THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to the action to be taken, you are recommended immediately to seek
your own personal financial advice from your stockbroker, bank manager,
solicitor, accountant or other independent financial adviser authorised under
the Financial Services and Markets Act 2000 if you are in the United Kingdom,
or, if not, from another appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all your Existing CAT Shares and/or
CAT ADSs, OGS Shares and/or OGS ADSs, please forward this document, together
with the accompanying documents, as soon as possible to the purchaser or
transferee, or to the stockbroker, bank or other agent through whom the sale or
transfer was effected, for onward delivery to the purchaser or transferee. The
distribution of this document in jurisdictions other than the UK may be
restricted by law and therefore persons into whose possession this document
comes should inform themselves about and observe such restrictions. Any failure
to comply with these restrictions may constitute a violation of the securities
laws of any such jurisdictions.
A copy of this document, which comprises Listing Particulars relating to the New
CAT Shares which have been prepared in accordance with the Listing Rules made
under section 74 of the Financial Services and Markets Act 2000, has been
delivered to the Registrar of Companies in England and Wales for registration in
accordance with section 83 of that Act. Applications have been made to the UK
Listing Authority for the New CAT Shares to be admitted to the Official List and
to the London Stock Exchange for the New CAT Shares to be admitted to trading on
the London Stock Exchange's market for listed securities. Admission to the
Official List together with admission to trading on the London Stock Exchange's
market for listed securities constitute admission to official listing on a stock
exchange. New CAT Shares will only be made available to OGS Shareholders
pursuant to the Scheme and will not be generally made available or marketed to
the public in the UK. It is expected that Admission will become effective and
dealings will commence on the London Stock Exchange at 8.00 a.m. (London time)
on the Effective Date which, subject to the satisfaction of certain conditions
and the sanction of the Scheme by the Court, is expected to occur by 31 March
2003.
- --------------------------------------------------------------------------------
Cambridge Antibody Technology Group plc
Registered in England No. 03234033
Listing Particulars
relating to the issue of up to
21,907,094 new ordinary shares of 10 pence each
in connection with the recommended merger
pursuant to a scheme of arrangement with
Oxford GlycoSciences Plc
Sponsored by
Merrill Lynch International
- --------------------------------------------------------------------------------
The New CAT Shares to be issued to OGS Shareholders under the Scheme have not
been and will not be registered under the Securities Act or any US state
securities laws. New CAT Shares will be issued in reliance upon the exemptions
from the registration requirements of the Securities Act and any US state
securities laws provided by sections 3(a)(10) and 18(b) of the Securities Act,
respectively. OGS Shareholders who are or will be "affiliates" (as such term is
defined in Rule 144 under the Securities Act) of OGS or CAT prior to, or of CAT
after, the Effective Date will be subject to certain US transfer restrictions
relating to New CAT Shares received under the Scheme. Neither the SEC nor any US
state securities commission has approved or disapproved of the securities
described herein or passed upon the accuracy or adequacy of this document or any
accompanying document. Any representation to the contrary is a criminal offence
in the United States.
In addition, no steps have been, or will be, taken to enable the New CAT Shares
to be offered in compliance with the applicable securities laws of Canada or
Japan and no prospectus in relation to the New CAT Shares has been, or will be,
lodged with or registered by the Australian Securities and Investments
Commission. Accordingly, the New CAT Shares may not be offered, sold,
transferred, resold, delivered or distributed, directly or indirectly, in or
into or from Canada, Japan or Australia (except in transactions exempt from or
not subject to the registration requirements of the relevant securities laws of
Canada, Japan or Australia).
Merrill Lynch International is acting for CAT and no-one else in connection with
the Merger and will not be responsible to anyone other than CAT for providing
the protections afforded to clients of Merrill Lynch International or for
providing advice in relation to the Merger.
Goldman Sachs International is acting for OGS and no-one else in connection with
the Merger and will not be responsible to anyone other than OGS for providing
the protections afforded to clients of Goldman Sachs International or for
providing advice in relation to the Merger.
Both CAT and OGS have equity securities traded on the London Stock Exchange and
quoted on NASDAQ. The Panel wishes to draw the attention of those market makers
and broker dealers transacting in the securities of CAT and/or OGS on NASDAQ to
certain UK dealing disclosure requirements during the offer period pertaining to
the Merger. The offer period (in accordance with the City Code, which is
published and administered by the Panel) commenced on 23 January 2003.
The above disclosure requirements are set out in more detail in Rule 8 of the
City Code. In particular, Rule 8 requires public disclosure of dealings during
the offer period by persons who own or control, or who would as a result of any
transaction own or control, one per cent. or more of any class of relevant
securities of the offeror or offeree company. Relevant securities include CAT
Shares, CAT ADSs, instruments convertible into CAT Shares or CAT ADSs, OGS
Shares, OGS ADSs and instruments convertible into OGS Shares or OGS ADSs. This
requirement will apply until the end of the offer period.
Disclosure should be made on an appropriate form by no later than 12 noon
(London time) on the Business Day following the date of the dealing transaction.
These disclosures should be sent to a Regulatory Information Service.
The Panel requests that those market makers and broker dealers advise those of
their clients who wish to deal in the relevant securities of CAT or OGS, whether
in the United States or in the United Kingdom, that they may be affected by
these requirements. If there is any doubt as to their application, the Panel
should be consulted (telephone number: +44 (0)20 7382 9026, fax number +44 (0)20
7638 1554).
NOTICE TO SHAREHOLDERS IN THE UNITED STATES
The Merger involves an acquisition of the securities of a public limited company
incorporated under the laws of England and Wales by way of the Scheme. The
Merger is subject to disclosure requirements of a foreign country that are
different from those of the United States. The financial statements included in
this document have been prepared in accordance with UK GAAP and these may not be
comparable to the financial statements prepared in accordance with US GAAP.
Substantially all of CAT's directors and senior management are not residents of
the United States and substantially all of the assets of such persons and a
substantial majority of the assets of CAT and its subsidiaries are located
outside the United States. As a result, it may not be possible for investors to
effect service of process within the United States upon such person or CAT or to
enforce against them judgments of courts of the United States predicated upon
civil liability provisions of the US federal or state securities laws.
Overseas shareholders and holders of CAT ADSs and OGS ADSs should refer to Part
VI of this document, which contains important information relevant to such
holders, to Part VII, which contains a description of the New CAT ADSs to be
issued in the Scheme, and to paragraph 13 of Part X, which contains a
description of certain UK and US tax consequences of the Scheme and holding CAT
Shares and CAT ADSs. Holders of CAT ADSs and OGS ADSs are also referred to in
paragraph 13 of Part I and paragraph 13 of Part III of the CAT Shareholder
Circular and Scheme Document, respectively, for information on voting procedures
relating to them.
FORWARD-LOOKING STATEMENTS
Application of the Safe Harbor of the US Private Securities Litigation Reform
Act of 1995: This document contains statements about CAT or OGS that are or may
be forward-looking. All statements other than statements of historical facts
included in this document may be forward-looking statements. Any statements
preceded or followed by or that include the words "targets", "plans",
"believes", "expects", "aims", "intends", "will", "may", "anticipates" or
similar expressions or the negative thereof, are forward-looking statements.
Forward-looking statements include statements relating to the following:
o future capital expenditures, expenses, revenues, economic performance,
financial condition, dividend policy, losses and future prospects;
o future performance in clinical trials of the product candidates that were
developed using CAT's or OGS' technology;
o the ability of CAT or OGS and their respective collaborators to commercialise
products;
o business and management strategies and the expansion and growth of CAT's or
OGS' operations;
o the effects of government regulation on CAT's or OGS' businesses;
o expansion and other development trends of CAT's or OGS' current and future
customers and their industries;
o acquisitions, including the timing, nature, availability, location and
significance of those acquisitions;
o costs relating to the integration of the businesses of CAT and OGS; and
o cost savings from the Merger.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of CAT or OGS or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are based on
numerous assumptions regarding CAT's and/or OGS' present and future business
strategies and the environment in which CAT and OGS will operate in the future.
Certain factors that could cause CAT's or OGS' actual results, performance or
achievements to differ materially from those in the forward-looking statements
are described in the 'Risk factors' in Part VIII of this document.
The expected operational cost savings have been calculated on the basis of the
existing cost and operating structures of the companies and by reference to
current prices and the current regulatory environment. These statements of
estimated cost savings and one-off costs for achieving them relate to future
actions and circumstances which, by their nature, involve risks, uncertainties
and other factors. As a result, the cost savings referred to may not be
achieved, or those achieved could be materially different from those estimated.
TABLE OF CONTENTS
Page
Expected timetable of principal events 5
Directors, registered office, registrars and advisers 6
PART I General information 8
PART II Financial information relating to the CAT Group 27
PART III(A) Financial information relating to the OGS Group 52
PART III(B) Reconciliation of OGS' financial information to conform with CAT accounting policies 86
PART III(C) Unaudited interim results of the OGS Group for the six months ended 30 June 2002 91
PART IV Pro forma financial information relating to the Enlarged Group 101
PART V Conditions to the implementation of the Scheme and the Merger 105
PART VI Information for overseas shareholders and holders of ADSs 111
PART VII CAT American Depositary Shares 113
PART VIII Risk factors 119
PART IX Regulatory environment 130
PART X Additional information 139
Definitions 176
Glossary of Scientific Terms 182
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
All times shown in this document are London times unless otherwise stated.
Event 2003
Latest time for receipt by the CAT ADS Depositary
of completed voting instruction cards from holders
of CAT ADSs 5.00 p.m. (New York time) on Tuesday 4 March
Latest time for receipt of forms of proxy for the CAT EGM 12.30 p.m. on Sunday 9 March
OGS Court Meeting (to approve the Scheme) 10.00 a.m. on Tuesday 11 March
OGS EGM(1) 10.15 a.m. on Tuesday 11 March
CAT EGM 12.30 p.m. on Tuesday 11 March
OGS Court Hearing (to sanction the Scheme) 10.30 a.m. on Thursday 27 March
Last day of dealings in OGS Shares and OGS ADSs(2) Friday 28 March
Scheme Record Time(2) 6.00 p.m. on Friday 28 March
Effective Date of the Scheme(2) Monday 31 March
Commencement of dealings on the London Stock
Exchange in the New CAT Shares and on
NASDAQ in New CAT ADSs(2) Monday 31 March
Crediting of New CAT Shares to CREST accounts(2) Monday 31 March
Latest time for despatch of share certificates for
New CAT Shares (where applicable)(2) Monday 7 April
(1) To commence at the time fixed, or, if later, immediately after the
conclusion or adjournment of the OGS Court Meeting.
(2) These dates are indicative only and will depend, amongst other things, on
the date upon which the Court sanctions the Scheme.
DIRECTORS, REGISTERED OFFICE, REGISTRARS AND ADVISERS
Directors Professor Peter Garland, Non-Executive Chairman
Peter Chambre, Chief Executive Officer
John Aston, Chief Financial Officer
Dr David Glover, Chief Medical Officer
Dr Kevin Johnson, Chief Technology Officer
Professor Uwe Bicker, Non-Executive Director
Dr James Foght, Non-Executive Director
Professor Sir Aaron Klug, Non-Executive Director
Dr Paul Nicholson, Non-Executive Director
Ake Stavling, Non-Executive Director
Dr John Stocker, Non-Executive Director
Proposed Directors Dr David Ebsworth, Executive Director
Professor Rajesh Parekh, Executive Director
Dr James Hill, Non-Executive Director
Dr Peter Ringrose, Non-Executive Director
Company Secretary Diane Mellett
Registered and Head Office Milstein Building
Granta Park
Cambridge
CB1 6GH
Financial Adviser and Merrill Lynch International
Sponsor to CAT Merrill Lynch Financial Centre
2 King Edward Street
London
EC1A 1HQ
Stockbroker to CAT Cazenove & Co. Ltd
12 Tokenhouse Yard
London
EC2R 7AN
Solicitors to CAT Mayer, Brown, Rowe & Maw LLP
11 Pilgrim Street
London
EC4V 6RW
Solicitors to Merrill Lynch Linklaters
One Silk Street
London
EC2Y 8HQ
Registered Auditors and Deloitte & Touche
Reporting Accountants Leda House
to CAT Station Road
Cambridge
CB1 2RN
Reporting Accountants Ernst & Young LLP
to OGS Apex Plaza
Reading
RG1 1YE
Registrars to CAT Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
US Depositary to CAT The Bank of New York
101 Barclay Street
New York, NY 10286
PART I
GENERAL INFORMATION
1. Introduction
On 23 January 2003, the Boards of CAT and OGS announced that they had agreed the
terms of a recommended merger of CAT and OGS to create a leading European
biotechnology company combining the key strengths of the two organisations.*
2. Summary of the terms of the Merger
The Merger of CAT and OGS will be effected by way of a scheme of arrangement of
OGS under section 425 of the Companies Act. Under the terms of the Merger, CAT
Shareholders will retain their shares in CAT and, upon completion of the Merger,
OGS Shareholders will receive:
for each OGS Share 0.3620 New CAT Shares
OGS ADS holders will receive New CAT ADSs on the following basis:
for each OGS ADS 0.3620 New CAT ADSs
Based upon CAT's share price of 540.0 pence, being the Closing Price of a CAT
Share on 22 January 2003 (which was the last Business Day prior to the date of
the announcement of the Merger), the Merger values each OGS Share at 195.5
pence, and the entire issued and to be issued share capital of OGS at
approximately (pound)109.6 million. This represents a premium of 28.2 per cent.
over the Closing Price on 22 January 2003 (which was the last Business Day prior
to the date of the announcement of the Merger) of 152.5 pence per OGS Share.
Based on the volume weighted average trading price of CAT Shares in the last ten
Business Days prior to the announcement of the Merger, the Merger values each
OGS Share at 210.6 pence and the entire issued and to be issued share capital of
OGS at approximately (pound)118.2 million. This represents a premium of 43.3 per
cent. over the volume weighted average trading price of OGS Shares in the last
ten Business Days prior to the date of the announcement of the Merger of 147.0
pence per OGS Share.
Based upon CAT's share price of 464.0 pence, being the Closing Price of a CAT
Share on 4 February 2003 (being the last practicable date prior to the
publication of this document), the Merger values each OGS Share at 168.0 pence,
and the entire issued and to be issued share capital of OGS at approximately
(pound)93.9 million. This represents a premium of 10.1 per cent. over the
Closing Price of 152.5 pence per OGS Share on 22 January 2003 (which was the
last business day prior to the date of announcement of the Merger).
Upon completion of the Merger, which is expected to occur in March 2003, and
based on the current issued share capital of each company, CAT Shareholders will
hold approximately 64.3 per cent. and OGS Shareholders will hold approximately
35.7 per cent. of the issued share capital of CAT. The name of CAT will be
changed in due course as part of management's commitment to building a leading
biopharmaceutical company.
The Merger is subject to the conditions set out in Part V of this document,
including, amongst other things, the approval of the Merger by shareholders of
both CAT and OGS, the obtaining of relevant regulatory consents and the sanction
of the Scheme by the Court.
* Dr Donald Drakeman, an OGS Director, is also the Chief Executive Officer
of Medarex, Inc. a competitor of CAT, and has therefore not participated
in decisions of the OGS Board relating to the Merger. Accordingly, he has
abstained from the recommendation by the OGS Board to OGS Shareholders and
from entering into any undertakings regarding voting in favour of the
resolutions to be presented at the OGS Court Meeting and the OGS EGM which
are required to implement the Merger. All references in this document to
the recommendation of the OGS Board should be read accordingly.
3. Background to and reasons for the Merger
CAT has stated that its goal is to complete the transition to a profitable,
product-based biopharmaceutical company over the next five years and to build a
broad portfolio of products that will deliver rapid revenue and profit growth
beyond that point through a combination of internal development and acquisition.
OGS has stated that its goals are to focus on key objectives including cost
reductions and to build critical mass and strengthen its clinical pipeline
through appropriate transactions.
The Merger helps both companies to achieve their stated goals by creating an
enlarged entity which will significantly strengthen discovery and development
capabilities and financial resources with which to build its pipeline. In
particular:
o the Merger will significantly strengthen the Enlarged Group's core
capabilities in R&D by combining CAT's leading human monoclonal antibody product
development expertise with OGS' oncology drug discovery capabilities and
potential target pool and by increasing the breadth of the discovery and
pre-clinical portfolios. The Enlarged Group will also have both antibody and
small molecule discovery capabilities, as well as significantly improved scale
in product development resulting from the combination of each Group's strengths
in pre-clinical, clinical and regulatory activities. The Enlarged Group will
benefit from OGS' demonstrated ability to drive products through to approval;
o the Enlarged Group will have a stronger and broader product portfolio, with
two approved products, seven additional product candidates in clinical trials
and seven pre-clinical products. These are set out below:
Product/candidate Partner Disease Phase
- ---------------------------------------------------------------------------------------------------------
Humira(TM) Abbott Rheumatoid arthritis(1) Approved in US; filed
for approval in Europe
Juvenile rheumatoid arthritis Phase III
Crohn's disease Phase II/III
Zavesca(TM) Actelion/Teva Type I Gaucher disease(2) Approved in Europe; filed
in Israel and an amended
application to be filed
in the US
CAT-152 - Scarring post glaucoma surgery Phase III
CAT-192 Genzyme Scleroderma Phase I/II
CAT-213 - Allergic disorders Phase I/II
J695 Abbott/Wyeth Rheumatoid arthritis Phase II
Crohn's disease Phase II
LymphoStat-BTM HGSI Systemic lupus erythematosus Phase I
TRAIL-R1 mAb HGSI Cancer Phase I
OGT 923 - Glycolipid disorders Phase I
GC1008 Genzyme Fibrotic diseases Pre-clinical
OGT 2378 - Cancer Pre-clinical
TRAIL-R2 mAb HGSI Cancer Pre-clinical
MDX-OGS 001 Medarex Cancer Pre-clinical
Undisclosed Wyeth Undisclosed Pre-clinical
Undisclosed HGSI Undisclosed Pre-clinical
Undisclosed Undisclosed Undisclosed Pre-clinical
(1) Also in development for psoriasis, psoriatic arthropathy and ankylosing
spondylitis
(2) Also in development for Niemann-Pick Type C, Late-Onset Tay Sachs and Type
III Gaucher disease
The Enlarged Group will have substantially greater financial strength. This will
increase its ability to fund product development to later stages, thereby
retaining greater value and reducing the need for additional capital. Pro-forma
net cash was (pound)260.1 million as at 31 December 2002.
Cost savings based on the removal of duplicated activities have been identified
in the areas of corporate overhead, R&D and real estate. These savings are
expected to have a cash effect of approximately (pound)10 million in the first
full financial year following completion of the Merger*. In addition, further
savings are expected from a portfolio review to focus R&D expenditure on the
highest quality projects. The results of this review will be announced in
November 2003.
* The expected operating cost savings have been calculated on the basis of
the existing cost and operating structures of the companies and by
reference to current prices and the current regulatory environment. These
statements of estimated cost savings and one-off costs for achieving them
relate to future actions and circumstances which, by their nature, involve
risks, uncertainties and other factors. As a result, the cost savings
referred to may not be achieved, or those achieved could be materially
different from those estimated.
4. Management and employees
Following completion of the Merger, CAT will continue to be chaired by Professor
Peter Garland. Peter Chambre and John Aston will remain Chief Executive Officer
and Chief Financial Officer, respectively.
Dr David Ebsworth, currently Chief Executive Officer of OGS, will be invited to
join the CAT Board as an executive director to assist in the integration
process. It is the intention of both CAT and Dr Ebsworth that, after completion
of that process, he will remain on the CAT Board as a non-executive director.
Dr David Glover, who will remain as Chief Medical Officer of CAT, will co-chair
the portfolio review of the Enlarged Group with Professor Rajesh Parekh,
currently Chief Scientific Officer of OGS. Professor Parekh will be invited to
join the CAT Board as an executive director upon completion of the Merger and it
is the intention of both CAT and Professor Parekh that, following the completion
of the portfolio review, he will remain on the CAT Board as a non-executive
director.
Dr James Hill, currently a non-executive director of OGS, will be invited to
join the CAT Board as a non-executive director.
Dr Chris Moyses, currently Chief Medical Officer of OGS, and Denis Mulhall,
currently Chief Financial Officer of OGS, will be invited to join the executive
committee of CAT.
Dr Kevin Johnson, CAT's Chief Technology Officer, will leave the CAT Board on
completion of the Merger. He will continue to lead the effort to secure
independent financing for the business of patient stratification based on
antibody arrays.
It is expected that two of CAT's existing non-executive directors will step down
from the Board by the end of 2003.
The CAT Board confirms that the existing contractual employment rights,
including pension rights, of the employees of both the CAT Group and the OGS
Group will be fully safeguarded following completion of the Merger. Certain OGS
Directors are entitled to compensation on termination of, or leaving, employment
following the Effective Date.
Following completion of the Merger, appropriate proposals will be made to
participants in the OGS Share Option Schemes pursuant to which they will be
offered new options over shares in CAT in exchange for the release of existing
options over shares in OGS, where practicable. Further details are contained in
paragraph 10.
5. OGS Shareholder support
CAT has received irrevocable undertakings from those OGS Directors who hold OGS
Shares (other than Dr Drakeman*) representing in aggregate 273,873 OGS Shares,
or approximately 0.5 per cent. of the issued share capital of OGS, under which
they have agreed to vote in favour of the resolutions to implement the Merger.
* Dr Donald Drakeman, an OGS Director, is also the Chief Executive Officer
of Medarex, Inc. a competitor of CAT, and has therefore not participated
in decisions of the OGS Board relating to the Merger. Accordingly, he has
abstained from the recommendation by the OGS Board to OGS Shareholders and
from entering into any undertakings regarding voting in favour of the
resolutions to be presented at the OGS Court Meeting and the OGS EGM which
are required to implement the Merger. All references in this document to
the recommendation of the OGS Board should be read accordingly.
CAT has also received non-binding letters of intent to vote in favour of the
resolutions to implement the Merger from Invesco Asset Management Limited and
Fidelity Investments International Limited, in respect of a total of 16,021,763
OGS Shares representing approximately 28.7 per cent. of the issued share capital
of OGS.
6. Information on CAT
CAT is a UK-based biotechnology company with an advanced platform technology for
rapidly isolating human monoclonal antibodies using phage display systems. CAT
has created libraries of over 100 billion distinct phage antibodies and applies
its proprietary technologies to the discovery and development of human
monoclonal antibodies as new treatments for human disease.
CAT has a respected research discovery group, with five products in pre-clinical
development, 15 products in discovery and a strong intellectual property
position.
Humira(TM), the most advanced CAT-derived human monoclonal antibody, isolated
and optimised in collaboration with Abbott Laboratories, has been approved by
the FDA for marketing in the US as a treatment for rheumatoid arthritis and was
filed by Abbott for approval for marketing in Europe in April 2002. Approval is
expected by Abbott in the first half of 2003. Humira is now being developed by
Abbott for five further indications. Six further CAT-derived human therapeutic
antibodies are at various stages of clinical trials.
CAT has a number of alliances in place with established pharmaceutical and
biotechnology companies. Present partners include Abbott Laboratories, Amgen,
Chugai, Genzyme, HGSI, Merck, Pharmacia and Wyeth Research.
There are currently seven CAT-derived human monoclonal antibody product
candidates in clinical trials that have been developed using CAT's technology:
o Humira, a human anti-TNF(alpha) monoclonal antibody, was isolated and
optimised in collaboration with Abbott Laboratories (which is responsible for
manufacturing, clinical trials and marketing). In April 2002, Abbott filed
Humira with the US Food and Drug Administration and the European Agency for the
Evaluation of Medicinal Products for marketing approval for rheumatoid
arthritis. In December 2002, Abbott announced that it received marketing
approval for Humira from US regulators. Abbott Laboratories commenced
recruitment of patients for Phase III clinical trials for juvenile rheumatoid
arthritis and Crohn's disease in 2002.
o J695, a human monoclonal antibody that was developed as part of a
collaboration between CAT, Abbott Laboratories and Wyeth Research, neutralises
IL-12, a pro-inflammatory molecule associated with many severe autoimmune and
inflammatory disorders. Abbott Laboratories and Wyeth Research are currently
conducting Phase II clinical trials.
o CAT-152, a human anti-TGF(beta)2 monoclonal antibody with potential to prevent
scarring in the eye at the operation site following glaucoma surgery, is in
Phase III international clinical trials. CAT has commenced discussions with a
number of potential partners with a view to the partner marketing and selling
CAT-152.
o CAT-213, a human anti-eotaxin1 monoclonal antibody that has potential in the
treatment of allergic disorders, is in Phase I/II clinical trials. Results of
the allergic rhinitis challenge study have been submitted for presentation at
the American Academy of Allergy, Asthma and Immunology meeting in March 2003.
Patient recruitment to a Phase I/II challenge study in allergic conjunctivitis
has begun.
o CAT-192, a human anti-TGF(beta)1 monoclonal antibody offering the potential to
provide a specific treatment for a range of local and systemic fibrotic
conditions, including scleroderma, is in Phase I/II clinical trials. CAT-192 is
co-funded by CAT and Genzyme.
o LymphoStat-B(TM), a human monoclonal antibody against B-lymphocyte stimulator
that has potential in the treatment of autoimmune and neoplastic disorders being
developed by CAT's partner, HGSI, has entered a Phase I clinical trial to
determine its safety and pharmacology in patients with systemic lupus
erythematosus.
o TRAIL-R1 mAb, an agonistic human monoclonal antibody, is being evaluated as an
anti-cancer treatment by CAT's partner, HGSI. HGSI has entered a Phase I
clinical trial in the US on patients with advanced cancer.
Background to antibodies
o The function of antibodies
Antibodies are part of the body's principal defence mechanism against
disease-causing organisms and other foreign molecules. They are proteins made
naturally by the immune system and each recognises and binds to a specific
molecular structure on a target known as an antigen. The specificity of
antibodies is such that they are capable of distinguishing the subtlest of
molecular differences. They serve to recognise, bind to and eliminate
disease-causing organisms and to neutralise toxins. Antibodies are naturally
present in the blood and can survive in the circulation for extended periods in
order to perform their surveillance and defence functions.
Each individual B-cell (which is the class of human white blood cell that
produces antibodies) produces a unique antibody that can be capable of
recognising and binding to one type of antigen. A monoclonal antibody is
derived from a single clone of cells, all molecules of which have
identical target (antigen) binding sites.
The basic structure of an antibody comprises two protein chains,
designated as "heavy chain" and "light chain" because of their relative
size. Each chain has a variable domain, which contains the binding site
for an antigen and gives the antibody its specificity, and a constant
domain, which interacts with other parts of the immune system to
facilitate the removal of the pathogen or foreign molecule.
As with all proteins, antibody structure is defined largely by genes.
Different antibodies are produced, in part, as a result of the random
pairing of genes for the variable domains. As a result, the immune system
is able to adapt and produce antibodies against virtually any antigen.
When an antibody encounters an antigen to which it binds, the B-cell which
produces the antibody proliferates to generate more antibodies against the
target antigen.
o Antibodies as drugs
Antibodies are an increasingly important class of drugs. Several
antibody-based drugs are currently marketed including: ReoPro(R) (for use
in angioplasty), Rituxan(R) (for Non-Hodgkin's Lymphoma), Synagis(R) (for
prevention of Respiratory Synctical Virus infection), Herceptin(R) (for
cancer) and Remicade(R) (for Rheumatoid Arthritis and Crohn's Disease).
Early efforts to develop monoclonal antibodies into human therapeutic
products were based on immunising mice with a target antigen and isolating
the mouse's B-cells that produce the antibodies that bind the antigen.
Those B-cells were then used to produce the desired monoclonal antibodies.
This process generally took between two and six months. Mouse-derived
monoclonal antibodies were flawed, however, because when administered,
they were recognised as foreign by the human immune system, thus causing
an adverse immune reaction. Generally this reaction increases in severity
with repeat dosing, which reduces or negates the effectiveness of the
antibody and may be harmful to recipients. The mouse-derived antibodies
were also poorly effective at interacting with other components of the
human immune system.
In an attempt to make mouse-derived monoclonal antibodies better tolerated
and more effective, monoclonal antibodies were designed to be more human.
Monoclonal antibodies were therefore developed composed of variable
regions from mouse antibodies and constant regions from human antibodies,
which are known as "chimaeric antibodies". Subsequently, mouse antibodies
were converted into a human form by grafting the mouse amino acid
sequences which comprise the antigen-binding regions of the antibody into
a human framework. These antibodies are known as "humanised" or
CDR-grafted antibodies. These techniques reduce the mouse genetic content
from 100 per cent. to approximately 30 per cent. in the case of chimeric
antibodies and 10 per cent. in the case of humanised antibodies. A number
of chimeric and humanised monoclonal antibodies have been approved for
marketing as therapeutic products. However, these antibodies still contain
elements derived from mouse genes.
CAT has developed a process to isolate quickly and effectively human
monoclonal antibodies of the required specificity from CAT's libraries of
antibodies. CAT's libraries are derived from antibody-producing cells from
human donors and other sources of human antibody genes. This system does
not require immunisation of mice or humans. Human monoclonal antibodies
should reduce or remove adverse human immune response, such as that caused
by "foreign" mouse protein. Companies other than CAT have developed
alternative methods for obtaining human monoclonal antibodies, such as
those involving the use of transgenic mice, whereby immunising those mice
with antigens causes those mice to produce genetically human antibodies.
CAT platform technologies
o Antibody libraries
CAT has created extensive human monoclonal antibody libraries for the
discovery and identification of drug candidates. CAT has developed its
libraries primarily using phage display technology. All antibodies share
the same basic structure. They are large "Y" shaped protein molecules,
comprising two chains, a "heavy" chain and a "light" chain. The tips of
the forked region, which come into contact with the antigen, are highly
variable in structure, enabling the antibody to be specific for a
particular antigen. The "backbone" of the molecule is reasonably
consistent between different antibodies and has an important role in
activating the next steps in the body's process to neutralise or eliminate
the foreign molecule or pathogen. CAT's libraries are derived from the
combination of human "heavy chain" and "light chain" genes, which encode
the antigen binding parts (variable domain) of the antibody.
Phage display is the process by which a phage is made to display human
antibody proteins on its surface. A phage, which is a bacterial virus that
is harmless to humans, can be engineered, when combined with human
antibody genes, to display functional antibody proteins - in this case
fragments of human antibodies capable of specifically recognising and
binding to an antigen. Genes from the human antibody libraries are
inserted into a population of phage. Each phage carries the genes for an
antibody and thus displays that antibody protein on its surface. These
genes can be recovered and made available for use in the onward
development and potential manufacture of antibody products.
A large and diverse antibody library has a greater chance of containing
high quality antibodies that will bind to any given target molecule. Each
of CAT's phage antibodies contains a combination of human antibody genes,
giving each one its specificity. CAT has engineered combinations of these
to produce libraries that currently incorporates around 100 billion
distinct antibodies allowing it to isolate antibodies to potential disease
targets rapidly and efficiently.
CAT's antibody libraries are contained in phage particles and stored under
refrigeration. A copy of the library has the appearance of a clear fluid.
One teaspoon of this fluid would represent approximately 400 copies of the
libraries. When testing the libraries against a target antigen, the target
is typically bound to a solid surface, such as a plastic microplate, and
incubated with the antibody libraries. The antibody libraries are so large
that in a typical case many phage antibodies will bind the target,
whatever the target is. A simple wash removes those phage antibodies which
do not bind to the target. The bound phage antibodies are recovered and
allowed to infect bacteria, one phage entering a single bacterium. These
infected bacteria are spread on agar plates where each bacterial cell
grows into a colony of identical bacterial cells. Each colony produces
small quantities of a single monoclonal antibody. All of CAT's libraries
can be screened against a target molecule (antigen) in less than a week.
CAT believes than no other antibody isolation technology can match the
speed and capacity of this approach.
As the phage antibody contains the genes that code for the antibody
protein, the genes are available for use in the onward development and
potential manufacture of human monoclonal antibody therapeutic products.
CAT believes that it has strengthened its position in antibody display
technology through its July 1998 acquisition of Aptein, giving CAT key
patents in the field of ribosome display. Ribosome display involves the
use of ribosomes, a type of molecular complex responsible for protein
synthesis within living organisms, to display functional antibody proteins
in a laboratory environment. Using ribosome display technology, the need
for phage particles and bacteria to generate antibodies as described above
is not necessary. Since its acquisition of Aptein, CAT has continued to
refine the ribosome display technology platform. Together with CAT's phage
display technology, this new technology has the potential to enhance
significantly CAT's capabilities and its leading position in combinatorial
antibody libraries through the creation of even larger antibody libraries
offering greater efficiency in the development of antibody therapeutics.
o Advantages of CAT's technology
CAT believes that its platform technology has a number of advantages over
alternative techniques for obtaining antibodies.
CAT's platform technology:
o avoids the need for immunisation in animals, which is lengthy; and
o enables the rapid identification and isolation of antibodies,
usually within days.
CAT's platform technology enables the isolation of:
o antibodies to a large number of target antigens simultaneously and
cost effectively;
o a broad spectrum of antibodies to each target antigen;
o antibodies to a diverse range of target antigens directly
(including naturally occurring proteins that the immune system would
not normally respond to);
o antibodies of completely human origin, reducing the likelihood of
an adverse immunological response; and
o antibodies which can be further engineered, if required, to
optimise potential utility as the basis for a human therapeutic
product.
CAT's technology processes can be automated in many areas which allows CAT
to screen potential antibody drug candidates rapidly and efficiently.
o Commercialisation and collaborations
A key element of CAT's strategy is to exploit its technology platforms in
collaboration with other companies. CAT has been successful in attracting
collaborators and continues to seek further collaborations.
CAT's own product development activity focuses on the "value-adding"
stages from identification of potential antibody targets through to
clinical demonstration of effectiveness for an antibody-based drug. In
general, CAT will seek partners for further clinical trials of product
candidates, in gaining marketing approval of product candidates and for
subsequent marketing of products. If a product based on CAT's technology
is developed solely by CAT's collaborative partner, CAT will generally
receive long-term revenue in the form of milestone payments and royalties
should the product be marketed. CAT will typically receive royalties until
the later of: (a) the expiration of the last of CAT's patents upon which
the product is based; or (b) at least ten years after the first commercial
sale of the product. Where CAT is responsible for product development,
either on its own or with a collaborator, it can expect to receive a
higher share of the revenues derived from the product.
Research stage antibodies
o Pre-clinical development programmes:
There are currently five CAT-derived human monoclonal antibodies in
pre-clinical development, both at CAT and at CAT's collaborators,
including:
o The GC1000 series which are human monoclonal antibodies against
TGF(beta) are being jointly developed by CAT and Genzyme for
non-ophthalmic indications. Several candidates with differing
specificities and potencies have been identified and assessments of
the potential medical and commercial opportunities they present are
currently being evaluated. Pre-clinical studies of GC 1008 have
commenced. There is considerable interest in the role played by
TGF(beta) in tissue repair, with overproduction of TGF(beta)
inducing the deposition of excess extracellular matrix, the hallmark
of tissue fibrosis and scar tissue. The development of fibrosis in
internal organs can give rise to conditions such as pulmonary
fibrosis, liver cirrhosis and diabetic nephropathy where progressive
fibrosis leads to organ dysfunction and ultimately organ failure.
Together, CAT and Genzyme believe they have a significant lead over
other competitive approaches in the development of new treatments
for this major area of medical need that CAT and Genzyme believe is
poorly served by existing medicines.
o TRAIL-R2 mAb is the third human monoclonal antibody to come from
CAT's collaboration with HGSI and the second CAT-derived human
monoclonal antibody candidate directed to a cell-surface receptor
protein rather than a soluble cytokine. Early pre-clinical data
presented at the AACR meeting in April 2002 showed that TRAIL-R2 mAb
has anti-cancer activity. HGSI hopes to file an IND application for
TRAIL-R2 mAb in the first half of 2003. In May 2002, HGSI exercised
an option for an exclusive licence to TRAIL-R2 mAb and in September
2002, CAT granted HGSI an exclusive licence to an antibody to an
undisclosed target, the fourth human monoclonal antibody to come
from CAT's collaboration with HGSI.
o In June 2002, CAT granted Wyeth Research an exclusive product
licence to a human antibody identified by CAT against a disease
target supplied by Wyeth.
o Discovery stage antibody programmes
CAT is currently working on 15 drug discovery projects. Of these, CAT
funds or co-funds around one-third; the remaining projects are
collaborator funded. The active programmes include Anti-IL-18R (with
Amgen), a programme with Elan and one proprietary programme at a
late-stage of drug discovery. CAT believes that up to five of these
antibodies may enter pre-clinical studies in 2003.
Drug discovery programmes are also underway at those CAT partners who have
licensed CAT's libraries for their own use, enabling CAT to broaden the
application of its technologies for the creation of antibody therapeutic
candidates. Five exclusive product licences have been granted in total
since January 2002 - three to HGSI, one to Amgen and one to Wyeth
Research. CAT received licence fees and will also receive clinical
development milestone payments and royalties on any sales from the
licenced drug candidates commercialised by these partners.
Recent collaborations include:
Date Arrangement
October 2001 CAT entered into a collaboration and licence
agreement with Merck for the research and
development of products specific for a key
target involved in disease mediated by HIV.
December 2001 CAT entered into a co-development
collaboration with Amrad to develop human
monoclonal antibodies against the receptor
for granulocyte-macrophage colony stimulating
factor as a potential therapeutic for
rheumatoid arthritis, with CAT and Amrad
jointly funding development up to completion
of Phase II trials. After this, CAT will have
responsibility for further trials and
commercialisation. Amrad, however, retains an
option to receive milestone and royalty
payments or participate jointly in
development and commercialisation.
January 2002 Amgen exercised an exclusive licence option
to develop and commercialise human monoclonal
antibodies raised to an undisclosed disease
target. CAT received a licence fee and will
obtain milestone and royalty payments on any
therapeutics commercialised by Amgen.
August 2002 CAT expanded its existing relationship with
Xerion Pharmaceuticals into a research
collaboration to evaluate a cell surface
protein involved in allergic reactions. CAT
and Xerion will jointly own any intellectual
property generated by the collaboration.
September 2002 CAT signed a research agreement with Chugai,
one of Japan's leading pharmaceutical
companies, to license CAT's libraries for
discovery and development of potential human
antibody therapeutics.
October 2002 CAT entered into a second agreement granting
Merck a licence to CAT's libraries used to
support and promote discovery research and
development across a broad range of
therapeutic areas.
Intellectual property and significant licence agreements
o Key Patents
CAT has a patent portfolio of approximately 30 patent families comprising
over 300 patents. CAT has three key patent families: (i) Winter II and
Winter/Lerner/Huse, which covers production of expression libraries of
antibody genes; (ii) McCafferty, which protects CAT's phage display method
used to obtain specific antibodies from these libraries; and (iii)
Griffiths, which covers human antibodies specific for human "self"
antigens isolated from CAT's libraries.
Winter II covers CAT's processes for generating the collections of
antibody genes that comprise CAT's libraries. Patents from the Winter II
family have been granted in Europe, the United States, Japan, South Korea
and Australia. A patent application is pending in Canada. The Winter II
patent is co-owned by MRC, Scripps and Stratagene. Pursuant to CAT's
agreements with those parties, CAT has exclusive commercial exploitation
rights over Winter II, subject to certain rights held by MRC, Scripps and
Stratagene and their pre-existing licensees.
The Winter II patent was upheld by the opposition divisions within the
European Patent Office (the "Opposition Division") set up by Article 15(d)
of the Convention on the Grant of European Patents (European Patent
Convention) 1973, as amended. After this decision both CAT and MorphoSys
appealed against a modification of one claim of the Winter II patent that
was requested by the Opposition Division. A hearing date for these appeals
was set for 14 February 2003. A request for postponement of the appeal
hearing has been made by CAT following MorphoSys' agreement to withdraw
their appeal, details of which are summarised at paragraph 12(a)(i) of
Part X of these Listing Particulars.
McCafferty covers CAT's phage display and target screening technology.
Patents from the McCafferty family have been granted in Europe, the United
States, Japan, South Korea and Australia. A patent application is pending
in Canada. These patents are co-owned by CAT and MRC. CAT may use the
related technology to develop and commercialize products under the terms
of the MRC licence agreement.
The parent McCafferty patent was upheld by the Opposition Division. After
this decision BioInvent and MorphoSys lodged appeals against the
Opposition Division's decision to maintain the main claims. CAT has also
appealed requesting reinstatement of some minor dependent claims.
MorphoSys has agreed to withdraw its appeal under its recent settlement
agreement with CAT, details of which are summarised at paragraph 12(a)(i)
of Part X of these Listing Particulars.
A further patent in the McCafferty family was granted in Europe in January
2002 with claims covering a filamentous phage particle containing a
phagemid genome and displaying a Fab or scFv on its surface. This patent
was opposed by Dyax, MorphoSys, Crucell and BioInvent. MorphoSys and
Crucell have agreed to withdraw their oppositions under recent agreements,
details of which are summarised at paragraph 12(a)(i) and paragraph
12(a)(ii) of Part X of these Listing Particulars respectively.
Griffiths covers the use of phage display technology to isolate human
"anti-self" antibodies that bind to molecules found in the human body.
Patents have been granted in the United States and Australia. CAT has
patent applications pending in Canada, Europe and Japan. This patent is
co-owned by CAT and MRC. CAT may use the related technologies and develop
and commercialize products under the terms of the MRC licence agreement.
As referred to above, CAT has recently settled all patent disputes with
MorphoSys including litigation in the US regarding the Griffiths,
McCafferty, Winter II and Winter/Huse/Lerner patents as well as
oppositions launched by MorphoSys at the European Patent Office against
the Winter II and McCafferty patents. Details of this settlement agreement
are set out at paragraph 12(a)(i) of Part X of these Listing Particulars.
In addition, as referred to above, CAT has settled all patent disputes
with Crucell, including litigation in the Netherlands as well as the
opposition launched by Crucell at the European Patent Office against one
of the McCafferty patents. Details of this settlement agreement are set
out at paragraph 12(a)(ii) of Part X of these Listing Particulars.
During the 2002 financial year, CAT's previously granted European patents
on anti-TGF(beta)1 antibodies (covering CAT-192) and anti-CEA antibodies
were not opposed in the Opposition Division.
In April 2002, CAT was granted a UK patent in relation to CAT-213 and
other anti-eotaxin antibodies.
In connection with its acquisition of Aptein in the 1998 financial year,
CAT acquired patents covering ribosome display technology, under which
human monoclonal antibody fragments can be displayed in a laboratory
environment without the use of a phage. Patents have been granted in
Europe, the United States, South Korea and Australia. Patent applications
are pending in Canada and Japan.
o Other Intellectual Property
In addition to patents, CAT relies on trade secrets and proprietary
know-how. CAT seeks protection, in part, through confidentiality and
proprietary information agreements. These agreements may not provide
meaningful protection or adequate remedies for CAT's technology in the
event of unauthorized use or disclosure of confidential and proprietary
information. The parties to these agreements may breach them. Also, CAT's
trade secrets may otherwise become known to, or be independently developed
by, its competitors.
CAT has a policy of defending its patents forcefully. CAT may also face
claims from third parties that it infringes patents.
o Significant licence agreements
CAT initially developed its platform technology in cooperation with MRC.
