IAS 27

§ IAS 34 Interim Financial Reporting - Disclosure of information 'elsewhere in the interim financial report'

§ IAS 7 Disclosure Initiatives - Amendments to IAS 7

§ IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12

AIP IFRS 12 Disclosure of Interests in Other Entities - Clarification of the scope of the disclosure requirements in IFRS 12

The Directors have assessed that the adoption of these revisions and amendments did not have a material impact on the financial position or performance of the Company.

(b) Standards, amendments and interpretations that are not yet effective and have not been early adopted:

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

Effective date* -01-Jan-18

§ IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2

§ IFRS 9 Financial Instruments

§ IFRS 15 Revenue from Contracts with Customers

§ IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

§ AIP IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters

§ AIP IAS 28 Investments in Associates and Joint Ventures - clarification that measuring investees at fair value through profit or loss is an investment - by - investment choice

Effective date* -01-Jan-19

§ IFRS 16 Leases

* the standard is effective for accounting periods beginning in or after this date

IFRS 15, Revenue from Contracts with Customers and IFRS 16, Leases, and their impact on the financial statements for year to 31 March 2019 is being considered.

Merger accounting

On 23 May 2014 Abzena plc acquired the entire issued share capital of PolyTherics Limited in a share for share exchange, in an exact replication of the pre-existing share capital. Reorganisations involving entities under common control are outside the scope of IFRS 3, and there is no other specific IFRS guidance that applies in these circumstances. Accordingly, the Directors have used their judgement to develop an accounting policy that is relevant and reliable and therefore the Group reconstruction has been accounted for using the merger method of accounting in accordance with FRS 6, which treats the merged entities as if they had been combined throughout the current and comparative accounting periods. Under merger accounting, the results for the Group have been reported as if the Group had been in existence in its current form through the current and previous financial years. No purchased goodwill was created in the transaction and the assets and liabilities of PolyTherics Limited were not adjusted to reflect their fair value.

Revenue recognition

Revenue, which excludes value added tax, represents the income generated by the Group from services provided to external parties, licensing activities and grants. Revenue is recognised only when it is reasonably certain that the economic benefits associated with the transaction will flow to the Group.

Revenue in respect of service contracts, where the Group's contractual obligations are performed gradually over time, is recognised as the contracted activity progresses, to reflect the Group's partial performance of its contractual obligations. The stage of completion requires a degree of estimation and judgement by management, although typically obligations are discharged evenly over the performance period and revenue is therefore typically recognised on a straight-line basis. This is not necessarily in line with the stage payments specified within contractual agreements, resulting in accrued and deferred revenue, as appropriate. Where the substance of a contract is that a right to consideration does not arise until the occurrence of a critical event, revenue is not recognised until the event occurs. Consideration for options and similar contingent receipts are recognised when the contingency is resolved or from the point the option is exercised.

Revenue in respect of licensing activities typically comprises an initial up-front fee receivable on signature of the agreement, followed by subsequent payments when certain milestone conditions are met. In addition, future sales royalties may also be due under licence agreements. The initial up-front fee receivable on the signature of a licence agreement is generally recognised in full on the date the agreement is executed, if all the Group's obligations required to enter into the licence have been completed and at the point that the up-front fee becomes non-refundable.

Milestone payments are recognised only when all the conditions stipulated in the agreement are satisfied for the particular milestone payment and all the Group's obligations have been met. Future sales royalties receivable under a licence would generally be recognised on receipt of a royalty statement unless accurate sales information is available to accrue revenue for royalty over the financial period. To date, the Group has not received nor recognised any royalty income.

Grant income is typically claimed quarterly in arrears and is recognised on a straight-line basis throughout each quarter. Where a grant claim has not been made, grant income is accrued on a straight-line basis. Grant income is disclosed as Other Operating Income on the face of the Consolidated Statement of Comprehensive Income. Government grants received relating to property, plant and equipment are treated as deferred income and released to the Consolidated Statement of Comprehensive Income over the shorter of the period of the grant, or the life of the asset.

Goodwill and intangible assets arising on business combinations

IFRS 3 (revised)'Business Combinations' requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other intangible assets at acquisition. The assumptions involved in valuing these intangible assets requires the use of estimates and judgements which may differ from the actual outcome. These estimates and judgements cover future growth rates, expected inflation rates and the discount rate used. Changing the assumptions selected by management could significantly affect the allocation of the purchase price paid between goodwill and other acquired intangibles.

