Proteome Sciences : Mapping the future for personalised medicine- Annual Report & Accounts 2014

Mapping the future for personalised medicine

Annual report and accounts 2014

Over view and strategic repor t Proteome Sciences in brief Mission and vision

(inside front cover)

01 The future of healthcare is personalised medicine

02 Chairman's message

03 Key performance indicators

04 Proteome Sciences at a glance

06 Proteomics - the essential measure

08 Our valuable IP portfolio

10 Our business model

11 Our measures for success...

12 Strategic report

Governance and financial statements

20 Senior management team and board of directors

22 Directors' report

28 Independent auditor's report

29 Consolidated income statement

30 Consolidated statement

of comprehensive income

31 Consolidated balance sheet

32 Company balance sheet

33 Consolidated statement of changes in equity

34 Company statement of changes in equity

35 Consolidated and company cash flow statements

36 Notes to the consolidated financial statements

Other matters

61 Advisers

62 Notice of meeting

63 Form of proxy

Proteome Sciences in brief

Proteome Sciences is a leading protein biomarker company specialising in proteomics and peptidomics services and applications, and a best-in-class mass spectrometry protein analysis capability.

We have developed a broad portfolio of novel, high value protein biomarker content addressing numerous disease areas where there is unmet need,

or where the range of existing diagnostic or therapeutics available have severe limitations. These include neurodegenerative diseases, stroke and cancer and where biomarker product candidates have the potential to transform disease management and treatment.

Through our novel biomarker discovery both internally and with collaborative partners, our goal is to improve the quality of life for patients with debilitating and life-threatening diseases.

Mission and vision

Proteome Sciences is a life sciences company delivering content for personalised medicine through its services, biomarkers and reagents. We have a strong track record in discovery and innovation supported by intellectual property.

We use high sensitivity proprietary technologies to detect biomarkers (differentially expressed proteins from body fluids or tissue in diseases) and to make rapid assays for testing. These are developed and commercialised as diagnostic, monitoring or therapeutic products through strategic alliances and out-licensing.

Our strategy is to discover, develop and implement measurably better biomarker tools for a range of major human diseases and to provide rapid cost effective outsourcing services and assays which enable

our partners to deliver more effective healthcare.

The fuTure Of heAlThcAre iS PerSOnAliSed Medicine

Our breakthrough science and trusted proprietary technologies for protein biomarker discovery, validation and assay development puts us in a position of great privilege, leading the way in one of the most exciting areas of personalised medicine.

We are pioneering a field that is opening up the possibility of not just preventing some of the most pernicious and debilitating diseases, but being able to treat them before they get to the terminal stage.

In a world with an ageing population and an increasing social care burden as we look for ways to reduce both financial and personal costs, our pathfinding contribution to the advancement of medical science has a significant role to play. The satisfaction we take from the progress we make is driving us further forward all the time.

Proteome Sciences plc Annual report and accounts 2014 01

chAirMAn'S MeSSAGe

The accelerating drive for better drugs and diagnostics for personalised medicine has provided a buoyant background for our biomarker services and prospects.

Our service and main business activities made considerable progress in 2014 even though this was not fully reflected in revenues because of unavoidable delays of several contracts that will fall into the current year. We have experienced high levels of interest in our SysQuant®and TMTcalibrator™and TMT®-MS3 biomarker workflows which increase the quality and number of biomarkers found in body fluids. This has been reflected by a strong underlying growth in biomarker services.