CAT's rights in respect of this technology are governed by a licence
agreement of 7 January 1997 with MRC. Under this agreement, CAT receives
exploitation rights to key underlying intellectual property and know-how
relating to the production and screening of phage display libraries. The
agreement grants CAT exclusive rights, subject to certain rights retained
by MRC, to exploit the technology for the development of therapeutic,
diagnostic or prophylactic entities arising from gene sequencing data,
including the rights:
o to identify, develop, manufacture and commercially exploit antibodies
for human use;
o to provide antibody isolation services on behalf of customers; and
o to use the molecules isolated by the technology for use in the
manufacture of pharmaceutical products or intermediaries.
CAT pays MRC royalties of 3 per cent. of the net invoice price on the sale
by CAT of products made using the patent rights and technology licensed
under this agreement. Where CAT's sub-licensees sell such products, CAT is
obligated to pay MRC between 1 per cent. and 2.3 per cent. of the net
invoice price, calculated in accordance with a specified formula. CAT will
be required to pay a royalty to MRC in connection with Abbott's sales of
Humira. The royalty obligations of CAT may be reduced under certain
circumstances. CAT's licence with MRC includes the Winter II, McCafferty
and Griffths patent families discussed above under "Key Patents".
Under agreements entered into in 1997, CAT also has a non-exclusive
licence from Dyax for rights under certain of its Ladner phage display
patents and CAT has granted certain limited rights to Dyax under antibody
phage display patents controlled by CAT. In addition, CAT and Dyax have
recently entered into a revised agreement dated 3 January 2003 under which
the parties agreed to increase access and freedom to each other's phage
display patents. Under the terms of the revised agreement, CAT granted
Dyax worldwide non-exclusive licences for research and certain other
purposes under certain of the antibody phage display patent controlled by
CAT.
Dyax also has been granted certain options under the revised agreement to
take up licences (together with a right to sub-license those licences) to
develop therapeutic and diagnostic antibody products using patent rights
controlled by CAT. In return, CAT will receive milestone payments and
royalties on antibody products which are advanced into clinical trials by
Dyax and Dyax's customers. CAThas also been granted the option to co-fund
and co-develop with Dyax antibodies discovered by Dyax, as well as the
right to share in Dyax's revenues from certain other applications of
antibody phage display.
In addition, under the revised agreement, CAT's obligations to pay
royalties under the previous arrangements with Dyax for rights in respect
of Dyax's Ladner patents used in relation to the development of antibody
products by CAT have been terminated, save in relation to Humira. Under
the revised agreement, CAT has been granted an option to buy out, under a
predetermined schedule, any obligation to pay royalties by CAT to Dyax in
respect of Humira.
CAT has licensed intellectual property relating to the use of certain
inhibitors of TGF(beta) (for prevention of fibrosis) from the Burnham
Institute and Integra Life Sciences Corporation ("Burnham and Integra").
CAT's licence is exclusive, royalty bearing and worldwide and allows CAT
to make, use and sell certain products that incorporate the intellectual
property; it also provides for CAT to pay to Burnham and Integra a
proportion of any up front, milestone or similar payments received in
relation to the intellectual property. The use of CAT-152 and CAT-192 for
the prevention and treatment of fibrosis fall within the terms of this
licence from Burnham and Integra.
o Termination of Royalty Agreement with DRC
CAT terminated its Royalty Agreement with DRC on 30 April 2002. Details
of this termination are set out at paragraph 11(a)(iii) of Part X of
these Listing Particulars.
o Fund raising
CAT completed its initial public offering and listing on the London Stock
Exchange in March 1997, raising (pound)41 million. In April 2000, CAT
raised (pound)93 million in a secondary offering. In June 2001, CAT's ADSs
commenced trading on NASDAQ.
o Financial information
For the year ended 30 September 2002, CAT reported a loss before taxation
of (pound)31.8 million on turnover of approximately (pound)9.5 million.
CAT had net assets as at that date of approximately (pound)135.8 million,
with net cash and liquid resources of approximately (pound)129.8 million.
Based upon CAT's share price of 540.0 pence, being the Closing Price of a
CAT Share on 22 January 2003 (which was the last Business Day prior to the
date of the announcement of the Merger). CAT's market capitalisation was
approximately (pound)196.3 million.
7. Information on OGS
OGS is a research and product development company with three distinct business
units - Inherited Storage Disorders (or ISD), proteomics and oncology.
Inherited Storage Disorders
OGS was originally founded around a core glycobiology platform and has become a
leader in the field of human glycobiology. Glycobiology is the study of the
structure and functions of carbohydrates, the processes by which carbohydrates
are formed and destroyed in the human body, and the biological processes in
which they participate.
Under the ISD business unit, there are currently two OGS-derived product
candidates in clinical trials:
o Miglustat, a small molecule drug, which is an oral inhibitor of
glucosylceramide synthase, a key enzyme involved in glycosphingolipid (GSL)
biosynthesis, was exclusively licensed from G.D. Searle for use in the treatment
of glycolipid disorders under G.D. Searle's glycolipid storage patents. The
trade name for the capsule formulation of miglustat is Zavesca(TM). In July
2001, OGS filed Zavesca with the European Agency for the Evaluation of Medicinal
Products for marketing approval for Type I Gaucher disease. In November 2002,
OGS received Marketing Authorisation from the European Commission for Zavesca
for the treatment of patients with mild to moderate Type I Gaucher disease for
whom enzyme replacement therapy is unsuitable. OGS has submitted documentation
to transfer the Zavesca Marketing Authorisation to Actelion, OGS' worldwide
marketing partner (with the exception of Israel). European launch is expected in
March 2003. In January 2003, an application for marketing approval for Zavesca
was submitted in Israel, by OGS' Israeli marketing partner, Teva. Following
submission for marketing approval in the US in 2001 OGS received a non-approval
letter; OGS has announced its intention to file an amendment to the NDA in the
first quarter of 2003. Zavesca is also undergoing further clinical
investigations in other glycosphineal storage disorders, including Late-Onset
Tay Sachs, Niemann-Pick Type C and Type III Gaucher disease.
o OGT 923, a new chemical entity, which is a galactose analog of miglustat, has
shown activity as an inhibitor of glucosylceramide synthase and efficacy in
pre-clinical models of Sandhoff and Niemann-Pick Type C disease. OGT 923 entered
Phase I clinical studies in November 2002. As with miglustat, OGT 923 is covered
by the exclusive licence with G.D. Searle.
Proteomics
Proteomics is the comprehensive study of proteins expressed in cells, tissue and
body fluids. Each of the cell types in the human body has a different complement
of proteins, and the pattern of proteins varies according to biological need and
external influences. Proteins constitute major targets for drug discovery and
provide the key to defining new molecular markers for disease.
The primary uses of OGS' proteomics and genomics technologies are the discovery
of proteins and genes that are associated with diseases and the determination of
which of its discoveries will be useful as novel targets for drug development or
as bio-markers of disease.
OGS believes that its proteomics technology has the following key advantages:
o High reproducibility. This characteristic is achieved by a combination of a
high degree of automation, stability in the gel process and proprietary protein
separation and display technologies.
o High sensitivity. OGS is able to identify extremely small quantities and
variations of proteins by using highly sensitive fluorescence imaging
techniques.
o Greater linear dynamic range. The use of the highly sensitive fluorescence
imaging techniques gives OGS the ability to quantify the amount of individual
proteins from very small to very large amounts.
o High throughput. By automating and standardising its handling and processing
of samples, separation media, proteins and fragments for advanced mass spectral
analysis, OGS has developed the capacity to perform proteomics on an industrial
scale.
o High level of integration. Efficient integration of the overall process is
based on OGS' bio-informatics architecture.
OGS has several proteomics collaborations with partners including Bayer, GSK,
Pfizer, Pioneer Hi-Bred/DuPont and Wyeth. In addition it has a joint venture
company, Confirmant, to develop the protein atlas of the human genome. OGS
receives royalties for licensing its intellectual property in proteomics.
Oncology
In oncology, OGS is developing a pipeline of projects and has drug discovery and
development alliances with Medarex and BioInvent and a drug discovery alliance
with NeoGenesis. OGS currently has five discovery projects in oncology.
Under its alliance with Medarex, OGS and Medarex are co-developing MDX/OGS-001,
a heparanase 1 antibody, which is currently in pre-clinical development.
OGS' stated goals
OGS has stated its goals are to focus on key objectives, including cost
reductions and to build critical mass and strengthen the clinical pipeline
through appropriate transactions.
Fund-raising
OGS completed its initial public offering and listing on the London Stock
Exchange in April 1998, raising approximately (pound)27.8 million. In March
2000, OGS raised approximately (pound)32.9 million and, in December 2000 raised
a further (pound)157.4 million in secondary offerings. In December 2000, the OGS
ADSs commenced trading on NASDAQ.
Financial information
For the year ended 31 December 2001, the OGS Group reported a loss before
taxation of (pound)28.2 million on turnover of approximately (pound)13.4
million. The OGS Group had net assets as at that date of approximately
(pound)194.6 million, with net cash of approximately (pound)176.6 million. On
the basis of the Closing Price of an OGS Share on 22 January 2003 (the last
Business Day prior to the date of the announcement of the Merger), OGS' market
capitalisation was approximately (pound)85.0 million.
8. Current trading of CAT and OGS and prospects for the Enlarged Group
CAT's current trading
Recurring revenues, representing contract research revenues and income from
licensing arrangements entered into prior to the 2003 financial year are
expected to be in the range of (pound)3 million to (pound)4 million for the 2003
financial year. Additional revenues may arise from technical and clinical
milestone payments and any further licensing or contract research arrangements
including extensions to existing arrangements. Cash receipts from collaborators
and licensees in the 2003 financial year are expected to be at least comparable
to the 2002 financial year.
On 31 December 2002, Abbott Laboratories announced that it had received FDA
approval to market Humira for the treatment of rheumatoid arthritis in the US.
This approval was received earlier than had been expected and Abbott has stated
that it began supplying Humira to pharmacies throughout the US in January 2003.
The European Agency for the Evaluation of Medicinal Products (or "EMEA")
accepted Abbott's submission for Humira for the treatment of rheumatoid
arthritis in April 2002, and approval is expected by Abbott in mid-2003. Humira
was developed in a collaboration between Abbott and CAT, under which CAT will
receive milestone payments based upon approval in the US and Europe and
royalties based on Humira sales.
Significant increases in operating costs are expected during the current
financial year as compared with the 2002 financial year. This reflects, in
particular, an increase in spending on clinical trials on CAT's pipeline of
product candidates.
In December 2002, CAT settled patent disputes with MorphoSys and Crucell and
announced a cross-licensing arrangement with Xoma. In January 2003, CAT
announced an expanded licence agreement with Dyax, as referred to in paragraph 6
of this Part I of these Listing Particulars.
As at 31 December 2002, CAT had net cash and liquid resources of approximately
(pound)123.7 million, representing 340.2 pence per CAT ordinary share in issue.
OGS' current trading
In September 2002, OGS announced a reorganisation of its operations and a cost
reduction programme. In light of the delays in the approval of Zavesca in the
US, the Bridgewater, New Jersey facility was closed. OGS also carried out a
review of its UK operations which resulted in redundancies, restructuring and
the streamlining of some existing alliances. As from 1 January 2003, OGS has
been reorganised into three separate business units; ISD, proteomics and
oncology, with the intention of increasing transparency, responsibility and
accountability.
In November 2002, OGS announced that the European Commission had granted
marketing authorisation for Zavesca, an oral treatment for patients with mild to
moderate Type I Gaucher disease for whom enzyme replacement therapy is
unsuitable. The existing European marketing agreement with Actelion for Zavesca
was also extended to cover the rest of the world, excluding Israel. Zavesca is
expected to be launched in Europe in March 2003. In January 2003, Zavesca was
filed for approval in Israel by Teva, which has rights to the drug in Israel.
Following recent discussions with the FDA, OGS and Actelion intend to submit an
amendment to the New Drug Application for Zavesca in the first quarter of 2003.
In addition to the US, Actelion intends to file for registration of Zavesca in
Japan and will evaluate opportunities in other territories, as appropriate.
OGS has also commenced a Phase I study with OGT 923, bringing a second
iminosugar into clinical development for glycosphingolipid storage disorders.
As at 31 December 2002, the OGS Group had net cash of approximately (pound)136.4
million, representing 244.8 pence per OGS ordinary share in issue.
Prospects for the Enlarged Group
As detailed in the above section, Abbott Laboratories received FDA approval on
31 December 2002 to market Humira for the treatment of rheumatoid arthritis in
the US, and in November 2002 OGS announced that the European Commission had
granted marketing authorisation for Zavesca.
Cost savings based on the removal of duplicated activities have been identified
in the areas of corporate overhead, R&D and real estate. These savings are
expected to have a cash effect of approximately (pound)10 million in the first
full financial year following completion of the Merger*. In addition, further
savings are expected from a portfolio review to focus R&D expenditure on the
highest quality projects. The results of this review will be announced in
November 2003. One-off costs relating to the integration of CAT and OGS are
expected to be up to (pound)6 million. Management intends to continue OGS'
strategy of maintaining discrete business units in respect of proteomics and
ISD.
The Enlarged Group will have substantially greater financial strength. This will
increase its ability to fund product development to later stages, thereby
retaining greater value and reducing the need for additional capital. Pro-forma
net cash was (pound)260.1 million as at 31 December 2002.
The Merger helps both companies to achieve their stated goals by creating an
enlarged entity with significantly strengthened discovery and development
capabilities and financial resources with which to build its pipeline. The
directors are confident of the prospects for the Enlarged Group.
* The expected operating cost savings have been calculated on the basis of
the existing cost and operating structures of the companies and by
reference to current prices and the current regulatory environment. These
statements of estimated cost savings and one-off costs for achieving them
relate to future actions and circumstances which, by their nature, involve
risks, uncertainties and other factors. As a result, the cost savings
referred to may not be achieved, or those achieved could be materially
different from those estimated.
9. Further details of the Merger
9.1 The Merger is to be implemented by way of a scheme of arrangement to be
effected by OGS under section 425 of the Companies Act and is subject to the
conditions set out in Part V of this document, including, amongst other things,
the approval of the Merger by both CAT Shareholders and OGS Shareholders, the
obtaining of relevant regulatory consents and the sanction of the Scheme by the
Court.
It is proposed that, under the Scheme, OGS Shareholders who are on the
register of OGS and holders of OGS ADSs at the Scheme Record Time will receive
0.3620 New CAT Shares for each OGS Share and 0.3620 New CAT ADSs for each OGS
ADS.
Fractional entitlements to New CAT Shares will be aggregated and sold in
the market with the net proceeds distributed pro rata to OGS Shareholders
entitled thereto. Fractional entitlements to New CAT ADSs will not be
distributed. Fractional entitlements will be aggregated and sold in the market
and the net proceeds will be distributed pro rata to the former OGS ADS holders
entitled thereto. CAT Shareholders will retain their shares in CAT. The New CAT
Shares and New CAT ADSs to be issued to OGS Shareholders and holders of OGS ADSs
pursuant to the Merger will be issued credited as fully paid and will rank pari
passu in all respects with the Existing CAT Shares and existing CAT ADSs,
including the right to receive all dividends, distributions and other
entitlements declared, made or paid by CAT on such shares on or after the date
of the announcement of the Merger.
The Scheme will require approval by OGS Shareholders at the OGS Court
Meeting, the OGS EGM, and the sanction of the Court at the OGSCourt Hearing. The
approval required at the OGS Court Meeting is a majority in number of the
shareholders who vote at the meeting representing 75 per cent. of the shares
voted at the meeting. The Scheme also requires the sanction of the Court and
approval separately by a special resolution of the OGS Shareholders to be
proposed at the OGS EGM. In addition, the Merger requires the approval by CAT
Shareholders at the CAT EGM.
On the Effective Date, the Scheme will be binding on all OGS Shareholders
(including holders of OGS ADSs), including any such holders who did not vote to
approve the Scheme or who voted against the Scheme. OGS will become a
wholly-owned subsidiary of CAT.
The Scheme can only become effective if all the conditions to the Merger
have been satisfied or, where relevant, waived, including receipt of all
shareholder approvals, relevant regulatory consents and sanction by the Court.
The Scheme will become effective upon the delivery to the Registrar of Companies
in England and Wales by OGS of a copy of the Order and registration of the
Order, which, subject to the sanction of the Scheme by the Court, is expected to
take place by 31 March 2003. Further details of the conditions to implementation
of the Scheme and the Merger are set out in Part V of this document and of the
relevant shareholder approvals are set out below.
9.2 OGS Shareholder approvals
The Merger is subject to the approval of OGS Shareholders at the OGS Court
Meeting and at the OGS EGM, both of which will be held on 11 March 2003. The OGS
Court Meeting is being held at the direction of the Court to seek the approval
of OGS Shareholders to the Scheme as explained below. The OGS EGM is being
convened for the purposes also explained below.
Holders of OGS ADSs will not be entitled to vote at either the OGS Court
Meeting or the OGS EGM. Holders of OGS ADSs are referred to paragraph 13 of Part
III of the Scheme Document for information on voting procedures relating to
them.
9.2.1 OGS Court Meeting
At the OGS Court Meeting, voting will be by poll and not on a show
of hands and each OGS Shareholder who is present in person or by proxy will be
entitled to one vote for each OGS Share held. The approval required at the OGS
Court Meeting is that those voting to approve the Scheme should:
(a) represent a simple majority in number of those OGS Shareholders
present and voting in person or by proxy; and
(b) also represent three-fourths in value of the OGS Shares held by
those OGS Shareholders present and voting in person or by proxy.
9.2.2 OGS EGM
The OGS EGM has been convened to consider and, if thought fit, pass
a special resolution (which requires a vote in favour of not less than 75 per
cent. of the votes cast):
(a) to approve the Scheme and to authorise the OGS Directors to take
such action as they consider necessary or appropriate to carry the Scheme into
effect;
(b) to approve the cancellation of the OGS Shares and the subsequent
issue of new OGS Shares of 5 pence each to CAT (and/or its nominee(s)) in
accordance with the Scheme (on the basis set out in the first paragraph of
paragraph 2 "Summary of the terms of the Merger" above); and
(c) to amend the OGS Articles in the manner described below.
9.2.3 Amendments to the OGS Articles
A special resolution to be proposed at the OGS EGM includes
proposals to amend the OGS Articles to ensure that: (a) any OGS Shares issued
under the OGS Share Option Schemes or otherwise between the Voting Record Time
and 6.00 p.m. on the last Business Day before the Hearing Date will be subject
to the Scheme; (b) no OGS Shares will be issued between 6.00 p.m. on the last
Business Day before the Hearing Date and the time the Scheme becomes effective;
and (c) any shares in OGS issued to any person (other than to CAT and/or its
nominee(s)) after the Effective Date will be automatically exchanged for New CAT
Shares on the same terms as under the Scheme. These amendments are designed to
avoid any person (other than CAT) being left with shares in OGS after dealings
in OGS Shares have ceased on the London Stock Exchange (which will occur at the
close of business on the Business Day before the Effective Date).
9.2.4 CAT EGM
The Merger is also conditional upon the passing by CAT Shareholders
of ordinary resolutions to be proposed at the CAT EGM to be held at 12.30 p.m.
on 11 March 2003 to approve, amongst other things, the Merger (as required by
the Listing Rules), an increase in the share capital of CAT and the issue of the
New CAT Shares in connection with the Merger.
CAT has received irrevocable undertakings from the CAT Directors in
respect of, in aggregate, 192,155 CAT Shares in which they are interested
(amounting to 0.5 per cent. of the issued share capital of CAT) to vote in
favour of such resolutions.
Holders of CAT ADSs will not be entitled to vote at the CAT EGM.
Holders of CAT ADSs are referred to paragraph 13 of Part I of the CAT
Shareholder Circular for information on voting procedures relating to them.
9.2.5 Court Hearing
At the OGS Court Hearing (scheduled for 27 March 2003), the Court
will hear the petition to sanction the Scheme. All OGS Shareholders are entitled
to attend the Court Hearing in person or to be represented by counsel to support
or oppose the sanctioning of the Scheme.
The Merger will become effective upon the delivery by OGS to the
Registrar of Companies in England and Wales of a copy of the Order sanctioning
the Scheme and confirming the reduction of capital involved therein. Subject to
the requisite approvals to the Merger being obtained from OGS Shareholders and
CAT Shareholders, the conditions not being breached or unfulfilled, the
necessary regulatory approvals being obtained and the sanction of the Court,
implementation of the Merger is expected to occur by 31 March 2003.
Unless the Scheme becomes effective by no later than 30 April 2003,
or such later date, if any, as OGS and CAT may agree, and the Court may allow,
the Scheme will not become effective and the Merger will not proceed.
10. OGS Share Option Scheme(s)
Any holders of options granted under the OGS Share Option Schemes who exercise
their options and are issued OGS Shares as a result prior to the Scheme Record
Time will participate in the Scheme on the same basis as other OGS Shareholders
on the register of OGS at that time.
As a result of the Merger, options granted under the OGS Share Option Schemes
will become exercisable (if not already exercisable) after the Scheme is
sanctioned by the Court. If not exercised, the options will eventually lapse.
Any shares in OGS issued after the Effective Date upon exercise of options will
automatically be exchanged for new shares in CAT on the same terms as under the
Scheme subject to the proposed changes to the articles of association of OGS to
be proposed at the OGS EGM.
As an alternative, it is proposed that CAT will also offer OGS option holders
equivalent options over shares in CAT in exchange for the release of their
existing options ("Rollover Options"). The aggregate value of shares under
option (determined by reference to the exchange ratio applicable to the Merger)
and the total exercise price for each option will be the same for the original
options and the Rollover Options. Any vesting or performance conditions
attaching to the original options would be replicated in the Rollover Options
(with appropriate credit given for vesting or performance prior to the date of
the Merger), save for Rollover Options granted under the approved part of the
Executive Scheme, where the rules of that scheme specify that the performance
conditions will be treated as met. The Rollover Options will not become
exercisable or lapse as a consequence of the Merger.
For option holders resident in the US, the offer of Rollover Options will only
be made to "accredited investors" (as such term is defined in Rule 501 under the
Securities Act) in a transaction that is exempt from the registration
requirements of the Securities Act. Shares in CAT issuable upon exercise of such
Rollover Options may not be sold without registration under the Securities Act,
except pursuant to the applicable resale provisions of Rule 144 under the
Securities Act, or another applicable exemption from the registration
requirements of the Securities Act or in a transaction not subject to such
requirements (including a transaction that satisfies the applicable requirements
for resales outside the United States pursuant to Regulation S under the
Securities Act).
OGS option holders in the US should consult their own legal advisors with
respect to the legal consequences of the Scheme in their particular
circumstances.
Rollover Options granted in respect of OGS options granted under the 1994 Scheme
will provide that redundant leavers are allowed one year from leaving in which
to exercise their options (rather than six months as specified in that scheme).
Additionally, for other leavers under that scheme, exercise of options will be
permitted at the discretion of the directors for a period not exceeding one year
after leaving (rather than the options lapsing automatically, as specified in
the scheme) and CAT has confirmed that it will exercise its discretion in favour
of G. Kirk Raab and Professor Raymond Dwek after they leave the Group, if the
options have not previously been exercised. These measures broadly conform the
leaver provisions with those applicable to options granted under the Executive
Scheme.
11. Risk factors
The attention of OGS Shareholders and CAT Shareholders is drawn to the
information set out in Part VIII of this document.
12. Overseas shareholders and holders of ADSs
Overseas shareholders and holders of CAT ADSs and OGS ADSs should refer to Part
VI of this document, which contains important information relevant to such
holders; to Part VII of this document, which contains a description of the New
CAT ADSs to be issued in the Scheme; and to paragraph 13 of Part X of this
document, which contains a description of certain UK and US tax consequences of
the Scheme and of holding CAT Shares and CAT ADSs.
13. Settlement, listing and dealings
Application has been made to the UK Listing Authority, for the New CAT Shares to
be admitted to the Official List and to the London Stock Exchange, for the New
CAT Shares to be admitted to trading on the London Stock Exchange's market for
listed securities. It is expected that Admission will become effective and
dealings, for normal settlement, will commence on the Effective Date. CAT will
seek to have the New CAT ADSs quoted on NASDAQ commencing on the Effective Date.
The London Stock Exchange and the UK Listing Authority will also be requested to
cancel the trading in OGS Shares on the London Stock Exchange's market for
listed securities and the listing of the OGS Shares on the Official List with
effect from the close of business on the dealing day immediately prior to the
Effective Date. The last day of dealings in OGS Shares will, therefore, be the
last dealing day before the Effective Date.
No transfers of OGS Shares (other than transfers to any member or members of the
CAT Group) will be registered after the Scheme Record Time. On the Effective
Date, share certificates in respect of OGS Shares will cease to be valid and
should, if so requested by CAT or as its agents may direct, be sent to CAT for
cancellation. An application to cancel the quotation of the OGS ADSs on NASDAQ
and a filing with the SEC to de-register OGS' ADSs will be made shortly after
the Effective Date.
Subject to the Scheme becoming effective (and except as provided in Part V of
the Scheme Document in relation to certain overseas OGS Shareholders), the issue
of the New CAT Shares to which any OGS Shareholders are entitled as
consideration under the Scheme will be effected in the following manner:
13.1 OGS Shares in uncertificated form (CREST)
Where, at the Scheme Record Time, an OGS Shareholder holds OGS Shares in
uncertificated form, the New CAT Shares to which such OGS Shareholder becomes
entitled will be issued to such person in uncertificated form through CREST. CAT
will procure that CRESTCo is instructed to credit the appropriate stock account
in CREST of such OGS Shareholder with such person's entitlement to New CAT
Shares at the commencement of dealings in the New CAT Shares.
CAT reserves the right to issue New CAT Shares in certificated form in the
manner referred to in paragraph 13.2 below if, for any reason outside its
reasonable control, it is not able to effect settlement in uncertificated form
in accordance with this paragraph 13.1.
13.2 OGS Shares in certificated form
Where, at the Scheme Record Time, an OGS Shareholder holds OGS Shares in
certificated form, the New CAT Shares to which such OGS Shareholder is entitled
will be issued in certificated form. Definitive certificates for New CAT Shares
will be despatched by first-class post to the address appearing in the register
of members of OGS as at the Scheme Record Time immediately prior to despatch or,
in the case of joint holders, to the holder whose name stands first in such
register in respect of the joint holders or in accordance with any special
instructions regarding communications. Definitive certificates and cheques in
respect of fractional entitlements will be despatched within 14 days following
the Effective Date.
Temporary documents of title will not be issued pending the despatch by
post of new definitive share certificates. Holders wishing to register transfers
of the New CAT Shares prior to the issue of the new share certificates will be
required to produce their existing certificates for OGS Shares to the CAT
Registrar. On the issue of definitive share certificates for the New CAT Shares,
the certificates for the existing OGS Shares will cease to be valid. Every
holder of OGS Shares who has not already produced his or her existing
certificate(s) to the CAT Registrar will be bound on the request of OGS to
deliver up to OGS, or to any person appointed by OGS, the existing
certificate(s) for cancellation. Existing CAT share certificates will continue
to be valid.
13.3 OGS ADSs
Upon the Effective Date: (i) the OGS Shares underlying each OGS ADS will
be cancelled and New CAT Shares will be issued to the OGS ADS Depositary based
on the exchange ratio of 0.3620 New CAT Shares for each OGS Share; (ii) the OGS
ADS Deposit Agreement will be amended to be identical to the CAT ADS Deposit
Agreement and the OGS ADS facility will become part of the CAT ADS facility; and
(iii) each holder of OGS ADSs will be required to exchange their OGS ADSs for
CAT ADSs based on the exchange ratio of 0.3620 New CAT ADSs for each OGS ADS.
Following the Effective Date, The Bank of New York, as depositary for the
OGS and CAT ADS facilities, will mail a notice to registered holders of OGS ADSs
regarding the mechanics of the exchange of their existing OGS ADSs for New CAT
ADSs. Registered holders will need to follow the instructions set out in the
notice. If you hold your OGS ADSs through a broker, financial institution or
other nominee or otherwise, you must rely on the procedures of your broker,
financial institution, or other nominee.
13.4 General
All documents and remittances sent to OGS Shareholders (or in accordance
with their directions) will be despatched at their own risk.
All mandates, instructions and other instruments in force relating to
holdings in OGS Shares will, unless and until amended or revoked, continue in
force and be deemed as from the Effective Date to relate to payments and notices
to or by CAT in respect of New CAT Shares.
13.5 Fractional entitlements
Fractions of a New CAT Share will not be issued to OGS Shareholders, but
will be aggregated and sold in the market and, in the case of OGS Shares held in
certificated form, the relevant share of the proceeds paid by cheque to the
relevant OGS Shareholder. In the case of OGS Shares held in uncertificated form,
CAT will ensure that an assured payment obligation in respect of the sums
payable in respect of fractional entitlements is created in accordance with the
CREST assured payment arrangements provided that CAT may (if, for any reason, it
wishes to do so) make payment of the said sums by cheque as aforesaid.
Fractions of a CAT ADS will not be issued to any holder of an OGS ADS. All
fractions to which holders of OGS ADSs would otherwise have been entitled will
be aggregated and sold in the market after the Effective Date and the ADS
Depositary will receive an amount in pounds sterling equal to the total amount
payable in respect of fractional entitlements in respect of OGS Shares held by
the ADS Depositary. Such amount will be converted into US dollars by the OGS ADS
Depositary pursuant to the terms and conditions of the OGS ADS Deposit
Agreement. It is expected that once the OGS ADS Depositary has received the
funds, holders OGS ADSs will receive their pro rata portion (if any) of the US
dollars from the OGS ADS Depositary upon surrender of their OGS ADSs in
accordance with the terms of the OGS ADS Deposit Agreement.
14. Further information
Your attention is drawn to the remaining parts of this document which contain
further information on CAT, OGS and the listing of the New CAT Shares.
INVESTORS SHOULD READ THE WHOLE OF THIS DOCUMENT AND NOT JUST RELY ON SUMMARY
INFORMATION OR ON ANY ONE SECTION OF THIS DOCUMENT.
PART II
FINANCIAL INFORMATION RELATING TO THE CAT GROUP
The following financial information has been extracted, without material
adjustment, from the audited consolidated financial statements of the CATGroup
for the three years ended 30 September 2002.
This financial information does not constitute statutory accounts within the
meaning of section 240 of the Companies Act. Copies of the accounts for each of
the three years ended 30 September 2002, which have been reported on by the
Company's auditors, have been delivered to the Registrar of Companies in England
and Wales. The reports of the auditors were unqualified and did not contain any
statements required under sub-section 237(2) or sub-section 237 (3) of the
Companies Act.
Consolidated profit and loss accounts
Years ended 30 September
2002 2001 2000
Notes (pound)'000 (pound)'000 (pound)'000
Turnover 2 9,471 7,121 7,018
Direct costs (80) (351) (381)
----------- ----------- -----------
Gross profit 9,391 6,770 6,637
----------- ----------- -----------
Research and development expenses (31,307) (21,393) (15,728)
Drug Royalty Corporation transaction costs 3 (7,913) -- --
Other general and administration expenses (8,321) (6,443) (4,842)
General and administration expenses (16,234) (6,443) (4,842)
----------- ----------- -----------
Operating loss (38,150) (21,066) (13,933)
----------- ----------- -----------
Interest receivable (net) 5 6,386 9,295 5,644
Loss on ordinary activities before taxation 4 (31,764) (11,771) (8,289)
----------- ----------- -----------
Taxation on loss on ordinary activities 7 3,557 -- --
----------- ----------- -----------
Loss for the financial year (28,207) (11,771) (8,289)
Loss per share - basic and fully diluted (pence) 8 78.7p 33.3p 27.5p
----------- ----------- -----------
Shares used in calculating net loss per share (number) 35,828,446 35,313,260 30,179,818
----------- ----------- -----------
The losses for all years arise from continuing operations
Consolidated Statements of Total Recognised Gains and Losses
2002 2001 2000
Notes (pound)'000 (pound)'000 (pound)'000
Loss for the financial year (28,207) (11,771) (8,289)
Gain/(loss) on foreign exchange transaction 96 1 (7)
----------- ----------- -----------
Total recognised losses relating to the year (28,111) (11,770) (8,296)
----------- ----------- -----------
The accompanying notes are an integral part of these consolidated profit and
loss accounts and consolidated statements of total recognised gains and losses.
Consolidated balance sheets
As at 30 September
2002 2001 2000
Notes (pound)'000 (pound)'000 (pound)'000
Fixed assets
Intangible assets 9 7,933 4,075 4,448
Tangible assets 10 12,429 6,642 5,008
Investments 215 -- --
-------- -------- --------
20,577 10,717 9,456
-------- -------- --------
Current assets
Debtors 12 6,556 4,940 3,452
Investment in liquid resources 13 126,694 156,228 156,502
Cash at bank and in hand 3,081 585 26
-------- -------- --------
136,331 161,753 159,980
-------- -------- --------
Creditors: amounts falling due within one year 14 (12,563) (8,335) (9,627)
-------- -------- --------
Net current assets 123,768 153,418 150,353
-------- -------- --------
Total assets less current liabilities 144,345 164,135 159,809
Creditors: amounts falling due after more than one year 15 (8,580) (8,085) (7,369)
-------- -------- --------
Net assets 135,765 156,050 152,440
-------- -------- --------
Capital and reserves
Called-up share capital 17 3,621 3,546 3,477
Share premium account 17 202,534 195,017 179,706
Other reserve 18 13,456 13,451 13,451
Profit and loss account 18 (83,846) (55,964) (44,194)
-------- -------- --------
Shareholders' funds - all equity 19 135,765 156,050 152,440
-------- -------- --------
The accompanying notes are an integral part of these consolidated balance
sheets.
Consolidated cash flow statements
Years ended 30 September
2002 2001 2000
Notes (pound)'000 (pound)'000 (pound)'000
Net cash inflow from operating activities 20 (26,808) (19,150) (3,609)
Returns on investment and servicing of finance 21 7,558 8,322 4,245
Taxation 21 920 -- --
Capital expenditure and financial investment 21 (9,961) (3,481) (974)
------- ------- --------
Net cash outflow before management of liquid
resources and financing (28,291) (14,309) (338)
Management of liquid resources 21 29,534 274 (133,729)
Financing 21 1,448 15,380 132,293
------- ------- --------
Increase/(decrease) in cash 22 2,691 1,345 (1,774)
------- ------- --------
The accompanying notes are an integral part of these consolidated cash flow
statements.
1. Accounting policies
A summary of the principal accounting policies is set out below. These have all
been applied consistently throughout the periods covered by this report with the
exception of the policy for revenue recognition which is now as explained below
and the impact of this change is explained in note 3.
(a) Basis of accounting
The financial statements have been prepared under the historical cost
convention and in accordance with generally accepted accounting standards in the
United Kingdom ("UK GAAP")
(b) Basis of consolidation
The Group financial statements consolidate the financial statements of CAT
and its subsidiary undertakings, drawn up to 30 September each year. All
intercompany balances and transactions have been eliminated on consolidation.
The acquisition of CAT Limited, by way of share for share exchange on 20
December 1996, was accounted for as a group reconstruction in accordance with
Financial Reporting Standard Number 6. Consequently, consolidated financial
information is presented as if the Company has always owned CAT Limited.
Otherwise, the results of subsidiaries acquired are consolidated for the periods
from the date on which control passed. Such acquisitions are accounted for under
the acquisition method. The results of subsidiaries disposed of are consolidated
up to the date on which control passed.
(c) Goodwill
Goodwill, representing the excess of fair value of the consideration given
over the fair value of the identifiable assets and liabilities acquired, is
capitalised as an asset on the balance sheet. On disposal of a previously
acquired business, the attributable amount of goodwill previously written off to
reserves under the then accounting policy is included in determining the profit
or loss on disposal.
(d) Turnover
Turnover principally consists of income received in the normal course of
business from licence fees, technical milestones, clinical milestones, fees for
research and development services, payments for purchased rights, and royalties.
These are stated net of trade discounts, VAT and other sales related taxes.
A description of the various elements of turnover and their accounting
policies is given below.
Licence fees
Licence fees are deferred and recognised over the period of the licence
term or the period of the associated research and development agreement (where
relevant). In circumstances where no such defined period exists, the licence fee
is deferred and recognised over the period to expiration of the relevant patents
licensed. For licence fees, where a proportion of the fee is creditable against
research and development services to be provided in the future that proportion
of the amount received is deferred and recognised over the period during which
the services are rendered.
Technical milestones
During certain research and development programs, the Group receives
non-refundable milestone payments when it achieves certain defined technical
criteria. Such milestones are recognised based on the percentage of completion
of the relevant research and development program subject to the total revenue
recognised being limited to the aggregate amount of non milestone payments
received. The percentage completion is determined by reference to effort in
hours incurred compared to total estimated effort for the program.
Clinical milestones
The Group receives non-refundable clinical development milestones when a
licensee or corporate partner achieves key stages in clinical trials which they
are conducting with a view to the ultimate commercialisation of a product
derived using the Group's proprietary technology. Such milestones are recognised
when received except that if such milestones are creditable against future
royalty payments a relevant amount will be deferred and released as the related
royalty payments are received.
Research and development services
The Group provides research and development services to certain corporate
collaborators, usually in the form of a defined number of the Group's employees
working under the direction of the collaborator to further the collaborator's
research and development effort. Such contracts are made on the basis of Full
Time Equivalent ("FTE") employees and are charged at a specified rate per FTE.
Revenues from FTE services are recognised as the services are rendered.
Purchased rights
Under an agreement with Drug Royalty Corporation Inc. ("DRC"), the Group
received a payment of (pound)1.5 million in 1994 in return for rights to a
percentage of revenues (and certain other payments) received by the Group over a
period terminating in 2009. The Group's accounting policy is that the payment be
deferred and recognised ratably over the period for which rights were purchased.
On 2 May 2002, the Group bought out this royalty obligation with the issue
of CAT Shares to DRC. The remaining balance of deferred income has been released
in the year ended 30 September 2002.
Royalties
Royalty income is generated by sales of products incorporating the Group's
proprietary technology and is recognised when received. The Group has yet to
receive any significant royalty payments.
(e) Government grants
Grants of a revenue nature are credited to the profit and loss account as
the related expenditure is incurred.
(f) Taxation
Current tax, including UK corporation tax and foreign tax, is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted or substantially enacted by the balance sheet date.
The Company has adopted FRS 19 'Deferred Tax'.
Deferred tax is provided in full on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallize based on
a current tax rates and law. Timing differences arise from the inclusion of
items of income and expenditure in taxation computations in periods different
from those in which they are included in financial statements. Deferred tax is
not provided on timing differences arising from the revaluation of fixed assets
where there is no commitment to sell the asset, or on unremitted earnings of
subsidiaries and associates where there is no commitment to remit these
earnings. Deferred tax assets are recognized to the extent that it is regarded
as more likely than not that they will be recovered. Deferred tax assets and
liabilities are not discounted.
(g) Research and development
Research and development expenditure is written off as incurred.
(h) Collaboration arrangements
The Group has entered into certain collaboration arrangements whereby the
parties agree to work jointly on research and development of potential
therapeutic products. Under such arrangements the parties agree which elements
of research and development each will perform. These arrangements do not include
the creation of any separate entity to conduct the activities nor any separate
and distinct assets or liabilities. The parties agree that the combined cost of
all relevant activities will be borne by the parties in a particular proportion
and that net revenues derived from sales of any resulting product will be shared
similarly. The sharing of costs will result in balancing payments between the
parties and such payments receivable or payable will be respectively added to or
deducted from research and development costs in the profit and loss account. Any
amounts receivable or payable at a period end are included in the balance sheet
under debtors or creditors.
(i) Pension costs
The Group operates a group personal pension plan which is a defined
contribution scheme. The amount charged to the profit and loss account in
respect of pension costs is the Group's contributions payable in the year.
Differences between contributions payable in the year and contributions actually
paid are shown as either accruals or prepayments in the balance sheet.
(j) Intangible assets
Purchased intangible assets (excluding goodwill) are capitalised as assets
on the balance sheet at fair value on acquisition and amortised over their
useful economic lives, subject to reviews for impairment when events or change
of circumstances indicate that the carrying value may not be recoverable using
cash flow projections. To the extent carrying values exceed fair values, an
impairment is recognized and charged to the profit and loss account in that
period. This applies to intangibles purchased separately from a business and
also to intangibles acquired as part of the acquisition of a business, if their
value can be measured reliably on initial recognition. The Group's purchased
intangible assets include access to intellectual property and options for
product development rights which are being amortised over seven years and also
include certain patents which are being written off over their term to expiry
which is between 12 and 16 years from the date of acquisition. When reviewing
all these assets for impairment, the Directors have considered future cash flows
arising.
(k) Tangible fixed assets
Tangible fixed assets are stated at cost, net of depreciation and any
provision for impairment. Depreciation is provided on all tangible fixed assets
other than freehold land on a straight-line basis at rates calculated to write
off the cost, less estimated residual value, of each asset over its expected
useful life as follows:
Freehold buildings: over 12 years.
Motor vehicles: 33 1/3 per cent. per annum.
Office and laboratory equipment: 25 per cent. per annum.
Fixtures and fittings: over either 5 or 20 years (or the
remaining lease term if less).
(l) Investments
Fixed asset investments are shown at cost less provision for impairment.
(m) Liquid resources
Liquid resources comprise negotiable securities and term deposits and are
shown at cost with accrued interest included in debtors.
Where relevant, a provision is made such that cost plus accrued interest
does not exceed market value.
(n) Foreign currency
Transactions in foreign currencies are recorded at the rate of exchange at
the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are reported at the rates of
exchange prevailing at that date. Any gain or loss arising from a change in
exchange rates subsequent to the date of the transaction is included as an
exchange gain or loss in the profit and loss account.
The results of overseas operations and their balance sheets are translated
at the rates ruling at the balance sheet date. Exchange differences arising on
translation of the opening net assets and results of overseas operations are
dealt with through reserves.
(o) Leases
Assets held under finance leases, which confer rights and obligations
similar to those attached to owned assets, are capitalised as tangible fixed
assets and are depreciated over the shorter of the lease terms and their useful
lives. The capital elements of future lease obligations are recorded as
liabilities, while the interest elements are charged to the profit and loss
account over the period of the leases to produce a constant rate of charge on
the balance of capital repayments outstanding. Hire purchase transactions are
dealt with similarly, except that assets are depreciated over their useful
lives.
Rentals under operating leases are charged on a straight-line basis over
the lease term even if payments are made on another basis.
(p) Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting standards requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the dates of the
financial statements and the reported amounts of revenues and expenses during
the year. In the preparation of these consolidated financial statements,
estimates and assumptions have been made by management concerning the selection
of useful lives of fixed assets, provisions necessary for certain liabilities,
the carrying value of investments, the recoverability of deferred tax assets and
other similar evaluations. Actual results could differ from those estimates.
2. Turnover and loss on ordinary activities before taxation
Turnover and loss on ordinary activities before taxation relate solely to the
principal activity and are attributable to the continuing operations of the
Group substantially, all of which take place in the United Kingdom.
Turnover principally consists of licence fees, milestone payments and fees for
research and development services provided under corporate agreements.