Classification of IPO and share issuance costs

Due to the nature of an initial public offering (IPO) and other public share issuances new shares are issued to raise additional capital and, along with existing shares, subsequently become listed on a stock exchange. Judgement is required in assessing whether the associated expenditure is directly attributable to the issue of shares and whether it meets the criteria to be offset against the share premium account

Basis of consolidation

The Group's consolidated Financial Information consists of Abzena plc and all its subsidiaries.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The Group controls an entity when the Group is expected to, or has the rights to, variable returns from its involvement with the entity and has the ability to effect those returns through its power over the entity. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

The cost of acquisition is measured at fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed, in a business combination are initially measured at their fair values at acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets is recorded as goodwill.

Inter-company transactions, balances and unrealised gains / losses on transactions between Group companies are eliminated. Accounting policies of subsidiary undertakings have been changed where necessary to ensure consistency with the policies adopted by the Group.

Foreign currency translation

The consolidated Financial Statements are presented in pounds sterling, which is the Group's presentational currency. The Group determines the functional currency of each entity. Transactions undertaken in foreign currencies are translated into the functional currency of the subsidiary at the exchange rate prevailing on the date of the transaction. Foreign currency assets and liabilities are translated into the functional currency at the rates of exchange ruling at the year-end date. Any exchange differences arising are included within 'Administrative expenses' in the Consolidated Income statement, except for foreign exchange gains and losses that relate to borrowings and cash and cash equivalents which are presented in the Consolidated Income Statement within 'Finance income' or 'Finance expenses'. This also applies to sterling-based entities with foreign currency transactions, assets and liabilities.

The Group has subsidiaries where the functional operating currency is United States dollars. The results of these subsidiaries are translated monthly at the prevailing rate of exchange. At each reporting period end, the assets and liabilities are translated at the closing rate of exchange.

Gains or losses on translation are recorded in the Consolidated Statement of Comprehensive Income and as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of the US subsidiaries are treated as assets and liabilities of the US subsidiaries and translated at the closing rate. Exchange differences are recognised in the Consolidated Statement of Comprehensive Income. Such gains or losses are transferred to the Consolidated Income statement on disposal or liquidation of the relevant subsidiary.

Intra-group loans denominated in US dollars are translated at the prevailing exchange rate at the year end. Gains on the retranslation of these loans, which are expected to remain in place on a long-term basis, form part of the net investment in the foreign operations and are taken to reserves and shown in the Consolidated Statement of Comprehensive Income.

Financial instruments

The Group uses financial instruments comprising cash and cash equivalents and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the Group.

Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Consolidated Statement of Comprehensive Income within administrative expenses.

Trade payables

Trade payables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held with banks, bank overdrafts and other short-term highly liquid investments with original maturities of less than 3 months. Short term liquid investments with a maturity of over three months would be included in a separate category, 'Short term liquidity investments'.

Research and development

Research costs are written off to the Consolidated Income Statement in the year in which they are incurred. All research costs, whether funded by grant or not, are included within R&D costs on the face of the income statement.

All ongoing development expenditure is currently expensed in the year in which it is incurred. Due to the regulatory and other uncertainties inherent in the development of the Group's programmes, the criteria for development costs to be recognised as an asset, as prescribed by IAS 38, 'Intangible assets', are not met until the product has been submitted for regulatory approval, such approval has been received and it is probable that future economic benefits will flow to the Group. The Group does not currently have any such internal development costs that qualify for capitalisation as intangible assets.

The Group is entitled to claim tax credits in the United Kingdom for certain R&D expenditure and these are recognised in the financial statements on an accrual basis.

Pensions

The Group makes payments to defined contribution schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Consolidated Statement of Comprehensive Income in the period to which they relate.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes all expenditure directly attributable to bringing each product to its present location and condition on a first in first out basis, unless separately identified. Net realisable value is based on estimated selling price, or value in use less further costs expected to be incurred to completion and disposal. Where necessary, provision is made for obsolete, slow moving and defective inventories.

Current and deferred income tax

Income tax on the result for the year comprises current and deferred tax. Income tax is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the Statement of Financial Position date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the Statement of Financial Position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the Statement of Financial Position date.