$2m biomarker services contract
PS Biomarker Services was awarded a $2m contract in September by Genting Tau RX Diagnostic Centre to profile blood samples from 1000 patients in a phase 3 trial of LMTX, a drug targeting the tau pathway in Alzheimer's disease (AD) and to develop a protein panel for diagnosis and monitoring treatment efficacy. Work on the contract starts in 2015 and Proteome Sciences will be joint owner of any companion diagnostic developed.
excellent toxicity results for cK1d in Alzheimer's disease Further biological data during the year highlighted the power of SysQuant®to identify multiple beneficial effects of our AD
compounds in tau and amyloid related pathology. Two external toxicity tests demonstrated excellent safety characteristics for our two compounds PS110 and PS 278-05 for CK1d. These are important milestones in the pre-clinical development of potent and selective inhibitors of tau, a key protein involved AD progression and the last elements required to move the CK1d programme to the final stages of securing a license for the programme with a major pharmaceutical company.
Blood test for Alzheimer's moves closer
In July we announced a major breakthrough in Alzheimer's disease (AD) with a panel of 10 proteins in blood that can predict whether a person with early symptoms of memory loss or mild cognitive impairment will go on to develop AD within
12 to 18 months with a very high accuracy rate of 87%.
The study published in Alzheimer's and Dementia Journal with our calibrators at King's College, London which analysed over
1000 individuals, is the largest of its kind to date and marks a significant step towards developing and outlicensing a simple blood test for AD.
TMT®receives huPO award
Our TMT®mass tags received the prestigious Science and Technology Award at the HUPO World Congress in October. TMT®10-plex provides the highest multiplexing capability currently available and is the global market leader. We will continue to deliver new reagents to expand the range and that should create further new applications and demand
for TMT®tags.
in conclusion
Personalised medicine is making a massive leap forward, changing the way that drugs are developed, disease is diagnosed and patients are treated. The publication in Nature
in May 2014 of the Protein Atlas was a major landmark. It provides an A to Z of proteins which for the first time allows genomics researchers to complement their research with information on changes in protein and peptide expressions that cannot be obtained through genomics that are central to personalised medicine. Since the initial sequence of the human genome, genomics has driven the growth and value of the pharmaceutical industry over the last 10-15 years. Proteins and proteomics should now play a much larger and more long-lasting role and will be key value drivers for next generation drug development, diagnosis
and transforming patient care.
Through our workflows, our biomarker services, our content and IP, Proteome Sciences is exceptionally placed to provide many of the main components in personalised medicine. Our core activities are all performing well against a buoyant background.
We expect to see this reflected in revenue growth and news flow in 2015 with the prospect of this complemented by some high profile licenses in Alzheimer's disease and stroke.
On a final note, the Board of Proteome Sciences would like to recognize and thank James Malthouse for the considerable contribution that he made as Finance Director over the last
20 years, a period in which the company's pioneering research has been converted into products, services and revenue.
We wish him a long and enjoyable retirement.
christopher Pearce
Chairman

Proteome Sciences plc Annual report and accounts 2014 02

Key finAnciAl PerfOrMAnce indicATOrS

revenue growth (£m)

(exclusive of equipment on loan)

+9%

£1.56m

£1.43m

revenue (exclusive of equipment on loan)

increased 9% to £1.56m

(2013: £1.43m)

£3.57m

2014 2013

revenue growth by type (£m)

licences/Sales/Services

revenue growth by type (£m)

Grant Services

loss after taxation was £3.57m

(2013: £3.15m)

+65%

£1.30m

£1.21m

£0.27m

£0.22m

revenue from Biomarker Services £0.53m

(2013: £0.32m)

£1.87m

2014 2013

revenue breakdown

licences/Sales/Services

83% licences/Sales/ Services

2014 2013

17% Grant Services

cash balance £1.87m

(2013: £0.60m)

+31%TMT®reagent sales increased 31% in 2014

+13

iP portfolio strengthened

Another 13 patents granted and a further

20 applications were filed in 2014

Proteome Sciences plc Annual report and accounts 2014 03

PrOTeOMe ScienceS AT A GlAnce

Proteome Sciences is a leading protein biomarker discovery services company specialising in proteomics and peptidomics applications and boasts a

best-in-class mass spectrometry protein analysis and assay development capability.

- We have developed a broad portfolio of novel, high value protein biomarker content addressing numerous disease areas which are available

for licensing

- We are heavily invested in conducting novel Biomarker discovery, assay development and workflows in cell signalling pathways both internally and with key collaborative partners

- In addition to our comprehensive biomarker services and validated protein biomarkers for discovery and diagnostics applications, we offer an array of high performance protein tags and assays for mass spectrometry analysis