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Total turnover 16,891 9,421 7,018
Less: intra-group eliminations (7,420) (2,300) --
------- ------ -----
Consolidated turnover 9,471 7,121 7,018
------- ------ -----
2. Turnover and loss on ordinary activities before taxation (continued)
Consolidated turnover was generated from customers in the following geographical
areas:
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
United Kingdom -- -- 316
Europe 135 53 1,104
United States of America 8,674 6,969 5,598
Rest of World 662 99 --
------- ------ -----
9,471 7,121 7,018
------- ------ -----
Net liabilities of (pound)349,000 (excluding creditors eliminated on
consolidation of (pound)9,210,000) (2001 - net assets of (pound)643,000,
excluding creditors eliminated on consolidation of (pound)2,387,000) and total
assets of (pound)549,000 (2001 - (pound)643,000) are held in the United States
of America.
Consolidated turnover by type:
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Licence fees 1,676 1,635 699
Technical milestones 35 -- 652
Clinical milestones 1,396 -- 1,000
Contract research fees 5,611 5,369 4,536
Other 753 117 131
----- ----- -----
Total 9,471 7,121 7,018
----- ----- -----
During the financial years ended 30 September 2002, 2001 and 2000, certain
customers individually contributed more than 10 per cent. of the Group's revenue
in each year. The amounts of those individual contributions in order of size by
year were as follows:
% (pound)'000
2002 Customer contributing greatest % to revenue 36 3,424
2002 Customer contributing second greatest % to revenue 31 2,954
-- -----
Total 67 6,378
-- -----
2001 Customer contributing greatest % to revenue 31 2,230
2001 Customer contributing second greatest % to revenue 30 2,101
2001 Customer contributing third greatest % to revenue 24 1,742
-- -----
Total 85 6,073
-- -----
2000 Customer contributing greatest % to revenue 37 2,609
2000 Customer contributing second greatest % to revenue 20 1,425
2000 Customer contributing third greatest % to revenue 15 1,050
2000 Customer contributing fourth greatest % to revenue 14 1,000
-- -----
Total 86 6,084
-- -----
As at 30 September 2002, the two customers shown above constituted 89 per cent.
of the Group's trade receivables. As at 30 September 2001, the three customers
shown above constituted 96 per cent. of the Group's trade receivables.
3. Drug Royalty transaction costs
General and administration expenses include (pound)7.9 million of costs incurred
in the year relating to the two transactions entered into with DRC during the
year (comparative periods: none).
In January 2002, the Group announced a recommended offer for the whole of DRC. A
competing offer was made by Inwest Investments Ltd of Canada which was accepted
in April 2002.
Under an agreement with DRC, the Group received a payment of (pound)1.5 million
in 1994 in return for rights to a percentage of revenues (and certain other
payments) received by the Group over a period terminating in 2009. On 2 May
2002, the Group bought out this royalty obligation to DRC for consideration of
(pound)6.1 million (CAD$14 million) with the issue of 463,818 CAT Shares to DRC.
The remaining balance of (pound)0.6 million of deferred income has all been
released to turnover in the period.
The professional fees incurred in the Group's bid and royalty buy-back were
(pound)1.8 million.
4. Loss on ordinary activities before taxation
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
The loss on ordinary activities before taxation is stated after charging
(crediting):
Depreciation and amounts written off owned tangible fixed assets: 2,617 2,146 1,808
Amortisation of intangible fixed assets 882 373 374
Auditors' remuneration:
- - audit Deloitte & Touche 35 -- --
- - audit Arthur Andersen -- 42 27
- - other assurance Deloitte & Touche 19 -- --
- - other Deloitte & Touche 9 -- --
- - other Arthur Andersen 287 149 219
Foreign exchange loss/(gain) 192 (56) (123)
Profit on disposal of Denzyme ApS (2) -- --
Operating lease rentals:
- - plant and machinery 5 3 3
- - other operating leases 874 721 290
Allocations under equity participation schemes 607 416 459
------ ------ ------
Arthur Andersen resigned as auditors to the Group on 17 May 2002 and were
replaced by Deloitte & Touche.
5. Interest receivable (net)
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Interest receivable 6,386 9,295 5,644
------ ------ ------
6. Staff costs
The average monthly number of persons (including Executive Directors) employed
by the Group was as follows:
2002 2001 2000
Number Number Number
Management and administration 39 32 22
Research and development 235 192 139
------- ------ -----
274 224 161
------- ------ -----
Their aggregate remuneration comprised:
(pound)'000 (pound)'000 (pound)'000
Wages and salaries 9,771 7,268 5,233
Social security costs:
- - (credit)/charge provided on unapproved options (248) (194) 523
- - on wages and salaries 970 740 527
Other pension costs 875 641 432
------- ------ -----
11,368 8,455 6,715
------- ------ -----
The Group has made a provision for employer's National Insurance payable on
certain options granted under the CSOP Part 'B' scheme in December 1999. The
liability will not crystallise until the options are exercised (they are
exercisable from December 2002) and the ultimate liability will be determined by
the difference between the exercise price paid by the employee and the market
price on exercise and on the then prevailing rate for employer's contributions.
The options are exercisable subject to the condition that the proportionate
increase in the Closing Price of shares in the Company over a specified period
must exceed the proportionate increase in the total return on the FTSE All Share
Index. The specified period begins on the date of grant and ends between the
third and fourth anniversary of the date of grant.
The provision is being made systematically by reference to the market value of
the shares at the balance sheet dates over the period from the date of grant to
the end of the performance period, and from that date to the date of actual
exercise the provision will be adjusted by reference to changes in market value.
For this purpose, the performance period is assumed to be of minimum duration.
The provision and corresponding charges to the profit and loss account will be
affected by: the elapse of performance periods; the remaining number and option
price of shares under option; and the market value of the shares.
The market price of shares at 30 September 2002 was (pound)4.64. If that price
and the relevant number of shares under option remained unchanged, the charge
for a further year would amount to (pound)5,000. If the market value of the
shares were to increase by 10 per cent. over that at the year end, the charge
would increase by (pound)22,000.
6. Staff costs (continued)
Directors' emoluments
Fees/ Performance Pension
basic Taxable related Total contributions
salary benefits remuneration 2002 2002
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
J C Aston 153.8 0.3 40.8 194.9 15.4
P A Chambre(i)/(iii) 172.5 147.6 81.3 401.4 --
D J Chiswell(ii)/(iv) 111.7 0.1 -- 111.8 11.2
D R Glover 151.2 0.3 37.1 188.6 15.1
K S Johnson 151.2 0.3 40.5 192.0 15.1
Non-Executive Directors
U Bicker 22.0 -- -- 22.0 --
J L Foght 22.0 -- -- 22.0 --
P B Garland 50.0 0.1 -- 50.1 --
Sir Aaron Klug 22.0 0.2 -- 22.2 --
P A Nicholson 22.0 2.2 -- 24.2 --
J W Stocker 34.0 -- -- 34.0 --
------- ------- ------- ------- -------
Aggregate emoluments 912.4 151.1 199.7 1,263.2 56.8
------- ------- ------- ------- -------
(i) Included within P.A. Chambre's salary are payments made to him during the
year of(pound)16,250 (2001: nil) for him to contribute towards his
retirement annuity contract.
(ii) D J Chiswell received a payment in lieu of notice of(pound)296,000 in
addition to the emoluments shown above.
(iii) Became a Director of the Company on 8 April 2002.
(iv) Resigned as a Director of the Company on 31 March 2002.
The emoluments of the Directors who served during the year ended 30 September
2001 were as follows:
Fees/ Performance Pension
basic Taxable related Total contributions
salary benefits remuneration 2001 2001
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
J C Aston 130.0 11.9 41.2 183.1 13.0
D J Chiswell 195.0 11.9 58.4 265.3 19.5
D R Glover 130.0 11.9 40.0 181.9 13.0
K S Johnson 130.0 11.9 37.1 179.0 13.0
Non-Executive Directors
U Bicker 21.0 -- -- 21.0 --
J L Foght 21.0 -- -- 21.0 --
P B Garland 45.0 0.4 -- 45.4 --
Sir Aaron Klug 21.0 0.1 -- 21.1 --
P A Nicholson 21.0 2.2 -- 23.2 --
J W Stocker 33.0 -- -- 33.0 --
----- ----- ----- ----- -----
Aggregate emoluments 747.0 50.3 176.7 974.0 58.5
----- ----- ----- ----- -----
6. Staff costs (continued)
The emoluments of the Directors who served during the year ended 30 September
2000 were as follows:
Fees/ Performance Pension
basic Taxable related Total contributions
salary benefits remuneration 2000 2000
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
J C Aston 115.0 12.1 32.6 159.7 11.5
D J Chiswell 155.0 11.4 55.2 221.6 15.5
D R Glover 115.0 12.1 28.9 156.0 11.5
K S Johnson 115.0 11.7 32.6 159.3 11.5
Non-Executive Directors
U Bicker 20.0 -- -- 20.0 --
J L Foght(i) 20.0 -- -- 20.0 --
P B Garland 40.0 0.5 -- 40.5 --
Sir Aaron Klug 20.0 -- -- 20.0 --
P A Nicholson 20.0 0.2 -- 20.2 --
J W Stocker 32.0 -- -- 32.0 --
----- ----- ----- ----- -----
Aggregate emoluments 652.0 48.0 149.3 849.3 50.0
----- ----- ----- ----- -----
(i) Of the fees for the services of J L Foght,(pound)10,000 was paid to
Prudential Vector Healthcare Group.
7. Taxation
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Research and development tax credit 3,557 -- --
----- ----- -----
During the year ended 30 September 2002, the Group received a refund of
(pound)920,000 in respect of the surrender of tax losses created through
research and development for the year ended 30 September 2000. A similar claim
has been made for the year ended 30 September 2001, which is reflected in other
debtors at 30 September 2002 and for which the Group received a refund of
(pound)2,637,000 in October 2002.
The tax assessed for the year differs from that resulting from applying the
standard rate of corporation tax in the UK of 30 per cent. (2001: 30 per cent.).
The differences are explained below:
2002 2001
(pound)'000 (pound)'000
Loss on ordinary activities before tax (31,764) (11,771)
Tax at 30% thereon (9,529) (3,531)
------- -------
Effects of:
Increase in losses carried forward 11,400 5,071
Expenses not deductible for tax purposes (1,041) (1,205)
Capital allowances in excess of depreciation (888) (335)
Utilisation of tax losses in respect of research and development tax credit (3,557) --
Movement in short term timing differences 58 --
------- -------
(3,557) --
------- -------
7. Taxation (continued)
Analysis of deferred tax balances:
2002 2001
(pound)'000 (pound)'000
Short term timing differences (58) --
Accelerated capital allowances 1,272 (335)
Tax losses available (23,658) (18,126)
------- -------
Total unprovided deferred tax asset (22,444) (18,461)
------- -------
At 30 September 2002, the Group had tax losses of approximately (pound)79
million (2001: (pound)60 million, 2000: (pound)36 million) available for relief
against future taxable points. Due to the availability of tax losses there is no
provision for deferred taxation. A deferred tax asset amounting to (pound)24
million representing such losses has not been recognised. The deferred tax asset
would become recoverable should the Group generate relevant taxable profits
against which the tax losses would be offset. The adoption of FRS 19 'Deferred
Tax' by the Group has no effect on prior periods.
8. Loss per share
Basic net loss per share is calculated by dividing net loss by the weighted
average number of ordinary shares outstanding during the year. The computation
of diluted net loss per share reflects the potential dilution that could occur
if dilutive securities and other contracts to issue ordinary shares were
exercised or converted into ordinary shares or resulted in the issue of ordinary
shares that then shared in the net loss of the Group.
Potentially dilutive issuable shares are included in the calculation of diluted
loss per share if their issue would increase net loss per share or decrease net
profit per share. Since the Group has reported losses, its basic and diluted
loss per share are therefore equal.
For the years ending 30 September 2002, 2001 and 2000, 867,316, 1,077,800 and
1,548,764 potentially dilutive issuable shares attributable to the exercise of
outstanding options were excluded from the calculation of diluted loss per
share. No adjustments were made to reported net loss in the computation of net
loss per share.
Loss per ordinary share (basic and diluted) is based on the loss for the
financial year of (pound)28,207,000 (2001: (pound)11,771,000, 2000:
(pound)8,289,000) and a weighted average number of ordinary shares of 35,828,446
(2001: 35,313,260, 2000: 30,179,818).
9. Intangible assets
Licences Patents Total
(pound)'000 (pound)'000 (pound)'000
Cost:
At September 2000 and 30 September 2001 -- 5,265 5,265
Additions 4,740 -- 4,740
----- ----- ------
At 30 September 2002 4,740 5,265 10,005
----- ----- ------
Amortisation:
At 30 September 2000 -- 817 817
Charge for the year -- 373 373
----- ----- ------
At 30 September 2001 -- 1,190 1,190
Charge for the year 509 373 882
----- ----- ------
At 30 September 2002 509 1,563 2,072
----- ----- ------
Net book value:
At 30 September 2002 4,231 3,702 7,933
----- ----- ------
At 30 September 2001 -- 4,075 4,075
----- ----- ------
At 30 September 2000 -- 4,448 4,448
----- ----- ------
10. Tangible fixed assets
Freehold
land and Fixtures Laboratory Office Motor
buildings and fittings equipment equipment vehicles Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Cost:
At 30 September 2000 788 3,001 6,157 657 6 10,609
Additions -- 1,428 2,004 339 14 3,785
Disposals (3) -- (2) -- -- (5)
---- ----- ------- ----- -- -------
At 30 September 2001 785 4,429 8,159 996 20 14,389
---- ----- ------- ----- -- -------
Additions -- 4,622 3,452 330 -- 8,404
Disposals -- -- (276) -- -- (276)
==== ===== ======= ===== == =======
At 30 September 2002 785 9,051 11,335 1,326 20 22,517
---- ----- ------- ----- -- -------
Depreciation:
At 30 September 2000 90 1,473 3,624 412 2 5,601
Charge for the year 49 565 1,375 154 3 2,146
---- ----- ------- ----- -- -------
At 30 September 2001 139 2,038 4,999 566 5 7,747
---- ----- ------- ----- -- -------
Charge for the year 49 740 1,655 167 6 2,617
Eliminated in respect of
disposals -- -- (276) -- -- (276)
---- ----- ------- ----- -- -------
At 30 September 2002 188 2,778 6,378 733 11 10,088
---- ----- ------- ----- -- -------
Net book value:
At 30 September 2002 597 6,273 4,957 593 9 12,429
---- ----- ------- ----- -- -------
At 30 September 2001 646 2,391 3,160 430 15 6,642
---- ----- ------- ----- -- -------
At 30 September 2000 698 1,528 2,533 245 4 5,008
---- ----- ------- ----- -- -------
11. Fixed asset investments
(pound)'000
Cost and net book value:
At 30 September 2000 and 2001 --
Additions 215
---
At 30 September 2002 215
---
The subsidiary undertakings of the Company, all of which are consolidated, are
as follows:
Percentage of
Name and Country of Incorporation and operation Principal activity ordinary shares held
Cambridge Antibody Technology Limited, England Research and development 100%
CAT Group Employees' Trustees Limited, England Share scheme trust company 100%
Optein Inc. (trading as Aptein Inc.), USA Research and development 100%
During the year ended 30 September 2002, the Group disposed of its wholly owned
subsidiary, Denzyme ApS, in return for a minority interest in another company.
The transaction has no impact on reported results.
12. Debtors
2002 2001
(pound)'000 (pound)'000
Due within one year:
Trade debtors 12 732
Other debtors 3,982 386
Prepayments and accrued income 2,562 3,822
----- -----
6,556 4,940
----- -----
13. Investment in liquid resources
2002 2001
(pound)'000 (pound)'000
Negotiable securities:
Floating rate notes 24,998 14,285
Certificates of deposit 98,000 128,498
Term deposits 3,696 13,445
------- -------
126,694 156,228
------- -------
The Group holds cash which is surplus to current requirements, but which will be
required to finance future operations, in sterling in interest bearing
marketable securities as described in note 16.
14. Creditors
2002 2001
(pound)'000 (pound)'000
Amounts falling due within one year:
Bank overdraft -- 163
Trade creditors 3,999 727
Taxation and social security 304 --
Other creditors 1,003 534
Accruals(i) 4,710 3,953
Deferred income 2,547 2,958
------ -----
12,563 8,335
------ -----
(i) Includes purchase commitments of (pound)888,000 (2001: (pound)101,000).
The bank overdraft comprises payments to suppliers and other third parties which
are in the course of presentation.
15. Creditors
2002 2001
(pound)'000 (pound)'000
Amounts falling due after more than one year:
Deferred income 8,580 8,085
----- -----
16. Financial instruments
The financial instruments of the Group comprise cash, liquid resources and
debtors and creditors arising in the normal course of business. The Group does
not trade in financial instruments or derivatives.
The Group's liquid resources are managed on a discretionary basis by a third
party. The mandate under which the fund managers operate includes the following
criteria:
o Investments only in freely negotiable instruments or deposit with
specified banks and building societies.
o For the whole fund, limits on the maximum exposure to counterparties with
particular minimum credit ratings, which ratings have been set
deliberately high.
o For investments in particular classes of instrument, minimum credit
ratings (which are tighter than for the fund as a whole) or an agreed
counterparty list.
o For the whole fund, a maturity profile which is tailored to the Group's
expected cash requirements (as investments are generally held to
maturity).
o No currency exposure or short positions.
These criteria are set by the Board and are reviewed when deemed necessary. The
principal purpose of the Group's liquid resources is for future funding and
hence their safeguarding is considered to be a greater priority than the actual
return made on the investments. The criteria for fund management reflect this.
The Audit Committee reviews the return made on the Group's funds against
benchmark market returns half yearly. The majority of the Group's investments
are short term investments and hence exposure to interest rate changes has been
minimal. Realisation of losses from interest rate movements is unlikely as
investments are held to maturity. Declines in interest rates over time will,
however, reduce the Group's interest income.
The results of the Group have not, to date, been materially impacted by exchange
rate fluctuations. However, a significant proportion of current and future
income is likely to be receivable in United States Dollars, which may give rise
to transactional currency exposures due to fluctuations in the exchange rate
between United States Dollars and Sterling, which is the Group's functional
currency.
16. Financial instruments (continued)
Where possible, the Group seeks to match United States Dollar income with United
States Dollar expenditure. To date, the Group has not hedged any transactional
currency exposure but will keep such exposures under review and where prudent
and appropriate may enter into such transactions in future.
Financial
Floating liabilities
Fixed rate rate on which
financial financial no interest
assets(i) assets(ii) is paid Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000
Financial assets and liabilities
At 30 September 2002
Sterling assets/(liabilities) 11,998 114,699 (1,678) 125,019
United States Dollar assets -- 4,755 -- 4,755
Other assets -- 1 -- 1
------ ------- ------ -------
Book value 11,998 119,455 (1,678) 129,775
------ ------- ------ -------
Fair value 12,000 119,563 (1,678) 129,885
------ ------- ------ -------
(i) Interest rates determined for more than one year
(ii) Interest rates determined at least once a year
Financial
Floating liabilities
Fixed rate rate on which
financial financial no interest
assets(i) assets(ii) is paid Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000
Financial assets and liabilities
At 30 September 2001
Sterling assets/(liabilities) 8,498 147,731 (1,346) 154,883
United States Dollar assets -- 1,760 -- 1,760
Other assets -- 7 -- 7
------ ------- ------ -------
Book value 8,498 149,498 (1,346) 156,650
------ ------- ------ -------
Fair value 8,966 151,943 (1,346) 159,563
------ ------- ------ -------
(i) Interest rates determined for more than one year
(ii) Interest rates determined at least once a year
The weighted average return on the fixed rate financial assets for 2002 was 3.1
per cent. (2001 - 6.1 per cent.), which was fixed over a weighted average term
of 1.3 years (2001 - 1.5 years). The returns achieved on fixed and floating rate
financial assets are determined by money market rates prevailing at the date a
transaction is entered into.
In this disclosure financial assets comprise liquid resources and cash at bank
and in hand. Short-term debtors and creditors have been excluded. The financial
liabilities on which no interest is paid comprise payments to third parties in
the course of presentation. These are payable on demand. The Directors do not
consider the deferred income balances to be financial liabilities where monies
received are non-refundable. Fair value of marketable securities is determined
by reference to market value.
16. Financial instruments (continued)
Currency exposures
At the year ends, the Group's individual operations had the following net
monetary assets and liabilities in currencies other than their functional
currency.
USD Sterling Other Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000
At 30 September 2002
Functional currency: Sterling 801 -- (87) 714
United States Dollar -- (90) -- (90)
---- --- ---- ----
801 (90) (87) 624
---- --- ---- ----
USD Sterling Other Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000
At 30 September 2001
Functional currency: Sterling 30 -- (2) 28
United States Dollar -- (88) -- (88)
---- --- ---- ----
30 (88) (2) (60)
---- --- ---- ----
Transactions in such monetary assets and liabilities give rise to currency gains
and losses in the profit and loss account.
17. Called-up share capital and share premium account
2002 2001
(pound)'000 (pound)'000
Authorised:
50,000,000 (2001 - 50,000,000) ordinary shares of 10 pence each - equity 5,000 5,000
----- -----
During the two years ending 30 September 2002, the Directors exercised their
powers to allot ordinary shares as shown in the table below.
10 pence Called-up Share
ordinary share premium
shares capital account
Number (pound)'000 (pound)'000
Allotted, called-up and fully paid - equity
At 1 October 2000 34,770,438 3,477 179,706
Issued to the All-Employee Share Ownership Plan 13,230 1 436
Exercise of options 363,073 36 1,332
In lieu of fees(ii) 1,142 1 35
Adjustment to fundraising expenses -- -- 15
To Genzyme Corporation as part of a corporate agreement in
October 2000(iv) 307,982 31 13,493
---------- ----- -------
At 30 September 2001 35,455,865 3,546 195,017
---------- ----- -------
Issued to the All-Employee Share Ownership Plan 36,838 4 623
Exercise of options 251,634 25 755
Exercise of options(i) 4,000 -- --
In lieu of fees(ii) 2,194 -- 37
To Drug Royalty Corporation as part of the termination
of the royalty agreement(iii) 463,818 46 6,102
---------- ----- -------
At 30 September 2002 36,214,349 3,621 202,534
---------- ----- -------
(i) Exercised over shares in CAT Limited and exchanged, issued at an aggregate
premium of (pound)5,000.
(ii) All Non-Executive Directors elected to take part of their fees in shares.
(iii) Shares were issued at a price of(pound)13.26 per share, being the average
share price for the ten days prior to 30 April 2002.
(iv) Shares were issued at a price of(pound)44.59 per share, being a 15 per
cent. premium to the average share price for the 20 days prior to 27
September 2000.
At 30 September 2002, options had been granted over ordinary shares of the
Company. Options also exist over shares in CAT Limited, which are matched with
share exchange option agreements whereby shares allotted in CAT Limited on
exercise are immediately exchanged for shares in the Company. The tabulation of
options below reflects the effective numbers and exercise prices of options over
shares in the Company.
Certain options were granted in one scheme in parallel with options in a
different scheme under arrangements whereby the exercise of options in one
scheme would cause a corresponding number of options to lapse in the other
scheme. Where relevant, pairs of linked options are counted as a single option.
17. Called-up share capital and share premium account (continued)
At 30 September 2002, share options and other rights were as follows:
Exercise price Earliest date exercisable Latest date exercisable Notes Number
Old schemes (pound)1.28 15 September 1996 14 September 2003 (i) 16,350
(pound)1.28 28 April 1998 27 April 2005 25,000
US$4.80 19 April 2001 19 April 2006 75,000
(pound)3.00 4 September 1999 3 September 2003 114,179
CSOP (pound)5.00 24 March 2000 23 March 2004 (ii) 39,670
(pound)5.00 24 March 2000 23 March 2007 (ii) 36,230
(pound)5.58 2 June 2000 1 June 2004 (ii) 3,584
(pound)5.58 2 June 2000 1 June 2007 (ii) 5,376
(pound)5.00 19 December 2000 18 December 2004 (ii) 67,400
(pound)5.00 19 December 2000 18 December 2007 (ii) 40,000
(pound)5.00 25 June 2001 24 June 2008 (ii) 42,500
(pound)5.00 27 November 2001 26 November 2008 (ii) 15,000
(pound)2.42 27 November 2001 26 November 2005 (ii) 125,632
(pound)2.42 27 November 2001 26 November 2008 (ii) 53,361
(pound)2.10 28 May 2002 27 May 2009 (ii) 4,375
(pound)2.87 3 December 2002 2 December 2006 (iii) 406,501
(pound)2.87 3 December 2002 2 December 2009 (iii) 68,231
(pound)23.03 26 May 2003 25 May 2010 (iii) 3,128
(pound)30.54 1 December 2003 30 November 2007 (iii) 57,704
(pound)30.54 1 December 2003 30 November 2010 (iii) 19,650
(pound)25.66 25 May 2004 24 May 2008 (iii) 1,458
(pound)25.66 25 May 2004 24 May 2011 (iii) 8,124
(pound)21.62 18 June 2004 17 June 2011 (iii) 3,471
CSOP
- - granted in year and (pound)17.07 30 November 2004 29 November 2011 (iii) 75,945
outstanding as at (pound)17.04 4 December 2004 3 December 2011 (iii) 99,579
30 September 2002 (pound)10.83 24 May 2005 23 May 2012 (iii) 79,354
(pound)10.83 24 May 2005 23 May 2012 (iv) 15,005
---------
Total 1,501,807
---------
(i) Includes linked options.
(ii) These options were subject to the condition as stated in note (iii) below.
This condition had been satisfied as at 30 September 2002.
(iii) These options are exercisable subject to the condition that the
proportionate increase in the Closing Price of shares in the Company over
a specified period must exceed the increase in the Total Shareholder
Return ("TSR") for the FTSE All Share Index. The specified period begins
on the date of grant and ends between the third and fourth anniversary of
the date of grant. In certain circumstances, such as the death of an
employee, the rules of the CSOP permit the Directors to allow options
which have been granted but which have not vested to be exercised provided
the exercise takes place within the period prescribed in the CSOP rules in
relation to these circumstances.
(iv) The number of options which will become exercisable will be determined on
the linear sliding scale on the third anniversary of the date of grant
based on the extent to which the TSR for the Company exceeds the
percentage increase in the TSR for the FTSE All Share Index by an amount
of between 0 per cent. and 33 per cent.
18. Profit and loss account and other reserve
Profit and Other
loss account reserve
(pound)'000 (pound)'000
At 30 September 2000 (44,194) 13,451
Retained loss for the year (11,771) --
Foreign exchange translation 1 --
------- ------
At 30 September 2001 (55,964) 13,451
------- ------
Retained (loss)/profit for the year (28,207) --
Premium on issue of capital in subsidiary -- 5
Foreign exchange translation 96 --
Write back of goodwill on sale of Denzyme ApS 229 --
------- ------
At 30 September 2002 (83,846) 13,456
------- ------
The other reserve represents the share premium account of CAT Limited and arises
on consolidation from the application of merger accounting principles to the
acquisition of that company.
The cumulative amount of goodwill written off against the Group's reserves is
(pound)nil (2001 - (pound)229,000).
19. Reconciliation of movements in Group shareholders' funds
2002 2001
(pound)'000 (pound)'000
Loss for the financial year (28,207) (11,771)
Other recognised gains and losses relating to the year 325 1
-------- --------
(27,882) (11,770)
New shares issued 7,597 15,380
-------- --------
Net increase in shareholders' funds (20,285) 3,610
-------- --------
Opening shareholders' funds 156,050 152,440
-------- --------
Closing shareholders' funds 135,765 156,050
-------- --------
20. Reconciliation of operating loss to operating cash flows
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Operating loss (38,150) (21,066) (13,933)
Depreciation charge 2,617 2,146 1,808
Amortisation of patents 882 373 374
Loss/(profit) on disposal of fixed assets -- 1 (5)
Shares issued to buy out DRC royalty agreement 6,149 -- --
Increase in debtors (158) (515) (1,159)
(Decrease)/increase in creditors 1,852 (89) (9,306)
------- ------- --------
Net cash outflow from operating activities (26,808) (19,150) (3,609)
------- ------- --------
21. Analysis of cash flows
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Returns on investments and servicing of finance
Interest received 7,558 8,322 4,245
------- ------- --------
Net cash inflow 7,558 8,322 4,245
------- ------- --------
Taxation 920 -- --
------- ------- --------
Net cash inflow 920 -- --
------- ------- --------
Capital expenditure and financial investment
Purchase of intangible assets (2,067) -- --
Purchase of tangible fixed assets (7,894) (3,485) (1,018)
Sale of tangible fixed assets -- 4 44
------- ------- --------
Net cash outflow (9,961) (3,481) (974)
------- ------- --------
Management of liquid resources
Decrease/(increase) in term deposits 9,749 10,762 (23,980)
Net (purchase)/sale of securities 19,785 (10,488) (109,749)
------- ------- --------
Net cash inflow/(outflow) 29,534 274 (133,729)
------- ------- --------
Financing
Issue of ordinary share capital 1,448 15,380 132,302
Capital elements of finance lease rental payments -- -- (9)
------- ------- --------
Net cash inflow 1,448 15,380 132,293
------- ------- --------
22. Analysis and reconciliation of net funds
1 October Exchange 30 September
2001 Cash flow movement 2002
(pound)'000 (pound)'000 (pound)'000 (pound)'000
Cash at bank 585 2,528 (32) 3,081
Overdrafts (163) 163 -- --
-------- ------- --- --------
-- 2,691 (32) --
Liquid resources 156,228 (29,534) -- 126,694
-------- ------- --- --------
Net funds 156,650 (26,843) (32) 129,775
-------- ------- --- --------
1 October Exchange 30 September
2000 Cash flow movement 2001
(pound)'000 (pound)'000 (pound)'000 (pound)'000
Cash at bank 26 559 -- 585
Overdrafts (949) 786 -- (163)
-------- ------- --- --------
-- 1,345 -- --
Liquid resources 156,502 (274) -- 156,228
-------- ------- --- --------
Net funds 155,579 1,071 -- 156,650
-------- ------- --- --------
22. Analysis and reconciliation of net funds (continued)
1 October Exchange 30 September
1999 Cash flow movement 2000
(pound)'000 (pound)'000 (pound)'000 (pound)'000
Cash at bank 849 (825) 2 26
Overdrafts -- (949) -- (949)
------- -------- --- --------
-- 1,774 -- --
Liquid resources 22,773 133,729 --- 156,502
Finance leases (9) 9 -- --
------- -------- --- --------
Net funds 23,613 131,964 2 155,579
------- -------- --- --------
2002 2001 2000
(pound)'000 (pound)'000 (pound)'000
Increase/(decrease) in cash in the year 2,691 1,345 (1,774)
(Decrease)/increase in liquid resources (29,534) (274) 133,729
Decrease in lease financing -- -- 9
-------- -------- --------
Change in net funds resulting from cash flows (26,843) 1,071 131,964
Exchange movements (32) -- 2
-------- -------- --------
Movement in net funds in year (26,875) 1,071 131,966
Net funds at beginning of year 156,650 155,579 23,613
-------- -------- --------
Net funds at end of year 129,775 156,650 155,579
-------- -------- --------
23. Financial commitments
Capital commitments of the Group were as follows:
2002 2001
(pound)'000 (pound)'000
Contracted but not provided for 515 827
--- ---
Since the end of the 2002 financial year, the Group has established a lease
financing facility. Furniture and equipment with a cost of (pound)504,000 have
been financed under this facility which is repayable over four years.
In the next year, the Group has operating lease commitments as follows,
categorised by period to expiry.
Land and Land and Land and
buildings Other buildings Other buildings Other
2002 2002 2001 2001 2000 2000
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Expiry date:
within one year -- -- -- 2 -- --
Between two and five years -- 48 -- 1 -- 3
after five years 1,801 -- 836 -- 275 --
----- -- --- --- --- ---
24. Pension arrangements
The Group operates a group personal pension plan. Contributions payable for the
year to 30 September 2002 were (pound)875,000 (2001 - (pound)641,000, 2000 -
(pound)432,000).
25. Related party transactions
During the 2000 financial year CAT Limited paid a fee of US$1.3 million to
Prudential Vector Healthcare Group ("Prudential Vector") under an arrangement
whereby Prudential Vector agreed to provide certain financial advisory services.
The arrangement was subsequently terminated although Prudential Vector were, in
certain circumstances, entitled to a further fee in respect of further
transactions entered into by CAT Limited in the period up to February 2001. No
such further transactions or payments have taken place.
J L Foght was a managing director of Prudential Vector at the time the
arrangement was entered into and the payment made and is a Non-Executive
Director of the Company.
The Board of Directors has determined that this transaction does not interfere
with Dr Foght's exercise of independent judgement and accordingly has determined
that it is in the best interests of the Company that he continues to serve on
the Audit Committee.
In accordance with Financial Reporting Standard Number 8 - Related Party
Disclosures, the Group does not disclose transactions or balances between Group
entities which are wholly eliminated on consolidation.
26. Litigation
As previously reported, CAT's patent infringement action against MorphoSys
relating to the European Winter II and McCafferty patents in Munich is currently
stayed pending the outcome of appeal proceedings at the European Patent Office.
In March 2002 the District Court in Washington DC issued a formal ruling that
MorphoSys does not infringe CAT's US Griffiths patent. The decision was based on
the method by which MorphoSys' library is derived. CAT has appealed this
decision. The appeal will be limited to the issue as to whether MorphoSys
infringes the Griffiths patent. A hearing date has not yet been set but it is
anticipated that the hearing will take place in mid 2003.
May 2003 has been proposed as the trial for the two legal actions in the
District Court in Washington DC in which CAT claims that MorphoSys infringes its
Winter II patent and two of the Winter/Lerner/Ruse patents. The preliminary
'Markman Hearings' on these cases were postponed. A new date for these hearings
has yet to be set by the Court.
A trial date of 17 February 2003 has been proposed for the legal action brought
by MorphoSys in respect of CAT's US McCafferty patent. The preliminary 'Markman
Hearing' on this case was postponed. A new date for this hearing has yet to be
set by the Court.
As previously reported, in 2000 Crucell issued writs against the Medical
Research Council ("MRC"), Scripps and Stratagene in a Dutch national court,
seeking a declaration that the Winter II patent was invalid or that Crucell did
not infringe the claims of the patent. A separate writ against MRC sought a
similar declaration in respect of the McCafferty patent Pursuant to its
agreements with the defendants. CAT is responsible for the defence of these
proceedings. The Court has declined jurisdiction for Crucell's non infringement
claims and assumed jurisdiction only on the invalidity claims (any decision will
only cover Holland). The Court's ruling to decline jurisdiction in the Winter II
case is currently under appeal by Crucell.
CAT intends to defend these proceedings vigorously and does not believe there is
merit in these claims. Whatever the outcome of the above litigation activity.
CAT believes that its ability to operate its own technology will not be
materially and adversely affected.
As previously reported following certain share issues by CAT Limited,
Continental Venture Capital Limited ("CVC") issued proceedings in the State of
New York claiming that it is entitled to anti-dilution shares (equivalent to
25,790 ordinary shares of 10 pence each). If CVC succeeds then the Directors
would be obliged to issue anti-dilution shares to all similarly situated
participants (approximately 763,000 ordinary shares of 10 pence each). Both
parties issued cross motions for summary judgement which were denied in May
2000. There has been no change in the status of proceedings during the year and
the Directors continue to believe, on the basis of legal advice they have
received, that the proceedings have no merit.
PART III(A)
FINANCIAL INFORMATION RELATINGTOTHE OGS GROUP
The following financial information has been extracted, without material
adjustment, from the audited consolidated financial statements of the OGS Group
for the three years ended 31 December 2001. During the year ended 31 December
2000 OGS revised the value ascribed to warrants which were issued in November
1999 (see Note 1). The financial statements for the year ended 31 December 2000
restated the results for the year ended 31 December 1999 so as to reflect this
change in accounting policy. The consolidated financial information set out
below includes both the financial information for the year ended 31 December
1999 as originally stated and as restated.
This financial information does not constitute statutory accounts within the
meaning of section 240 of the Companies Act.
Copies of the financial statements for each of the periods referred to above
have been delivered to the Registrar of Companies in England and Wales.
PricewaterhouseCoopers, Chartered Accountants and Registered Auditors of 1
Embankment Place, London, WC2N 6RH have made reports under section 235 of the
Companies Act in respect of the statutory accounts for each of the years ended
31 December 1999 and 2000 referred to above. These reports were unqualified and
did not contain a statement under sub-section 237(2) or sub-section 237(3) of
the Companies Act. Ernst & Young LLP, Registered Auditors, of Apex Plaza,
Reading, RG1 1YE have made a report under section 235 of the Companies Act in
respect of the statutory accounts for the year ended 31 December 2001. This
report was unqualified and did not contain a statement under sub-section 237(2)
or sub-section 237(3) of the Companies Act.
Consolidated profit and loss account
1999 1999
2001 2000 (original) (restated)
Notes (pound)000 (pound)000 (pound)000 (pound)000
Turnover 2, 4 13,376 8,934 8,701 8,701
Net operating costs 3 (49,396) (28,904) (20,584) (21,258)
------- ------- ------- -------
Operating loss (36,020) (19,970) (11,883) (12,557)
Profit on disposal 5 82 -- 388 388
Share of joint venture loss 4, 13 (2,007) -- -- --
------- ------- ------- -------
Loss on ordinary activities before
interest and taxation (37,945) (19,970) (11,495) (12,169)
Net interest receivable 8 9,733 3,156 1,807 1,807
------- ------- ------- -------
Loss on ordinary activities before taxation 9 (28,212) (16,814) (9,688) (10,362)
Tax on loss on ordinary activities 10 2,864 1,205 -- --
------- ------- ------- -------
Loss for the year (25,348) (15,609) (9,688) (10,362)
------- ------- ------- -------
Loss per ordinary 5 pence share
- - basic and diluted 11 (46.04p) (38.64p) (26.00p) (27.81p)
------- ------- ------- -------
There is no difference between the losses on ordinary activities before taxation
and the losses for the years stated above, and their historical cost
equivalents. The results for the periods above are derived entirely from
continuing activities.
Statement of Group total recognised gains and losses
2001 2000 1999
(pound)000 (pound)000 (pound)000
Loss for the year (25,348) (15,609) (9,688)
------- ------- -------
Total recognised losses for the year (25,348) (15,609) (9,688)
Prior year adjustments/release of warrant reserve -- (674) (674)
------- ------- -------
Total losses recognised since last annual report (25,348) (16,283) (10,362)
------- ------- -------
Consolidated balance sheet
1999 1999
2001 2000 (original) (restated)
Notes (pound)000 (pound)000 (pound)000 (pound)000
Fixed assets
Tangible assets 12 14,221 12,738 5,743 5,743
Investments
Investment in joint venture - share of
gross assets 14,679 -- -- --
Investment in joint venture - share of
gross liabilities (1,686) -- -- --
Investment in joint venture - provision
for unrealised profit (2,708) -- -- --
-------- -------- ------- -------
10,285 12,738 5,743 5,743
Other investments 13 4,251 -- -- --
-------- -------- ------- -------
28,757 12,738 5,743 5,743
-------- -------- ------- -------
Current assets
Stock 14 346 226 222 222
Debtors 15 9,626 6,109 3,809 3,809
Cash at bank and in hand 176,618 203,892 25,969 25,969
-------- -------- ------- -------
186,590 210,227 30,000 30,000
-------- -------- ------- -------
Creditors: amounts falling due within one year 16 (18,250) (10,725) (5,806) (5,806)
-------- -------- ------- -------
Net current assets 168,340 199,502 24,194 24,194
-------- -------- ------- -------
Total assets less current liabilities 197,097 212,240 29,937 29,937
Creditors: amounts falling due after more
than one year 17 (2,399) (2,383) (3,197) (3,197)
Provisions for liabilities and charges 18 (87) (181) -- --
-------- -------- ------- -------
Net assets 194,611 209,676 26,740 26,740
======== ======== ======= =======
Capital and reserves
Share capital 21 2,778 2,727 1,866 1,866
Share premium account 23 275,950 265,718 67,360 67,360
Capital reserve 23 11,107 11,107 11,107 11,107
Warrant reserve 23 -- -- -- 674
Profit and loss account (deficit) 23 (95,224) (69,876) (53,593) (54,267)
-------- -------- ------- -------
Equity shareholders' funds 23 194,611 209,676 26,740 26,740
-------- -------- ------- -------
Consolidated cash flow statement
1999 1999
2001 2000 (original) (restated)
Notes (pound)000 (pound)000 (pound)000 (pound)000
Net cash flow from operating activities A (22,164) (14,447) (13,209) (13,209)
Returns on investments and servicing
of finance
Interest received 9,042 2,575 2,013 2,013
------- -------- ------- -------
Net cash flow from returns on investments
and servicing of finance 9,042 2,575 2,013 2,013
------- -------- ------- -------
Capital expenditure and financial investment
Purchases of tangible fixed assets (5,306) (9,266) (3,935) (3,935)
Purchases of fixed asset investments (19,251) -- -- --
Sale of tangible fixed assets -- -- 6 6
------- -------- ------- -------
Net cash flow from capital expenditure
and financial investment (24,557) (9,266) (3,929) (3,929)
------- -------- ------- -------
Disposals
Cash consideration from sale of biochemicals
product line 5 115 -- -- --
Cash consideration from sales of other assets 7 -- 926 926
------- -------- ------- -------
Net cash flow before management of liquid
resources and financing (37,557) (21,138) (14,199) (14,199)
------- -------- ------- -------
Management of liquid resources B 39,480 (176,738) 13,567 13,567
Financing
Issue of ordinary share capital 10,552 213,873 115 115
Expenses paid in connection with share issues (269) (14,812) -- --
------- -------- ------- -------
Net cash flow from financing 10,283 199,061 115 115
------- -------- ------- -------
(Decrease)/increase in net cash C 12,206 1,185 (517) (517)
------- -------- ------- -------
Notes to the consolidated cash flow statement
A. Reconciliation of operating loss to net cash flow from operating
activities
1999 1999
2001 2000 (original) (restated)
(pound)000 (pound)000 (pound)000 (pound)000
Operating loss (36,020) (19,970) (11,883) (12,557)
Depreciation charges (including profit/(loss)
on disposals) 4,418 2,867 2,384 2,384
Warrants issued -- -- -- 674
Increase in stock (170) (4) (59) (59)
(Increase)/decrease in debtors 34 (514) (2,960) (2,960)
(Decrease)/increase in deferred income 6,815 706 (1,190) (1,190)
Increase in creditors 2,759 2,468 499 499
-------- -------- ------- -------
13,856 5,523 (1,326) (652)
-------- -------- ------- -------
Net cash flow from operating activities (22,164) (14,447) (13,209) (13,209)
-------- -------- ------- -------
B. Reconciliation of cash flow to movement in net funds
1999 1999
2001 2000 (original) (restated)
(pound)000 (pound)000 (pound)000 (pound)000
(Decrease)/increase in cash in the year 12,206 1,185 (517) (517)
Cash flow from (decrease)/increase in
liquid resources (39,480) 176,738 (13,567) (13,567)
-------- -------- ------- -------
Movement in net funds in the year (27,274) 177,923 (14,084) (14,084)
-------- -------- ------- -------
Net funds at 1 January 203,892 25,969 40,053 40,053
-------- -------- ------- -------
Net funds at 31 December 176,618 203,892 25,969 25,969
-------- -------- ------- -------
C. Analysis of net funds
At 1 At 1 At 1 At 31
January Cash January Cash January Cash December
1999 flow 2000 flow 2001 flow 2001
(original) (original) (restated) (restated)
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Cash at bank and in hand 1,178 (517) 661 1,185 1,846 12,206 14,052
Bank deposits - liquid
resources 38,875 (13,567) 25,308 176,738 202,046 (39,480) 162,566
------- ------- ------- ------- -------- -------- -------
40,053 (14,084) 25,969 177,923 203,892 (27,274) 176,618
------- ------- ------- ------- -------- -------- -------
Notes to the financial information
1. Principal accounting policies
The notes to the financial information have been prepared in accordance with
applicable accounting standards in the United Kingdom. As disclosed in note 1
(b) below, OGS revised the value ascribed to warrants which were issued in
November 1999. This resulted in a restatement of the results for the year ended
31 December 1999. Where appropriate, the notes to the accounts disclose the
financial information as originally stated and as restated. A summary of the
principal Group accounting policies, which have been applied consistently, is
set out below.