The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Operating leases

Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the period of the lease.

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the period of the lease.

Finance leases

The Group leases certain equipment. The Group has substantially all the risks and rewards of ownership and these are classified as finance leases, which are capitalised at the leases' commencement dates at the lower of fair value and the present value of minimum lease payments. Each lease payment is allocated between the liability and finance charge. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance charge is charged to the income statement over the period of the lease to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

Warrants

Where the Company issues shares and equity-classified warrants in the same transaction, the Group estimates the fair value of the warrant instruments. If material, the fair value of the warrants is recorded as a separate component of equity.

Goodwill

Goodwill arising on the acquisition of a subsidiary represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate potential impairment. The carrying value of goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense, separately disclosed in the intangible fixed asset note to the financial statements, and is not subsequently reversed.

Impairment

The carrying value of non-current assets is reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Intangible assets initially recognised during the current annual period which are not yet available for use are also tested for impairment by reference to the asset's recoverable amount at the Statement of Financial Position date.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows over the remaining useful economic life of the asset in question are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Exceptional Items

The Group discloses separately items of income or expenditure which are by nature not expected to recur as part of the normal operational activity of the business. Such items are shown separately on the face of the Consolidated Statement of Comprehensive Income.

Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics.

Equity

All the classes of the Group's share capital are classified as equity. Share capital is determined using the nominal value of shares issued.

The share premium account represents premiums received on the initial issuance of share capital. Incremental costs directly attributable to the issue of new share capital are shown as a deduction, net of tax, from the share premium account.

The share based payment reserve represents the cumulative amount which has been expensed in the Consolidated Statement of Comprehensive Income in connection with equity settled share based payments, less any amounts transferred to the retained earnings on the exercise of share options.

Retained earnings include all current and prior results as disclosed in the Consolidated Statement of Comprehensive Income.

Where, as part of a business combination, the Group enters into an agreement which includes a contingent element that is classified as equity, these amounts are fair valued at the date of acquisition and held in a separate equity reserve. These amounts are not subsequently re-measured but are transferred to share capital and share premium on settlement of the contingent consideration.

Foreign Exchange Reserve

The results of these subsidiaries where the functional operating currency is United States dollars are translated monthly at the prevailing rate of exchange. At each reporting period end, the assets and liabilities are translated at the closing rate of exchange.

Gains or losses on translation are recorded in the Consolidated Statement of Comprehensive Income and as a separate component of equity, the Foreign Exchange Reserve.

Goodwill and fair value adjustments arising on the acquisition of the US subsidiaries are treated as assets and liabilities of the US subsidiaries and translated at the closing rate. Exchange differences are recognised in the Consolidated Statement of Comprehensive Income and as a separate component of equity within the Foreign Exchange Reserve. The gains or losses are transferred to the Consolidated Income statement on disposal or liquidation of the relevant subsidiary.

Intra-group loans denominated in US dollars are translated at the prevailing exchange rate at the year end. Gains on the retranslation of these loans form part of the net investment in the foreign operations and are taken to the Foreign Exchange Reserves and shown in the Consolidated Statement of Comprehensive Income.

Significant accounting judgements and estimates

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements are as follows:

Restricted stock units (RSUs)

Where the Company issues restricted stock units classified as equity instruments, the Group estimates the fair value of the RSUs at the date of issue and records the value as a separate component of equity under deferred consideration. Where the Company issues restricted stock units classified as liabilities, the Group estimates the fair value of the RSUs at the date of issue and records this as a financial liability. At each subsequent Statement of Financial Position date, the Group revalues the liability using observable market based data wherever possible and applying estimates where not possible. Fair value gains and losses are recorded in the income statement under financial income.

Restructuring provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the Statement of Financial Position date, and are discounted to present value where the effect is material.

Share-based payments

Employees (and Directors) receive remuneration in the form of equity-settled share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed on a straight-line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets).

The share options are valued using the Black-Scholes option pricing model. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each Statement of Financial Position date to allow for forecast leaving employees and the difference is charged or credited to the Consolidated Statement of Comprehensive Income, with a corresponding adjustment to reserves.