PS Biomarker Services™

Our state-of-the-art biomarker discovery services use the very latest in sample preparation and separation techniques, isobarically labelled and label-free sample analysis platforms and data analysis tools at our ISO 9001:2008 accredited facility.
Our biomarker discovery consulting services provide access to extensive custom assay development options for a wide range of disease model and human sample types.
The number of biomarkers covered by our assays and workflows increased again in 2014 and this number is expected to continue to grow as we complete additional mass spectrometry assays and workflows, particularly through the introduction of our
'game-changing' SysQuant®and TMTcalibrator™workflows.
Customers have included major pharmaceutical companies including Johnson & Johnson, Takeda, Eisai etc., CROs (Icon, Parexel) biotechnology companies and academia.

cASe STudy

Personalised medicine: diagnosing disease earlier with TMTcalibrator™

The biggest cause of poor treatment outcome is late diagnosis where treatment is delayed until the disease is well established. To improve this situation we need to identify proteins released by cells early in disease and which are detectable

in blood or other body fluids. However, these are very hard to find as they are produced in low amounts and diluted to extremely low concentrations in the blood.

Using the power of TMT®10plex reagents we have developed TMTcalibrator™to overcome the problems of measuring ver y low abundant proteins in body fluids by using diseased tissue to amplify the signal. In prototype experiments we have measured over 100 brain proteins that are either increased or decreased in the cerebrospinal fluid of patients with Alzheimer's disease

and these may ultimately allow earlier diagnosis. TMTcalibrator™can be used for any disease and we will shortly be testing it further in blood for both Alzheimer's and various types of cancer.

Proteome Sciences plc Annual report and accounts 2014 04

BiomarkersTMT®Reagents

Proteome Sciences conducts its own novel research and discovery for new protein biomarkers in many human diseases.
We have numerous collaborations and partnerships with leading laboratories in industry and academia to drive discovery, validation and implementation of novel protein biomarkers for drug discovery and diagnostic uses. From these, we have discovered a broad portfolio of validated biomarkers across a variety of disease
biology and therapeutic indications and where we have established comprehensive intellectual property coverage.
The main areas include CNS disorders, (Alzheimer's, Huntington's, stroke, traumatic brain injury, Oncology (lung, breast, esophageal, colorectal cancers and neuroblastoma).
Anyone wanting to use any of our biomarkers for a commercial application will have to obtain a licence, from which Proteome Sciences will obtain fees and royalties on any products sold.

cASe STudy

Personalised medicine: Tailoring drug selection

Everybody's disease is unique to them and many drugs are ineffective or lose activity after prolonged use. This is particularly common in cancer when drug resistance occurs. By profiling individual disease better we can select the most appropriate drug at the outset and, where necessary, pick optimal treatment combinations to reduce the chances of resistance.

With our proprietary SysQuant®next-generation proteomics workflow, we are able to identify the key processes driving an individual's disease and select the optimum drug targets for making a tailored drug selection. We have recently extended our pilot study in pancreatic cancer and more than doubled the number of proteins we measure. We now have personal disease maps for 32 individual cases of pancreatic cancer which we can map to existing drugs and we hope

to start clinical trials with SysQuant®for liver cancer later this year.

TMT®works like a car tracker system to uniquely tag proteins and peptides, radically reducing the variability of biomarker discovery and speeding up the transition to biomarker validation.
Through issued US and EU patents, Proteome Sciences dominates the global isobaric mass tag space. We have developed and are rapidly expanding a range of novel isobaric and isotopic reagents under the Tandem Mass Tag®(TMT®) brand which are exclusively licensed and distributed worldwide by Thermo Scientific.
TMT®considerably enhances the performance of mass spectrometers and delivers the ability to measure with absolute quantitation.

cASe STudy

Personalised medicine: improving drug development

Personalised medicine is all about developing drugs that work very specifically against a single protein target. These 'precision medicines' should have fewer side effects and be better tolerated by patients. When developing precision medicines it is important to consider their effects on the entire system, not just look at a subset of a small number of downstream proteins.

We have been developing precision medicines targeting a protein,

casein kinase 1 delta (CK1D), which is highly active in Alzheimer's disease, phosphorylating tau and regulating several key cellular events related to how brain cells are killed. Using our CK1d compounds, we have improved cognitive function. With SysQuant®we have been able to identify over 50 cellular pathways that are regulated by CK1D inhibitors in an animal model of human tauopathy and matched that to how those pathways perform in human AD brains. This allowed us to confirm the relevance of our chosen model to human disease and confirm the multimodal mechanism of action of our CK1D inhibitors. This approach can be used in

all diseases to improve molecular design and select new combinations of drugs to maximize outcomes as well as providing a list of potential protein biomarkers to ensure we can monitor treatment effectiveness over time.