(a) Basis of accounting preparation and consolidation
The accounts have been prepared under the historical cost convention.
The accompanying consolidated accounts comprise the accounts of OGS and
its subsidiary undertakings (together, the "Group") made up to 31 December each
year, together with the Group's share of the net assets and the results of the
joint venture. Intra-group balances, sales and profits are eliminated fully on
consolidation. The method of merger accounting was adopted for the acquisition
of OGS (UK) in 1992 (note 23).
(b) Treatment of warrants
Net cash proceeds from the issue of warrants for equity shares, or fair
value where warrants are issued for non-cash consideration, are credited to
shareholders' funds as a warrant reserve. Upon exercise of the relevant warrant,
the amount previously recognised in respect of the warrant is included in the
net proceeds of the shares issued and a transfer is made between the warrant
reserve and the share premium account.
Prior year adjustment
Warrants were issued in November 1999 to G D Searle & Co as part of a
transaction to improve the licensing terms for Zavesca. At that time the
directors, with outside advice, calculated the value of these warrants and
considered that the resultant value was not material and made no entry in the
accounts. The directors revisited the valuation during the year ended 31
December 2000 and decided to change the approach taken to valuing warrants
issued for non-cash consideration. One of the factors taken into account in the
valuation was share price volatility. Previously the approach taken was to
assess the volatility of OGS' own share price over a limited period and, on this
basis, the G D Searle & Co warrants were not material. The method now applied by
OGS is to assess the volatility of a number of comparator companies over a
period, which equates to the expected life of the warrants. The directors
believe that this approach gives a fairer presentation of the results and the
financial position of the Group.
This new approach resulted in the valuation of the warrants issued in
November 1999 being (pound)674,000. This was treated as a prior year adjustment
for 31 December 1999 (note 23) and increased both the loss for 1999 and the
profit and loss account deficit at 31 December 1999 by (pound)674,000. The
creation of the necessary warrant reserve amounting to (pound)674,000 at 31
December 1999 had no impact on equity shareholders' funds at 31 December 1999.
The change is a one-off charge in 1999 and had no cash effect on the
Group. All warrants held by G D Searle & Co were exercised during 2000.
(c) Turnover
Turnover represents revenues from collaborative research agreements and
the sale of products and services.
Revenues from collaborative research agreements are recognised in order to
match revenues with the underlying deliverables required to fulfill the specific
agreement or the achievement of the related milestone. In recognising revenues,
consideration is given to the terms and conditions of the agreement. Revenues
which are related to the achievement of specified objectives such as milestone
fees are recognised when those objectives are met, revenues relating to the
delivery of software are recognised on delivery, and revenues relating to time,
including upfront fees and on-going research payments, are recognised over the
period of the agreement.
Revenues from the sale of products and services are recognised, excluding
value added tax, when goods are supplied and services are rendered to third
parties.
(d) Interest receivable
Interest receivable is credited to the profit and loss account as it is
earned.
(e) Financial instruments
The Group's financial instruments comprise cash and liquid resources, and
various other items such as investments, trade debtors and trade creditors that
arise directly from its operations. The Group's cash and liquid resources are
used to fund its research and development programmes. Entities in which the
Group holds an interest on a long term basis, but in which it does not have a
significant interest, are shown at cost.
Throughout the period under review, the Group did not engage in hedging or
enter into derivative transactions. The Group does not have any committed
borrowing facilities due to the significant cash balances held.
Treasury policies
The Group places the majority of its cash on short term deposit (note 19),
placing sterling and US dollar deposits with UK based banks, with staggered
maturities. The Group has a policy objective to minimise the risk of losses by
limiting credit exposure to institutions maintaining high quality credit
ratings. The principal risks arising from the Group's financial instruments are
interest rate and foreign currency risks. The Board reviews and agrees policies
for managing each of these risks; the policies were last reviewed and updated in
February 2002.
Interest rate risk
The Group has exposure to interest rate fluctuations on its deposits. To
manage this risk, a proportion of deposits are made at fixed rates, for varying
periods up to one year. This form of deposit maintains a high level of liquidity
of cash resources whilst allowing some stability in relation to the rates
received.
Foreign currency risk
Although the Group is based in the UK, it has one overseas subsidiary in
the US. As a result, movements in the US dollar/sterling exchange rate can
affect the Group's sterling balance sheet. The magnitude of this risk is not
currently significant to the Group and therefore no specific measures are
undertaken to manage the risk.
The Group also has transactional currency exposures. Such exposures arise
from sales or purchases in currencies other than the Group's functional
currency. In order to reduce the currency exposure, the Group holds US dollar
receipts in cash as necessary for up to one year to match expected US dollar
expenditures.
(f) Government grants
Grants that relate to revenue expenditure are credited to the profit and
loss account so as to match the related expenditure. Grants that relate to
specific capital expenditure are treated as deferred income, which is then
released to the profit and loss account over the related asset's useful life.
(g) Research and development expenditure
Research and development expenditure is not capitalised but charged to the
profit and loss account as it is incurred.
Funding of external research programmes is expensed as the related
expenditure is incurred, and any initial payment is expensed over the period of
the relevant arrangement.
(h) Pension costs
OGS (UK) operates a defined contribution pension scheme to provide pension
benefits for UK employees and life assurance benefits for both UK and US
employees. The scheme is a non-contributory pension scheme, which has tax exempt
approval. It is not contracted out of the State Earnings Related Pension Scheme.
Employer contributions are charged to the profit and loss account as they become
payable.
OGS Inc operates a 401K pension scheme, a defined contribution scheme with
the Principal Mutual Life Insurance Company. OGS Inc pays the administration
costs of operating the scheme but does not contribute to the scheme on behalf of
its employees.
(i) Deferred taxation
Provision is made for deferred taxation using the liability method, in
respect of all material timing differences where, in the opinion of the
directors, such timing differences are likely to reverse in the foreseeable
future. The Group intends to comply with FRS 19 Deferred Tax in the period
ending 31 December 2002, when this standard comes into force.
(j) Foreign currencies
Assets and liabilities denominated in foreign currencies are translated
into sterling at the rates of exchange ruling at each balance sheet date.
Transactions in foreign currencies during the year are translated into sterling
using the applicable exchange rate in force in the month in which the
transaction took place. Resulting exchange differences are dealt with through
the profit and loss account.
The accounts of the overseas subsidiary are consolidated using the
temporal method. The profit and loss account is translated at an average monthly
rate. Balance sheet monetary items are translated using the closing rate, with
exchange gains and losses being taken to the profit and loss account.
(k) Intangible fixed assets
Internally generated patents and trademarks are not capitalised, all costs
being written off as incurred.
(l) Tangible fixed assets
Tangible fixed assets are stated at the purchase cost net of depreciation.
Depreciation is calculated on a straight-line basis to write off the cost
of the asset to its residual value over the estimated useful lives which are as
follows:
Leasehold Improvements - 10 years or period of lease if shorter
Other assets - 2 to 4 years
(m) Investments
Investments are carried at the lower of cost and recoverable amount.
(n) Finance and operating leases
When assets are financed by leasing arrangements that give rights
approximating ownership (finance leases) or are obtained under hire purchase
contracts, they are capitalised at the fair value of the assets at the inception
of the lease and are depreciated over their useful lives. All other leases are
'operating leases' and the annual rentals paid under operating leases are
charged to the profit and loss account as incurred over the lease period. The
benefit of rent free periods is spread over the lease term or, if shorter, the
period to the first rent review, to produce an even monthly charge to the profit
and loss account for that period.
(o) Stock
Stock is stated at the lower of cost or estimated net realisable value.
Cost comprises the cost of direct material and labour plus attributable
overheads. Provision is made for slow moving or obsolete stock where
appropriate.
(p) National Insurance on share options
Employer's National Insurance charges on certain share option gains made
by employees are accrued over the period from the grant date to the end of the
performance period. The charge is recalculated using the market value of the
shares at each balance sheet date.
(q) Joint venture accounting
Entities in which the Group holds an interest on a long term basis and are
jointly controlled by the Group and one or more other venturers under a
contractual agreement are treated as joint ventures. The Group's interest in its
joint venture is accounted for using the gross equity method.
2. Segmental information
The Group operates one primary business, being the discovery and development of
novel products for the diagnosis and treatment of human disease. The Group's
turnover, loss before tax and net assets all relate to this business. The
Group's net assets are located in the UK.
The geographical analysis of turnover, all arising in the UK, by destination is
as follows:
2001 2000 1999
(pound)000 (pound)000 (pound)000
United Kingdom 5,422 140 267
Continental Europe 1,180 942 133
USA and Canada 6,772 7,840 8,212
Rest of the World 2 12 89
------ ----- -----
13,376 8,934 8,701
------ ----- -----
3. Net operating costs
1999 1999
2001 2000 (original) (restated)
(pound)000 (pound)000 (pound)000 (pound)000
Cost of sales -- (154) (342) (342)
Research and development - direct (36,242) (22,233) (15,569) (16,243)
Research and development - indirect (5,448) (3,167) (2,561) (2,561)
Sales and marketing costs (4,237) (187) (226) (226)
Administrative expenses (3,612) (3,163) (1,909) (1,909)
------- ------- ------- -------
Total operating costs (49,539) (28,904) (20,607) (21,281)
Other operating income 143 -- 23 23
------- ------- ------- -------
Total operating costs less other income (49,396) (28,904) (20,584) (21,258)
------- ------- ------- -------
4. Interest in joint venture
Both OGS (UK) and Marconi hold 50 per cent. of the issued share capital of
Confirmant, which was issued for cash for aggregate consideration of (pound)30.0
million in June 2001.
Revenue from Confirmant during the period ended 31 December 2001 amounted to
(pound)5.3 million, including (pound)2.9 million relating to the grant of
exclusive marketing rights, (pound)0.9 million in respect of the delivery of
data analysis software, and (pound)1.5 million in respect of research services.
In accordance with FRS 9, 'Associates and Joint Ventures', only revenue relating
to Marconi's share of the joint venture's marketing rights and software was
initially recognised. The balance of (pound)3.3 million is being recognised over
the life of the related assets in the joint venture, being three years.
The Group's share of Confirmant losses for the period ended 31 December 2001 is
(pound)2.0 million.
5. Profit on disposal
The profit on disposal of (pound)82,000 in 2001 relates to final receipts from
the sale of the biochemicals product line in 1999. The biochemicals line was
sold to Glyko Inc in May 1999 for a maximum consideration of (pound)1.3 million.
2001
(pound)000
Accrued costs 33
Profit on disposal 82
---
Consideration satisfied by cash 115
---
6. Staff costs and directors' remuneration
2001 2000 1999
Staff numbers
The average monthly number of persons (including executive
directors) employed during the year by function was:
Research, development and manufacturing 186 142 126
Sales and marketing 9 -- 1
Managerial and administration 24 21 20
------ ----- -----
219 163 147
------ ----- -----
2001 2000 1999
(pound)000 (pound)000 (pound)000
Staff costs during the year in respect of the above employees
Wages and salaries 11,165 7,529 5,612
Social security costs 853 791 576
Pension costs 626 433 351
------ ----- -----
12,644 8,753 6,539
------ ----- -----
2001 2000 1999
(pound)000 (pound)000 (pound)000
Directors' emoluments
Aggregate emoluments 1,596 1,243 926
Aggregate gains made on the exercise of share options 2,241 7,137 --
Company contributions to money purchase pension schemes 42 28 22
Compensation for loss of office -- 172 --
Sums paid to third parties for directors' services 5 99 20
------ ----- -----
3,884 8,679 968
------ ----- -----
6. Staff costs and directors' remuneration (continued)
In 2001, three directors (2000: four; 1999: two) had retirement benefits
accruing under money purchase pension schemes.
2001 2000 1999
(pound)000 (pound)000 (pound)000
Highest paid director
Aggregate emoluments 501 456 427
Aggregate gains made on exercise of share options 1,072 2,689 --
----- ----- ---
7. Directors' compensation
The following information provides details of the directors' compensation for
the three years ended 31 December 2001:
Directors' Compensation 2001
Salary/fees Benefits(1) Other Bonus Total Pensions
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
M L Kranda(2) 330 22 - 149 501 --
Prof R B Parekh 175 16 - 53 244 15
Dr C Moyses 150 14 - 45 209 13
Dr S B Parker(3) 160 23 7 24 214 14
Non-Executive Directors
G K Raab(4) 140 -- - 119 259 --
Prof M M Burger 27 -- - -- 27 --
Dr D L Drakeman 29 -- - -- 29 --
Prof R A Dwek(5) 75 -- - -- 75 --
Dr J F Hill 26 -- - -- 26 --
J L Rennocks(6) 12 -- - -- 12 --
J J Noble(7) 5 -- - -- 5 --
Notes:
1. Benefits include medical insurance, life insurance, cash allowances in
lieu of the provision of company cars and housing allowances.
2. Mr M L Kranda resigned from the Board in March 2002.
3. Dr S B Parker's other emoluments relate to relocation allowance payments.
Dr S B Parker resigned from the Board post 31 December 2001.
4. Mr G K Raab was paid an exceptional bonus of (pound)119,323 in recognition
of his contributions during 2000. This payment (being (pound)100,000 after
deduction of tax) was used by Mr Raab to purchase shares in the Company,
in respect of which he entered into an undertaking to retain such shares
for a minimum period of three years.
5. Professor R A Dwek's remuneration includes the amount of(pound)50,000
(2000:(pound)41,667; 1999:(pound)25,000) received in his capacity as a
consultant to the Group.
6. Mr J L Rennocks was appointed to the Board on 15 August 2001. Directors'
remuneration includes amounts due to Mr Rennocks from that date.
7. Mr J J Noble retired from the Board effective 10 May 2001. Directors'
remuneration includes amounts due to Mr Noble up to that date. The board
fees payable to Mr Noble were paid directly to IIex Management Limited.
7. Directors' compensation (continued)
Directors' Compensation 2000
Compensation
for loss
Salary/fees Benefits(1) Other of office Bonus Total Pensions
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
M L Kranda 285 21 -- -- 150 456 --
Prof R B Parekh 146 16 -- -- 53 215 12
Dr C Moyses 94 10 -- -- 42 147 8
Dr S B Parker(2) 21 2 20 -- -- 43 1
C P Triniman 87 12 -- 172 20 291 7
Non-Executive Directors
G K Raab 114 -- -- -- -- 114 --
Prof M M Burger 27 -- -- -- -- 27 --
Dr D L Drakeman 12 -- -- -- -- 12 --
Prof R A Dwek 77 -- 10 -- -- 87 --
Dr J F Hill 13 -- -- -- -- 13 --
N J Lowcock 10 -- -- -- -- 10 --
J J Noble 90 -- -- -- -- 90 --
Dr G N Vernon 9 -- -- -- -- 9 --
Directors' Compensation 1999
Salary/fees Benefits(1) Other Bonus Total Pensions
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
Executive Directors
M L Kranda 285 22 -- 120 427 --
Prof R B Parekh 135 16 -- 34 185 11
Dr C Moyses -- -- -- -- -- --
Dr S B Parker(2) -- -- -- -- -- --
CP Triniman 129 16 -- 32 177 11
Non-Executive Directors
G K Raab 92 -- -- -- 92 --
J Benjamin -- -- -- -- -- --
Prof M M Burger 10 -- -- -- 10 --
Prof R A Dwek 35 -- -- -- 35 --
N J Lowcock -- -- -- -- -- --
J J Noble 10 -- -- -- 10 --
J E Thomas -- -- -- -- --
Dr G N Vernon 10 -- -- -- 10 --
Waiver of emoluments
In 2001, no directors waived emoluments (2000: one director waived emoluments
totalling(pound)95,000; 1999: two directors waived emoluments
totalling(pound)10,000).
Directors' options
Directors have been granted options over ordinary shares under the 1989 Scheme
and the 1994 Scheme, with vesting periods of up to five years. Pre-determined
percentages of the options granted under these schemes may be exercised during
each successive year from the date of grant over the duration of the vesting.
All options granted under the 1989 Scheme and 1994 Scheme pre-date OGS'
floatation on the London Stock Exchange. The executive directors have also been
granted options under the Executive Scheme during the year. In addition,
executive directors are entitled to apply for options under the Sharesave
Scheme. Details on all of these schemes are set out below:
7. Directors' compensation (continued)
2001
Number of ordinary shares(1) Exercise dates
----------------------------------------------------------------------- ------------------------
At 1 At 31 Exercise
January December price
2001 Granted Exercised 2001 ((pound))(2) Earliest Latest
ML Kranda
1994 Scheme 408,945 -- (120,204) 288,741 1.425 Aug 97 Aug 06
160,000 -- -- 160,000 2.125 Dec 98 Dec 07
Executive Scheme 84,000 -- -- 84,000 17.25 Mar 03 Mar 10
11,158 -- -- 11,158 15.325 Dec 03 Dec 10
88,842(3) -- -- 88,842 15.325 Dec 05 Dec 10
Sharesave Scheme 4,352 -- (4,352) -- 2.24 Jun 01 Dec 01
-- 1,153 -- 1,153 8.40 Jun 04 Dec 04
------- ------ -------- -------
757,297 1,153 (124,556) 633,894
------- ------ -------- -------
Prof R B Parekh
1989 Scheme 19,200 -- (19,200) -- 0.75 -- --
16,000 -- (16,000) -- 0.75 -- --
3,122 -- (3,122) -- 0.75 -- --
24,000 -- (24,000) -- 0.75 -- --
40,000 -- (40,000) -- 0.75 -- --
16,076 -- (16,076) -- 0.75 -- --
1994 Scheme 8,000 -- -- 8,000 1.25 Jan 96 Jan 05
80,000 -- -- 80,000 1.25 Jan 97 Jan 06
40,000 -- -- 40,000 1.425 Jan 98 Jan 07
80,000 -- -- 80,000 2.125 Dec 98 Dec 07
Executive Scheme 51,000 -- -- 51,000 17.25 Mar 03 Mar 10
30,000(3) -- -- 30,000 15.325 Dec 05 Dec 10
-- 20,000(4) -- 20,000 11.00 Jul 02 Jul 06
-- 20,000 -- 20,000 11.00 Jul 04 Jul 11
------- ------ -------- -------
407,398 40,000 (118,398) 329,000
------- ------ -------- -------
Dr C Moyses
1994 Scheme 8,000 -- (4,000) 4,000 1.425 Oct 97 Oct 06
8,000 -- -- 8,000 1.425 Jan 98 Jan 07
12,000 -- -- 12,000 2.125 Jul 98 Jul 07
102,566 -- -- 102,566 2.125 Dec 98 Dec 07
Executive Scheme 35,000 -- -- 35,000 17.25 Mar 03 Mar 10
27,000(3) -- -- 27,000 15.325 Dec 05 Dec 10
-- 25,000(4) -- 25,000 11.00 Jul 02 Jul 06
-- 25,000 -- 25,000 11.00 Jul 04 Jul 11
Sharesave Scheme 7,700 -- -- 7,700 2.24 Jul 03 Dec 03
------- ------ -------- -------
200,266 50,000 (4,000) 246,266
------- ------ -------- -------
Dr S B Parker
Executive Scheme 51,038 -- -- 51,038 14.45 Dec 03 Dec 10
48,962(3) -- -- 48,962 14.45 Dec 05 Dec 10
-- 15,000 -- 15,000 11.00 Jul 02 Jul 06
-- 15,000 -- 15,000 11.00 Jul 04 Jul 11
Sharesave Scheme -- 1,153 -- 1,153 8.40 Jun 04 Dec 04
------- ------ -------- -------
100,000 31,153 -- 131,153
------- ------ -------- -------
7. Directors' compensation (continued)
2001 (continued)
Number of ordinary shares(1) Exercise dates
----------------------------------------------------------------------- ------------------------
At 1 At 31 Exercise
January December price
2001 Granted Exercised 2001 ((pound))(2) Earliest Latest
G K Raab
1994 Scheme 156,971 -- -- 156,971 1.25 Oct 96 Oct 05
40,000 -- -- 40,000 1.425 Aug 97 Aug 06
40,000 -- -- 40,000 2.125 Dec 98 Dec 07
------- ------ -------- -------
236,971 -- -- 236,971
------- ------ -------- -------
Prof M M Burger
1994 Scheme 10,000 -- -- 10,000 2.125 Dec 98 Dec 07
20,000 -- -- 20,000 2.125 Feb 99 Feb 08
------- ------ -------- -------
30,000 -- -- 30,000
------- ------ -------- -------
Prof R A Dwek
1994 Scheme 10,000 -- -- 10,000 2.125 Dec 98 Dec 07
------- ------ -------- -------
10,000 -- -- 10,000
------- ------ -------- -------
Notes;
1. No options lapsed during the year.
2. The market price of the OGS' share at the end of the financial year
was(pound)6.425 and the range of market Closing Prices during the year was
between(pound)4.50 and(pound)15.10.
3. These are Second Tier options which are subject to performance criteria.
These options can be exercised from the fifth anniversary of grant
provided that either the increase in the average Total Shareholder Return
over the preceding 60 months falls in the upper quartile when ranked
against companies in the FTSE Small Cap Index with respect to options
granted prior to 10 May 2001 or the FTSE 350 Index with respect to options
granted after that date, or OGS' share price has at least doubled since
the date of the grant.
4. These are Third Tier options exercisable as to one third on each of the
first second and third anniversaries of the Grant Date.
5. These options have been granted over shares in OGS (UK), as a subsidiary
of OGS. Exercise of options under this scheme results in the optionholder
receiving ordinary shares in OGS of a quantity and at the exercise price
as set out above.
7. Directors' compensation (continued)
2000
Number of ordinary shares(1) Exercise dates
----------------------------------------------------------------------- ------------------------
At 1 At 31 Exercise
January December price
2000 Granted Exercised 2000 ((pound))(2) Earliest Latest
ML Kranda
1994 Scheme 600,000 -- (191,055) 408,945 1.425 Aug 97 Aug 06
160,000 -- -- 160,000 2.125 Dec 98 Dec 07
Executive Scheme -- 84,000 -- 84,000 17.25 Mar 03 Mar 10
-- 11,158 -- 11,158 15.325 Dec 03 Dec 10
-- 88,842(3) -- 88,842 15.325 Dec 05 Dec 10
Sharesave Scheme 4,352 -- -- 4,352 2.24 Jun 01 Dec 01
------- ------- -------- -------
764,352 184,000 (191,055) 757,297
------- ------- -------- -------
Prof R B Parekh
1989 Scheme(4) 19,200 -- -- 19,200 0.75 Aug 97 Aug 04
16,000 -- -- 16,000 0.75 Jan 97 Jan 04
3,122 -- -- 3,122 0.75 Mar 98 Mar 05
24,000 -- -- 24,000 0.75 Mar 98 Mar 05
40,000 -- -- 40,000 0.75 Mar 98 Mar 05
16,076 -- -- 16,076 0.75 Mar 98 Mar 05
1994 Scheme 8,000 -- -- 8,000 1.25 Jan 96 Jan 05
80,000 -- -- 80,000 1.25 Jan 97 Jan 06
113,600 -- (113,600) -- 1.25 -- --
40,000 -- -- 40,000 1.425 Jan 98 Jan 07
80,000 -- -- 80,000 2.125 Dec 98 Dec 07
Executive Scheme -- 51,000 -- 51,000 17.25 Mar 03 Mar 10
-- 30,000(3) -- 30,000 15.325 Dec 05 Dec 10
------- ------- -------- -------
439,998 81,000 (113,600) 407,398
------- ------- -------- -------
Dr C Moyses
1994 Scheme 20,000 -- (12,000) 8,000 1.425 Oct 97 Oct 06
20,000 -- (12,000) 8,000 1.425 Jan 98 Jan 07
20,000 -- (8,000) 12,000 2.125 Jul 98 Jul 07
120,000 -- (17,434) 102,566 2.125 Dec 98 Dec 07
Executive Scheme 35,000 -- -- 35,000 17.25 Mar 03 Mar 10
-- 27,000(3) -- 27,000 15.325 Dec 05 Dec 10
Sharesave Scheme 7,700 -- -- 7,700 2.24 Jun 03 Dec 03
------- ------- -------- -------
222,700 27,000 (49,434) 200,266
------- ------- -------- -------
Dr S B Parker
Executive Scheme -- 51,038 -- 51,038 14.45 Dec 03 Dec 10
-- 48,962(3) -- 48,962 14.45 Dec 05 Dec 10
------- ------- -------- -------
-- 100,000 -- 100,000
------- ------- -------- -------
G K Raab
1994 Scheme 240,000 -- (83,029) 156,971 1.25 Oct 96 Oct 05
40,000 -- -- 40,000 1.425 Aug 97 Aug 06
40,000 -- -- 40,000 2.125 Dec 98 Dec 07
------- ------- -------- -------
320,000 -- (83,029) 236,971
------- ------- -------- -------
7. Directors' compensation (continued)
2000 (continued)
Number of ordinary shares(1) Exercise dates
----------------------------------------------------------------------- ------------------------
At 1 At 31 Exercise
January December price
2000 Granted Exercised 2000 ((pound))(2) Earliest Latest
Prof M M Burger
1994 Scheme 12,000 -- (12,000) -- 1.25 -- --
8,000 -- (8,000) -- 1.425 -- --
10.000 -- -- 10,000 2.125 Dec 98 Dec 07
20,000 -- -- 20,000 2.125 Feb 99 Feb 08
------- ------- -------- -------
50,000 -- (20,000) 30,000
======= ======= ======== =======
Prof R A Dwek
1994 Scheme 10,000 -- -- 10,000 2.125 Dec 98 Dec 07
------- ------- -------- -------
10,000 -- -- 10,000
------- ------- -------- -------
J J Noble
1994 Scheme 20,000 -- -- 20,000 1.425 Apr 98 Apr 07
20,000 -- -- 20,000 2.125 Feb 99 Feb 08
------- ------- -------- -------
40,000 -- -- 40,000
------- ------- -------- -------
1999
Number of ordinary shares(1) Exercise dates
--------------------------------------------------------------------- ----------------------
At 1 At 31 Exercise
January December price
1999 Granted Exercised 1999 ((pound))(2) Earliest Latest
ML Kranda
1994 Scheme 600,000 -- -- 600,000 1.425 1997 2006
160,000 -- -- 160,000 2.125 1998 2007
Sharesave Scheme 4,352 -- -- 4,352 2.24 2001 2001
------- ----- ----- -------
764,352 -- -- 764,352
------- ----- ----- -------
Prof R B Parekh
1989 Scheme 3,904 -- -- 3,904 0.75 1998 2005
30,000 -- -- 30,000 0.75 1998 2005
50,000 -- -- 50,000 0.75 1998 2005
20,096 -- -- 20,096 0.75 1998 2005
24,000 -- -- 24,000 0.75 1997 2004
20,000 -- -- 20,000 0.75 1997 2004
1994 Scheme 8,000 -- -- 8,000 1.25 1996 2005
80,000 -- -- 80,000 1.25 1997 2006
113,600 -- -- 113,600 1.25 1997 2006
40,000 -- -- 40,000 1.425 1998 2007
80,000 -- -- 80,000 2.125 1998 2007
------- ----- ----- -------
469,600 -- -- 469,600
======= ===== ===== =======
7. Directors' compensation (continued)
1999 (continued)
Number of ordinary shares(1) Exercise dates
--------------------------------------------------------------------- ----------------------
C P Triniman
1994 Scheme 160,000 -- -- 160,000 2.125 1998 2007
30,000 -- -- 30,000 2.125 1999 2008
Sharesave Scheme 6,964 -- -- 6,964 2.24 2005 2005
------- ----- ----- -------
196,964 -- -- 196,964
------- ----- ----- -------
G K Raab
1994 Scheme 240,000 -- -- 240,000 1.25 1996 2005
40,000 -- -- 40,000 1.425 1997 2006
40,000 -- -- 40,000 2.125 1998 2007
------- ----- ----- -------
320,000 -- -- 320,000
------- ----- ----- -------
Prof M M Burger
1994 Scheme 12,000 -- -- 12,000 1.25 1996 2005
8,000 -- -- 8,000 1.425 1998 2007
10,000 -- -- 10,000 2.125 1998 2007
20,000 -- -- 20,000 2.125 1999 2008
------- ----- ----- -------
50,000 -- -- 50,000
------- ----- ----- -------
Prof R A Dwek
1994 Scheme 10,000 -- -- 10,000 2.125 1998 2007
------- ----- ----- -------
10,000 -- -- 10,000
------- ----- ----- -------
J J Noble
1994 Scheme 20,000 -- -- 20,000 1.425 1998 2007
20,000 -- -- 20,000 2.125 1999 2008
======= ===== ===== =======
40,000 -- -- --
------- ----- ----- -------
Gains made by directors on share options
The table below shows gains made by individual directors from the exercise of
share options:
2001 2000 1999
(pound)000 (pound)000 (pound)000
G K Raab -- 1,183 --
M L Kranda 1,072 2,689 --
Professor R B Parekh 1,136 1,619 --
Dr C Moyses 33 678 --
Professor M M Burger -- 284 --
C P Triniman -- 684 --
----- ----- ----
Total 2,241 7,137 --
----- ----- ----
7. Directors' compensation (continued)
Directors' interest in ordinary shares
The Directors who held office at the end of the financial year had interests in
the shares of the Company described below, inclusive of family interests or
interests as trustees, in addition to the options disclosed above. All of these
were beneficial and related to the shares of OGS. Save as specially noted, there
have been no changes to the holdings between 31 December 2001 and 20 March 2002.
At 1 At 31 At 31 At 1
December December December January
2001 2000 1999 1999
Directors' interest in
ordinary shares
G K Raab(1) 26,102 15,630 11,482 11,482
M L Kranda 50,000 5,444 4,000 4,000
Professor R B Parekh 71,212 21,212 20,812 20,812
Dr C Moyses 26,876 22,876 17,738 17,738
Professor M M Burger 52,878 52,878 58,759 58,759
Professor R A Dwek 47,799 51,777 102,009 102,009
Dr D L Drakeman(2) 1,142 -- -- --
Dr J F Hill(3) 1,204 -- -- --
J J Noble(4) -- -- 10,000 10,000
C P Triniman(5) -- -- 13,831 13,831
Dr G N Vernon(6) -- -- 30,039 30,039
------ ------ ------- -------
Notes:
1. At 20 March 2002, the holding of Mr G K Rabb had increased to 26,587
shares.
2. At 20 March 2002, the holding of Dr D L Drakeman had increased to 1,928
shares.
3. At 20 March 2002, the holding of Dr J F Hill had increased to 2,037
shares.
4. Mr J J Noble retired from the Board effective 10 May 2001.
5. Mr C P Triniman retired from the Board effective 1 September 2000.
6. Dr G N Vernon retired from the Board effective 4 May 2000.
Share schemes
The Group has four share schemes. Details of the two principal schemes under
which grants of options may be made, the Executive Scheme and the Sharesave
Scheme, are given below. The total number of shares that may be issued in
pursuance of rights granted after 10 May 2001 under the Executive Scheme and the
Sharesave Scheme may not in aggregate exceed ten per cent. of the issued share
capital of OGS.
The Executive Scheme is divided into two elements. The first element is used to
grant options on a basis within Inland Revenue limits. The second element is for
granting options beyond the Inland Revenue limits. Options granted under the
Executive Scheme are also divided into First, Second and Third Tier Options.
First Tier options may be granted to qualifying employees and may be exercised
three years after the date of grant and are not subject to demanding performance
criteria. Second Tier options may be granted to qualifying employees but are
subject to demanding performance criteria and may be exercised five years after
the date of the grant. Third Tier options may be granted to qualifying
employees, vest one-third annually on the anniversary of grant for three years
after grant, and are not subject to performance criteria. The sum of First,
Second and Third Tier options granted to new recruits may not exceed the value
of eight times annual salary, except in exceptional circumstances. Thereafter,
the sum of First, Second and Third Tier options that may be granted to
qualifying existing employees in any year may not exceed the value of four times
annual salary, except in exceptional circumstances. First and Second Tier
options have a ten year life. Third Tier options have a five year life.
7. Directors' compensation (continued)
The Sharesave Scheme is available for participation to qualifying employees of
OGS and its participating subsidiaries. Under this scheme, options may only be
granted to employees entering an Inland Revenue approved savings contract with a
nominated savings institution. During the year, the fourth invitation to apply
for options under the Sharesave Scheme was issued and as a result options over
66,988 ordinary shares were granted. Mr M L Kranda and Dr S B Parker
participated in this grant.
8. Interest receivable
2001 2000 1999
(pound)000 (pound)000 (pound)000
On bank deposits 9,733 3,156 1,807
----- ----- -----
9. Loss on ordinary activities before taxation
Loss on ordinary activities before taxation is arrived at after
charging/(crediting):
2001 2000 1999 1999
(original) (restated)
(pound)000 (pound)000 (pound)000 (pound)000
Depreciation - owned tangible assets 4,419 2,926 2,383 2,383
Revenue from government grant (14) -- (23) (23)
Profit on disposal of tangible fixed assets (1) (59) 1 1
Operating lease rentals
- - hire of plant & machinery 148 39 23 23
- - hire of other assets 1,052 586 517 517
Auditors' remuneration
- - audit services 78 41 46 46
- - other services 147 23 8 8
Exchange (profit)/loss (131) 227 31 31
Direct research and development expenditure 36,242 22,233 15,569 16,243
Indirect research and development expenditure 5,448 3,167 2,561 2,561
------- ------- ------- -------
Included within share issue costs (note 23) is auditors' remuneration for other
services of (pound)9,000 (2000: (pound)737,000; 1999: (pound)nil).
10. Tax on loss on ordinary activities
No liability arose to UK corporation taxation during the year. In 2001, the
Group has losses computed for taxation purposes of approximately (pound)73.1
million (2000: (pound)64.0 million, 1999: (pound)48.0 million) available to
carry forward to future periods.
The Group has recognised Research and Development Tax Credits totalling
(pound)2.9 million (2000: (pound)1.2 million; 1999: (pound)nil) in the accounts,
relating to the period from 1 January 2001 to 31 December 2001. Under this
scheme, qualifying losses may be surrendered in return for credits at 24 per
cent. of the qualifying losses, which are receivable in cash.
11. Loss per ordinary share
Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders by the weighted average number of ordinary shares in issue during
the year.
For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume exercise of all options, which would be potentially
dilutive. Due to the loss making position of the Group, the exercise of share
options does not increase the basic loss per share and therefore according to
FRS14 'Earnings Per Share', the basic and diluted loss per share remain the
same. There is no difference between the basic and diluted loss per share.
Weighted
Loss Average
for the number of Per share
year shares amount
(pound)000 '000 pence
1999 (original) (9,688) 37,256 (26.00)
1999 (restated) (10,362) 37,256 (27.81)
2000 (15,609) 40,397 (38.64)
2001 (25,348) 55,052 (46.04)
------- ------ -----
12. Tangible fixed assets
Leasehold Other
Improvements Assets Total
(pound)000 (pound)000 (pound)000
Cost:
At 1 January 1999 2,400 6,758 9,158
Additions 1,832 1,845 3,677
Disposals (1) (102) (103)
------- ------- -------
At 31 December 1999 4,231 8,501 12,732
------- ------- -------
Additions 5,249 4,672 9,921
Disposals -- (235) (235)
------- ------- -------
At 31 December 2000 9,480 12,938 22,418
------- ------- -------
Additions 870 5,038 5,908
Disposals -- (12) (12)
------- ------- -------
At 31 December 2001 10,350 17,964 28,314
------- ------- -------
Depreciation:
At 1 January 1999 1,038 3,634 4,672
Charge for year 342 2,041 2,383
Disposals (1) (65) (66)
------- ------- -------
At 31 December 1999 1,379 5,610 6,989
------- ------- -------
Charge for year 629 2,297 2,926
Disposals -- (235) (235)
------- ------- -------
At 31 December 2000 2,008 7,672 9,680
------- ------- -------
Charge for year 972 3,447 4,419
Disposals -- (6) (6)
------- ------- -------
At 31 December 2001 2,980 11,113 14,093
------- ------- -------
Net book value:
At 31 December 1999 2,852 2,891 5,743
------- ------- -------
At 31 December 2000 7,472 5,266 12,738
------- ------- -------
At 31 December 2001 7,370 6,851 14,221
------- ------- -------
At 31 December 2001, the Group had contractually committed to (pound)2.0 million
(2000: (pound)1.2 million; 1999: (pound)0.1million) of capital expenditure,
which had not been delivered prior to 31 December and hence was not provided in
the accounts.
13. Fixed asset investments
Investment in joint venture
(pound)000
Cost:
At 1 January 2001 --
Additions 15,000
------
At 31 December 2001 15,000
------
Movements:
At 1 January 2001 --
Share of joint venture losses 2,007
Provision for unrealised profit 2,708
------
At 31 December 2001 4,715
------
Net book value:
At 31 December 2001 10,285
------
Net book value:
At 31 December 2000 and 1999 --
------
In June 2001, OGS (UK) subscribed (pound)15.0 million in cash for 50 per cent.
of the issued shares in Confirmant. Confirmant will provide database services to
pharmaceutical and biotechnology companies.
Payments received from Confirmant for marketing rights and data analysis
software are being taken to revenue. A total of (pound)6.5 million has been
received by OGS; (pound)3.8 million has been taken to revenue during the year
and a provision for unrealised profit of (pound)2.7 million has been recorded.
The provision for unrealised profit is being released to revenue over the
expected useful life of the assets to which it relates, being three years.
Other investments
(pound)000
Cost:
At 1 January 2001 --
Additions 4,251
-----
At 31 December 2001 4,251
-----
Provisions:
At 1 January 2001 and 31 December 2001 --
-----
Net book value:
At 31 December 2001 4,251
-----
At 31 December 2000 and 1999 --
-----
13. Fixed asset investments (continued)
The Group's other investment of (pound)4.3 million consists of one million
convertible preference shares in NeoGenesis Inc, which were received as part of
a three year drug discovery collaboration. The shares received were recorded at
(pound)4.23 ($5.97) each, which reflected the most recent subscription price for
NeoGenesis Inc's equity, and the aggregate subscription price of $6.0 million
was paid in cash. The preference shares are convertible into ordinary shares and
represented not greater than 5 per cent. of NeoGenesis Inc's issued share
capital at 31 December 2001.
Loans to
Cost subsidiaries Total
Investment in subsidiary (pound)000 (pound)000 (pound)000
Cost:
At 1 January 1999 and 31 December 1999, 2000 and 2001 85 36,974 37,059
-- ------ ------
Amounts written off:
At 1 January 1999 and 31 December 1999, 2000 and 2001 -- 393 393
-- ------ ------
Net book value:
At 31 December 1999, 2000 and 2001 85 36,581 36,666
-- ------ ------
At 31 December 2001, OGS had the following wholly owned subsidiaries which
operate principally in their country of incorporation:
Principal business Country of Description of
Subsidiary Undertaking activity incorporation shares held
OGS (UK) Drug discovery using England & Wales Ordinary 1 pence shares
proteome technology
OGS GT Ltd Dormant England & Wales Ordinary 1 pence shares
OGS Inc Business development USA Ordinary $1 shares
All interests are direct except, the interest in OGS Inc which is by virtue of
OGS' interest in OGS (UK). The results of the above companies are included in
the consolidated financial statements.
14. Stock
2001 2000 1999
(pound)000 (pound)000 (pound)000
Raw materials and consumables 346 206 202
Work in progress -- 10 9
Finished goods -- 10 11
--- --- ---
346 226 222
--- --- ---
15. Debtors
2001 2000 1999
(pound)000 (pound)000 (pound)000
Amounts falling due within one year:
Trade debtors 3,355 3,630 3,399
Other debtors 4,195 1,622 124
Prepayments and accrued income 1,703 827 256
Amounts falling due after more than one year:
Other debtors 30 30 30
Prepayments and accrued income 343 -- --
------ ------ -----
9,626 6,109 3,809
------ ------ -----
Other debtors include (pound)4.1 million (2000:(pound)1.2 million;
1999:(pound)nil) in relation to Research and Development Tax Credits receivable
within one year (note 10).
16. Creditors: amounts falling due within one year
2001 2000 1999
(pound)000 (pound)000 (pound)000
Trade creditors 2,885 2,126 1,743
Other taxation and social security 532 236 169
Other creditors -- -- 81
Deferred income (note 17) 7,341 3,250 1,730
Accruals 7,492 5,113 2,083
------ ------ -----
18,250 10,725 5,806
------ ------ -----
17. Creditors: amounts falling due after more than one year
2001 2000 1999
(pound)000 (pound)000 (pound)000
Deferred income 2,399 2,383 3,197
------ ------ -----
Deferred income is released to the profit and loss account to match revenues
with the underlying deliverables required to fulfill each specific agreement.
18. Provisions for liabilities and charges
At 1 Charge At 31 Charge At 31 Charge At 31
January in the December in the December in the December
1999 year 1999 year 2000 year 2001
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Provision for National
Insurance -- -- -- 73 73 (73) --
Other provisions -- -- -- 108 108 (21) 87
--- --- --- --- --- --- ---
-- -- -- 181 181 (94) 87
--- --- --- --- --- --- ---
Provision for National Insurance relates to the employer's National Insurance
charge which will be payable on certain share option gains made by employees.
The charge is calculated using the market value of the shares at the balance
sheet date, and is accrued over the period from the date of grant to the end of
the performance period.
Other provisions relate to gains due to employees associated with the exercising
of share options. Amounts may become due when the employees exercise the
relevant share options, and the amount will be determined by the share price on
the exercise date. The maximum amount payable is being accrued over the period
from the date of grant of the share options to the end of the performance
period. The maturity profile of these provisions is set out below:
Other provisions
2001 2000 1999
(pound)000 (pound)000 (pound)000
Less than one year to eight years 75 -- --
Between one and nine years 12 50 --
Between two and ten years -- 58 --
--- --- ---
87 108 --
--- --- ---
19. Financial instruments
Note 1(e) provides an explanation of the role that financial instruments have
had during the period in creating or changing the risks the Group faces in its
activities. The explanation summarises the objectives and policies for holding
or issuing financial instruments and similar contracts, and the strategies for
achieving those objectives that have been followed during the period.