Impairment of goodwill and acquired intangibles

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit ('CGU') to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows of the CGU, and a suitable discount rate, in order to calculate present value. Similar calculations are required in respect of other acquired intangibles. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group's impairment evaluation.

Acquired intangible assets

At the date of acquisition of a subsidiary, intangible assets that are separately identifiable and that arise from contractual or other legal rights are capitalised and included within net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic benefits embodied in the asset will flow to the entity, and are amortised as follows:

They are subsequently measured at cost less accumulated amortisation and impairment. At each Statement of Financial Position date, these assets are assessed for indicators of impairment and, in the event that an asset's carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately through the Consolidated Statement of Comprehensive Income.

Property, plant and equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation, together with any incidental costs of acquisition. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight-line basis over its expected useful life, as follows:

Leasehold property improvements: over the life of the lease

Fixtures, fittings and equipment: 20%-33% straight-line

The assets' residual lives are reviewed annually and at any given time where there is an event which may indicate potential impairment and are adjusted as appropriate.

2. Going concern

The Group is currently loss making and has raised funds in the past by issuing equity. As at 31 March 2018 the Group had £6.8 million in cash and cash equivalents.

The future cash consumption will depend on the trajectory of revenue, cost of goods sold, gross profit growth and overhead expenditure together with the amount of capital expenditure, the level of Research & Development ('R&D') and the overheads required to support the growth. These forecast items of income and expenditure are inherently uncertain.

Following the substantial investments made in FY'18, the Directors believe that the Group's current infrastructure is sufficient for its current needs and no further substantial cash capital commitments are envisaged in the reminder of the 2018 calendar year. Should the rate of growth of order intake be materially higher than the current trajectory, further new investment in manufacturing and/or laboratory facilities may be required to increase capacity in calendar year 2019 and, supported by concrete evidence of additional demand, the Board would then consider such additional investment, subject to appropriate funding being available.

Investment in R&D will be focussed directly on supporting the immediate short-term revenue growth opportunities and gross profit enhancement of technology for the services currently provided by the Group.

As announced on 16 April 2018, the Board has taken actions to implement a cost reduction programme to reduce operating costs. Under this programme, total operating Costs (including R&D) are expected to be approximately £2 million (8%) lower on an annualised basis. This programme has been designed to ensure that Abzena's resource base and infrastructure are optimised to meet customers' needs.

Although the Board believe that these actions have extended the forecast cash runway of the Group significantly, the Directors believe that additional working capital will be required within the next twelve months to support the continued growth of the Group. The Board is working with its advisers to explore appropriate options and based on these discussions, the Directors have a reasonable expectation that the Company will be able to raise sufficient funds within an appropriate timeline, although there can be no certainty of this.

On this basis, the Directors have concluded that it is appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments that may be necessary should the Company be unsuccessful in raising the required finance.

3. Segmental reporting

The Group has adopted IFRS 8, 'Operating Segments'. IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Chief Executive Officer.

Segmental reporting has been reviewed and considered in light of the development of the Group's businesses over the year ended 31 March 2018 and the Directors are of the opinion that under IFRS 8 the Group has three operating segments; biology research services, Chemistry research and manufacture services and bio-manufacturing. However, the results of the segments are only reported and assessed to a 'contribution level'. The contribution analysis considered by the CEO represents cash generated by the laboratory based staff and direct management. The costs include the direct customer related and internal research and development material costs. Salary costs include total salary costs of the scientists carrying out customer related work or supporting research and development activity and directly attributable scientific management. Central costs are not allocated to segments.

Assets and liabilities are currently not reported on a fully segmental basis and it is the opinion of the Directors that, presently, it would not be relevant or appropriate to do so. Segmental reporting will continue to be reviewed and considered in light of the on-going development and growth of the Group's businesses.

The Group had no single significant customer which alone contributed more than 11% of Group revenue in 2018 (2017: largest customer contributed 7%). An analysis of the revenue from all sources is as given below:

Analysis of revenue by location of customer:

Analysis of revenue:

Within Biomanufacturing revenue stated above, a customer generated revenue of £2,408,000 which represents 11% of overall revenue for the year ended 31 March 2018. There were no other customers who generated revenue greater than 10% of overall revenue. In the year ended 31 March 2017, there were no customers who represented over 10% of overall revenue.