Proteome Sciences plc Annual report and accounts 2014 05

PrOTeOMicS - The eSSenTiAl MeASure

Mapping the future of personalised medicine.

The demand for new treatments in the drive towards a healthier world is a pressing one. We need to understand

the true causes of debilitating and life threatening conditions and the best way to alleviate or cure them. Yet the process

of discovering new drugs and treatments can be long and drawn out. Speed and cost are critical factors in the development of new, affordable medicines. We may not know exactly what the future holds, but we do know the way forward. Personalised medicine.

For medicine to become truly personalised, it is critical that the right measurements are made and interpreted. We believe that measurement is proteomics.

Proteomics is the scientific discipline which studies proteins and searches for proteins that are associated with a disease by means of their altered levels of expression and/or

post-translational modification between control and disease states. It enables correlations to be drawn between the range of proteins produced by a cell or tissue and the initiation

or progression of a disease state and the effect of therapy.

The abundance of information and detailed analysis of

the proteome permits the discovery of new protein markers for diagnostic purposes and of novel molecular targets for drug discovery. Proteomics play a major role in biomedical research and the development of future generations of diagnostic and therapeutic products.

Proteome Sciences plc Annual report and accounts 2014 06

Cell Signaling Pathway Activity

SysQuant®, TMTcalibrator™and our iP act as the gateway to better treatments

01 02 03

discovery

Within the body, cells constantly

'talk' with each other via a complex and myriad system involving numerous chemical messengers and relay systems that communicate signals between the cells of different tissues and organs. When

these communications systems and cell signaling pathways are disrupted, pathogenic processes such as cancer

often arise.

Validate

Proteins uniquely provide a real-time, clinically relevant measure of individual patients. Detailed analysis of proteins permits the discovery of new protein markers for diagnostic purposes and of novel molecular targets for drug discovery for specific

patient populations.

Apply

We are identifying the biological cell signalling pathways and networks involved in disease. We are developing a range

of targeted assays for key signaling pathway checkpoint proteins and other key molecules involved in signaling events. Signalling cascades

are proteins that can be altered, activated or deactivated to alter gene activation and protein expression.

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Our VAluABle iP POrTfOliO

Proteomics works with the lifesciences industry to create real advantage.

While cancer, stroke, brain damage and Alzheimer's remain a major challenge, improving their diagnosis and speed

the testing of drugs to treat them cannot come soon enough. We're determined to address these needs. Our pioneering science has already made us global leaders in applied proteomics. Our established proprietary technologies

for protein biomarker discovery, validation and assay development are opening new worlds for the biotech

and pharmaceutical industries. But most important of all, while we constantly innovate for the future, our pathfinding approach offers new hope today, to millions of people.

Providing in-depth expertise on protein biomarkers reduces costs and speeds up the process of large scale clinical trials. This brings together identifying and validating predictive

and diagnostic biomarkers with the facility to prove their

use in real life applications for individual patients. It's opening up a new world of breakthrough medicine. The more data that scientists can gather from genomics and proteomics

of real individuals, the closer we are to prescribing safer, better drugs and treatments with fewer side effects, tailored to the medical needs of particular patient populations.

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Commercial applications

Our iP acts as the gateway to better treatments

Breast & Colon Cancer Pancreas Cancer

Better accuracy Discovery and validate disease-relevant biomarkers.

Time advantage

Using TMT®reduces study times tenfold. In a single experiment SysQuant®covers

>20,000 phosphorylation sites.

cost saving

Reduction of costs bringing diagnostics and treatments to market.

Personalised medicine More effective treatments tailored to specific patient populations.

drug and treatment development

Proteome Sciences are identifying the biological cell signalling pathways and networks involved in disease. We are developing a range of targeted assays for key signaling pathway checkpoint proteins and other key molecules involved in signaling events. Signalling cascades are proteins that can be altered, activated or deactivated to alter gene activation

and protein expression.

Proteome Sciences plc Annual report and accounts 2014 09

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