The numerical disclosures in these notes deal with the financial assets and
liabilities as defined in FRS 13 'Derivatives and Other Financial Instruments'.
The period end position is considered representative of the Group's position
during the year and is consistent with its objectives.
Short term debtors and creditors
Short term debtors and creditors have been excluded from the following
disclosures, other than in the currency risk disclosures.
Interest rate profile of financial assets
The interest rate risk profile of the Group's financial assets at 31 December
was:
2001 2001 2001 2000 2000 2000
Fixed Floating Fixed Floating
rate rate Total rate rate Total
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Sterling 145,235 33,669 178,904 199,500 1,930 201,430
US Dollar 1,798 172 1,970 2,177 104 2,281
Other -- 25 25 -- 211 211
------- ------- ------- ------- ------- -------
147,033 33,866 180,899 201,677 2,245 203,922
------- ------- ------- ------- ------- -------
of which:
- - short-term deposits 147,033 15,556 162,589 201,677 369 202,046
- - cash at bank and in hand -- 14,029 14,029 -- 1,846 1,846
- - other long term debtors -- 30 30 -- 30 30
- - other investment -- 4,251 4,251 -- -- --
------- ------- ------- ------- ------- -------
147,033 33,866 180,899 201,677 2,245 203,922
------- ------- ------- ------- ------- -------
1999 1999 1999
Fixed Floating
rate rate Total
(pound)000 (pound)000 (pound)000
Sterling 25,308 591 25,899
US Dollar -- 98 98
Other -- 2 2
------ ------ ------
25,308 691 25,999
------ ------ ------
of which:
- - short-term deposits 25,308 -- 25,308
- - cash at bank and in hand -- 661 661
- - other long term debtors -- 30 30
- - other investment -- -- --
------ ------ ------
25,308 691 25,999
------ ------ ------
Under FRS 13 'Derivatives and Other Financial Instruments', all short term
deposits are considered to be floating rate. However OGS believes it is
appropriate to give the above information regarding these items. Fixed rate
short term deposits in sterling are placed with banks up to a maximum period of
one year. Contracts in place at 31 December 2001 had a weighted average period
to maturity of 2.0 months, (2000: 1.7 months; 1999: 2.8 months) and a weighted
average annualised rate of interest of 4.27 per cent (2000: 5.8 per cent.; 1999:
5.8 per cent.). Floating rate cash earns interest at prevailing market rates.
The Group's other investment of (pound)4.3 million consists of one million
preference shares in NeoGenesis Inc, which were received for cash consideration
(note 13).
Financial liabilities
The Group's only financial liabilities, other than short term trade creditors,
other creditors and accruals, are deferred income received under its
collaboration arrangements (notes 16 and 17) and provisions for liabilities and
charges (note 18). These represent non-interest bearing financial liabilities.
Fair value
The fair value of financial assets and liabilities, based on the directors' best
estimate, is not materially different from the reported book values.
19. Financial instruments (continued)
Currency exposures
The Group has one principal functional currency, sterling. The table below shows
the extent to which the Group has monetary assets and liabilities in currencies
other than sterling. Foreign exchange differences on re-translation of these
assets and liabilities are charged to the profit and loss account.
Net foreign currency monetary assets/(liabilities)
2001 2001 2001 2000 2000 2000 1999 1999 1999
US Dollar Other Total US Dollar Other Total US Dollar Other Total
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Functional currency of
Group operation 276 (6) 270 4,362 64 4,426 3,121 (166) 2,955
--- -- --- ----- -- ----- ----- ---- -----
20. Deferred taxation
There is no potential liability for deferred taxation in the current or previous
years. Details of the tax losses of the Group are set out in note 9.
21. Share capital
Ordinary shares of Ordinary shares of Ordinary shares of
5 pence nominal value 5 pence nominal value 5 pence nominal value
2001 2001 2000 2000 1999 1999
Number (pound)000 Number (pound)000 Number (pound)000
Authorised
Ordinary shares 80,000,000 4,000 80,000,000 4,000 80,000,000 4,000
---------- ----- ---------- ----- ---------- -----
Allotted, called up and
fully paid
Ordinary shares 55,565,759 2,778 54,530,955 2,727 37,320,774 1,866
---------- ----- ---------- ----- ---------- -----
2001
During the year ended 31 December 2001, ordinary shares of 5 pence each were
allotted for cash as follows:
1. 389,642 shares were allotted pursuant to the exercise of options under
OGS' share option schemes.
2. 645,162 shares were allotted to Marconi pursuant to a subscription
agreement dated 15 June 2001.
2000
During the year ended 31 December 2000, ordinary shares of 5 pence each were
allotted as follows:
1. 1,130,252 shares were allotted pursuant to the exercise of options under
OGS' share option schemes.
2. 2,074,765 shares were allotted pursuant to the completion of a Placing and
Open Offer in March 2000.
3. 360,163 shares were allotted pursuant to exercise of warrants.
4. 94,383 shares were allotted to Pfizer and 185,913 shares to Medarex
pursuant to collaborative agreements.
5. 13,364,705 shares were allotted pursuant to the completion of an Open
Offer and International Offering in December 2000.
1999
During the year ended 31 December 1999, 85,316 ordinary shares of 5 pence
nominal value were allotted pursuant to the exercise of options under OGS' share
option schemes.
22. Share options
2001
(a) Grants of options
Option grants during the year ended 31 December 2001 consisted of:
1 66,988 ordinary shares under the Sharesave Scheme at a subscription price
of(pound)8.40.
2 871,770 ordinary shares under the Executive Scheme at exercise prices
between(pound)5.725 and(pound)14.125. These were designated as Tier 1,
Tier 2 or Tier 3 options.
(b) Options outstanding
At 31 December 2001, options outstanding were as follows:
Exercisable in
Number of shares normal
2001 2000 Exercise price circumstances
1989 Scheme (1) 2,480 123,278 (pound)0.75 From 1995 to 2005
1994 Scheme 1,421,854 1,633,496 From (pound)1.25 to (pound)2.125 From 1994 to 2008
Executive Scheme 2,221,606 1,387,046 From (pound)1.69 to (pound)23.40 From 2001 to 2011
Sharesave Scheme 211,770 196,891 From (pound)2.24 to (pound)26.20 From 2001 to 2008
Contractual rights:
University of Oxford 10,000 20,000 (pound)1.25 From 1995 to 2002
Note:
(1) The 1989 Scheme provides options to subscribe for shares of 1 pence
nominal value in OGS (UK). Option holders exercising options under the
1989 Scheme are required to relinquish their rights to ordinary shares of
1 pence nominal value in OGS (UK) in consideration for the issue of four
ordinary shares of 5 pence nominal value in OGS for every five ordinary
shares of 1 pence nominal value in OGS (UK). The numbers for the 1989
Scheme in the above table take account of this right and reflect the
number of ordinary shares of 5 pence nominal value to which holders of
options under the scheme would be entitled.
2000
(a) Grants of options
Option grants during the year ended 31 December 2000 consisted of:
1 4,571 ordinary shares under the Sharesave Scheme at a subscription price
of(pound)26.20.
2 1,180,050 ordinary shares under the Executive Scheme at exercise prices
between(pound)14.45 and(pound)23.40. These were designated as Tier 1 or
Tier 2 options.
(b) Options outstanding
At 31 December 2000, options outstanding were as follows:
Exercisable in
Number of shares normal
2000 1999 Exercise price circumstances
1989 Scheme(1) 123,278 150,792 (pound)0.75 From 1995 to 2005
1994 Scheme 1,633,496 2,744,508 From (pound)1.25 to (pound)2.125 From 1994 to 2008
Executive Scheme 1,387,046 373,386 From (pound)1.69 to (pound)23.40 From 2001 to 2010
Sharesave Scheme 196,891 207,967 From (pound)2.24 to (pound)26.20 From 2001 to 2007
Contractual rights:
University of Oxford 20,000 30,000 (pound)1.25 From 1995 to 2002
22. Share options (continued)
2000 (continued)
Note:
1 The 1989 Scheme provides options to subscribe for shares of 1 pence
nominal value in OGS (UK). Option holders exercising options under the
1989 Scheme are required to relinquish their rights to ordinary shares of
1 pence nominal value in OGS (UK) in consideration for the issue of four
ordinary shares of 5 pence nominal value in OGS for every five ordinary
shares of 1 pence nominal value in OGS (UK). The numbers for the 1989
Scheme in the above table take account of this right and reflect the
number of ordinary shares of 5 pence nominal value to which holders of
options under the scheme would be entitled.
Warrants
The treatment of warrants is set out in notes 1 (e).
1999
(a) Grants of options
During the year, options over OGS' ordinary shares were granted as
follows:
(i) Over 63,758 ordinary shares of 5 pence nominal value under the
Sharesave Scheme at subscriptions prices of 247.6 pence.
(ii) Over 236,712 ordinary shares of 5 pence nominal value under the
Executive Scheme at exercise prices between(pound)3.09 and(pound)3.45 per share.
All options under the Executive Scheme granted during the year were
designated as recruitment and Tier 1 options. It is the policy of the
Compensation Committee that future grants over a market value of (pound)30,000
(as valued at the date of grant) would be split equally between Tier 1 and Tier
2 options.
(b) Options outstanding
At 31 December 1999 options outstanding were as follows:
Number of shares of 5 pence Exercisable in
nominal value normal
1999 1998 Subscription price circumstances
1989 Scheme(1) 150,792 168,112 (pound)0.75 From 1996 to 2005
1994 Scheme 2,744,508 2,870,300 From(pound)1.25 to(pound)2.125 From 1996 to 2008
Executive Scheme 373,386 140,020 From(pound)1.69 to(pound)3.45 From 2001 to 2009
Sharesave Scheme 207,967 156,954 From(pound)2.24 to(pound)2.476 From 2001 to 2006
Contractual rights:
University of Oxford 30,000 50,000 (pound)1.25 From 1995 to 2002
(1) The 1989 Scheme provides options to subscribe for shares of 1 pence
nominal value in OGS (UK). Option holders exercising options under
the 1989 Scheme are required to relinquish their rights to ordinary
shares of 1 pence nominal value in OGS (UK) in consideration for the
issue of four ordinary shares of 5 pence nominal value in OGS for
every five ordinary shares of 1 pence nominal value in OGS (UK). The
numbers for the 1989 Scheme in the above table take account of this
right and reflect the number of ordinary shares of 5 pence nominal
value to which holders of options under the scheme would be
entitled.
23. Reserves
Share
premium Capital Warrant Profit and
account reserve(1) reserve loss account Total
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Balances at 1 January 1999
as previously reported 67,249 11,107 -- (43,905) 34,451
Premium on shares issued during the year 111 -- -- -- 111
Loss for the year -- -- -- (9,688) (9,688)
-------- ------ ------- -------- --------
Balances at 31 December 1999
as originally stated 67,360 11,107 -- (53,593) 24,874
-------- ------ ------- -------- --------
Prior year adjustment - warrants -- -- 674 (674) --
as restated 67,360 11,107 674 (54,267) 24,874
-------- ------ ------- -------- --------
Premium on shares issued 213,012 -- -- -- 213,012
Expenses of shares issued (15,328) -- -- -- (15,328)
Warrants exercised during the year 674 -- (674) -- --
Loss for the year -- -- -- (15,609) (15,609)
======== ====== ======= ======== ========
Balances at 31 December 2000 265,718 11,107 -- (69,876) 206,949
-------- ------ ------- -------- --------
Premium on shares issued 10,501 -- -- 10,501
Expenses of shares issued (269) -- -- (269)
Retained profit for the year -- -- (25,348) (25,348)
-------- ------ ------- -------- --------
Balances at 31 December 2001 275,950 11,107 (95,224) 191,833
-------- ------ ------- -------- --------
Note:
(1) The capital reserve represents the excess of the issued capital and share
premium account of OGS (UK) over the nominal value of the shares issued by
OGS in consideration of its acquisition in 1992. The entire share capital
of OGS (UK) was acquired by OGS on the basis of two shares in OGS for one
share in OGS (UK) and was accounted for as a merger.
Warrants
During the year ended 31 December 1999 OGS issued warrants to G D Searle & Co
over 360,163 ordinary shares of 5 pence nominal value, exercisable from 11
November 1999 to 10 November 2004 at a price of (pound)3.78 per share. These
warrants were transferable in units of no less than 20,000 and were not listed
on any public exchange.
As explained in note 1(b), the directors have revised the approach to valuing
warrants issued for non-cash consideration. The new approach results in a
valuation of the warrants of (pound)674,000, which has been charged to the
profit and loss account as a direct research expense and treated as a prior year
adjustment. All warrants held by G D Searle & Co were exercised during 2000.
24. Reconciliation of movements in shareholders' funds
2001 2000 1999 1999
(original) (restated)
(pound)000 (pound)000 (pound)000 (pound)000
Loss for the year (25,348) (15,609) (9,688) (10,362)
New share capital issued 10,552 213,873 115 115
Expenses of share issue (269) (15,328) -- --
Prior year adjustment - warrants -- -- -- 674
-------- -------- ------- -------
Net addition to/(reduction in) shareholders' funds (15,065) 182,936 (9,573) (9,573)
Opening shareholders' funds 209,676 26,740 36,313 36,313
-------- -------- ------- -------
Closing shareholders' funds 194,611 209,676 26,740 26,740
-------- -------- ------- -------
25. Financial commitments
The Group had annual commitments under non-cancellable operating leases as
follows:
2001 2001 2000 2000 1999 1999
Land and Land and Land and
buildings Other buildings Other buildings Other
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
Expiring within one year 41 -- 1 4 16 9
Expiring between one
and two years 418 25 41 -- -- 11
Expiring between two
and five years 209 29 239 47 267 1
Expiring after five years 475 -- 475 -- 475 --
----- --- --- --- --- --
1,143 54 756 51 758 21
----- --- --- --- --- --
In addition to the above, the Group has a number of long term financial
commitments in relation to existing collaborative agreements. During the year
ended 31 December 2001, the Group entered into an agreement to lease a further
property with an annual rental of approximately (pound)1.2 million.
26. Summary of differences between UK and US generally accepted accounting
principles
Reconciliation of loss for the year and equity shareholders' funds
The Group's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ in certain significant respects from generally accepted accounting
principles in the United States ("US GAAP").
The effect of the US GAAP adjustments to the loss for the years ended 31
December 2000 and 2001 and equity shareholders' funds as at 31 December 2000 and
2001 are set out in the tables below. US GAAP adjustments were not presented in
the consolidated financial statements for the year ended 31 December 1999.
(a) Reconciliation of loss for the year to US GAAP
2001 2000
(pound)000 (pound)000
Loss for the year under UK GAAP (25,348) (15,609)
US GAAP adjustments
Revenue
Revenue recognition (i) 3,175 1,420
Confirmant revenue (ii) (3,792) --
Operating expenses:
Share compensation expense (iii) (87) (77)
Capitalisation of software costs (iv) -- 154
Depreciation of capitalised software costs (iv) (77) (19)
Payroll tax on share options (v) (73) 73
Share of joint venture loss (ii) 542 --
Amortisation of negative goodwill (ii) 325 --
-------- --------
Net loss for the year under US GAAP (25,335) (14,058)
-------- --------
Basic and diluted loss per share under US GAAP (46.02p) (34.80p)
-------- --------
(b) Reconciliation of equity shareholders' funds to US GAAP
2001 2000
(pound)000 (pound)000
Equity shareholders' funds under UK GAAP 194,611 209,676
US GAAP adjustments:
Deferred income: Revenue recognition (i) (1,107) (4,282)
Tangible Fixed Assets
Capitalisation of software costs (iv) 154 154
Depreciation of capitalised software costs (iv) (96) (19)
Provisions for liabilities and charges
Payroll tax on share options (v) -- 73
Negative goodwill (ii) (3,250) --
Amortisation of negative goodwill (ii) 325 --
-------- --------
Shareholders' equity under US GAAP 190,637 205,602
-------- --------
26. Summary of differences between UK and US generally accepted accounting
principles (continued)
(i) Revenue recognition
Under UK GAAP, revenues from collaborative research agreements are
recognised in order to match revenues with the underlying deliverables required
to fulfil the specific agreement, or they are recognised upon the achievement of
specific objectives, including the delivery of software.
Under US GAAP, revenues from such collaborative research agreements,
including up front fees, technology and software licence fees, ongoing research
payments and milestone fees, are recognised as if they entire contract were a
single element arrangement using the lesser of non-refundable cash received or
the result achieved using percentage of completion accounting.
(ii) Confirmant
See notes 4 and 13.
In June 2001, Confirmant was formed as a joint venture between OGS (UK)
and Marconi, each owning 50 per cent. of the issued share capital. Confirmant
was formed primarily for the purpose of marketing proteomics and genomics
databases to pharmaceutical and biotechnology companies for use in their
research.
OGS (UK) and Marconi each invested (pound)15.0 million in cash as a
capital contribution. At the same time, OGS (UK) received (pound)5.0 million as
consideration for granting Confirmant exclusive licences to intellectual
property on three specific databases, and (pound)1.5 million as consideration
for granting a licence to use data analysis software.
Under UK GAAP, OGS (UK)'s investment was recorded at (pound)15.0 million
and the amount received for database and software licences is being recognised
as revenue, with Marconi's share recognised immediately and the balance of
(pound)3.3 million recognised over the life of the related assets, being three
years.
Under US GAAP, because OGS (UK) received (pound)6.5 million for certain
intangible assets simultaneously with its cash investment in Confirmant, OGS
(UK)'s investment in Confirmant was effectively (pound)8.5 million in cash plus
intangible assets with a carrying value of zero. However, Marconi contributed
(pound)15.0 million for its share of the joint venture and, therefore, negative
goodwill of (pound)3.3 million was recognised by OGS (UK) upon the formation of
the joint venture. This negative goodwill is being amortised over its expected
useful life of five years.
OGS (UK) also entered into a Database Services Agreement with Confirmant
to provide services in connection with the continued population of the three
licensed databases. As consideration for these services, Confirmant will pay up
to (pound)22.5 million, of which (pound)3.0 million was received by OGS (UK) in
advance.
(iii) Share compensation expense
Under UK GAAP, no accounting recognition has been given to share options
where the exercise price is equal to the market price of the security on the
date of grant of the option. Under US GAAP, equity instruments issued to
non-employees are required to be measured at fair value and included as
compensation in the profit and loss account over the vesting period of the
options. In addition, discounts given to employees under the Sharesave Plan are
recorded as compensation charge over the vesting period of the options.
The Group has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB25"). Under APB 25, an
excess of market value at the date of grant over exercise price of the options
is charged to shareholders' equity as an unearned compensation upon issuance of
options under the plans, and subsequently amortised over the vesting period.
26. Summary of differences between UK and US generally accepted accounting
principles (continued)
(iv) Capitalisation of software costs
Under UK GAAP, the cost of internally developed software, for both
internal and external use, is expenses as incurred. Under US GAAP, such costs
are capitalised once technological feasibility is established, if the software
is sold or marketed to external users. Capitalisation ceases once such software
is available for general release. Amounts capitalised are amortised over their
useful life of two years.
(v) Payroll tax on share options
Under UK GAAP, employer's payroll is accrued for over the period from the
date share options are granted to the date of exercise (see note 1(o)). Under US
GAAP, such tax is recognised when the options are exercised.
PART III(B)
RECONCILIATION OF OGS' FINANCIAL INFORMATION
TO CONFORM WITH CAT'S ACCOUNTING POLICIES
There are differences between the accounting policies adopted by OGS under UK
GAAP and those adopted by CAT under UK GAAP which would give rise to material
adjustments relating to revenue recognition. An unaudited restatement of OGS'
financial information under CAT's accounting policies is set out below:
6 months
ended Year ended 31 December
30 June -----------------------------------------------
2002 2001 2000 1999
(restated)
(pound)000 (pound)000 (pound)000 (pound)000
(a) Loss for the period (19,519) (25,348) (15,609) (10,362)
Adjustments:
Revenue recognition 782 (979) 1,696 (2,450)
-------- -------- -------- -------
Loss for the period after adjustment to accord with
CAT's accounting policies (18,737) (26,327) (13,913) (12,812)
-------- -------- -------- -------
(b) Shareholders' equity as reported in the
consolidated balance sheet 175,346 194,611 209,676 26,740
Adjustments:
Revenue recognition (4,203) (4,985) (4,006) (5,702)
-------- -------- -------- -------
Shareholders' equity as adjusted to accord with
CAT's accounting polices 171,143 189,626 205,670 21,038
-------- -------- -------- -------
(c) Reconciliation of profit and loss account for the year ended 31 December
2001
As As
originally restated
stated under under
OGS CAT
policies Adjustments policies
(pound)000 (pound)000 (pound)000
Turnover 13,376 (979) 12,397
Net operating costs (49,396) -- (49,396)
------- ---- -------
Operating loss (36,020) (979) (36,999)
Share of joint venture loss (2,007) -- (2,007)
Profit on disposal 82 -- 82
------- ---- -------
Loss on ordinary activities before interest and taxation (37,945) (979) (38,924)
Interest receivable 9,733 -- 9,733
------- ---- -------
Loss on ordinary activities before taxation (28,212) (979) (29,191)
Tax loss on ordinary activities 2,864 -- 2,864
------- ---- -------
Loss for the year (25,348) (979) (26,327)
------- ---- -------
(d) Reconciliation of balance sheet as at 31 December 2001
Audited net Restated net
assets assets
under under
OGS CAT
policies Adjustments policies
(pound)000 (pound)000 (pound)000
Fixed assets
Tangible 14,221 -- 14,221
Investments 14,536 -- 14,536
-------- ------- --------
28,757 -- 28,757
-------- ------- --------
Current assets
Stock 346 -- 346
Debtors 9,626 -- 9,626
Cash at bank and in hand 176,618 -- 176,618
-------- ------- --------
Total current assets 186,590 -- 186,590
Creditors: amounts falling due within one year (18,250) (1,626) (19,876)
-------- ------- --------
Net current assets 168,340 (1,626) 166,714
-------- ------- --------
Total assets less current liabilities 197,097 (1,626) 195,471
Creditors: amounts falling due after more than one year (2,399) (3,359) (5,758)
Provisions for liabilities and charges (87) -- (87)
======== ======= ========
Net assets 194,611 (4,985) 189,626
-------- ------- --------
(e) Reconciliation of profit and loss account for the six months ended 30 June
2002
Audited net Restated net
assets assets
under under
OGS CAT
policies Adjustments policies
(pound)000 (pound)000 (pound)000
Turnover 5,780 782 6,562
Net operating costs (28,767) -- (28,767)
------- --- -------
Operating loss (22,987) 782 (22,205)
Share of joint venture loss (1,641) -- (1,641)
------- --- -------
Loss on ordinary activities before interest and taxation (24,628) 782 (23,846)
Interest receivable 3,256 -- 3,256
------- --- -------
Loss on ordinary activities before taxation (21,372) 782 (20,590)
Tax loss on ordinary activities 1,853 -- 1,853
------- --- -------
Loss for the period (19,519) 782 (18,737)
------- --- -------
(f) Reconciliation of balance sheet as at 30 June 2002
Audited net Restated net
assets assets
under under
OGS CAT
policies Adjustments policies
(pound)000 (pound)000 (pound)000
Fixed assets
Tangible 14,800 -- 14,800
Investments 16,969 -- 16,969
-------- ------- --------
31,769 -- 31,769
-------- ------- --------
Current assets
Stock 321 -- 321
Debtors 10,116 -- 10,116
Cash at bank and in hand 153,376 -- 153,376
-------- ------- --------
Total current assets 163,813 -- 163,813
Creditors: amounts falling due within one year (18,622) (952) (19,574)
-------- ------- --------
Net current assets 145,191 (952) 144,239
-------- ------- --------
Total assets less current liabilities 176,960 (952) 176,008
Creditors: amounts falling due after more than one year (1,614) (3,251) (4,865)
-------- ------- --------
Net assets 175,346 (4,203) 171,143
-------- ------- --------
Summary of significant differences between OGS' accounting policies under UK
GAAP and CAT accounting policies under UK GAAP
The accounting policies under which the consolidated financial statements of OGS
are prepared differ in certain respects from the accounting policies as applied
by CAT. The principal differences which impacts loss for the period and/or net
assets are set out below:
Revenue recognition
Under OGS' accounting policies, revenues from collaborative research agreements
are recognised in order to match revenues with the underlying deliverables
required to fulfil the specific agreement, or they are recognised upon the
achievement of specific objectives, including the delivery of software.
Non-refundable technology licence fees are recognised on grant of the licence.
Under CAT's accounting policies, non-refundable licence fees are recognised over
the period of the licence term or the period of the related research and
development agreement (where relevant). In circumstances where no such defined
period exists, the licence fee is spread forward over the period to the
expiration of the relevant patents licensed.
Revenues from CAT's collaborative research agreements are recognised in two
ways. For milestone payments receivable on the achievement of certain technical
deliverables, revenue is recognised based on the percentage of completion of the
relevant work. Revenue recognised is limited to the aggregate amount of
non-refundable milestone payments received. Where CAT provides research and
development services to corporate collaborators in the form of Full Time
Equivalent ("FTE") employees at a specified rate per FTE, such revenues are
recognised as the services are rendered.
CAT has not, to date, recognised any revenue related to software deliverables.
CAT's accounting policy for software licences accords to the principles applied
for recognising revenue for its technology access licence fees, as set out above
i.e. non-refundable software licence fees are recognised over the period of the
relevant licence.
The Directors and Proposed Directors
Cambridge Antibody Technology Group plc
Milstein Building
Granta Park
Cambridge
CB1 6GH
Merrill Lynch International
Merrill Lynch Financial Centre
2 King Edward Street
London
EC1A 1HQ 6 February 2003
Dear Sirs
We report on the unaudited reconciliation of the consolidated balance sheets as
at 31 December 1999, 2000 and 2001, the consolidated balance sheet as at 30 June
2002, the consolidated profit and loss accounts for each of the three financial
years ended 31 December 2001 and the consolidated profit and loss account for
the six months ended 30 June 2002 of Oxford GlycoSciences Plc ("OGS") and its
subsidiaries ("the financial information (as adjusted) of OGS") prepared on the
basis of the accounting policies of CAT set out in Part III(B) of these Listing
Particulars (which will also be incorporated by reference into the CAT
Shareholder Circular).
Responsibilities
It is the responsibility solely of the Directors of CAT to prepare the financial
information (as adjusted) of OGS in accordance with paragraph 12.11 of the
Listing Rules of the UK Listing Authority ("the Listing Rules"). It is our
responsibility to form an opinion, as required by the Listing Rules, on the
financial information (as adjusted) of OGS and to report our opinion to you.
The financial information (as adjusted) of OGS incorporates significant
reclassifications of and adjustments to the historical consolidated financial
statements and historical interim results of OGS. The historical consolidated
financial statements of OGS for each of the two years ended 31 December 2000
state that they were prepared in accordance with UK GAAP and were audited by
PriceWaterhouseCoopers who gave unqualified reports thereon. The historical
consolidated financial statements of OGS for the year ended 31 December 2001
state that they were prepared in accordance with UK GAAP and were audited by
Ernst & Young LLP who gave an unqualified report thereon. The historical
unaudited interim results for the six months ended 30 June 2002 were prepared in
accordance with UK GAAP. We do not accept any responsibility for the historical
financial statements or historical interim results of OGS, which were the
responsibility of the directors of OGS.
Basis of Opinion
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards issued in the United Kingdom by the Auditing Practices
Board. Our work, which was substantially less in scope than an audit and
involved no independent examination of any of the underlying financial
information, consisted primarily of making enquiries of the management of OGS
and its auditors to establish the accounting policies which were applied in the
preparation of the underlying financial information, considering the evidence
supporting the reclassifications and adjustments made and discussing the
financial information (as adjusted) of OGS with the CAT Directors.
Our work has not been carried out in accordance with auditing or other standards
and practices generally accepted in the United States or other jurisdictions and
accordingly should not be relied upon as if it had been carried out in
accordance with those standards and practices.
Opinion
In our opinion:
1. the financial information (as adjusted) of OGS has been properly compiled on
the basis stated; and
2. the adjustments are appropriate for the purpose of presenting the financial
information (as adjusted) of OGS on a basis consistent in all material respects
with the accounting policies of CAT.
Yours faithfully
Deloitte & Touche
Chartered Accountants
PART III(C)
UNAUDITED INTERIM RESULTS OF THE OGS GROUP
FOR THE SIX MONTHS ENDED 30 JUNE 2002
1. Nature of Financial Information
The financial information in this Part III(C) has been extracted without
material adjustment from the unaudited consolidated interim announcement of OGS
for the six months to 30 June 2002, as released on 26 September 2002.
2. Highlights of the year to date
Organisational
o Appointment of Dr David Ebsworth as Chief Executive Officer
o Completion of strategic review of OGSoperations
o Implementation of cost control efforts to reduce burn-rate
o Divisionalisation of OGS into three business units - Proteomics, Inherited
Storage Disorders and Oncology
o Appointment of Denis Mulhall as new Chief Financial Officer
Commercial
o Positive CPMPopinion recommending EU approval for Zavesca
o Marketing collaboration for Zavesca in EU signed with Acetelion representing
significant cost savings, equitable profit share and faster route to market for
Zavesca
o Medarex collaboration progressing well and on target to file an
Investigational New Drug Application (IND) for MDX-OGS 001 in Q2 2003
o Three year collaboration signed with BioInvent to identify, develop,
manufacture and commercialise novel therapeutic antibodies
o First licence issued to GeneProt to operate under OGS' proteomics patents
o New collaboration with Cystic Fibrosis Foundation Therapeutics Inc to discover
and validate serum biomarkers of cystic fibrosis
o Acceptance of the first clinically valid protein targets by Bayer using OGS's
core proteomics technologies
o Cooperative Research and Development Agreement (CRADA) signed with FDAto
identify serum biomarkers for the early prediction and evaluation of drug
induced toxicities
Financial review
o Revenue of (pound)5.8 million for the six months to 30 June 2002 (H1
2001: (pound)8.7 million)
o Loss for the period was (pound)19.5 million (H1 2001: (pound)7.2 million),
reflecting the expansion of OGS's drug discovery programmes with NeoGenesis and
BioInvent, and manufacturing costs associated with Zavesca launch
o Cash balance at 30 June 2002 of(pound)153.4 million (at 31 December
2001: (pound)176.6 million)
3. Chairman's Statement
The year to date has held several challenges for OGS. In July, we were delighted
to receive a positive opinion from the Committee for Proprietary Medicinal
Products (CPMP) for recommendation of Zavesca, our oral therapy against type 1
Gaucher Disease, for approval by the European Commission.
Following the CPMP's positive opinion, our priority is to continue working with
the regulators to complete the final steps in the process to achieve full
approval for the drug in Europe, which we expect to be by the end of the year.
It is our goal to establish a market presence in type 1 Gaucher Disease, to
expand the product label and explore new previously untreatable indications. A
new dosing schedule/switch trial with Zavesca in Europe is planned to begin
shortly. In addition to Zavesca, we have a second product, OGT 923, which has
shown promising results in in vivo studies and we expect it to enter the clinic
by the end of 2002.
The success of our marketing application in Europe was balanced by the receipt
of a "complete response" letter from the US Food and Drug Administration ("FDA")
indicating that Zavesca is not approvable in the US at present based upon the
dossier submitted in August 2001. OGS had a meeting with the FDA on 24 September
and we expect additional guidance in the near future. Our study OGT-918 005 is
continuing at New York University.
In Israel, IRB permission to recommence drug trials was received in July. In
conjunction with our Israeli marketing partner, Teva, we plan to file Zavesca
before the year end. Additionally, we plan to initiate an access protocol for
those patients that want to continue to receive Zavesca at the end of clinical
studies.
A trial exploring Zavesca in Niemann-Pick type C has commenced. We expect
similar trials in type 3 Gaucher Disease and Late Onset Tay Sachs to begin
recruiting in 2002. These indications represent a potential pool of some 2,000
additional patients for which there is no alternative therapy.
In July, we announced a European marketing and distribution partnership with
Actelion Ltd, the Swiss biotechnology company, which has recently had its first
drug approved in the EU and US. Under the terms of this partnership, Actelion
will market Zavesca in the EU. This is a five year agreement that provides
excellent economics for OGS and offers substantial cost savings and risk
reduction when compared to the alternative of building our own infrastructure.
It also offers a quicker route to market for Zavesca.
In the area of drug discovery, we entered into a second collaboration in
monoclonal antibodies, with BioInvent, a Swedish biotechnology company.
BioInvent is a leading player in phage display technologies, giving OGS an
additional means of discovering antibody therapies. Most of the ensuing antibody
discoveries will be wholly owned by OGS. As part of this collaboration, OGS
invested $5m in BioInvent.
During the period, significant collaborations were also signed with our
industry-leading proteomics group and a number of our existing collaborations
extended. A new proteomics initiative was signed with Cystic Fibrosis Foundation
Therapeutics Inc to discover and validate serum biomarkers of cystic fibrosis
and associated pulmonary complications. More recently, OGS entered into a
Cooperative Research and Development Agreement (CRADA) with the Center for Drug
Evaluation and Research of the FDA. The research collaboration will aim to
identify serum protein biomarkers that could be useful across species during
drug development for early prediction and evaluation of drug-induced toxicities.
In addition, we were pleased to extend our proteomics collaborations with
Pfizer, to identify biomarkers for Alzheimer's disease and atherosclerosis, and
Bayer, for the identification of therapeutic targets for asthma and Chronic
Obstructive Pulmonary Disorder. Bayer has recently accepted targets under its
collaboration, which means that our targets have met stringent validation
criteria and will go directly into screening for discovery of potential
therapeutic drugs. Finally, we were pleased to validate our investment in
intellectual property with the issuance of the first licence to our core
proteomics patents and technologies to GeneProt.
We continue to work to bring antibodies and small molecules to the clinic in
both the cancer and glycolipid storage disorder therapeutic areas. Preclinical
development of OGT 923, an analogue of Zavesca, is in its final stages and we
are on target for a first dose in man by the end of 2002. We have, however,
discontinued preclinical development of our first anti-heparanase new chemical
entity (NCE), OGT 2492, after inconclusive preclinical results. We are currently
evaluating various back-up compounds and expect to bring the chosen candidate
into the clinic by the end of 2004. From our imino sugar research, we have
identified a number of compounds with anti-cancer activity. A lead compound, OGT
2378, is being explored in preclinical oncology models and we have a target IND
date of Q1 2004.
We are also pleased with the progress being made in our collaboration with
Medarex. The efforts exerted by the research and development teams are showing
results and we anticipate that an IND for an oncology indication will be filed
for MDX-OGS 001 (Heparanase 1 antibody) in Q2 2003.
Following the response to our New Drug Application (NDA) for Zavesca by the FDA,
we have moved swiftly to reduce our cost base. We have closed our Bridgewater,
New Jersey facility and Don DeGolyer, who was appointed to the Board during the
period, resigned from the Board and the Company. We have also carried out a
review of our UK operations and made some selective redundancies, and
restructured and streamlined some of our existing alliances. The strategic steps
being taken by the Company following these changes are described below.
During the period, Michael Kranda, who served the Company as Chief Executive
Officer since 1996, announced his decision to resign from the Company for
personal reasons. We were all saddened by this decision as Michael led the
Company through its flotation onto the London Stock Exchange in 1998 and the
NASDAQ listing in 2000. I am delighted to report that Michael has now taken up a
position as CEO of a biotechnology start-up in Seattle, Washington. I hope that
he will guide it to as much success as he had with OGS.
We were delighted to appoint Dr David Ebsworth to succeed Michael. David joins
us following a successful career in Bayer where he was Global Head of
Pharmaceuticals. He has already moved the Company forward implementing
significant changes to control costs, improve focus and build the potential for
long-term profitability. His management as well as his sales and marketing
experience have also been invaluable in determining the right course to launch
Zavesca in Europe. We very much look forward to continued success under his
leadership.
In addition, we have appointed Denis Mulhall as Chief Financial Officer. He is a
senior executive with a strong international background in finance and
operations, and will be taking over from Stephen Parker who will be leaving the
Company with immediate effect.
Over the last six months, the global stock markets have proved challenging for
companies in all sectors and OGS has been affected along with many other
biotechnology companies. We are grateful for the continued support of our
shareholders along with the great commitment and efforts of our staff during the
period and look forward to the improved development of the Group, guided by a
clear strategy and regained momentum.
G Kirk Raab
Chairman
26 September 2002
4. Chief Executive's Statement
In the period since I took over as CEOof OGS, I have taken the opportunity to
review the operations and cost base of the company. It is clear that, in light
of the delays in the approval of Zavesca in the US, we must focus on those parts
of our business that will enhance shareholder value in the shortest possible
time.
OGS has a leading technology base in its world-class proteomics platform,
several molecules with high potential in the field of cancer and inherited
storage disorders approaching the clinic and, of course, Zavesca. We also have
sufficient resources with which to build value, including a cash balance of
(pound)153.4 million at 30 June 2002.
As part of the review, and in light of our core competencies, the Board accepted
a recommendation to reorganise the Company in order to focus clearly on our
areas of strength. We will increase transparency, responsibility and
accountability through the creation of three business units:Inherited Storage
Disorders (ISD), Proteomics and Oncology. ISDand Oncology will each form the
core of our research and product development activities. They will each be
supported by Proteomics, which will be tasked with extending its commercial
relationships, commercialising its existing intellectual property and creating
new product offerings so that it rapidly achieves profitability.
From January 2003, we will report these as distinct business units. Each unit
will be tasked with leveraging the internal expertise within the company, and
the external expertise of our partners in order to maximise progress and value
creation, whilst controlling costs and minimising cash burn. Proteomics has the
key objective of achieving profitability in 2003 and ISD of achieving
profitability in 2005.
Oncology will become an increasing focus for OGS and the major portion of
OGScash will be allocated to funding the development of high quality oncology
products. Operationally, the oncology business unit will focus on the
development of OGS' current pipeline, with strategic acquisitions of products
and, where appropriate, companies to fill the gap in our clinical pipeline.
In summary, the goal of the company moving forward is to become an R&D based
pharmaceutical company with a focus on delivering shareholder value from
products for oncology and inherited storage disorders, supported by world-class
proteomics.
I am committed to ensuring that this new organisation will form the basis for
rapid improvement in OGS' performance.
David R Ebsworth, PhD
Chief Executive Officer
26 September 2002
5. Independent review report
Introduction
We have been instructed by Oxford GlycoSciences Plc to review the financial
information for the six months ended 30 June 2002 which comprises the Profit and
Loss Account, Balance Sheet and Cash Flow Statement and the related notes 1 to
7. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performance
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. Areview
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
Ernst & Young LLP
Reading
26 September 2002
Unaudited Consolidated Profit and Loss Account
Half year Half year Year
ended ended ended
30.06.02 30.06.01 31.12.01
Notes (pound)'000 (pound)'000 (pound)'000
Turnover 2, 3 5,780 8,712 13,376
Net operating costs (28,767) (22,879) (49,396)
------- ------- -------
Operating loss (22,987) (14,167) (36,020)
Share of joint venture loss 3 (1,641) -- (2,007)
Profit on disposal -- 109 82
------- ------- -------
Loss on ordinary activities before interest and taxation (24,628) (14,058) (37,945)
Net interest receivable 3,256 5,413 9,733
------- ------- -------
Loss on ordinary activities before taxation (21,372) (8,645) (28,212)
Tax on loss on ordinary activities 1,853 1,413 2,864
------- ------- -------
Loss for the period (19,519) (7,232) (25,348)
------- ------- -------
Loss per ordinary 5 pence share
- - basic and diluted 4 (35.11p) (13.25p) (46.04p)
------- ------- -------
The Group has no recognised gains and losses other than the losses above and
therefore no separate statement of total recognised gains and losses has been
presented.
There is no difference between the losses on ordinary activities before taxation
and the losses for the periods stated above, and their historical cost
equivalents.
Unaudited Group Balance Sheet
30.06.02 30.06.01 31.12.01
Notes (pound)'000 (pound)'000 (pound)'000
Fixed assets
Tangible assets 14,800 14,089 14,221
-------- -------- --------
Investments
Investment in joint venture - share of gross assets 11,874 15,000 14,679
Investment in joint venture - share of gross liabilities (522) -- (1,686)
Investment in joint venture - provision for unrealised profit (2,162) (3,250) (2,708)
-------- -------- --------
3 9,190 11,750 10,285
Other investments 5 7,779 -- 4,251
-------- -------- --------
31,769 25,839 28,757
-------- -------- --------
Current assets
Stock 321 251 346
Debtors 10,116 9,837 9,626
Cash at bank and in hand 153,376 195,872 176,618
-------- -------- --------
163,813 205,960 186,590
-------- -------- --------
Creditors: amounts falling due within one year (18,622) (15,836) (18,250)
-------- -------- --------
Net current assets 145,191 190,124 168,340
-------- -------- --------
Total assets less current liabilities 176,960 215,963 197,097
Creditors: amounts falling due after more than one year (1,614) (3,640) (2,399)
Provisions for liabilities and charges -- (73) (87)
-------- -------- --------
Net assets 175,346 212,250 194,611
-------- -------- --------
Capital and reserves
Share capital 2,785 2,761 2,778
Share premium account 276,197 275,490 275,950
Capital reserve 11,107 11,107 11,107
Profit and loss account (deficit) (114,743) (77,108) (95,224)
-------- -------- --------
Equity shareholders' funds 6 175,346 212,250 194,611
-------- -------- --------
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. This
statement of half year results will be sent to all shareholders. Copies are
available to members of the public at the Group's registered office shown at the
back of this report.
The comparative figures for the year ended 31 December 2001 have been extracted
from the Group's statutory financial statements for that financial year. Those
accounts carried an unqualified audit report and have been filed with the
Registrar of Companies.
Unaudited Consolidated Cash Flow Statement
Half year Half year Year
ended ended ended
30.06.02 30.06.01 31.12.01
Notes (pound)'000 (pound)'000 (pound)'000
Net cash outflow from operating activities A (22,379) (3,649) (22,164)
Returns on investments and servicing of finance 4,677 3,437 9,042
Taxation 1,281 -- --
Purchases of tangible fixed assets (3,547) (3,011) (5,306)
Purchases of fixed asset investments (3,528) (15,000) (19,251)
Disposals - cash consideration -- 115 122
-------- -------- --------
Net cash outflow before management of
liquid resources and financing (23,496) (18,108) (37,557)
Management of liquid resources 32,104 23,585 39,480
Financing 254 10,088 10,283
-------- -------- --------
Increase in net cash B 8,862 15,565 12,206
-------- -------- --------
(A) Reconciliation of operating loss
to net cash outflow from operating activities
Operating loss (22,987) (14,167) (36,020)
Depreciation charges 2,476 2,001 4,418
Decrease/(increase) in stock 25 (47) (170)
(Increase)/decrease in debtors (1,339) (344) 34
(Decrease)/increase in deferred income (1,585) 5,721 6,815
Increase in creditors 1,031 3,187 2,759
-------- -------- --------
608 10,518 13,856
-------- -------- --------
Net cash outflow from operating activities (22,379) (3,649) (22,164)
-------- -------- --------
(B) Reconciliation of net cash flow to movement in net funds
Increase in cash in the period 8,862 15,565 12,206
Cash inflow from movement in liquid resources (32,104) (23,585) (39,480)
-------- -------- --------
Movement in net funds in the period (23,242) (8,020) (27,274)
Net funds at commencement of the period 176,618 203,892 203,892
-------- -------- --------
Net funds at the end of the period 7 153,376 195,872 176,618
-------- -------- --------
Notes to the Accounts
1 Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2001 statutory accounts. The
statements were approved by a duly appointed and authorised committee of the
Board of Directors on 26 September 2002.