Analysis of revenue, gross margin and contribution by segment:

Revenue by segment

Gross profit by segment

Contribution by segment

4. Finance income and expenses

5. Loss before income tax

Loss before income tax is stated after charging / (crediting):

Exceptional costs in the year ended 31 March 2018 amounted to net £55,000 (2017: £nil). The charge principally arose from the legal fees associated with the defence and subsequent agreed resolution of the complaint filed by Stanford University, CA, USA. These legal fees are recoverable from funds held in escrow. The net charge represents unrecoverable non-legal costs associated with reaching the agreement.

The audit fee of £69,000 (2017: £67,000) for the Parent and the Group is borne by Polytherics Ltd.

Earnings before interest, tax, depreciation and amortization analysis

6. Employees and Directors

Average monthly number of persons (including Executive Directors but excluding non-executive Directors) employed:

The Parent Company has no employees other than the directors, who did not receive any remuneration from the Parent Company.

Key Management Compensation

The Group considers all members of the Board (including Non-Executive Directors) and the senior management team to be key management. Total compensation paid for the year ended 31 March 2018 amounted to £1,758,000 (2017: £1,618,000).

Key management emoluments are as follows:

The Group contributes to defined contribution money purchase pension schemes for its Executive Directors and employees. Contributions of £Nil (included in other payables) were payable to pension funds for the benefit of Directors at the year-end (2017: £ Nil). The details of Directors who received emoluments from the Group, including details of the highest paid director are shown in the tables contained in the Directors' Remuneration Report.

7. Taxation

Analysis of taxation (credit) in the year

The Group is entitled to claim tax credits in the United Kingdom for certain R&D expenditure. The amount included in the financial information represents the credit receivable by the Group for the year. The 2018 amounts have not yet been agreed with the relevant tax authorities.

Additionally, included in other operating income is £177,000 (2017: £231,000) in respect of a R&D expenditure credit.

There is no current tax charge in the year as the Group has utilised losses brought forward and is entitled to a cash tax credit in the United Kingdom for certain R&D expenditure. The repayable tax credit for the year is lower (2017: lower) than the credit that would be repayable at the standard rate of corporation tax in the UK of 19% (2017: 20%). The differences are explained in the following table:

Tax reconciliation

Changes to reduce the UK corporation tax rate were substantively enacted on 26 October 2015 as part of the Finance Bill (2015). These include reductions in the main rate of corporation tax to reduce the rate to 19% from 1 April 2018 and to 17% from 1 April 2020. This change has been reflected in the tax workings for the year ended 31 March 2018.

Deferred tax liability

As at 31 March 2018, the unrecognised deferred tax asset amounted to £3,356,000 (2017: £3,130,000). This deferred tax asset is in respect of cumulative losses incurred to date. The Directors have not recognised this asset as they are not sufficiently certain about its recoverability.

8. Loss per share

Basic loss per share is calculated by dividing the loss for the financial year by the weighted average number of Ordinary Shares in issue during the period. The losses and weighted average number of shares used in the calculations are set out below:

As net losses were recorded in 2018 and 2017, the potentially dilutive share options and restricted stock units are anti-dilutive for the purposes of the losses per share calculation and their effect is therefore not considered.

9. Intangible Fixed Assets

For the year ended 31 March 2018 - Goodwill and Intangibles resulting from Business Combinations

For the year ended 31 March 2018 - Other Intangibles

For the year ended 31 March 2017 - Goodwill and Intangibles resulting from Business Combinations

For the year ended 31 March 2017 - Other Intangibles

The amortisation charge for the period has been included in Administrative expenses in the Consolidated Statement of Comprehensive Income.

The goodwill arose on the purchase of 100% of the share capital of each of Antitope Limited on 25 July 2013 as to £1,856,000; PacificGMP on 11 September 2015 as to £6,203,000; and TCRS on 11 December 2015 as to £7,001,000. The goodwill represents the excess of the fair value of the consideration over the fair value of assets acquired.

The Group tests annually whether goodwill and intangible assets have suffered any impairment and tests more frequently when events or circumstances indicate that the current carrying value may not be recoverable. The Directors consider there to be four Cash Generating Units (CGUs). These are the legacy businesses of Antitope Limited, PolyTherics Limited, PacificGMP and TCRS. In considering the goodwill and other intangible asset impairment reviews the Directors have considered the legacy operations individually within the Group as conducted by Antitope Limited, PolyTherics Limited, PacificGMP, and TCRS.