2 Segmental information
The geographical analysis of turnover, all arising in the UK, by destination is
as follows:
Half year Half year Year
ended ended ended
30.06.02 30.06.01 31.12.01
(pound)'000 (pound)'000 (pound)'000
United Kingdom 1,946 3,260 5,422
Continental Europe 866 597 1,180
USA and Canada 2,915 4,853 6,772
Rest of the World 53 2 2
----- ------ ------
5,780 8,712 13,376
----- ------ ------
Details of turnover from Confirmant, a joint venture owned by OGS and Marconi,
are given in note 3.
3 Interest in joint venture
In June 2001, OGS formed a joint venture with Marconi, called Confirmant, which
will provide database services to pharmaceutical and biotechnology companies.
As at 30 June 2002, there is a provision for unrealised profit, (pound)2.2
million, representing revenue from the sale of marketing rights and data
analysis software to Confirmant. This amount will be released over the life of
the assets to which it relates. Sales by OGS to Confirmant during the period
ended 30 June 2002 amounted to (pound)1.9 million (2001: (pound)3.3 million).
4 Losses per share
The basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders of (pound)19.5 million (2001: (pound)7.2 million) by the
weighted average number of ordinary shares in issue during the period, 55.6
million (2001: 54.6 million).
For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume the exercise of all options which would be
potentially dilutive. There is no difference between the basic and diluted loss
per share.
5 Other investments
BioInvent NeoGenesis Inc. Total
(pound)'000 (pound)'000 (pound)'000
Cost:
At 1 January 2002 -- 4,251 4,251
Additions 3,528 -- 3,528
----- ----- -----
At 30 June 2002 3,528 4,251 7,779
----- ----- -----
Provisions:
At 1 January 2002 and 30 June 2002 -- -- --
----- ----- -----
Net book value:
At 30 June 2002 3,528 4,251 7,779
----- ----- -----
Net book value:
At 31 December 2001 -- 4,251 4,251
----- ----- -----
On 16 May 2002, OGS subscribed SEK52.0 million in cash at SEK39.1 per share in
BioInvent, as part of a research collaboration.
At 30 June 2002, BioInvent's share price was SEK28.5 per share. However, this
investment, and the investment in NeoGenesis Inc, is not held for resale and
management do not consider that any permanent diminution in value existed at
that date.
6 Reconciliation of movements in shareholders' funds
Half year Half year Year
ended ended ended
30.06.02 30.06.01 31.12.01
(pound)'000 (pound)'000 (pound)'000
Loss for the period (19,519) (7,232) (25,348)
New shares issued 254 10,091 10,552
Expenses of shares issued -- (285) (269)
-------- -------- --------
Net (reduction in)/addition to shareholders' funds (19,265) 2,574 (15,065)
Opening shareholders' funds 194,611 209,676 209,676
-------- -------- --------
Closing shareholders' funds 175,346 212,250 194,611
-------- -------- --------
7 Analysis of net funds
31.12.01 Cash flow 30.06.02
(pound)'000 (pound)'000 (pound)'000
Cash at bank and in hand 14,052 8,862 22,914
Bank deposits - liquid resources 162,566 (32,104) 130,462
-------- -------- -------
176,618 (23,242) 153,376
-------- -------- -------
Liquid resources represent all deposits with an original maturity of between 24
hours and one year. Cash includes cash in hand and deposits of up to 24 hours
which are payable on demand.
PART IV
PRO FORMA FINANCIAL INFORMATION RELATING
TO THE ENLARGED GROUP
UNAUDITED PRO FORMA NET ASSETS STATEMENT
The following table sets out a pro forma statement of net assets of the Enlarged
Group following the Merger as if it had taken place on 30 September 2002. This
table has been prepared for illustrative purposes only, and because of its
nature, it may not give a true picture of the financial position of the Enlarged
Group.
Adjustments
--------------------------------------------
CAT OGS
As at As at Pro forma Proforma
30 September 30 June adjustments Enlarged
2002 2002 Group Group
(note 1) (note 2) (i) (ii)
(pound) 000 (pound) 000 (pound) 000 (pound) 000 (pound) 000
Fixed assets
Negative goodwill -- -- (56,903) -- (56,903)
Intangible assets 7,933 -- -- -- 7,933
Tangible fixed assets 12,429 14,800 -- -- 27,229
Investment in joint venture-share
of gross assets -- 11,874 -- -- 11,874
Investment in joint venture-share
of gross liabilities -- (522) -- -- (522)
Investment in joint venture-provision
for unrealised profit -- (2,162) -- -- (2,162)
-------- -------- -------- ------- --------
-- 9,190 -- -- 9,190
Other investments 215 7,779 -- -- 7,994
-------- -------- -------- ------- --------
20,577 31,769 (56,903) (4,557)
-------- -------- -------- ------- --------
Current assets
Stock -- 321 -- -- 321
Debtors 6,556 10,116 -- -- 16,672
Investment in liquid resources 126,694 -- -- -- 126,694
Cash at bank and in hand 3,081 153,376 (5,300) -- 151,157
-------- -------- -------- ------- --------
136,331 163,813 (5,300) 294,844
-------- -------- -------- ------- --------
Creditors
Amounts falling due within one year (12,563) (18,622) -- (952) (32,137)
-------- -------- -------- ------- --------
Net current assets 123,768 145,191 (5,300) (952) 262,707
-------- -------- -------- ------- --------
Total assets less current liabilities 144,345 176,960 (62,203) (952) 258,150
-------- -------- -------- ------- --------
Creditors
Amounts falling due outside one year (8,580) (1,614) -- (3,251) (13,445)
-------- -------- -------- ------- --------
Net assets 135,765 175,346 (62,203) (4,203) 244,705
-------- -------- -------- ------- --------
Notes:
1. CAT statement of Net Assets
The figures for the CAT Group are extracted from the audited consolidated
balance sheet of CAT as at 30 September 2002 as set out in Part II of this
document.
2. OGS statement of Net Assets
The figures for the OGS Group are extracted from the unaudited
consolidated balance sheet of OGS as at 30 June 2002 as set out in Part III(C)
of this document.
3. Pro forma adjustments
Adjustments have been made to reflect:
(i) Negative goodwill arising on the acquisition of OGS, calculated as
follows;
(pound)'000
Consideration* 108,940
Estimated expenses of acquisition 5,300
Less: Net assets of OGS at 30 June 2002 (175,346)
Adjustment for accounting policy alignment
(See (ii) below) 4,203
--------
Negative goodwill arising (56,903)
--------
* Consideration has been calculated as follows:
The value of the purchase consideration is based upon issue of
20,174,091 New CAT Shares at a price of 540 pence per share being the
Closing Price of CAT Shares on 22 January 2003 (which was the last
Business Day prior to the date of the announcement of the Merger).
The estimated expenses of (pound)5,300,000 are assumed to be settled in
cash.
(ii) An adjustment has been made to align OGS' accounting policy for
revenue recognition with that of CAT. This has resulted in an increase in OGS'
deferred income balance of (pound)4,203,000 as at 30 June 2002. This is split as
follows: an increase in creditors due within one year of (pound)952,000 and a
(pound)3,251,000 increase in creditors due outside one year. Further details as
to the differences in the accounting policies for revenue recognition adopted by
CAT and OGS are as set out in Part III(B) of this document.
4. The statement does not include any adjustments necessary to reflect the fair
values of the assets and liabilities of OGS. No account has been taken of
trading results since the date of each balance sheet.
The Directors and Proposed Directors
Cambridge Antibody Technology Group plc
Milstein Building
Granta Park
Cambridge
CB1 6GH
Merrill Lynch International
Merrill Lynch Financial Centre
2 King Edward Street
London
EC1A 1HQ
6 February 2003
Our Ref:
Dear Sirs
Cambridge Antibody Technology Group plc ("CAT" or the "Company")
We report on the unaudited pro forma combined net assets statement ("the pro
forma financial information") set out in Part IV of the Listing Particulars of
the Company dated 6 February ("the Listing Particulars") issued by CAT. The pro
forma financial information has been prepared for illustrative purposes only to
provide information about how the proposed acquisition of OGS might have
affected the financial information presented.
Responsibilities
It is the responsibility solely of the Directors and Proposed Directors of CAT
to prepare the pro forma financial information in accordance with paragraph
12.29 of the Listing Rules of the UK Listing Authority ("the Listing Rules").
It is our responsibility to form an opinion, as required by the Listing Rules,
on the pro forma financial information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the pro forma financial
information beyond that owed to those to whom our reports were addressed by us
at the dates of their issue.
Basis of opinion
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards and the Bulletin 1998/8 "Reporting on pro forma financial
information pursuant to the Listing Rules" issued by the Auditing Practices
Board in the United Kingdom. Our work, which involved no independent examination
of any of the underlying financial information, consisted primarily of comparing
the unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the pro forma financial
information with the CAT Directors and the Proposed Directors.
Our work has not been carried out in accordance with auditing or other standards
and practices generally accepted in the United States or other jurisdictions and
accordingly should not be relied upon as if it had been carried out in
accordance with those standards and practices.
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis
stated;
(b) such basis is consistent with the accounting policies of CAT; and
(c) the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 12.29 of the Listing Rules.
Yours faithfully
Deloitte & Touche
Chartered Accountants
PART V
CONDITIONS TO THE IMPLEMENTATION OF THE SCHEME AND THE MERGER
The Merger is conditional upon the Scheme becoming unconditional and becoming
effective by not later than 30 April 2003 or such later date (if any) as OGS and
CAT may agree and the Court may allow.
1. Conditions of the Scheme
The Scheme is conditional upon:
(a) the approval by a majority in number representing three-fourths in
value of the holders of OGS Shares present and voting, either in person or by
proxy, at the OGS Court Meeting;
(b) any resolution or resolutions required to approve and implement the
Scheme being passed at the OGS EGM;
(c) any resolution or resolutions of CAT Shareholders required in
connection with the approval of the Merger and implementation of the Scheme
being passed at the CAT EGM;
(d) the Admission to the Official List of the New CAT Shares becoming
effective in accordance with the Listing Rules and the admission of such shares
to the London Stock Exchange's market for listed securities becoming effective
or (if CAT and OGS so determine and subject to the consent of the Panel) the UK
Listing Authority agreeing or confirming its decision to admit such shares to
the Official List and the London Stock Exchange agreeing to admit such shares to
trading subject only to (i) the allotment of such shares and/or (ii) the Scheme
becoming unconditional in all respects (other than in respect of this paragraph
1(d)); and
(e) the sanction (with or without modification) of the Scheme and
confirmation of the reduction of capital involved by the Court, an office copy
of the Order being delivered for registration to the Registrar of Companies in
England and Wales and registration of the Order confirming the reduction of
capital involved in the Scheme with the Registrar of Companies in England and
Wales.
2. Conditions of the Merger
CAT and OGS have agreed that, subject as stated in paragraph 3 below, the
Merger is also conditional upon, and, accordingly, the necessary action to make
the Scheme effective will not be taken unless the following conditions are
satisfied or waived as referred to below prior to the Scheme being sanctioned by
the Court:
(a) the Office of Fair Trading indicating in terms reasonably satisfactory
to CAT and OGS that it is not the intention of the Secretary of State for Trade
and Industry to refer the Merger or any matters arising therefrom to the
Competition Commission;
(b) all authorisations necessary or reasonably considered by CAT and OGS
to be material in the context of the Merger for or in respect of the Merger and
the implementation of the Scheme having been obtained, in terms and in a form
reasonably satisfactory to CAT and OGS and, where the withdrawal of any such
authorisations would, in the opinion of both of CAT and OGS (acting reasonably),
have a material adverse effect on the Enlarged Group, the Merger or the
implementation of the Scheme, these remaining in full force and effect, and no
intimation of an intention to revoke or not renew any of these having been
received, and all necessary notifications, filings and applications (including
such notifications, filings and applications as may be required to national or
supranational merger authorities) having been made and all applicable waiting
and other time periods (including any extensions thereof) under any applicable
legislation or regulation of any jurisdiction having expired, lapsed or been
terminated (as appropriate) and all necessary statutory and regulatory
obligations in connection with the Merger and the implementation of the Scheme
in any jurisdiction having been complied with;
(c) no relevant authority having taken, instituted, implemented or
threatened (and there not continuing to be outstanding) any action, proceeding,
suit, investigation, enquiry or reference or having enacted, made or proposed
any statute, regulation or order, or taken any other step that would or might in
any respect be material to the OGS Group or the CAT Group to:
(i) require, prevent or delay the divestiture or alter the terms
envisaged for any proposed divestiture by any member of the Wider OGS Group or
the Wider CAT Group of all or any portion of their respective businesses, assets
(including shares) or properties; or
(ii) (other than in relation to matters fairly disclosed by OGS to
CAT regarding the OGS Group or by CAT to OGS regarding the CAT Group prior to 23
January 2003) require any member of either the Wider CAT Group or the Wider OGS
Group to subscribe for or acquire, or to make an offer to acquire any shares or
other securities in any member of either the Wider CAT Group or the Wider OGS
Group owned by any third party; or
(iii) (other than in relation to matters fairly disclosed by OGS to
CAT regarding the OGS Group or by CAT to OGS regarding the CAT Group prior to 23
January 2003) impose any limitation on the ability of any member of the Wider
OGS Group or the Wider CAT Group to conduct their respective businesses or to
own or control their respective assets or properties; or
(iv) make the Merger or the Scheme or its implementation illegal,
void or unenforceable in or under the laws of any jurisdiction or otherwise
materially restrict, delay or interfere with the Merger or the Scheme or require
material amendment to the terms of the Merger or the Scheme;
(d) other than as fairly disclosed by OGS to CAT regarding the OGS Group
or by CAT to OGS regarding the CAT Group prior to 23 January 2003, there being
no provision of any arrangement, agreement, licence or other instrument to which
any member of the Wider OGS Group or the Wider CAT Group is a party or by or to
which any member of the Wider OGS Group or the Wider CAT Group may be bound or
is subject which would or might in the opinion of CAT and OGS (acting
reasonably) result, to an extent which is material in the context of the OGS
Group or the CAT Group, in:
(i) any moneys borrowed or other indebtedness or liabilities actual
or contingent of any member of the Wider OGS Group or the Wider CAT Group being
or becoming repayable or capable of being declared repayable prior to their
stated maturity date; or
(ii) any such arrangement, agreement, licence or instrument being
terminated or modified, or any adverse effect arising thereunder; or
(iii) the interests of CAT or OGS or any member of the Wider OGS
Group or the Wider CAT Group with any other person, firm, company or body being
terminated, modified or affected; or
(iv) any asset, property or interest of, or any asset the use of
which is enjoyed by, any member of the Wider OGS Group or the Wider CAT Group
being or falling to be disposed of, or charged in any manner whatsoever, or
ceasing to be available to any member of the Wider OGS Group, or the Wider CAT
Group or any right arising under which any such asset, property or interest
could be required to be disposed of, or could cease to be available to any
member of the Wider OGS Group or the Wider CAT Group otherwise than in the
ordinary course of business; or
(v) the creation or assumption of any liabilities (whether actual,
contingent or prospective) by any member of the Wider OGS Group or the Wider CAT
Group; or
(vi) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business, property, assets
or interests of any member of the Wider OGS Group or the Wider CAT Group or any
such mortgage, charge or other security interest (wherever created, arising or
having arisen) becoming enforceable; or
(vii) the financial or trading position or the value of any member
of the Wider OGS Group or the Wider CAT Group being prejudiced or adversely
affected; or
(viii) any member of the Wider OGS Group or the Wider CAT Group
being required to acquire any shares in any member of the Wider OGS Group or the
Wider CAT Group owned by any third party,
in each case in consequence of the Merger or the Scheme, and no
event having occurred which, under any provision of any such arrangement,
agreement, licence, permit, franchise or other instrument, could reasonably be
expected to result in any of the events or circumstances which are referred to
in paragraphs (i) to (viii) of this paragraph 2(d), in each case in consequence
of the Merger or the Scheme;
(e) CAT not having discovered regarding OGS, and OGS not having discovered
regarding CAT that:
(i) any adverse financial, business or other information in relation
to circumstances existing prior to 23 January 2003 and which is material in the
context of the relevant group has not been publicly disclosed by the relevant
group or otherwise fairly disclosed prior to such date (in the case of such
information regarding CAT) by CAT to OGS and (in the case of such information
regarding OGS) by OGS to CAT; or
(ii) any financial, business or other information which has been
publicly disclosed at any time by any member of the relevant group or otherwise
fairly disclosed prior to 23 January 2003 (in the case of such information
regarding CAT) by CAT to OGS and (in the case of such information regarding OGS)
by OGS to CAT is misleading or contains any misrepresentation of fact or omits
to state a fact necessary to make the information contained therein complete and
not misleading, and which in any such case is adverse and material in the
context of the relevant group; or
(iii) any member of the relevant group is subject to any liability
(contingent or otherwise) which has not been disclosed or reflected in the last
published audited consolidated accounts of its group or publicly disclosed
pursuant to the Listing Rules or otherwise prior to 23 January 2003 or otherwise
fairly disclosed prior to such date by OGS to CAT and which is material in the
context of the OGS Group or by CAT to OGS and which is material in the context
of the CAT Group;
(f) (i) unless publicly announced by CAT pursuant to the Listing Rules or
otherwise prior to 23 January 2003 or otherwise fairly disclosed by CAT to OGS
prior to such date no litigation, arbitration proceedings, prosecution or other
legal proceedings to which any member of the Wider CAT Group is a party (whether
as plaintiff or defendant or otherwise), in each case which is material and
adverse in the context of the CAT Group, having been instituted or threatened or
remaining outstanding; or
(ii) since 30 September 2002, being the date to which the latest
audited report and accounts of CAT were made up, and unless publicly announced
by CAT pursuant to the Listing Rules or otherwise publicly announced by CAT
prior to 23 January 2003 or otherwise fairly disclosed prior to such date by CAT
to OGS, there having been no material adverse change in the business, financial
or trading position of the CAT Group;
(g) (i) unless publicly announced by OGS pursuant to the Listing Rules or
otherwise prior to 23 January 2003 or otherwise fairly disclosed by OGS to CAT
prior to such date, no litigation, arbitration proceedings, prosecution or other
legal proceedings to which any member of the Wider OGS Group is a party (whether
as plaintiff or defendant or otherwise), in each case which is material and
adverse in the context of the OGS Group, having been instituted or threatened or
remaining outstanding; or
(ii) since 31 December 2001, being the date to which the latest
audited report and accounts of OGS were made up, and unless publicly announced
by OGS pursuant to the Listing Rules or otherwise prior to 23 January 2003 or
otherwise fairly disclosed prior to such date by OGS to CAT, there having been
no material adverse change in the business, financial or trading position of the
OGS Group;
(h) other than as publicly announced by CAT or OGS pursuant to the Listing
Rules or otherwise prior to 23 January 2003 or as contemplated by the Scheme or
as otherwise fairly disclosed prior to such date by CAT to OGS regarding the CAT
Group or by OGS to CAT regarding the OGS Group, no member of the CAT Group,
since 30 September 2002, and no member of the OGS Group, since 31 December 2001,
being the dates to which the respective latest audited report and accounts of
CAT and OGS were made up, having:
(i) issued or agreed to issue, or authorised or proposed the issue,
of additional shares of any class, or securities convertible into, or rights,
warrants or options to subscribe for or acquire, any such shares or convertible
securities ("Securities") (save as between CAT and OGS respectively and their
respective wholly-owned subsidiaries or for options granted, and any shares in
CAT or OGS respectively issued upon exercise of options granted prior to 23
January 2003, under or pursuant to the CAT Share Schemes or the OGS Share Option
Schemes or as agreed between CAT or OGS from time to time and save, in the case
of CAT, for the issue of Securities representing or convertible into ordinary
shares in CAT which are issued in connection with or relate to any commercial
agreement with a third party and which do not exceed, in aggregate, 5 per cent.
of CAT's current issued share capital) or redeemed, purchased, repaid or reduced
any part of its shares or other securities (or agreed to do so) to an extent
which (save in the case of any such issue, authorisation, proposal, redemption,
purchase or reduction by CAT or OGS respectively) is material in the context of
the CAT Group or OGS Group, as the case may be; or
(ii) except for:
(a) transactions between one wholly-owned member of the
relevant group and another such member;
(b) (in the case of OGS) the Scheme; and
(c) (in the case of CAT) the disposal of the business of
patient stratification based on antibody arrays;
authorised or proposed or announced its intention to propose
any merger or any change in its share or loan capital or (other than in the
ordinary course of business) any acquisition or disposal of assets or shares
which is material in the context of the CAT Group or OGS Group, as the case may
be; or
(iii) (other than transactions between one wholly-owned member of
the relevant group and another such member and, in the case of CAT, the disposal
of the business of patient stratification based on antibody arrays) entered into
or varied any contract, transaction or commitment (whether in respect of capital
expenditure or otherwise) (or agreed to do so) which is of a long term or
unusual or onerous nature and which is material in the context of the CAT Group
or OGS Group, as the case may be, or which involves or could involve an
obligation of a nature or magnitude which is material in the context of the CAT
Group or OGS Group, as the case may be; or
(iv) issued or proposed the issue of any debentures or, save in the
ordinary course of business, incurred or increased (or agreed to incur or
increase) any indebtedness or contingent liability of an aggregate amount which
might materially and adversely affect the CAT Group or OGS Group, as the case
may be; or
(v) (in the case of CAT or OGS only) recommended, declared, made or
paid, or proposed the declaration, paying or making of any dividend, bonus or
other distribution whether payable in cash or otherwise; or
(vi) entered into or varied or made any offer (which remains open
for acceptance) to enter into or vary the terms of, any contract, agreement or
arrangement with any of the directors or senior executives of any member of the
relevant group which would be material in the context of the OGS Group or the
CAT Group, as the case may be; or
(vii) (other than transactions between any wholly-owned member of
the OGS Group and another such member and other than pursuant to the Scheme or
the Merger), entered into, implemented, effected, authorised, proposed or
announced its intention to enter into, implement, effect or authorise any
merger, demerger, reconstruction, amalgamation, scheme, commitment or other
transaction or arrangement in respect of itself or another member of the OGS
Group which would be material in the context of the OGS Group; or
(viii) (other than transactions between any wholly-owned member of
the CAT Group and another such member and other than pursuant to the Scheme or
the Merger), entered into, implemented, effected, authorised, proposed or
announced its intention to enter into, implement, effect or authorise any
merger, demerger, reconstruction, amalgamation, scheme, commitment or other
transaction or arrangement in respect of itself or another member of the CAT
Group which would be material in the context of the CAT Group; or
(ix) taken any corporate action or had any legal proceedings
instituted or threatened against it or petition presented or order made for its
winding up (voluntarily or otherwise), dissolution or reorganisation or for the
appointment of a receiver, administrator, administrative receiver, trustee or
similar officer of all or any material part of its assets and revenues or any
analogous proceedings in any jurisdiction or appointed any analogous person in
any jurisdiction; or
(x) been unable, or admitted in writing that it is unable, to pay
its debts or having stopped or suspended (or threatened to stop or suspend)
payment of its debts generally or ceased or threatened to cease carrying on all
or a substantial part of its business; or
(xi) waived or compromised any claim other than in the ordinary
course of business which waiver or compromise is material in the context of the
OGS Group or the CAT Group, as the case may be; or
(xii) (in the case of CAT or OGS only) made any alteration to its
memorandum or articles of association which would be material in the context of
the OGS Group or the CAT Group, as the case may be; or
(xiii) entered into any contract, agreement, commitment or
arrangement or passed any resolution or made any offer (which remains open for
acceptance) or proposed or announced any intention with respect to any of the
transactions, matters or events referred to in this paragraph (h);
(i) CAT not having discovered regarding OGS, and OGS not having discovered
regarding CAT:
(i) that, save as fairly disclosed to CAT by OGS regarding the OGS
Group or to OGS by CAT regarding the CAT Group prior to 23 January 2003, any
past or present member of the relevant group has not complied with any
applicable legislation or regulations of any jurisdiction with regard to the
use, treatment, handling, storage, transport, release, disposal, discharge,
spillage, leak or emission of any waste or hazardous substance reasonably or any
substance likely to impair the environment or harm human health, or otherwise
relating to environmental matters or the health and safety of any person or that
there has otherwise been any such use, treatment, handling, storage, transport,
release, disposal, discharge, spillage, leak or emission (whether or not this
constituted a non-compliance by any person with any legislation or regulations
and wherever the same may have taken place) which, in any case, would be
reasonably likely to give rise to any liability (whether actual or contingent)
or cost on the part of any member of the relevant group which would be material
in the context of the relevant group; or
(ii) that save as fairly disclosed to CAT by OGS regarding the OGS
Group or to OGS by CAT regarding the CAT Group prior to 23 January 2003, there
is, or is reasonably likely to be, any liability (whether actual or contingent)
to make good, repair, reinstate or clean up any property now or previously
owned, occupied or made use of by any past or present member of the relevant
group or any other property or any controlled waters under any environmental
legislation, regulation, notice, circular, order or other lawful requirement of
any relevant authority or otherwise which would be material in the context of
the relevant group; or
(iii) that, save as fairly disclosed to CAT by OGS regarding the OGS
Group or to OGS by CAT regarding the CAT Group prior to 23 January 2003,
circumstances exist whereby a person or class of persons is proposing to bring a
claim in respect of any product or process of manufacture or materials used
therein now or previously manufactured, sold or carried out by any past or
present member of the relevant group which would be material and adverse in the
context of the relevant group.
For the purpose of these conditions:
(a) "authorisations" means authorisations, orders, grants, recognitions,
determinations, certificates, confirmations, consents, licences, clearances,
permissions, advices and approvals; and
(b) "relevant authority" means any central bank, government, government
department or governmental, quasi governmental, supranational, statutory,
regulatory or investigative body, court, stock exchange, trade agency,
association, institution or professional or environmental body or any other
similar person or body whatsoever in any relevant jurisdiction.
3. Subject to paragraph 4 below, CAT and OGS, acting together, may waive all or
any of the conditions contained in paragraphs 2(a), (b), (c) and (d). CAT
reserves the right (but shall be under no obligation) to waive all or any of the
conditions contained in paragraph 2(g) above, and in paragraphs 2(e), (h) and
(i) above (in so far as they relate to OGS), in whole or in part, and OGS
reserves the right (but shall be under no obligation) to waive all or any of the
conditions in paragraph 2(f) above, and in paragraphs 2(e), (h) and (i) above
(in so far as the relate to CAT), in whole or in part, for the purposes of the
Merger and the Scheme.
4. OGS shall only be entitled to invoke a condition in circumstances where it
would be able to invoke the condition if it were an offeror for CAT in an offer
governed by the City Code.
5. Save with the consent of the Panel, the Merger will lapse and the Scheme will
not proceed if, before the date of the OGS Court Meeting, there is a reference
to the Competition Commission.
PART VI
INFORMATION FOR OVERSEAS SHAREHOLDERS AND
HOLDERS OF ADSs
1. General
As regards persons resident in, or citizens of, jurisdictions outside the United
Kingdom ("overseas shareholders"), the implementation of the Merger may be
affected by the laws of those relevant jurisdictions. Such overseas shareholders
should inform themselves about and observe any applicable legal requirements. It
is the responsibility of overseas shareholders to satisfy themselves as to the
full observance of the laws of the relevant jurisdiction in connection with such
applicable legal requirements, including the obtaining of any governmental,
exchange control or other consents that may be required, or the compliance with
other necessary formalities that are required to be observed and the payment of
any issue, transfer or other taxes due in such jurisdiction.
In any case where the issue of New CAT Shares would infringe the laws of any
jurisdiction outside the United Kingdom or necessitate compliance with any
special requirement, the Scheme provides that such New CAT Shares may, at the
discretion of CAT, either be issued to a nominee of the overseas holder and then
sold or issued to the relevant OGS Shareholders and sold on his or her behalf,
in each case with the net proceeds of the sale being remitted to the overseas
shareholder.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITY, NOR SHALL THERE BE ANY SALE OF, ISSUE OR TRANSFER OF
THE SECURITIES REFERRED TO IN THIS DOCUMENT, IN ANY JURISDICTION IN
CONTRAVENTION OF APPLICABLE LAW.
Overseas shareholders should consult their own legal and tax advisers with
respect to the legal and tax consequences of the Scheme in their particular
circumstances.
2. US securities laws
The New CAT Shares to be issued to OGS Shareholders under the Scheme will be
issued in reliance upon the exemptions from the registration requirements of the
Securities Act and the requirements of any US state securities laws provided by
Sections 3(a)(10) and 18(b) of the Securities Act, respectively, and, as a
consequence, will not be registered under the Securities Act or any US state
securities laws. Except for the circumstances described in the next paragraph,
the New CAT Shares issuable to OGS Shareholders pursuant to the Scheme should
not be treated as "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act and may be resold by former OGS Shareholders without
restriction under the Securities Act.
Under US securities laws, an OGS Shareholder who is deemed to be an "affiliate"
(as such term is defined in Rule 144 under the Securities Act) of CAT or of OGS
before the Effective Date or of CAT following the Effective Date may not resell
New CAT Shares received pursuant to the Scheme without registration under the
Securities Act, except pursuant to the applicable resale provisions of Rule
145(d) under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act or in a transaction not subject
to such requirements (including a transaction that satisfies the applicable
requirements for resales outside the United States pursuant to Regulation S
under the Securities Act). Whether a person is an affiliate of a company for
such purposes depends upon the circumstances, but affiliates of a company can
include certain officers and directors and significant shareholders. OGS
Shareholders who believe they may be affiliates of CAT or OGS should consult
their own legal advisers prior to any sales of New CAT Shares received pursuant
to the Scheme.
3. Other overseas securities laws
No steps have been taken, nor will any be taken, to enable the New CAT Shares to
be offered in compliance with the applicable securities laws of Canada or Japan
and no prospectus in relation to the New CAT Shares has been, or will be, lodged
with or registered by the Australian Securities and Investments Commission.
Accordingly, no New CAT Shares may be offered, sold, transferred, resold,
delivered or distributed, directly or indirectly, in or into or from Canada,
Japan or Australia (except in transactions exempt from or not subject to the
registration requirements of the relevant securities laws of Canada, Japan or
Australia).
4. US Filings
Each of CAT and OGS is subject to the information requirements of the US
Exchange Act of 1934, as amended, applicable to foreign private issuers having
securities registered under section 12 thereof, and in accordance therewith file
annual reports and other information with the SEC. The reports and other
information CAT and OGS file with the SEC can be inspected and copied at the
SEC's public reference room located at 450 Fifth Street, NW, Washington, D.C.
20549. Copies of such materials are also available by mail from the public
reference room at prescribed rates. Please call the SEC at 1-800-SEC-0330
(within the United States) or +1-202-942-8090 (outside the United States) for
more information on the operation of the public reference room. In addition, CAT
and OGS' reports and other information filed through the Electronic Data
Gathering Analysis and Retrieval systems, commonly referred to as EDGAR, are
publicly available through the SEC's website (www.sec.gov). CAT and OGS SEC
filings are also available to the public from commercial document retrieval
services.
For the purpose of qualifying for the exemption from the registration
requirements of the Securities Act provided by section 3(a)(10) thereof, OGS
will advise the Court at the OGS Court Hearing that its sanctioning of the
Scheme will be relied upon by CAT for such purpose as an approval of the Scheme
following a hearing on its fairness to OGS Shareholders at which hearing all
such holders are entitled to attend in person or through counsel to support or
oppose the sanctioning of the Scheme and with respect to which notification has
been given to all such holders.
PART VII
CAT AMERICAN DEPOSITARY SHARES
CAT AMERICAN DEPOSITARY SHARES
The following is a summary of certain provisions of the CAT ADS Deposit
Agreement pursuant to which the New CAT ADSs evidenced by CAT ADRs are to be
issued to holders of OGS ADSs pursuant to the Merger. Because it is a summary,
it does not contain all the information that may be important to an investor in
CAT ADSs. For more complete information, investors should read the entire CAT
ADS Deposit Agreement and the CAT ADS. Directions on how to obtain copies of
these are provided below.
The parties to the CAT ADS Deposit Agreement are CAT, The Bank of New York (as
depositary) and the registered holders (the "CAT ADS Owners") and holders from
time to time of ADSs issued thereunder. You may hold ADSs either directly or
indirectly through your broker or other financial institution. If you hold ADSs
directly, you are a CAT ADS Owner. This description assumes you hold your ADSs
directly. If you hold the ADSs indirectly, you must rely on the procedures of
your broker or other financial institution. You should consult with your broker
or other financial institution to find out what those procedures are.
Holders of CAT ADSs and holders of OGS ADSs should refer to paragraph 13 of Part
I and paragraph 13 of Part III of the CAT Shareholder Circular and the Scheme
Document, respectively, for information on voting procedures relating to them,
and to paragraph 13 of Part X of this document, which contains a description of
certain UK and US tax consequences of the Scheme and holding CAT Shares and CAT
ADSs.
Holders of OGS ADSs are hereby notified that the OGS ADS Deposit Agreement will
be amended on the Effective Date to be identical to the CAT ADS Deposit
Agreement. A form of the CAT ADS Deposit Agreement and CAT ADS have been filed
with the SEC as exhibits to CAT's Registration Statement on Form F-6, dated 9
April, 2001, relating to the CAT ADSs. Every holder of an OGS ADS at the
Effective Date shall be deemed, by continuing to hold such OGS ADS, to consent
and agree to such amendment and to be bound by the terms of the CAT ADS Deposit
Agreement.
Terms used in this Part VII and not otherwise defined in this document will have
the meanings set forth in the CAT ADS Deposit Agreement. A copy of the CAT ADS
Deposit Agreement and the CAT ADS will be made available for inspection at the
Corporate Trust Office of the CAT ADS Depositary, currently located at 101
Barclay Street, New York, New York 10286, and at the principal London office of
the CAT ADS Depositary (the "Custodian"), currently located at One Canada
Square, London E14 5AL, England. The CAT ADS Depositary's principal executive
office is located at One Wall Street, New York, New York 10286.
CAT ADRs evidencing CAT ADSs (including New CAT ADSs) are issuable by the CAT
ADS Depositary pursuant to the CAT ADS Deposit Agreement. Each CAT ADS
represents one CAT Share (or evidence of the right to receive one CAT Share)
deposited with the Custodian. A CAT ADR may evidence any number of CAT ADSs.
Share dividends and other distributions
The CAT ADS Depositary has agreed to pay to CAT ADS holders the cash dividends
or other distributions it or the Custodian receives on CAT Shares or other
deposited securities after deducting its fees and expenses. CAT ADS Owners will
receive these distributions in proportion to the number of CAT ADSs evidenced by
their CAT ADRs.
Cash
The CAT ADS Depositary will convert any cash dividend or other cash distribution
CAT pays on CAT Shares into US dollars at the time it receives the dividends, if
it can do so on a reasonable basis and can transfer the US dollars to the United
States. If that is not possible or if any approval from the government of the
United Kingdom is needed and cannot be obtained, the CAT ADS Deposit Agreement
allows the CAT ADS Depositary to distribute the pounds sterling only to those
CAT ADS Owners to whom it is possible to do so or hold the pounds sterling it
cannot convert for the account of the CAT ADS Owners who have not been paid. It
will not invest the pounds sterling and it will not be liable for any interest.
Before making a distribution, any withholding taxes that must be paid under the
laws of the United Kingdom will be deducted. See paragraph 13 of Part X of this
document. The CAT ADS Depositary will distribute only whole US dollars and cents
and will round fractional cents to the nearest whole cent. If the exchange rates
fluctuate during a time when the CAT ADS Depositary cannot convert the pounds
sterling into US dollars, CAT ADS Owners may lose some or all of the value of
the distribution.
Ordinary Shares
The CAT ADS Depositary may and shall, if CATrequests, distribute new CAT ADSs
representing any CAT Shares CAT may distribute as a dividend or free
distribution, if CAT furnishes it promptly with satisfactory evidence that it is
legal to do so. The CAT ADS Depositary will only distribute whole CAT ADSs. It
will sell CAT ADSs that would require it to use a fractional CAT ADS and
distribute the net proceeds in the same way as it does with cash. If the CAT ADS
Depositary does not distribute additional CAT ADSs, each CAT ADR will also
evidence the new CAT ADSs.
Rights to receive additional CAT Shares
If CAT offers CAT Shareholders any rights to subscribe for additional CAT Shares
or any other rights, the CAT ADS Depositary may make these rights available to
CAT ADS Owners. CAT must first instruct the CAT ADS Depositary to do so and
furnish it with satisfactory evidence that it is legal to do so. If CAT does not
furnish this evidence and/or give these instructions, and the CAT ADS Depositary
decides it is practical to sell the rights, the CAT ADS Depositary will sell the
rights and distribute the proceeds, in the same way as it does with cash. The
CAT ADS Depositary may allow rights that are not distributed or sold to lapse.
In that case, CAT ADS Owners will receive no value for such rights.
If the CAT ADS Depositary makes rights available to a CAT ADS Owner, upon
instruction from the CAT ADS Owner, it will exercise the rights and purchase CAT
Shares on behalf of the CAT ADS Owner. The CAT ADS Depositary will then deposit
the CAT Shares with the Custodian and issue CAT ADSs to the CAT ADS Owner. It
will only exercise rights if CAT ADS Owners pay it the exercise price and any
other charges and fees required to be paid by the CAT ADS Owner.
US securities laws may restrict the sale, deposit, cancellation and transfer of
the CAT ADSs issued after exercise of rights. For example, CAT ADS Owners may
not be able to trade their CAT ADSs freely in the United States. In this case,
the CAT ADS Depositary may issue the CAT ADSs under a separate restricted
deposit agreement that will contain the same provisions as CAT ADS Deposit
Agreement, except for the changes needed to put the restrictions in place.
Other Distributions
The CAT ADS Depositary will send to CAT ADS Owners anything else CAT distributes
on deposited securities by any means it determines is legal, fair and practical.
If it cannot make the distribution in that way, the CAT ADS Depositary has a
choice. It may decide to sell what CAT distributed and distribute the net
proceeds in the same way as it does with cash or it may decide to hold what CAT
distributed, in which case the CAT ADSs will also represent the newly
distributed property.
The CAT ADS Depositary is not responsible if it decides that it is unlawful or
impractical to make a distribution available to any CAT ADS Owners. CAT has no
obligation to register CAT ADSs, CAT Shares, rights or other securities under
the Securities Act. CAT also has no obligation to take any other action to
permit the distribution of CAT ADSs, CAT Shares, rights or anything else to CAT
ADS Owners. This means that CAT ADS Owners may not receive the distribution CAT
makes on CAT Shares or any value for them if it is illegal or impractical for
CAT to make them available to CAT ADS Owners.
Deposit, withdrawal and cancellation
Subject to the terms of the CAT ADS Deposit Agreement, the CAT ADS Depositary
will issue CAT ADSs if CAT ADS Owners or their brokers deposit CAT Shares or
evidence of rights to receive CAT Shares are deposited with the Custodian. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp
taxes or stock transfer taxes or fees, the CAT ADS Depositary will register the
appropriate number of CAT ADSs in the names requested and will deliver the CAT
ADSs at its corporate trust office to the persons requested.
CAT ADS Owners may turn in CAT ADSs at the CAT ADS Depositary's corporate trust
office. Upon payment of its fees and expenses and of any taxes or charges, such
as stamp taxes or stock transfer taxes or fees, the CAT ADS Depositary will
deliver (1) the underlying CAT Shares to an account designated by the CAT
ADS Owner and (2) any other deposited securities underlying the CAT ADS at the
office of the Custodian. At the request, risk and expense of the CAT ADS Owner,
the CAT ADS Depositary will deliver the deposited securities at its corporate
trust office.
Voting rights
CAT ADS Owners may instruct the CAT ADS Depositary to vote the CAT Shares
underlying the CAT ADSs, but only if CAT asks the CAT ADS Depositary to ask for
those instructions. Otherwise, CAT ADS Owners will not be able to exercise the
right to vote unless they withdraw their CAT Shares. However, CAT ADS Owners may
not have sufficient advance notice of the meeting to withdraw their CAT Shares.
If CAT asks for instructions from the CAT ADS Owners, the CAT ADS Depositary
will notify CAT ADS Owners of the upcoming vote and arrange to deliver CAT's
voting materials to the CAT ADS Owners. The materials will (1) describe the
matters to be voted on and (2) explain how CAT ADS Owners, on a certain date,
may instruct the CAT ADS Depositary to vote the CAT Shares or other deposited
securities underlying the CAT ADSs as directed. For instructions to be valid,
the CAT ADS Depositary must receive them on or before the date specified. The
CAT ADS Depositary will try, as far as practical, subject to English law and the
provisions of CAT's Articles of Association, to vote or to have its agents vote
the CAT Shares or other deposited securities as instructed. The CAT ADS
Depositary will only vote or attempt to vote as instructed.
CAT cannot assure CAT ADS Owners that they will receive the voting materials in
time to ensure that they can instruct the CAT ADS Depositary to vote the CAT
Shares. In addition, the CAT ADS Depositary and its agents are not responsible
for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that CAT ADS Owners may not be able to exercise
the right to vote and there may be nothing CAT ADS Owners can do if CAT Shares
are not voted as requested.
Fees and expenses
CAT ADS Owners must pay: For:
$0.05 (or less) per CAT ADS o each issuance of a CAT ADS,
(or portion thereof) including as a result of a
distribution of shares or rights or
other securities or property; and
o each cancellation of a CAT ADS,
including if the CAT ADS Deposit
Agreement terminates.
$0.02 (or less) per CAT ADS o any cash payment.
(or portion thereof)
registration or transfer fees o any transfer and registration of
CAT Shares on the share register of
the foreign registrar from a CAT
Shareholder's name to the name of
the CAT ADS Depositary or its agent
when a CAT Shareholder deposits or
withdraws CAT Shares.
expenses of the CAT ADS Depositary o conversion of non-US dollars to US
dollars; and
o cable, telex and facsimile
transmission expenses.
Taxes and other governmental o as necessary.
charges the CAT ADS Depositary or
the Custodian have to pay on any
CAT ADS or CAT Shares underlying a
CAT ADS (for example, stock
transfer taxes, stamp duty or
withholding taxes)
Payment of taxes
CAT ADS Owners will be responsible for any taxes or other governmental charges
payable on the CAT ADSs or on the deposited securities underlying the CAT ADSs.
The CAT ADS Depositary may refuse to transfer the CAT ADSs or allow CAT ADS
Owners to withdraw the deposited securities underlying the CAT ADSs until such
taxes or other charges are paid. It may apply payments owed to the CAT ADS Owner
or sell deposited securities underlying the CAT ADSs to pay any taxes owed and
the CAT ADS Owners will remain liable for any deficiency. If it sells deposited
securities, it will, if appropriate, reduce the number of CAT ADSs to reflect
the sale and pay to the CAT ADS Owner any proceeds or send to the CAT ADS Owner
any property, remaining after it has paid the taxes.
Reclassifications, Recapitalisations and Mergers
If CAT: Then:
o Changes the nominal or par o the cash, CAT Shares or other
value of CAT Shares; or securities received by the CAT
ADS Depositary will become
o Reclassifies, splits up or deposited securities. Each CAT
consolidates any of the ADS will automatically
deposited securities. represent its equal share of
the new deposited securities.
o Distributes securities on the o the CAT ADS Depositary may and
CAT Shares that are not will, if CAT asks it to,
distributed to CAT ADS Owners; distribute some or all of the
or cash, CAT Shares or other
securities it received. It may
o recapitalises, reorganises, also issue new CAT ADSs or ask
merges, liquidate, sells all CAT ADS Owners to surrender
or substantially all of its outstanding CAT ADSs in
assets, or takes any similar exchange for new CAT ADSs,
action. identifying the new deposited
securities.
Amendment and termination
CAT may agree with the CAT ADS Depositary to amend the CAT ADS Deposit Agreement
and the CAT ADSs without the consent of the CAT ADS Owners for any reason. If
the amendment adds or increases fees or charges, except for taxes and other
governmental charges or registration fees, cable, telex or facsimile
transmission costs, delivery costs or other such expenses, or prejudices an
important right of CAT ADS Owners, it will only become effective 30 days after
notice of the amendment is given to CAT ADS Owners. At the time an amendment
becomes effective, CAT ADS Owners are considered, by continuing to hold CAT
ADSs, to agree to the amendment and to be bound by the CAT ADSs and the CAT ADS
Deposit Agreement, as amended.
The CAT ADS Depositary will terminate the CAT ADS Deposit Agreement if CAT asks
it to do so. The CAT ADS Depositary may also terminate the CAT ADS Deposit
Agreement if the CAT ADS Depositary has told CAT that it would like to resign
and CAT has not appointed a new depositary bank within 90 days. In both cases,
the CAT ADS Depositary must notify CAT ADS Owners at least 90 days before
termination.
After termination, the CAT ADS Depositary and its agents will be required to do
only the following under the CAT ADS Deposit Agreement: (1) collect
distributions on the deposited securities, (2) deliver CAT Shares and other
deposited securities upon cancellation of the CAT ADSs and (3)sell rights as
provided in the CATADSDeposit Agreement. At any time after expiration of one
year from the date of termination, the CAT ADS Depositary may sell any remaining
deposited securities by public or private sale and will hold the proceeds of the
sale, as well as any other cash it is holding under the CAT ADS Deposit
Agreement for the pro rata benefit of the CAT ADS Owners that have not
surrendered their CAT ADSs. It will not invest the money and will have no
liability for any interest. The CAT ADS Depositary's only obligations will be to
account for the proceeds of the sale and other cash. After that time, CAT's only
obligations will be with respect to indemnification and to pay certain amounts
to the CAT ADS Depositary.
Limitations on obligations and liability to CAT ADS Owners
The CAT ADS Deposit Agreement expressly limits CAT's obligations and the
obligations of the CAT ADS Depositary, and it limits CAT's liability and the
liability of the CAT ADS Depositary. CAT and the CAT ADS Depositary:
o are only obligated to take the actions specifically set forth in the CAT ADS
Deposit Agreement without negligence or bad faith;
o are not liable if either is prevented or delayed by law or circumstances
beyond their control from performing their obligations under the CAT ADS Deposit
Agreement;
o are not liable if either exercises discretion permitted under the CAT ADS
Deposit Agreement;
o have no obligation to become involved in a lawsuit or other proceedings
related to the CAT ADSs or the CAT ADS Deposit Agreement on behalf of CAT
ADS Owners or any other party; and
o are not liable if either relies upon the advice of or information from legal
counsel, accountants, any person depositing shares or any other person believed
by it in good faith to be competent to give such advice or information.
In the CAT ADS Deposit Agreement, CAT and the CAT ADS Depositary agree to
indemnify each other under certain circumstances.
Requirements for depositary actions
Before the CAT ADS Depositary will issue or register a transfer of a CAT ADS, or
withdrawal of CAT Shares, or make a distribution on a CAT ADS, the CAT ADS
Depositary may require:
o payment of stock transfer or other taxes or other governmental charges and
transfer or registration fees charged by third parties for the transfer of any
CAT Shares or other deposited securities;
o production of satisfactory proof of the identity and genuineness of any
signature or other information it deems necessary; and
o compliance with regulations it may establish, from time to time, consistent
with the CAT ADS Deposit Agreement, including presentation of transfer
documents.
The CAT ADS Depositary may refuse to deliver, transfer, or register transfers of
CAT ADSs generally when the books of the CAT ADS Depositary or CAT are closed,
or at any time if the CAT ADS Depositary or CAT thinks it advisable to do so.
CAT ADS Owners have the right to cancel their CAT ADSs and withdraw the
underlying CAT Shares at any time except:
o when temporary delays arise because the CAT ADS Depositary or CAT has closed
its transfer books in connection with voting at a shareholders' meeting or the
payment of dividends;
o when CAT ADS Owners seeking to withdraw CAT Shares owe money to pay fees,
taxes and similar charges; or
o when it is necessary to prohibit withdrawals in order to comply with any laws
or governmental regulations that apply to CAT ADSs or to the withdrawal of CAT
Shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the CAT
ADS Deposit Agreement.
Pre-Release of ADSs
In certain circumstances, subject to the provisions of the CAT ADS Deposit
Agreement, the CAT ADS Depositary may issue CAT ADSs before deposit of the
underlying CAT Shares. This is called a pre-release of the CAT ADS. The CAT ADS
Depositary may also deliver CAT Shares upon cancellation of pre-released CAT
ADSs (even if the CAT ADSs are cancelled before the pre-release transaction has
been closed out). A pre-release is closed out as soon as the underlying CAT
Shares are delivered to the CAT ADS Depositary. The CAT ADS Depositary may
receive CAT ADSs instead of CAT Shares to close out a pre-release. The CAT ADS
Depositary may pre-release CAT ADSs only under the following conditions: (1)
before or at the time of the pre-release, the person to whom the pre-release is
being made must represent to the CAT ADS Depositary in writing that it or its
customer owns the CAT Shares or CAT ADSs to be deposited; (2) the pre-release
must be fully collateralized with cash or other collateral that the CAT ADS
Depositary considers appropriate; and (3) the CAT ADS Depositary must be able to
close out the pre-release on not more than five Business Days' notice. In
addition, the CAT ADS Depositary will limit the number of CAT ADSs that may be
outstanding at any time as a result of pre-release, although the CAT ADS
Depositary may disregard the limit from time to time, if it thinks it is
appropriate to do so.
PART VIII
RISK FACTORS
An investment in New CAT Shares and New CAT ADSs is subject to a number of
risks. Prospective investors should consider carefully all of the risks
described below and the other information contained in this document.
The following describes some of the significant risks that, after the Merger,
could affect the Enlarged Group. Additionally, some risks may be unknown to CAT
and OGS and after the Merger, other risks, currently believed to be immaterial,
could turn out to be material. All of these could materially adversely affect
the Enlarged Group's business, turnover, profits, assets, liquidity and capital
resources. Furthermore, the trading price of the CAT Shares, New CAT Shares, CAT
ADSs and New CAT ADSs could decline, resulting in the loss of all or part of any
investment therein.
1. RISKS RELATED TO THE MERGER
1.1 The value of New CAT Shares will fluctuate
The number of New CAT Shares to be issued in the Scheme for each OGS Share
is fixed. The market prices of CAT Shares when the Merger is completed may vary
from their market prices at the date of the publication of this document. For
example, during the 12 month period ending on 3 February 2003, the last
practicable date prior to the publication of this document, CAT Shares traded in
a range from a low of 424.0 pence to a high of 1,560.0 pence and ended that
period at 465.0 pence and OGS Shares traded in a range from a low of 132.5 pence
to a high of 470.0 pence and ended that period at 170.0 pence.
These variations may be the result of various factors including without
limitation:
o changes in the business, operations, position or prospects of the
Enlarged Group;
o governmental and/or litigation developments and/or regulatory
considerations;
o governmental action affecting the industry generally; and
o general market and economic conditions.
1.2 CAT and OGS may be unable to integrate successfully their operations and
realise the full cost savings anticipated
The Merger involves the integration of two groups of companies which have
previously operated independently.
The process of integrating operations could cause an interruption of, or
loss of momentum in, the activities of one or more of the Enlarged Group's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
Merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations, financial condition or
prospects of the Enlarged Group after the Merger.
Among the factors considered by the Boards in connection with their
respective recommendations of the Merger were the opportunities for operating
efficiencies that could result from the Merger. No assurance can be given that
these savings will be realised within the time periods contemplated or even that
they will be realised at all.
1.3 The issue of New CAT Shares pursuant to the Merger may cause dilution to CAT
Shareholders
CAT and OGS believe that certain benefits will result from the Merger.
However, there can be no assurance that combining the businesses of CAT and OGS,
even if achieved in an efficient, effective and timely manner, will result in
combined results of operations and financial condition superior to those that
CAT and OGS could have achieved independently. The issue of New CAT Shares
pursuant to the Merger could reduce the market price of CAT Shares. The benefits
of the Merger to the Enlarged Group will depend on operating efficiencies,
revenue growth or other benefits sufficient to offset the effects of the issue
of New CAT Shares. There can be no assurances that the Enlarged Group will
achieve such benefits.
1.4 The Enlarged Group will incur significant transaction, Merger-related and
restructuring costs in connection with the Merger
The Enlarged Group expects to incur costs associated with combining the
operations of the two groups of companies, transaction fees and other costs
relating to the Merger. The total estimate includes approximately (pound)5.3
million for transaction costs and up to (pound)6 million of restructuring and
integration costs. These amounts are preliminary estimates and subject to
change. Additional unanticipated costs may be incurred in the integration of the
businesses of CAT and OGS. Although the Enlarged Group expects that the
elimination of duplicated activities, as well as the realisation of other
efficiencies related to the integration of the businesses, may offset
incremental transaction, Merger-related and restructuring costs over time, there
cannot be any assurance that this net benefit will be achieved in the near term,
or at all.
2. RISKS RELATED TO THE ENLARGED GROUP'S BUSINESS
2.1 CAT and OGS have a history of losses and expect to continue to incur losses
for the foreseeable future
Neither CAT nor OGS has begun to receive income resulting from the sales
of any marketed products. For the year ended 30 September 2002, CAT's
consolidated losses were approximately (pound)28 million and its consolidated
accumulated deficit on profit and loss account at that time was approximately
(pound)84 million. For the year ended 31 December 2001, OGS' consolidated losses
were approximately (pound)25 million and its consolidated accumulated deficit on
profit and loss account at that time was approximately (pound)95 million. These
losses result principally from the costs incurred in the research and
development of potential products and also from general and administrative costs
associated with operations. The Enlarged Group expects to incur further
substantial losses for the foreseeable future as research and development
activities continue. The Enlarged Group may not be able to generate meaningful
revenue or achieve or sustain profitability. If the Enlarged Group is unable to
do so, it may be required to seek additional financing in the future. Additional
financing may not be available on acceptable terms, or at all.
2.2 The Enlarged Group's early stage of development makes it difficult to
evaluate its business and prospects
Since the Enlarged Group and its collaborative partners have only recently
begun commercial sales of one product derived from its technology, the Enlarged
Group's revenue and profit potential are unproven. The Enlarged Group's limited
operating history makes it difficult for an investor to evaluate the Enlarged
Group's business and prospects. The Enlarged Group's technology may not result
in any meaningful benefits to the Enlarged Group's current or potential
collaborative partners. Further, due to the Enlarged Group's limited operating
history, the Enlarged Group may have difficulty accurately forecasting its
revenue. In addition, because the number of product candidates to which the
Enlarged Group and the Enlarged Group's collaborative partners can devote
development effort is limited by the availability of financial and scientific
resources, the Enlarged Group is exposed to the risk that the delay or failure
of individual product development programmes will adversely affect the content
and delivery over time of the Enlarged Group's product development pipeline.
Investors should consider the Enlarged Group's business and prospects in light
of the heightened risks and unexpected expenses and problems the Enlarged Group
may face as a company in an early stage of development in a new and rapidly
evolving industry.
2.3 The unpredictability of the Enlarged Group's financial results may cause the
Enlarged Group's operating results to fail to meet market expectations
The Enlarged Group expects that substantially all of its revenues for the
near future will result from payments pursuant to collaborative arrangements in
the form of contract research payments, licence fees, technical performance and
product development milestone payments and royalties. Payments pursuant to the
Enlarged Group's collaborative arrangements will be subject to significant
fluctuation in both timing and amount. The Enlarged Group's revenues may not be
indicative of its future performance or of its ability to continue to achieve
milestones and other performance criteria on which the Enlarged Group's revenues
depend. The Enlarged Group's revenues and results of operations for any period
may also not be comparable to the revenues or results of operations for any
other period. It is possible that in some future periods, the Enlarged Group's
operating results may be below expectations of analysts and investors. If this
happens, the price of CAT Shares, CAT ADSs, New CAT Shares and New CAT ADSs is
likely to decrease.
2.4 The Enlarged Group may not obtain adequate legal protection over its
technology
The Enlarged Group must obtain adequate legal protection for the
technology that it develops. The Enlarged Group's success thus depends on its
ability to:
o obtain patents;
o protect trade secrets;
o operate without infringing the proprietary rights of others; and
o prevent others from infringing its proprietary rights.
The Enlarged Group will be able to protect its proprietary rights from
unauthorised use by third parties only to the extent that its proprietary rights
are covered by valid and enforceable patents or are effectively maintained as
trade secrets. The Enlarged Group will try to protect its proprietary position
by filing patent applications related to its proprietary technology, inventions
and improvements that are important to the development of its business. The
Enlarged Group owns or co-owns or has licensed patents, and has applied for
patents, covering its core technology.
The patent position of biotechnology companies involves complex legal and
factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that the Enlarged Group owns or licenses from third parties
may not provide any protection against competitors. The Enlarged Group's pending
patent applications, those it may file in the future or proprietary rights it
may license from third parties, may not result in patents being issued. Also,
patent rights may not provide the Enlarged Group with adequate proprietary
protection or competitive advantages against competitors with similar
technologies.
If the Enlarged Group is unable to obtain sufficient legal protection of
its technology, other companies may use similar technology to develop and
produce products, which may deprive the Enlarged Group of the competitive
advantages provided by its technology.
2.5 The Enlarged Group has been involved in litigation with third parties
regarding the validity of its key patents
The Enlarged Group's strategy includes vigorously enforcing its
intellectual property rights, including its patents. The Enlarged Group has
been, and from time to time may become, involved in litigation involving its key
patents. This litigation may include suits to invalidate certain of the Enlarged
Group's key patents. If the Enlarged Group does not successfully defend or
settle these suits, the Enlarged Group's competitors may gain access to
technology that the Enlarged Group believes is proprietary to it. The Enlarged
Group's competitors may use this technology to assist their research and
development efforts, which would deprive the Enlarged Group of one of its
primary competitive advantages or at least weaken that advantage. In addition,
if some or all of the Enlarged Group's key patents were invalidated, this could
impact on the Enlarged Group's ability to obtain royalties from its current and
future collaborations.
The biotechnology and pharmaceutical industries have been characterised by
extensive litigation regarding patents and other intellectual property rights.
The defence and prosecution of intellectual property suits, interference and
opposition proceedings and related legal and administrative proceedings involve
complex legal and factual questions. As a result, such proceedings are costly
and time-consuming to pursue and their outcome is uncertain. Litigation may be
necessary to:
o enforce patents that the Enlarged Group owns or licenses;
o protect trade secrets or know-how that the Enlarged Group owns or
licenses; or
o determine the enforceability, scope and validity of the proprietary
rights of others.
The Enlarged Group may be denied access to important technology and
subjected to costly litigation if it infringes the intellectual property rights
of third parties.
2.6 OGS has patents covering important aspects of its proteomics platform that
may be challenged
In August 2001, OGS was issued a patent in the US (US Patent No.
6,278,794) providing more specific protection for the Enlarged Group's
proteomics technology than the coverage offered by the Enlarged Group's more
general US Patent No. 6,064,754, which was issued in May 2000. If one of the
Enlarged Group's competitors succeeds in proving that its proteomics methods and
apparatus do not infringe any valid claim of these patents, because, for
example, their processes fall outside the scope of the claims, the competitive
advantage that the Enlarged Group believes it gains from these patents may be
substantially reduced. The Enlarged Group may incur substantial costs if it is
required to enforce or defend its rights under these patents against third
parties, and it cannot predict whether it would be able to prevail in any such
litigation or proceeding.
2.7 The Enlarged Group may not be able to obtain patents on all of the proteins
and their uses to which its patent applications relate, and, even if patents are
issued, it will not realise the financial benefits of these patents unless the
proteins are properly researched
OGS is currently attempting to generate a portfolio of patents relating to
or to the use of a large number of proteins. The patent application process in
respect of these proteins is in its early stages. Because the patent application
process is lengthy and OGS does not know which proteins, genes or uses its
competitors' currently pending, but as yet unpublished, patent applications
relate to, there is no certainty that OGS is the first to discover the proteins
and uses to which the patent applications relate or that it is the first to file
patent applications relating to those proteins and uses. Therefore, the Enlarged
Group's pending patent applications may not result in the issuance of patents or
they may result in the issuance of patents whose scopes are narrowed during the
application process.
If the Enlarged Group is successful in getting patents issued, in order to
realise the benefits of these patents, it must dedicate significant resources
for the further validation of the subject proteins as viable drug targets and
bio-markers. The Enlarged Group may not have the capacity or ability, as a
result of limitations in its technology or facilities or otherwise, to research
fully and validate these proteins. Alternatively, the Enlarged Group will need
to maintain, or develop new, partnerships or collaborations in order to access
technologies and facilities that it does not have. In negotiating these
partnerships and collaborations, the Enlarged Group may have to give up valuable
commercial rights in any successful therapeutics or diagnostics. As a result,
the Enlarged Group may not realise the full financial benefits of its portfolio
of patents.
2.8 The Enlarged Group's commercial success depends significantly on its ability
to operate without infringing the patents and other proprietary rights of third
parties
The Enlarged Group's technologies may unintentionally infringe the
patents, or violate other proprietary rights, of third parties. In addition, in
developing products for particular targets or uses, the Enlarged Group and its
collaborative partners may infringe the patents or violate the intellectual
property of others. If the Enlarged Group is found to infringe the intellectual
property rights of third parties, the Enlarged Group and its collaborative
partners may be prevented from pursuing product development or commercialisation
based on the infringing technology, target or use and may be subject to
significant liabilities.
To gain access to such technology, targets or uses, the Enlarged Group may
be required to seek licences that may not be available from third parties on
acceptable terms, if at all. Costs associated with license arrangements may be
substantial and may include ongoing royalties payable by the Enlarged Group.
2.9 The Enlarged Group depends on collaborators for product development,
manufacturing and marketing. Failure to enter into new collaborative
arrangements or failure of the Enlarged Group's
collaborators to perform adequately under existing arrangements will harm the
Enlarged Group's ability to develop and market products and earn revenue
The Enlarged Group's strategy depends on entering into arrangements with
collaborators and licensees. The Enlarged Group currently does not plan to
develop significant manufacturing, marketing or sales capabilities and will rely
heavily on collaborators for these functions. Collaborations are necessary in
order for it to:
o access proprietary disease targets against which it intends to generate
drug products;
o access skills and information that it does not possess;
o fund its research and development activities;
o fund pre-clinical testing, clinical trials and manufacturing of product
candidates;
o seek and obtain regulatory approvals for product candidates; and
o market successfully and sell existing and future product candidates.
The Enlarged Group's success, therefore, will depend on the ability and
efforts of these outside parties in performing their responsibilities. Many of
these collaborative arrangements give the partner the exclusive right to market
and sell certain products developed in the collaboration. These collaborators
will have significant discretion over the resources they devote to these
efforts. The Enlarged Group's ability to earn revenues, including royalties
based on products sales and certain milestones, depends on these efforts. These
collaborators may not devote sufficient resources to collaborations with the
Enlarged Group.
If the Enlarged Group is not able to establish further collaborative
arrangements, if any collaborator fails to adequately perform its
responsibilities under a collaborative arrangement or if any or all of the
Enlarged Group's existing collaborative arrangements are terminated, then the
Enlarged Group may be required to seek new collaborative arrangements or to
undertake product development and commercialisation at its own expense. The
Enlarged Group may not be able to develop and commercialise the relevant product
candidates without the collaborators. If the Enlarged Group must seek new
arrangements or undertake these matters itself:
o the number of product candidates that the Enlarged Group will be able to
develop and commercialise may be limited;
o the likelihood of successful product introduction may be reduced;
o the collaborative arrangements may not be on terms favourable to the
Enlarged Group; and
o the Enlarged Group's capital requirements may be increased
significantly.
Any of the above would harm the Enlarged Group's ability to earn revenues
from its products and recover its research and development expenditures.
2.10 Clinical trials for product candidates will be lengthy and expensive and
may not be successful
Before obtaining regulatory approvals for the commercial sale of any
products, the Enlarged Group or its licensees or partners (either alone or with
the Enlarged Group) must demonstrate thorough pre-clinical testing and clinical
trials that its products are safe and effective for use in humans. Part of the
Enlarged Group's strategy is to conduct its own pre-clinical studies and
clinical trials over some potential product candidates prior to entering into a
collaborative arrangement concerning the further development and marketing of
these candidates. Conducting clinical trials is a lengthy and expensive process.
The Enlarged Group will incur substantial expense for, and devote a significant
amount of time to, pre-clinical testing and clinical trials. Moreover, certain
product candidates of the Enlarged Group will continue to be subjected to the
pre-clinical testing and clinical trials conducted by its licensees and
collaborative partners over which the Enlarged Group has no control.
Six product candidates based on CAT's technology and one product based on
OGS' technology are at the clinical trials stage. Where results from these
clinical trials are available and to the extent such results have generally been
encouraging and one product using CAT's technology has received marketing
authorisation in the US, and one product licensed and developed by OGS has
received marketing authorisation in Europe, data obtained from these clinical
trials has been insufficient to conclusively demonstrate safety and
effectiveness under applicable regulatory guidelines. As a result, this data
will not support an application for regulatory approval without further clinical
trials. Historically, the results from pre-clinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs and biologics have shown promising results in
clinical trials, but subsequently failed to establish sufficient safety and
effectiveness data to obtain necessary regulatory approvals. Data obtained from
pre-clinical and clinical activities is susceptible to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, regulatory
delays or rejections may be encountered as a result of many factors, including
changes in regulatory policy during the period of product development.
Completion of clinical trials may take several years or more. The length
of time generally varies substantially according to the type, complexity,
novelty and intended use of the product candidate. The Enlarged Group's
commencement and rate of completion of clinical trials may be delayed by many
factors, including:
o inability to manufacture sufficient quantities of materials for use in
clinical trials;
o slower than expected rate of patient recruitment;
o inability to follow patients adequately after treatment;
o unforeseen safety issues;
o lack of effectiveness during the clinical trials; or
o government or regulatory delays.
2.11 Obtaining required regulatory approvals for drug candidates is a lengthy,
expensive and uncertain process. The Enlarged Group or its collaborators may not
obtain, or may be required to expend substantial resources to obtain, the
necessary regulatory approvals to market products
The pre-clinical and clinical evaluation, manufacture and marketing of the
product candidates are all subject to regulation administered and enforced
by the governmental regulatory agencies in countries where the Enlarged
Group and any of its potential partners or licensees intend to test,
manufacture or market such products. The Enlarged Group or its
collaborative partner will be required to obtain from the relevant
regulatory authority an approval, called a marketing authorisation, to
market a drug in the territory which is subject to the regulatory
authority's jurisdiction. The grant of a marketing authorisation for a
drug requires the detailed evaluation of data relating to the quality,
safety and effectiveness of the drug in the proposed use or uses submitted
by the applicant in accordance with regulatory requirements. Many
countries, including Member States of the European Union and the US,
impose extensive data requirements and have very high standards of
technical appraisal. Accordingly, pre-clinical testing and clinical
research of medicinal products can be a very lengthy and costly process.
The manufacture of drugs is also subject to specific authorisation and to
the regular inspection of premises, staff and procedures by regulatory
authorities.
Product candidates that the Enlarged Group or its licensees and
collaborative partners identify and pursue now or in the future, may not receive
required regulatory approvals to manufacture and market such product candidates.
Furthermore, different regulatory authorities worldwide may impose their own
differing conditions upon marketing (by, for example, restricting a product's
indicated uses). Regulatory authorities may refuse to grant, or may require the
Enlarged Group or its collaborative partners to supply additional data before
granting, a marketing authorisation, even though the relevant product may have
been approved by another regulatory authority. If an authorisation is obtained,
the product and its manufacture are subject to regular review. Approvals may be
withdrawn or restricted at some point in the future. Changes in applicable
legislation or regulatory policy, serious breaches of regulatory requirements or
the discovery of problems related to the safety, quality or effectiveness of the
product or to the production process, site or manufacturer may result in the
imposition of restrictions upon sale, supply or manufacturer including, at
worst, the withdrawal of the product from the market or the loss of the relevant
authorisations, or may otherwise harm the Enlarged Group's business or income
from licensees and collaborative partners.
2.12 If the Enlarged Group is not able to procure manufacturing of its products
and product candidates on acceptable terms, its clinical trials may be delayed
and it may be unable to provide products on a cost effective basis
The Enlarged Group and its collaborators often rely on third parties to
manufacture product candidates for clinical trial and marketing purposes. CAT
currently relies on a third party manufacturer for the production of CAT-152,
CAT-192 and CAT-213 for clinical trials. OGS currently relies on third party
manufacturers for the production of Zavesca and OGT 923 for clinical trials.
Suitable manufacturers that are able to produce products on a timely and
competitive basis on acceptable terms may not be available. Manufacturers may
not have the capacity to produce the products demanded by the Enlarged Group and
its collaborators to meet the schedule required by clinical trials or to satisfy
commercial demand. Manufacturing runs of products may fail for technical or
other reasons that may delay the Enlarged Group from conducting clinical trials
or from supplying products for commercial purposes. Suitable manufacturing
processes may be proprietary to other persons. The Enlarged Group may be
required to pay amounts to license these manufacturing processes or may not have
access to these processes at all.
The manufacture of product candidates and products will be subject to
authorization and to the "Good Manufacturing Practice" standards prescribed by
the appropriate regulatory agencies. Compliance with these regulatory
requirements will be expensive and could further limit the number of suitable
manufacturers available to the Enlarged Group and its collaborators.
2.13 The Enlarged Group's competitors may market products before the Enlarged
Group does or produce superior products
The biotechnology and pharmaceutical industries are highly competitive and
subject to significant and rapid technological change. The Enlarged Group
is aware of several biotechnology and pharmaceutical companies that are
actively engaged in R&D in areas in which the Enlarged Group will operate
including areas related to antibody therapy and proteomics technologies. A
number of companies have begun clinical trials of antibody products or
have successfully commercialised antibody products and may succeed in
marketing products before the Enlarged Group does. In addition, many
companies are working to develop alternative methods to identify proteins
from biological samples. If such a technology were to be developed on a
commercial basis, the Enlarged Group's ability to generate revenues
through collaborations could be materially impaired. Many of these
companies, either alone or together with their collaborative partners,
have substantially greater financial resources and larger research and
development staffs than the Enlarged Group has and may have greater
expertise in product development and marketing activities.
Many of these companies are addressing the same diseases and disease
indications as the Enlarged Group or the Enlarged Group's collaborative
partners. Humira, which was approved in the US in December 2002 is likely to
face competition in the treatment of rheumatoid arthritis from Enbrel(TM), a
TNF(alpha) inhibitor developed by Immunex and American Home Products, which was
approved in the United States in 1998 and in Europe in 2000; from Remicade(TM),
a TNF(alpha) antibody developed by Centocor and Johnson & Johnson, which was
approved in the United States in 1999 and Europe in 2000; and from Kineret(TM),
an IL1 receptor antagonist developed by Amgen, which was approved in the United
States and Europe in November 2001. The Enlarged Group is aware that other
potentially competitive products are in late stage development for rheumatoid
arthritis. Celltech, Medarex and other companies each have antibody products in
clinical trials. Zavesca, which was approved inEurope in November 2002, is
likely to face competition in the treatment of Type I Gaucher disease from
Cerezyme(TM), an intravenous treatment developed by Genzyme. Consumers and
physicians may choose to use these or other products of the Enlarged Group's
competitors rather than the Enlarged Group's products.
Also, the Enlarged Group will compete with companies which offer antibody
generation services to companies that have antigens and have specific expertise
or technology related to antibody development. These companies include Medarex,
Medarex's joint venture partner, Kirin Brewing Co., Ltd, Abgenix Inc., Protein
Design Labs, Inc., Crucell, MorphoSys, BioInvent and Dyax.
The Enlarged Group also faces, and will continue to face, competition from
academic institutions, government agencies and research institutions, many of
whom have substantial available resources.
In addition, the Enlarged Group competes with companies that offer
proteomics services to companies and other institutions. These competitors may
have specific technology or expertise relating to proteomics. These companies
include GeneProt Inc. and Large Scale Biology Corporation.
The Enlarged Group faces and will continue to face intense competition
from other companies in establishing collaborative arrangements with
pharmaceutical and biotechnology companies and relationships with academic and
research institutions and obtaining licences to proprietary technology. The
Enlarged Group relies heavily on these types of arrangements in its product
development and marketing efforts and for access to technology.
2.14 The Enlarged Group's product candidates compete with established drug
therapies and may compete with newer, more effective techniques. As a result,
the Enlarged Group's technology may not be accepted in the market
Any product candidate successfully developed using the Enlarged Group's
technology may compete with existing therapies that have long histories of safe
and effective use. For example, Humira may face competition from many products,
including Disease Modifying Anti Rheumatoid Drugs, for the treatment of
rheumatoid arthritis. Competition may also arise from:
o other drug development technologies and methods of preventing or
reducing the incidence of a disease;
o new small molecules; or
o other classes of therapeutic agents.
Developments by competitors may render product candidates developed using
the Enlarged Group's technology or the Enlarged Group's technologies themselves
obsolete or uncompetitive. The Enlarged Group's collaborative partners may
pursue other technologies. These competitors, either alone or with their
collaborative partners, may succeed in developing technologies or products that
are more effective than the Enlarged Group's. If they do, then products based on
the Enlarged Group's technology will be obsolete or become uncompetitive and the
Enlarged Group will fail to earn expected revenue.
2.15 The Enlarged Group may be adversely affected by changes in legislation
The FDA has designated Zavesca (miglustat) as an orphan drug under the US
Orphan Drug Act. The Orphan Drug Act provides incentives to manufacturers to
develop and market drugs for rare diseases, generally by entitling the first
developer that receives FDA marketing approval for an orphan drug to a
seven-year exclusive marketing period in the US for that product. In recent
years, the US Congress has considered legislation to change the Orphan Drug Act
to shorten the period of automatic market exclusivity and to grant marketing
rights to simultaneous developers of the drug. If the Orphan Drug Act is amended
in this manner, in the event that Zavesca receives US regulatory approval and
for any other drugs for which the Enlarged Group may be granted exclusive
marketing rights under the Orphan Drug Act, the Enlarged Group would face
increased competition, which may decrease the amount of future revenues that
would be received from such products.
2.16 Commercialisation of database products may not achieve sales and marketing
expectations
The publication of the human genome has resulted in a proliferation of
database product offerings. This increased competition, together with
consolidations in the pharmaceutical industry, has led to downward pressure on
prices, particularly on non-exclusive databases. As a result, the Enlarged
Group's ability to generate significant revenues from the commercialisation of
disease-associated databases may be affected in the long-term.
Further, OGS' joint venture vehicle, Confirmant, which was established in
2001 to develop and commercialise the protein atlas of the human genome database
may not generate significant revenues from database sales and such failure may
adversely impact on the Enlarged Group's financial performance.
In addition, following the creation of Confirmant, OGS' joint venture
partner, Marconi, has informed the market of a severe worsening in its market
conditions, and it has undertaken a restructuring to address such changes. As a
consequence, Confirmant may have ceased to be core to Marconi's activities. It
is, therefore, possible that Marconi will not be able to participate in any
future funding of Confirmant that may be required pursuant to the terms of its
joint venture agreement with OGS. Such failure could impact on Confirmant's
ability to meet its payment obligations to OGS with regard to the population of
the protein atlas database, which in turn could affect Confirmant's ability to
market the protein atlas database successfully and have an adverse impact on the
financial performance of the Enlarged Group.
2.17 The Enlarged Group may not be able to maintain revenue growth in respect of
its proteomics operations
The market for the provision of proteomics services is becoming
increasingly competitive and the Enlarged Group's revenues from collaborations
depend upon OGS either entering into new revenue generating collaborations with
third parties or extending its existing collaborations when they come up for
renewal. If the Enlarged Group is unable to achieve this, its proteomics-derived
revenues may be affected, which could have an adverse impact on its financial
performance.
In particular, as part of the Confirmant joint venture, OGS has entered
into a three-year agreement to populate certain proteomics databases (being the
protein atlas, the cerebrospinal fluid (or CSF) proteome and the serum proteome)
pursuant to which the Enlarged Group expects to receive up to (pound)22.5
million over the three-year term. There is no guarantee that this agreement will
be extended beyond the initial term unless Confirmant is successful in
commercialising the existing databases and wishes to extend its database product
range to additional databases that the Enlarged Group is able to generate for
it.
2.18 If the Enlarged Group fails to attract and retain key employees and
consultants, its business will be harmed
The Enlarged Group depends significantly on its management and scientific
personnel. The loss of the services of any key employee could cause harm to the
Enlarged Group's business. The Enlarged Group's strategy depends on hiring key
scientific and management personnel and on hiring further such personnel as may
be necessary. The Enlarged Group faces significant competition in the hiring and
retention of key employees. The Enlarged Group will aim to provide incentives to
attract, retain and motivate key personnel, but this aim may not be achieved. If
the Enlarged Group fails to recruit scientific and managerial employees in the
future or loses any of its key employees, the Enlarged Group's business,
financial condition and results of operations may be harmed. In particular, some
of the OGS executive directors and other senior management may leave the
Enlarged Group within the first 12 months following the Merger and this may
cause discontinuity in the activities previously carried on by OGS. However, in
this regard, it should be noted that both Dr Ebsworth and Professor Parekh
intend to continue as non-executive directors of the Enlarged Group.
2.19 If the Enlarged Group's licence agreements violate the competition
provisions of the Treaty Establishing the European Community 1957, as amended,
then some terms of its key agreements may be unenforceable
Certain licence agreements that the Enlarged Group entered into, or may
enter into, will grant or may grant exclusive worldwide licences of patents,
patent applications and know-how, which are or may arguably fall within the
prohibition of Article 81(1) of the Treaty Establishing the European Community
1957, as amended. The Enlarged Group determines on an agreement-by-agreement
basis whether or not the prohibition of Article 81(1) applies, whether automatic
exemption from the prohibition of Article 81(1) is available under certain
bloc-exemptions or, if not, whether the conditions for exemption from the
prohibition of Article 81(1) are satisfied under Article 81(3) and, if so,
whether to apply to the European Commission for an individual exemption under
Article 81(3). If an exemption is not applicable and CAT does not apply for, or
is unsuccessful in obtaining, an individual exemption from the European
Commission, provisions of any licence agreement which fall within the
prohibition of Article 81(1), including those relating to the exclusivity or
rights, may be unenforceable.
2.20 The Enlarged Group may be subject to product liability claims, which are
expensive to insure against and, if successful, may force the Enlarged Group to
incur unforeseen expenditures
As a designer and developer of drug products and diagnostic products, the
Enlarged Group is exposed to potential product liability risks that are inherent
in the research and development, pre-clinical study, clinical trials,
manufacturing, marketing and use of these products. Consumers, healthcare
producers or persons selling products based on the Enlarged Group's technology
may be able to bring claims against the Enlarged Group based on the use of such
products in clinical trials and the sale of products based on the Enlarged
Group's technology. In addition, it may be necessary for the Enlarged Group to
secure certain levels of insurance as a condition to the conduct of clinical
trials. Insurance coverage may not be available to the Enlarged Group at an
acceptable cost, if at all. In the event of any claim, the Enlarged Group's
insurance coverage may not be adequate.
2.21 The Enlarged Group's business may be harmed if it is unable to obtain
enough biological samples at a reasonable cost
An adequate supply of human biological samples is important to the
Enlarged Group's efforts to discover and validate protein targets and
bio-markers. The Enlarged Group uses large numbers of samples, including
samples of tissues and body fluids, such as serum, urine, saliva and
cerebrospinal fluid (found in the central nervous system and referred to
as CSF). Research in the biotechnology and pharmaceutical industries is
greatly expanding, which is causing the cost of obtaining biological
samples to rise, as well as creating a general difficulty in obtaining
samples at all. CSF samples are particularly difficult to obtain from
individuals, because of the relatively invasive nature of the procedures
required. If the Enlarged Group is not able to obtain biological samples
on a cost efficient basis or at all, its ability to discover and validate
protein targets and bio-markers in key disease areas will be harmed.
In addition, a failure to obtain an adequate supply of biological samples
may cause the Enlarged Group to reprioritise the areas in which the Enlarged
Group attempts to discover protein targets and bio-markers.
2.22 The Enlarged Group's operations involve the use of hazardous materials. An
accident involving these materials could subject the Enlarged Group to liability
As a biotechnology company, the Enlarged Group will be subject to
environmental and safety laws and regulations, including those governing
the use of potentially hazardous materials. The design, development and
testing of products based on the Enlarged Group's technology involves the
use of hazardous materials. Although the Enlarged Group believes that its
procedures for handling and disposing of such materials comply with the
standards prescribed by applicable laws and regulations, the risk of
accidental contamination or injury from these materials cannot be
eliminated. In the event of an accident, the Enlarged Group may incur
unforeseen liabilities.
2.23 The market for CAT's Shares is volatile, which may cause unexpected changes
in CAT's share price
The share prices of publicly traded biotechnology and pharmaceutical
companies can be highly volatile. The market prices and trading volumes of CAT
Shares and CAT ADSs are volatile, and it is expected that the price of its
securities will be volatile for the foreseeable future. The price at which CAT
Shares and CAT ADSs are quoted and the price that investors may realise for
their securities will be influenced by a large number of factors, some specific
to the Enlarged Group and its operations and some that may affect the quoted
healthcare and pharmaceutical sector, or quoted companies generally. These
factors could include the performance of the Enlarged Group's research and
development program, large purchases or sales of CAT Shares and CAT ADSs,
currency fluctuations, legislative changes in the healthcare environment,
litigation, in particular intellectual property litigation, and general economic
conditions.
2.24 The ability of US investors to enforce civil liabilities obtained against
CAT in the United States may be limited
CAT is a public limited company incorporated under the laws of England and
Wales. Substantially all of CAT's directors and senior management are not
residents of the United States. Substantially all of the assets of such persons
and a substantial majority of the assets of the Enlarged Group are located
outside the United States. As a result, it may not be possible for investors to
effect service of process within the United States upon such person or the
Enlarged Group or to enforce against them judgments of courts of the United
States predicated upon civil liability provisions of the US federal or state
securities laws.
PART IX
REGULATORY ENVIRONMENT
1. INTRODUCTION
In most countries, dealings in drug products are subject to relatively high
levels of regulation. By setting detailed and specific requirements for data
that must be generated and evaluated before a product can be placed on the
market, most systems of regulation ensure that such products are subject to
extensive testing and evaluation before being made widely available.
The testing required once a potential product candidate has been identified
involves both pre-clinical and clinical research, the first one usually carried
out on animals, the latter one carried out on humans. The precise tests
undertaken and methods used vary according to the products under developments,
but basic principles and requirements must be addressed. The performance of
pre-clinical and clinical research is generally subject to legal provisions that
are in addition to, and separate from, those setting out the data requirements
for the purposes of applying for approval to market a product.
In most jurisdictions, any dealings in drug products at any point in the chain
of distribution will be regulated through a system of authorisation. In order to
place a product on the market, a marketing authorisation is required. This is a
fundamental requirement since, subject to fairly limited exemptions and the
provisions for clinical research, all dealings must be undertaken in relation to
authorised products. According to Community legislation, manufacturers and
wholesalers must have appropriate authorisations covering their activities.
Manufacturing, which includes assembly of products into their final dosage forms
and packaging operations, is generally strictly regulated. Wholesalers, who
supply to the trade, must meet certain criteria both as to staff and premises in
order to obtain authorisation. Supply at retail level to members of the public
is generally controlled through the limitations and conditions placed upon
retail outlets through, for example, pharmacy registration and the imposition of
statutory limitations, conditions and obligations upon other retail suppliers.
Exemptions from the requirements for authorisation tend to be extremely limited.
2. REGULATION BY THE EUROPEAN COMMUNITY
The system of regulation of medicinal products for human use at the European
Community ("EC") level dates back to 1965. There is a broad range of EC
legislation that has been implemented by European Union ("EU") Member States
governing all aspects of dealing in medicinal products. It is supplemented by
numerous guidelines which are not legally binding in many cases. However,
failure to comply with, or departure from, their provisions in practice requires
strong justification since it is assumed that such guidelines represent the
state of scientific and technical knowledge.
2.1 Pre-clinical research
European legislation, e.g. Directive 2001/83/EC, as amended, imposes
certain specific requirements for pre-clinical testing where the data to be
generated will be used for an application for a product marketing authorisation
in the EC. The basic provisions in legislation are expanded upon in guidance
issued by the Committee for Proprietary Medicinal Products ("CPMP") which, while
not usually formally incorporated into the legislation, are important. Deviation
by companies from such guidance would generally require a strong justification
upon application for a marketing authorisation. Aspects of pre-clinical research
involving animal testing are subject to the provisions of Directive 86/609/EEC
setting down standards to be met by animal testing institutions and those
conducting the research. These provisions are enforced through registration and
inspection. High standards of practice are also laid down for laboratories by
Directive 87/18/EEC and associated legislation, with compliance monitored
through a system of inspection.
2.2 Clinical research
Directive 2001/83/EC also establishes the data requirements in respect of
research undertaken in humans where the data is intended to be utilised in a
marketing authorisation application. There are also a number of guidance
documents issued by the CPMP. In particular, these include guidelines addressing
the conduct of trials in particular therapeutic categories and patient groups
and on a Good Clinical Practice ("GCP") the latter one coming into force in 1997
and being an adoption of the guidelines on GCP developed by the International
Conference for Harmonisation. Also of importance throughout the EC is the
Declaration of Helsinki setting out guidelines on the ethical principles
applying when research in humans is conducted.