The licence portfolio comprises a number of licence agreements to the Group's intellectual property which provide the opportunity for the Group to earn further payments as the customer takes these products through development, regulatory approval and through to commercial sales of licensed products. These further payments include a combination of technology access fees, annual licence payments, development milestones and/or royalties on commercial sales. The valuation of these further payments is a complex and highly judgemental process impacted by the development stage of the underlying program and the chance that the product will complete the development process through to become regulatory approval and commercial sales. In addition, the value will be impacted by the eventual sales achieved for each product. The most advanced 12 products (2017:12) are in clinical development through phases I, II or III of the clinical development process. Eleven of the licences have the potential to yield royalties on commercial sales, if successfully developed and approved, of between 0.25% and 1% of net sales, and one agreement specifies a six-figure development milestone only. The group has no significant information rights to these programmes and is not responsible for funding any of the development costs. External analysts have ascribed a value of this portfolio of licences far in excess of the current carrying value, and accordingly the Board does not believe any impairment is required as at the year end.

The goodwill arising on the consolidation of the US subsidiaries in the books of the immediate US holding companies has been revalued at the exchange rate prevailing at the year end of £1:$1.401, decreasing the value of goodwill in the Consolidated Statement of Financial Position to £16,264,000 ( 31 March 2017: £18,017,000); the corresponding entry of £1,753,000 going to the Foreign Exchange Reserve.

Goodwill has been allocated to the legacy operations as follows:

The range of key assumptions used for value in use calculations are as follows:

The budgeted gross margin represents management's best estimate of gross margin based on past performance of each business segment as a percentage of service revenue. The discount rate applied to the cash flows reflects the weighted average cost of capital of the Company using the industry standard formula. The growth rate is consistent, for UK operations, with past experience and management expectations for US operations given the planned level of investment. Sensitivity analysis of planned future revenues from US operations has been performed and showed that no impairment would be required if revenues achieved were approximately 70% of planned revenues over the next three years.

10. Property, plant and equipment

Property, plant and equipment for the year ended 31 March 2018

Included in additions above, are £150,410 (2017: £766,940) of assets acquired under finance lease and £1,451,460 (2017: £nil) of assets acquired under a Sartorius supplier agreement. As at 31 March 2018, the NBV of assets under finance lease was £736,636 (31 March 2017: £710,195). The NBV of assets acquired under a supplier agreement with Sartorius was £1,410,327 (2017: £nil).

See note 25.

The Parent Company has no property, plant and equipment.

Property, plant and equipment for the year ended 31 March 2017

11. Investments

Group

The principal operating subsidiaries of Abzena Plc, all of which have been included in these consolidated financial statements, are as follows:

The full list of subsidiary companies is shown in note 1.

Abzena plc owns 88.2% of Denceptor Therapeutics Limited. The financial impact of the non-controlling interest is not material to the Group consolidated financial statements.

Company

The investment in PolyTherics Limited, was part of the share re-organisation and reflects the share capital of PolyTherics Limited, held by the Company.

12. Inventories - Group

13. Trade and other receivables

Included within Other Receivables are two letters of credit associated with the leases of two US properties. These total £0.9m (2017: £0.1m).

Trade receivables by currency at the reporting date were as follows:

Trade receivables past due are as follows:

14. Cash and cash equivalents

The Group retains cash and cash equivalents on instant access current and deposit accounts in the following currencies:

15. Trade and other payables

16. Issued share capital

A schedule of the issued share capital of the Company at the year ends was as follows.

Shares issued in consideration for the exercise of Share Options during the year ended 31 March 2018

During the year ended 31 March 2018 a total of 75,757,576 Ordinary shares were issued for gross cash consideration of £25 million. A total of 213,227 (2017: 879,713) Ordinary shares were issued in consideration for the exercise of share options, for cash consideration amounting to £46 (2017: £178). RSUs issued as part of the purchase arrangement of PacificGMP vested and 369,389 Ordinary shares were issued to a former employee / owner of the subsidiary company and 33,880 Ordinary shares were issued to employees of the subsidiary company.

During the year ended 31 March 2018, no warrants were exercised (2017: 81,250) for cash consideration (2017: £29,250).