Aside from these provisions today the conduct of research in the EC is
also governed by Directive 2001/20/EC on the implementation of GCP in the
conduct of clinical trials on medicinal products for human use. This Directive
that has recently been adopted sets out a number of provisions governing the
conduct of clinical trials. It will be supplemented by detailed guidelines. The
aim of the Directive is to increase harmonisation in this area. Member States
have until 1 May 2004 to adopt the necessary measures to comply with the
Directive and these measures will affect regulation and practice. In the
meantime, the national laws and practices of Member States covered by the scope
of the Directive will continue to govern research conducted within the local
jurisdiction. Variation in these laws and practices limits the extent to which
the conduct of research projects can be streamlined across multiple sites
throughout the EC.
Pending specific rules, there are some practical influences upon the
conduct of research as a result of the requirements concerning the content of
application dossiers submitted in order to obtain marketing authorisation. These
requirements include adherence to GCP and failure to do so may lead to a
rejection of an application for a marketing authorisation.
The completion of Phase I, II and III clinical studies is a lengthy
process and can take up to six years or more to achieve. Adverse, poor or
inconclusive results at any stage can lead to the abandonment of a research
programme.
In practice, in Member States, clinical studies may only be commenced
after notification to and/or approval by, an independent ethics committee. The
process of application for and/or authorisation of a clinical study by the
regulatory authorities varies from Member State to Member State. Where the
results of earlier phase studies do not justify ongoing research, neither
ethical nor regulatory approval (where required) will be granted.
In addition to the above, further Community legislation, such as Directive
95/46 EC on the protection of individuals with regard to the processing of
personal data and on the free movement of such data, and also national law in
areas not yet covered by Community legislation, is relevant to the conduct of
clinical research.
2.3 Marketing
A medicinal product must have a marketing authorisation to be marketed in
an EC Member State. In 1995, the so-called "Centralised Procedure" for
authorisation of certain medicinal products was introduced in Europe. Regulation
(EEC) No 2309/93/EEC established a process of authorisation granted by the
Community for particular types of biotechnology and high technology products.
This centralised marketing authorisation system requires an application for a
marketing authorisation to be made by the person who will be responsible for
placing the product on the market and who must be established in the Community
to EMEA.
The EMEA co-ordinates the assessment process and procedure, while the
CPMP, as a body of experts drawn from the Member States, undertakes (with the
assistance, where necessary, of nominated external experts drawn from the EC)
the scientific assessment of the product dossier and produces an opinion as to
whether a product satisfies the criteria for authorisation. The final decision
as to the grant or refusal of a marketing authorisation is taken by the
Commission. If successful, an application results in a single marketing
authorisation for the product which is valid in all Member States. The time
limits set for the assessment procedure are intended to ensure that a product is
thoroughly and expeditiously evaluated to ensure the availability to the public
as soon as possible of high quality new products. It is possible for an
applicant's schedule to slip, for example, where the applicant delays in
responding to queries or provides additional data, and also in the later stages
of the process where there are no specific set time limits and bureaucratic
procedures can be time consuming. Accelerated evaluation of a marketing
authorisation application may be initiated by the CPMP in exceptional cases when
a product is intended to provide an answer to major public health need defined
by: (a) the seriousness of the disease; (b) the absence or insufficiency of an
alternative therapy; and (c) the anticipation of high therapeutic benefit.
The legislation also introduced in Directive 2001/83/EC a "Mutual
Recognition Procedure" under which a marketing authorisation for a product
gained in one Member State (the "Reference Member State") can be used as the
basis for gaining marketing authorisation in others without, in theory, the
repetition of the lengthy product assessment already carried out by the
Reference Member State in authorising the product. Objections to such
recognition may be made by Member States within time limits set by the
legislation. The process of dealing with these objections ("arbitration") may
significantly lengthen the time elapsing between the initial application and
approval in the nominated Member States. Arbitration is handled by the CPMP
whose decision on the matters subject to dispute, when it has been adopted by
the Commission, is binding in all Member States. The outcome of an arbitration
may adversely affect marketing authorisations obtained prior to the arbitration
in cases where the result is a decision limiting the terms of, or refusing, a
marketing authorisation. The Mutual Recognition Procedure is an option for all
products for which the Centralised Procedure is not compulsory under Regulation
(EEC) No 2309/93.
Some companies will have the option under the rules to use either
procedure to authorise a new product. In some cases, the relative flexibility of
certain aspects of the Mutual Recognition Procedure may recommend that system
above the Centralised Procedure. In others, the perceived benefits of a single
EC-wide authorisation and the relative simplicity of a single application in
Europe will influence the system of choice.
On 22 January 2000, Regulation (EC) No 141/2000 on orphan medicinal
products entered into force. These so called "orphan drugs" are basically
defined as products for diagnosing, preventing or treating life-threatening or
very serious conditions that are rare and affect not more than five in 10,000
persons in the Community. The Regulation offers a number of incentives to
encourage the development of orphan drugs which under normal market conditions
pharmaceutical companies would be unwilling to develop, as the expected sales
would not allow the recovery of the costs of bringing them to the market. For
example, once a marketing authorisation for an orphan drug has been granted, the
orphan drug will enjoy market exclusivity and no further applications by third
parties for the marketing authorisation of similar product for the same
indication will be accepted for a period of 10 years. This period may however be
reduced to six years if, at the end of the fifth year, certain requirements are
no longer met, inter alia, that the product reaches certain profit levels within
five years from authorisation. Other incentives of orphan drugs are direct
access to the Centralised Procedure for the application of marketing
authorisation and, under certain circumstances, the grant of fee reductions or
exemptions in respect to the marketing approval procedure. However, despite
these incentives, the status as orphan drug has no further effect on the general
obligation to obtain marketing authorisation.
After a marketing authorisation, which will be valid for five years and
renewable for consecutive periods of five years has been granted, and a product
has been brought to market, numerous obligations are imposed upon the marketing
authorisation holder by the legislation. These include the obligation to ensure
that the product keeps pace with the state of scientific and technical
knowledge, in particular, in terms of its manufacture and control. When the
circumstances and technical knowledge warrant updating and amendment this
requires notification to the regulatory authority and the need to obtain
approval or a modified or even new marketing authorisation. Requirements for
pharmacovigilance and the reporting of adverse reactions to products are central
to the legislation. Advertising and the production of labelling and patient
information leaflets are each specifically regulated by Directive 2001/83/EC,
with local codes of conduct and practice also in place and, in some cases,
providing additional, exceeding obligations that can even lead to the control on
corporate activity. The provisions of the legislation, which include the
requirement, in relation to the function of pharmacovigilance and information
services, to have nominated individuals within the company responsible for
compliance, require significant resourcing in terms of staff and expertise which
may be sourced in-house and/or from external providers.
The regulatory authorities have power to suspend, revoke or vary a
marketing authorisation after grant if they are no longer satisfied as to
product safety, quality or efficacy or any combination of these. The
requirements for the performance of comprehensive pharmacovigilance and frequent
reporting and assessment in respect of marketed products are of central
importance and are designed to enable companies and regulators to detect product
safety concerns as early as possible and take appropriate action in the interest
of public health in the EC. The harmonisation and streamlining of
decision-making on such matters in the EC through a system of mutual
communication between the competent authorities means that, depending on the
marketing authorisation procedure, a concern arising in one Member State in
relation to a product which is marketed in several Member States will be
examined at the European level and the outcome of the examination will in many
cases affect the product and its authorisation across all Member States in which
it is sold and supplied.
2.4 Manufacturing
Manufacturing conducted within the EC must meet the standards of Directive
91/356/EEC laying down the principles and guidelines of Good Manufacturing
Practice ("GMP") for medicinal products for human use. These apply both to
marketed products and, as can be concluded from Article 13 of Directive
2001/20/EC, to investigational medicinal products intended for use in clinical
trials.
In addition, Directive 2001/83/EC imposes the duty on each Member State to
ensure that the manufacture of medicinal products within the EC is subject to
the holding of an authorisation within the territory of the respective Member
State. Personnel with specific qualification has to be available to the
marketing authorisation holder and inspection of manufacturing site facilities
will be carried out before a manufacturer is authorised to produce or assemble
medicinal products. And even after being granted authorisation the regulatory
authorities can undertake inspections, both by local inspectors and under
certain conditions by inspectors representing other countries, in order to
control compliance, particularly with the GMP. The failure of an inspection can
be a serious matter. Product supplies may be interrupted and/or a recall
required in the most serious cases, plant closure, pending rectification of
defects may be ordered. The legislation also requires clear, contractual
documentation concerning the provision of manufacturing services by one company
to another, in particular, where aspects of the manufacturing process are
contracted out by the main manufacturer to others.
2.5 Wholesaling
Wholesale distribution in the EC is governed by Directive 2001/83/EC and
the Good Distribution Practice Guidelines cross-referenced in it. As with
manufacturing operations, Directive 2001/83/EC provides for all wholesalers to
be authorised by the authorities in the country in which they operate.
Wholesalers must meet minimum requirements in terms of staff, facilities and
procedure.
2.6 Pricing
In a number of Member States, it is not possible to market a product until
pricing negotiations with the responsible authorities have been concluded.
Obtaining a market authorisation by the regulatory authorities does not
guarantee the negotiation of a satisfactory price, or of reimbursement status
under national public health systems, for the products concerned.
2.7 Supplementary protection certificates
The time taken to research and develop medicinal products eats into the
marketing time protected by a product patent or patents and can therefore reduce
the period available to the developer in which to recoup its investment through
sales. In 1992, the EC introduced Regulation 1768/92 creating a Supplementary
Protection Certificate ("SPC") for certain authorised products which are
protected by a basic patent in force. The effect of the SPC is to confer the
same rights as are conferred by the basic patent (subject to the same
limitations and obligations), provided that the protection conferred by the SPC
extends only to the product covered by the authorization. The duration of the
SPC is a period equal to the period which elapsed between the date on which the
application for a basic patent was lodged and the date of the first
authorization to place the product on the market in the European Community, less
five years, and subject to an upper limit of five years.
2.8 Abridged applications
In cases where the patent and SPC have expired or are not available,
medicinal products can benefit from EC provisions which govern the making of
so-called abridged applications for marketing authorisations. An abridged
application is one in which the full data requirements are relaxed, allowing the
submission of a more limited dossier provided that the conditions under Article
10 of Directive 2001/83/EC are met.
Most significantly, under EC law, a third party whose product is said to
be essentially similar to one already on the market is effectively prevented for
a period not less than six years from authorisation of the prior product from
relying upon pre-existing data submitted in support of a prior full application
by another company, except in certain defined and limited circumstances. The
prior product has to be marketed in the Member State for which the application
is made. The period shall be fixed at ten years for products derived from
biotechnological processes specified in Part A of the Annex to Regulation (EEC)
No 2309/93 (for which the Centralised Procedure is compulsory), and
"hightechnology" products viewed by the competent regulatory authorities as
representing significant innovation and falling within Part B of the Annex (in
case the applicant voted for the optional Centralised Procedure). A Member State
may elect to extend the period from six to ten years in respect of all the
medicinal products marketed on its territory where it considers this necessary
in the interest of public health.
The rules do not, however, prevent a competitor from making a marketing
authorisation application by relying upon a full data package compiled by the
applicant, or by reference to published literature, or, with the consent of the
owner of the original data, by cross reference to the data held on file by the
regulatory authorities.
The rules are only intended to limit the circumstances in which a
marketing authorisation may be granted without a full data package on the basis
of cross reference to existing data already submitted by prior applicants in
order to support their full application.
The rules are unfortunately unclear in some respects and their
interpretation is subject to variation and dispute. Divergent views are taken by
regulatory authorities on the availability of protection, for example, where new
data is generated in respect of a variation to an existing product involving
substantial "investment" by the originator. There has been significant
litigation as a result.
2.9 Product candidates
Many, if not the majority, of therapeutic products developed through the
application of the Enlarged Group's technology will fall within the ambit of
Regulation (EEC) No 2309/93. All products developed by means of recombinant DNA
technology, controlled expression of genes coding for biologically active
proteins in prokaryotes and eukaryotes including transformed mammalian cells and
hybridoma and monoclonal antibody methods will be subject to compulsory
centralised authorisation for the purposes of marketing within the EC. In the
remaining cases, there will be an option as to the approval process and for
certain "hightechnology" products further specified in Part B of Regulation
(EEC) No 2309/93 the marketing authorisation may also be granted in a
Centralised Procedure. With regard to abridged applications a 10 year period
shall apply across all Member States in either case where Centralised Procedures
are applied. Clinical research programmes must be conducted according to local
and EC requirements to ensure the acceptability of data generated for EC
regulatory purposes.
2.10 Competition Regulation
The Enlarged Group's activities will be subject to EU and UK competition
law, including Article 81(1) of the Treaty Establishing the European Community
1957, as amended. Article 81(1) prohibits agreements which have as their object
or effect the prevention, restriction or distortion of competition within the EC
and may affect trade between Member States. Provisions of agreements falling
within the prohibition of Article 81(1) are void and unenforceable. In certain
cases, parties entering into agreements falling within the prohibition of
Article 81(1) may be subject to fines imposed by the European Commission of up
to 10 per cent. of their respective annual worldwide revenue and to claims
before the Courts of Member States of damages from those who have suffered loss
by reason of the agreements.
Certain licence agreements which the CAT Group or the OGSGroup entered
into, or which the Enlarged Group may enter into, will grant or may grant
exclusive worldwide licences of patents, patent applications and know-how, which
are or may arguably fall within the prohibition of Article 81(1). The Enlarged
Group determines on an agreement-by-agreement basis whether or not the
prohibition of Article 81(1) applies, whether automatic exemption from the
prohibition of Article 81(1) is available under certain bloc-exemptions or, if
not, whether the conditions for exemption from the prohibition of Article 81(1)
are satisfied under Article 81(3) and, if so, whether to apply to the European
Commission for an individual exemption under Article 81(3). If an exemption is
not applicable and the Enlarged Group does not apply for, or is unsuccessful in
obtaining, an individual exemption from the European Commission, provisions of
any licence agreement which fall within the prohibition of Article 81(1),
including those relating to the exclusivity or rights, may be unenforceable.
The assessment of the legal situation with regard to the Regulatory
Environment as set out in Section 2 of this Part IX has been based solely on
European Community legislation, such as directives and regulations. Directives
are addressed to the Member States and require implementation into national law
before they become directly applicable. Member States are granted a transition
period to effect implementation and there is no guarantee that the resulting
national laws are always a complete and correct transformation of the
directives. Thus, depending on the situation in each Member State, a legal
environment different from the one set out in this Part IX may prevail.
3. UNITED STATES
3.1 Regulatory authorities
The development and marketing of drug products for human use in the
United States is extensively regulated at the federal and state
government levels. The principal federal regulatory agency is the FDA
within the US Department of Health and Human Services. Although most
states maintain one or more agencies with power to regulate drug
products, they generally defer to the FDA in matters relating to product
development and approval. Some of the Enlarged Group's products may be
subject to state regulation as well as FDA regulation.
3.2 Cost of pre-market testing
Due to the requirements imposed by the FDA, the development process for
new pharmaceuticals in the United States is lengthy, expensive and
commercially risky. The great majority of compounds screened for possible
development are ultimately rejected at some stage in the pre-market
testing process. Total development time for successful compounds often
exceeds ten years.
Under the provision of recent legislation establishing "user fees" (e.g.
registration fees) for human drug applications (including new drug
applications and biological licence applications), the FDA has made
commitments to reduce the review time for marketing authorisation
applications. Although the agency has achieved some reductions, especially
for high-priority medicines, the review process remains lengthy and
complex and approval is never certain. There has been little or no
reduction in the testing required before applications are submitted, which
consumes most of the time spent in developing new drug products for the US
market.
3.3 Animal testing
FDA regulations govern all stages of the development and marketing of drug
products. Safety studies in laboratory animals that are intended to be
submitted to FDA in support of marketing authorisation applications must
ordinarily comply with principles of Good Laboratory Practice and they are
subject to inspection and verification by the FDA or foreign government
agencies with which the FDA maintains mutual recognition agreements.
3.4 Clinical trials
All clinical trials of investigational drug products in the United States
must be carried out under investigational new drug ("IND") exemptions, in
accordance with FDA regulations. Those regulations impose requirements for
documenting the safety of proposed clinical studies, provide for
submissions to the FDA before clinical studies can commence and authorise
the FDA to suspend or withdraw permission to continue clinical studies.
Sponsors of clinical studies must maintain records and make reports to the
FDA, including reports of adverse events from human use and significant
findings from studies in animals. Although the FDA affords sponsors some
discretion in the design of early phase clinical studies, it is common for
sponsors to confer with the agency on the design of later phase studies,
especially pivotal Phase III clinical studies that will provide the
principal evidence of safety and effectiveness for marketing approvals.
Advertising and commercial distribution of investigational products are
ordinarily prohibited, but in certain circumstances, the FDA will permit
sponsors to charge patients for investigational medicines. There are
special procedures for "treatment INDs" to allow for compassionate use
while controlled clinical studies are underway.
FDA regulations imposed requirements for Good Clinical Practice ("GCP")
and protection of human subjects in clinical studies. Informed consent of
study subjects is required, and studies must be reviewed and approved by
Institutional Review Boards ("IRBs") which are subject to inspection and
regulation by the FDA. Clinical studies in vulnerable populations (e.g.
prisoners, children, mental incompetents and pregnant women) are subject
to special scrutiny.
3.5 Approval procedures and criteria
US drug law establishes different procedures and criteria for the approval
of biological products (products licence applications and establishment
licence applications, or PLAs and ELAs, respectively, and a unified
biological licence application, or BLA, for well-characterised biological
products), other new drugs (NDAs) and antibiotic drugs (antibiotic drug
applications). Monoclonal antibody products are subject to regulation as
biologics generally. In practice, however, the FDA applies essentially the
same requirements for approval of all products, proof of safety and
effectiveness, demonstration of adequate controls in the manufacturing
process and conformity with requirements for labelling. Effectiveness must
ordinarily be demonstrated on the basis of two adequate and
well-controlled clinical studies carried out in accordance with FDA
regulations. In addition, the FDA has issued guidelines for clinical
studies of specific types of pharmaceutical products.
The FDA has substantial discretion to determine whether the data submitted
in support of a drug product is adequate for approval. The agency is not
required to consult with independent experts when it reviews new products,
but, in practice, if often seeks the opinion of an advisory committee.
Applicants have the right to an administrative hearing and judicial review
of the refusal to approve a pharmaceutical product, but the FDA's
decisions on issues relating to safety and effectiveness are nearly always
conclusive.
3.6 Regulation of software and other medical devices
The FDA also regulates software and other medical devices to diagnose and
treat illnesses and other medical conditions. To the extent that the
Enlarged Group's products are or become medical devices, they will or
would be subject to FDA review and regulation.
3.7 Accelerated approval
FDA regulations authorise accelerated approval of pharmaceutical products
that offer a significant improvement in the treatment of fatal or
life-threatening conditions. Approval can be based on clinical studies
using surrogate end-points, but applicants must ordinarily agree to
continue clinical studies after approval and to accept other conditions,
including simplified procedures for withdrawal of approval.
3.8 Acceptance of foreign clinical data
The FDA will accept applications that include reports of foreign clinical
studies if they meet requirements for GCP and are deemed relevant to US
medical practice. It is, however, uncommon for the agency to approve a new
pharmaceutical product without some evidence from clinical studies
conducted in the United States, and most sponsors carry out at least one
pivotal study in that country. Studies conducted outside the United States
are subject to special audits by the FDA and may be rejected if US
requirements for record-keeping, protection of human subjects and other
matters relating to GCP are not met.
3.9 Non-patent market exclusivity
US drug law creates two forms of non-patent market exclusivity. First, the
law prohibits approval of abbreviated new drug applications ("ANDAs") or
literature-based applications for copies of innovative products for a
period of five years after the approval of a new chemical entity and three
years after the approval of a new indication or dosage form for which
substantial clinical studies were required. These provisions do not
preclude approval of competitive applications based on original data, and
they are apply only to new drugs, rather than antibiotics or biological
products.
Secondly, the law provides for a special seven year period of protection
for "orphan drugs" (e.g. drugs for diseases that affect fewer than 200,000
persons in the United States or that are unlikely to repay development
costs). During this period, the FDA is ordinarily precluded, subject to
complex exceptions, from approving any application for the same drug, even
if it is based on original data. These provisions apply to all drugs,
including antibiotics and biological products as well as new drugs.
3.10 Manufacturing controls
The FDA inspects pharmaceutical manufacturing establishments for
compliance with requirements of its Current Good Manufacturing Practice
("CGMP") regulations and conformity with specifications in marketing
approvals. In addition, biological manufacturing establishments must be
licensed by the FDA, although for specified products the facility is
approved within the BLA. The agency inspects foreign manufacturing
facilities that supply bulk or finished products for the US market; if
companies cannot meet FDA requirements, their products may be excluded
from the United States.
3.11 Export controls
US drug laws restrict exports of unapproved new drugs and biological
products for commercial distribution and clinical investigation outside
the United States. Such drugs can only be exported for commercial use if
they have been approved in designated jurisdictions (the EC and the
individual Member States). Exports are also permitted for clinical studies
in the designated countries after notification to the FDA, but exports for
clinical studies in other countries may require prior approval. Less
restrictive rules apply to exports of unapproved antibiotics.
3.12 Advertising and promotion
The FDA closely regulates advertising, promotion and marketing of
prescription drugs. Promotion for unapproved uses is prohibited, and
sponsorship of medical symposia and publications is restricted. Financial
incentives to prescribers are regulated under federal and state civil and
criminal laws as well as codes of practice for the medical professions.
Advertising of over-the-counter drugs is chiefly regulated by the Federal
Trade Commission.
3.13 Enforcement powers
The US federal government has extensive powers to compel compliance with
medicine laws. Violative products are subject to seizure, and imported
products may be detained. Companies and individuals that violate the law
are subject to sanctions, including injunctions and criminal penalties
with no requirement for proof of negligence or intent. Persons and
companies convicted of certain offences can be temporarily or permanently
barred from involvement in the drug approval process. The US federal
government can suspend or withdraw approval of products if questions arise
concerning safety or effectiveness.
3.14 Product liability
Companies that market drug products in the United States are subject to
suit in state and federal courts for personal injuries caused by their
products. The risk of product liability is significantly greater than in
most European jurisdictions, and damage awards can be substantial. FDA
approval is seldom a defence to liability, but failure to comply with FDA
requirements may constitute evidence of negligence or conduct warranting
punitive or exemplary damages.
3.15 Potential limitations on US third-party reimbursements and US health care
reform
Sales of the Enlarged Group's products will depend in part on the
availability of reimbursement from third party payers and the state and US
federal governments. Revenue also may be negatively impacted by ongoing US
healthcare reform efforts which seek to contain costs and may limit or
prescribe treatments and/or services reimbursed by the government.
PART X
ADDITIONAL INFORMATION
1. Responsibility
(a) The CAT Directors, whose names are set in paragraph 3(a) below, and the
Proposed Directors, whose names are set out in paragraph 3(b) below, accept
responsibility for the information contained in this document (other than that
relating to the OGS Group, the OGS Directors and their immediate families and
connected persons). To the best of the knowledge and belief of the CAT Directors
and the Proposed Directors (who have taken all reasonable care to ensure that
such is the case), the information contained in this document for which they
accept responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
(b) The OGS Directors*, whose names are set out in paragraph 3(d) below, accept
responsibility for the information contained in this document relating to the
OGS Group, the OGS Directors and their immediate families and connected persons.
To the best of the knowledge and belief of the OGS Directors* (who have taken
all reasonable care to ensure that such is the case), the information contained
in this document for which they accept responsibility is in accordance with the
facts and does not omit anything likely to affect the import of such
information.
2. Incorporation and Status
CAT was incorporated as Intercede 1186 Limited on 5 August 1996 in England under
the Companies Act as a company limited by shares under registered number
03234033. CAT's name was changed and CAT was re-registered as a public limited
company under the Companies Act with the name Cambridge Antibody Technology
Group plc on 22 August 1996. CAT's head office, registered address and principal
place of business is Milstein Building, Granta Park, Cambridge, CB1 6GH.
3. Directors
(a) The CAT Directors and their respective functions are as follows:
Professor Peter Garland Non-Executive Chairman
Peter Chambre Chief Executive Officer
John Aston Chief Financial Officer
Dr David Glover Chief Medical Officer
Dr Kevin Johnson Chief Technology Officer
Professor Uwe Bicker Non-executive
Dr James Foght Non-executive
Professor Sir Aaron Klug Non-executive
Dr Paul Nicholson Non-executive
Ake Stavling Non-executive
Dr John Stocker## Non-executive
The Company Secretary of CAT is Diane Mellett.
The business address of each of the CAT Directors is Milstein Building,
Granta Park, Cambridge, CB1 6GH.
* Dr Donald Drakeman is also the Chief Executive Officer of Medarex, Inc., a
competitor of CAT and is not, therefore, taking responsibility for the
views of the OGS Board on the merits of the Merger.
(b) It is proposed that Dr David Ebsworth, Professor Rajesh Parekh and Dr James
Hill will join the CAT Board following the completion of the Merger. Dr Peter
Ringrose will join the CAT Board on 10 February 2003.
(c) Brief biographical details of the CAT Directors and the Proposed Directors
are as follows:
Professor Peter Garland MA MB PhD FRSE CBE (68) Non-Executive Chairman
Appointed to the CAT Board in 1990, Peter Garland became Chairman of the
CAT Board in September 1995. Until 1999 he was Chief Executive Officer of
the Institute of Cancer Research, where he continues to work as a Visiting
Research Fellow. During his career he has held a number of other senior
posts within academia and industry, including Professor of Biochemistry at
the University of Dundee, Principal Scientist and Head of Biosciences at
Unilever Research Colworth Laboratory and Director of Research at Amersham
International plc. In 1999 he was awarded the CBE for his services to
cancer research and biotechnology.
Peter Chambre (47) Chief Executive Officer
Peter Chambre joined CAT as Chief Executive Officer in April 2002.
Previously, Peter was Chief Operating Officer at Celera Genomics Group
and, prior to this, held the position of Chief Executive Officer at Bespak
plc, the drug delivery group. Peter has considerable experience of senior
management roles, both in the UK and the United States, where he led these
companies in their development toward the biopharmaceutical market. Peter
has also held positions at Bain & Company, the strategy consultancy, and
Unilever plc.
John Aston MA ACA (48) Chief Financial Officer
John Aston joined the Board as Finance Director in September 1996 and
subsequently saw CAT through a successful flotation in March 1997.
Previously, John was a director in corporate finance with J Henry Schroder
& Co Limited. He qualified as a chartered accountant with Price Waterhouse
and worked at the British Technology Group.
Dr David Glover MA MB Bchir MRCP FFPM (50) Chief Medical Officer
David Glover joined the Company in June 1994 as Vice President Medical
Development and was promoted to the CAT Board in July 1997. David's
pharmaceutical industry experience began in 1984 when he joined Merck
Sharp and Dohme as a Clinical Research Physician, rising to the Director
of Medical Affairs before moving to Schering-Plough Limited as Medical
Director. He has broad expertise in drug development, regulatory affairs,
clinical research and medical marketing encompassing several therapeutic
areas. Prior to 1984, he held a series of hospital positions in medicine
and cardiology including a clinical research fellowship at the University
of Birmingham. David also sits on the Board of Management of the ABPI
(Association of the British Pharmaceutical Industry).
Dr Kevin Johnson BSc PhD FRSA (42) Chief Technology Officer
Having joined CAT in 1990, Kevin Johnson was appointed to the CAT Board in
July 1997. In 2000, Kevin became Chief Technology Officer responsible for
exploitation and development of CAT's technology platforms. Previously, he
held positions in the Company as Research Director, Vice President
Research and Head of Research. Prior to 1990, he was a fellow of the
University of Melbourne, Australia and a John Lucas Walker Senior Student
at the University of Cambridge, where he originally gained his PhD.
Professor Uwe Bicker MD PhD (57) Non-Executive Director
Uwe Bicker joined the CAT Board in February 1999. He is Member of the
Board of Trustees of the Aventis Foundation; Chairman of the Supervisory
Board of Dade Behring Holding GmbH and a member of the Board of the
University of Marburg. Previously he was a board member of the
Behringwerke AG, a board member of HoechstMarionRoussel AG and a board
member of Boehringer Mannheim GmbH. He is a qualified physician, holds
doctorates in medicine and chemistry and is a professor at the University
of Heidelberg.
Dr James Foght PhD MS BS (66) Non-Executive Director
Jim Foght has been on the CAT Board since 1996. He is currently Managing
Director of Foght Enterprises, LLC., focused on international business
advisory services, and also Managing Director of Vector Securities
International, LLC. Jim has considerable experience of the pharmaceutical
and diagnostic industries having spent 23 years with El du Pont de Nemours
in management and research, latterly as Managing Director of DuPont (UK).
Jim also serves on the Board of Directors of Acrux Limited and is a member
of the Board of Advisors of Ovation Pharmaceuticals Inc. He has announced
his intention to resign from the Company following the forthcoming AGM on
7 February 2003.
Professor Sir Aaron Klug OM FRS ScD HonFRCP HonFRCPath Nobel Laureate
(1982) (76) Non-Executive Director
Sir Aaron Klug has been on the CAT Board since the Company was founded in
1990. Prior to his retirement in 1996, he was Honorary Professor of
Molecular Biology at the University of Cambridge and Director of MRC
Laboratory of Molecular Biology. Sir Aaron continues to lead an MRC
research group on the regulation of gene expression. He is a Foreign
Associate of the US National Academy of Science and was President of The
Royal Society (1995-2000).
Dr Paul Nicholson MB BS FFPM (65) Non-Executive Director
Paul Nicholson was appointed to the CAT Board in February 1999. Paul is a
qualified physician with extensive experience of the pharmaceutical
industry. Most recently he was Senior Vice President of Worldwide
Development at SmithKline Beecham. Prior to this, he held senior positions
at Monsanto. Hoechst and Sterling Winthrop. Paul serves as a board
director for a number of bioscience companies including Xantos AG, Biovex
Limited, Biomedicines Inc, Matrix Therapeutics Limited and BioScience VCT
plc. He is a member of the Novartis Science Board.
Ake Stavling (57) Non-Executive Director
Ake Stavling was appointed to the CAT Board on 2 December 2002. He has
many years of experience within the bio-sciences sector and, until very
recently, served as an Executive Director, Business Development with
AstraZeneca plc where he had overall responsibility for corporate
strategy.
Dr John Stocker AO MB BS BmedSc PHD FRACP (57) Non-Executive Director
John Stocker was appointed to the CAT Board in March 1995. John is
Chairman of the Sigma Company Ltd. and a Director of Telstra Corporation
Limited, Nufarm Limited, and Circadian Technologies Pty. Limited, all of
which are listed on the Australian Stock Exchange. He was formerly Chief
Scientist of Australia, Chief Executive of CSIRO Australia and Director of
Pharmaceutical Research at Hoffmann-La Roche and Co in Basel. John is also
Chairman of CAT's Scientific Advisory Board.
Dr David Ebsworth (48) Proposed Executive Director
David Ebsworth joined OGS as Chief Executive Officer Designate and
Director on 22 May 2002 and assumed the role of Chief Executive Officer of
OGS on 1 July 2002. He has over 20 years experience within the
pharmaceuticals industry. Most recently he was head of the worldwide
Pharmaceutical Business Group of Bayer AG. Prior to that, he was President
of Bayer Pharmaceutical Division in North America with responsibility for
all functions from research through clinical development, regulatory
affairs, sales and marketing, finance and strategy. Previously, he held a
number of senior management positions within Bayer in Canada, Europe and
the US. In 2001, he received the Global CitizenAward from the School of
Diplomacy and International Relations at Seton Hall University in New
Jersey. He is non-executive directive of SkyePharma plc, Curagen
Corporation and Clal Biotechnology Industries Limited. He holds a PhD from
the University of Surrey.
Professor Rajesh Parekh (42) Proposed Executive Director
Professor Rajesh Bhikhu Parekh was OGS' founding Research Director and has
been an executive director of OGS since 1992. He is internationally
recognised in the fields of glycobiology, carbohydrate engineering and
proteomics. He holds a DPhil from the University of Oxford, is author of
numerous publications and is named as an inventor in a number of patents
and patent applications.
Dr James Hill (57) Proposed Non-Executive Director
Dr James Hill has been a non-executive director of OGS since July 2000.
Until April 2001, he was Senior Vice President, Corporate Affairs at
SmithKline Beecham Plc (now part of GlaxoSmithKline) with responsibility
for government affairs, investor relations and all other aspects of
communications. He is a non-executive director of Genetix Group Plc,
Roadhaven Plc and Diplema Plc, a Fellow of the Royal College of Physicians
and a member of the Institute of Directors, the Faculty of Pharmaceutical
Medicine and the Royal Society of Medicine. He holds an MD from London
University.
Dr Peter Ringrose (57) Proposed Non-Executive Director
Peter Ringrose's appointment to the CAT Board will take effect from 10
February 2003. Peter has spent his whole 32-year career in the
pharmaceutical industry and, in particular, has many years' experience in
drug discovery. He was most recently Chief Scientific Officer and
President of Bristol-Myers Squibb Research Institute, Princeton, New
Jersey, and a member of the Executive Committee of Bristol-Myers Squibb
Company, responsible for pharmaceutical research and development
worldwide. He retired from these roles in December 2002. Prior to joining
Bristol-Myers Squibb Company in 1997 he held a number of senior posts at
Pfizer Inc, most recently Senior Vice President Worldwide Drug Discovery
and European Medicinal R&D. He joined Pfizer UK in 1982. Previously, Peter
held the post of Division Director with Sandoz Research Institute
(1979-1982) in Vienna, Austria, and held a number of positions at Roche
Research Division (1970-1979).
(d) The OGS Directors and their respective functions are as follows:
G Kirk Raab Non-Executive Chairman
Dr David Ebsworth Chief Executive Officer
Denis Mulhall Chief Financial Officer
Dr Chris Moyses Chief Medical Officer
Professor Rajesh Parekh Chief Scientific Officer
Professor Max Burger Non-executive
Dr Donald Drakeman Non-executive
Professor Raymond Dwek Non-executive
Dr James Hill Non-executive
John Rennocks Non-executive
The Company Secretary of OGS is John Ilett.
The business address of each of the OGS Directors is The Forum, 86 Milton
Park, Abingdon, Oxfordshire, OX14 4RY.
(e) Set out below is a list of companies and partnerships, other than CAT and
its subsidiary undertakings, of which the following CAT Directors and Proposed
Directors are or have been directors or partners in the five years preceding the
date of this document:
Past directorships
Name Current directorships in the last five years
Professor Peter Garland -- The Royal Cancer Hospital:
Institute of Cancer Research
Peter Chambre -- B.E.S. Technology Limited
Bertspa Engineering Co. Limited
Bespak Europe Limited
Bespak Holding (UK) Limited
Bespak plc
Phoenix Travel (King's Lynn)
Limited
John Aston -- --
Dr David Glover -- --
Dr Kevin Johnson -- --
Past directorships
Name Current directorships in the last five years
Professor Uwe Bicker Dade Behring Holdings Inc. Hoechst Marion Roussel GmbH
Future Capital AG
Aventis Research & Technologies AG
Dr James Foght Vector Asset Management Vector Securities International Inc.
(Vector Later-Stage Equity Funds) VSI Advisors LLC
Ovation Pharmaceutical, Inc. Vector Securities International Inc.
Vector Securities Prudential Vector Healthcare Group
International LLC Avocet Medical Inc.
Foght Enterprises LLC
Acrux Limited
African Wildlife Foundation
Turtle Will
Illinois Ventures
University of Akron Foundation
Professor Sir Aaron Klug -- Genome Research Limited
Endlock Limited
Gendaq Limited
Dr Paul Nicholson Xantos AG The Botanics Trading Company
Biomedicines Inc. Limited
BioVex Limited British Biotech plc
Bioscience VCT plc
Matrix Therapeutics Limited
Ake Stavling AstraZeneca plc
Dr John Stocker Sigma Company Limited
Telstra Corporation Limited
Nufarm Limited
Circadian Technologies Limited
Foursight Associates Pty Limited
Dr David Ebsworth Oxford GlycoSciences Plc
SkyePharma plc
Curagen Corporation
Clal Biotechnology Industries Limited
Professor Rajesh Parekh Oxford GlycoSciences Plc
Dr James Hill Oxford GlycoSciences Plc
Genetix Group Plc
Roadhaven Plc
Diplema Plc
Dr Peter Ringrose -- ImClone Systems Incorporation
(f) None of the CAT Directors or Proposed Directors have:
(i) any unspent convictions in relation to indictable offences;
(ii) been an executive director of any company at the time of or within
twelve months preceding which was put into receivership, compulsory liquidation,
creditors' voluntary liquidation, administration, company voluntary arrangement
or which made any composition or arrangement with its creditors generally or any
class of the creditors of such company;
(iii) had any bankruptcy order served upon him, nor has he entered into
any individual voluntary arrangement;
(iv) had any public criticisms made of him by any statutory or regulatory
authority (including designated professional bodies), nor has he ever been
disqualified by a court from acting as a director of a company or from acting in
the management or conduct of the affairs of a company;
(v) been a partner in any partnership at the time of or within twelve
months preceding which was put into receivership, compulsory liquidation,
administration or voluntary arrangement of such a partnership;
(vi) had an administrative or other receiver appointed over any of his
assets.
4. Service contracts and emoluments of the CAT Directors and the Proposed
Directors
(a) The following directors of the Company have service contracts with the
Company, particulars of which are set out below:
Director Annual Salary Notice period Date of contract
Peter Chambre (pound)325,000 12 months by either the Company or 22 February 2002
the director at any time
John Aston (pound)166,500 12 months by either the Company or 1 October 2001
the director at any time
David Glover (pound)160,600 12 months by either the Company or 1 October 2001
the director at any time
Kevin Johnson (pound)160,600 12 months by either the Company or 10 February 1997
the director at any time
Upon serving or receiving notice of termination, the Company has the
right, at its discretion, to pay basic salary (plus any benefits, as
described in the paragraph below, enjoyed by the CAT Director at that
time) in lieu of notice. There are no other provisions for compensation
payable upon early termination of the service contracts. Other than as
specified in the paragraph below, there are no commission or
profit-sharing arrangements.
The executive directors of CAT are each entitled to receive, whether under
their service contracts or otherwise, the following non-pensionable benefits:
(i) life insurance on the terms of the Company's personal accident scheme
and disability cover on the terms of the Company's income protection
scheme;
(ii) contributions to the Company's group personal pension scheme equal to
10 per cent. of their respective annual salaries (with the exception of
Peter Chambre for whom there is a 10 per cent. of basic salary
contribution to a pension allowance payable via payroll);
(iii) private medical insurance cover for the benefit of the CAT Director
under the Company's group private medical insurance scheme;
(iv) all of the rental and call charges of a home fax machine and the
costs of installing an additional home telephone line (if considered
necessary);
(v) membership fees for professional societies and subscriptions as agreed
with the Company; and
(vi) reasonable relocation expenses.
The executive directors of CAT are eligible for performance-related
remuneration, based on the attainment of specific performance criteria which are
established annually at the commencement of the financial year.
Performance-related remuneration is payable to a maximum of 45 per cent. of
basic salary, with the exception of Peter Chambre who is entitled to a
guaranteed bonus, payment of 50 per cent. of his salary in the 12 month period
following his appointment and thereafter a performance-related bonus payable on
the attainment of objectives which have been determined by the remuneration
committee.
(b) Pursuant to the terms of appointment letters variously entered into in the
period from 21 June 2002 to 13 November 2002 with the Company, each of Professor
Peter Garland, Professor Sir Aaron Klug, John Stocker, Professor Uwe Bicker,
Paul Nicholson, James Foght and Ake Stavling agreed to act as non-executive
directors of CAT. An annual fee of (pound)22,000 of which (pound)5,500 may be
taken in CATShares ((pound)50,000 in the case of the Chairman, of which
(pound)12,500 may be taken in CATShares) (in each case subject to periodic
review) is paid to each of them in respect of their offices and extra payments
may be made when exceptional demands have been placed on a non-executive
director's time. The appointments are terminable by either the Company or the
relevant CAT Director, in each case, on three months' notice without payment of
compensation. In certain circumstances the appointment of a non-executive
director of CAT will terminate without any requirement for notice and
compensation. In addition, all non-executive directors of CAT are contractually
obliged to present themselves for re-election as required by the Articles of
Association.
In the financial year ended 30 September 2002, John Stocker received
additional directors' fees of (pound)12,000 for his services as chairman of the
Company's Scientific Advisory Board and Professor Sir Aaron Klug received
additional consultancy fees of (pound)8,000 for his services as a member of such
Scientific Advisory Board.
(c) The total aggregate of the remuneration paid and benefits in kind granted to
all CAT Directors by any member of the CAT Group during the last completed
financial year under any description whatsoever amounted to (pound)1,263,200.
(d) The total emoluments receivable by the CAT Directors will not be
automatically varied as a result of the Merger.
(e) Proposed executive directors of CAT
Subject to the Merger becoming effective, David Ebsworth and Rajesh Parekh
have agreed to serve as executive directors of CAT.
David Ebsworth is employed under a service contract dated 22 May 2002 with
OGS. He receives an annual basic salary of (pound)386,250 subject to annual
review, an annual bonus, a car allowance, membership of the OGS pension scheme
to which he receives a company contribution by OGS of 12 per cent. of basic
salary subject to the earnings cap, and participates in OGS' PHI and private
medical insurance schemes. Either party may terminate the contract by giving not
less than 12 months notice, but special provisions apply on a change of control.
Rajesh Parekh is employed under a service contract dated 18 March 1998
with OGS. He receives an annual basic salary of (pound)188,500 subject to annual
review, an annual bonus, a car allowance, membership of the OGS pension scheme
to which he receives a contribution by OGS of 12 per cent. of basic salary
subject to the earnings cap, and participates in OGS' PHI and private medical
insurance schemes.
Either party may terminate the contract by giving not less than 12 months'
notice, but special provisions apply on a change of control.
The service contracts of David Ebsworth and Rajesh Parekh will remain
unchanged, save as follows.
o In the case of David Ebsworth, the change of control provision in his
service contract provides that he may give three months' notice to
terminate within 30 days of a change of control (without the need for any
material or detrimental change to his status). He is then entitled to a
pre-determined termination package.
o In relation to Rajesh Parekh, his existing service contract provides
that if there is a change of control of OGS and one of the events (the
"Trigger Events") set out below occurs as a result of (and within six
months of) such change of control, he is are entitled to give three
months' notice to terminate within 30 days of the Trigger Event occurring.
Where such notice is given, he is entitled to a pre-determined termination
package.
The Trigger Events are where there has been a "material and
detrimental change" to (i) his remuneration and terms and conditions
without his agreement; (ii) his status without his agreement; or (iii) his
benefits without compensation/agreement.
o CAT has agreed that, subject to the Merger becoming effective, the
Trigger Events will cease to be a condition to the exercise of the change
of control provisions for Rajesh Parekh and that the period for exercise
of the change of control provisions in the service contracts of David
Ebsworth and Rajesh Parekh shall be extended so that the change of control
provisions referred to above can be exercised at any point within the
period of one year from the Effective Date.
(f) Peter Ringrose has agreed to act as a non-executive director of CAT with
effect from 10 February 2003 under an appointment letter dated 5 January 2003.
The terms of this appointment letter are the same as those set out in the
appointment letters described in paragraph 4(b) above for the other
non-executive directors (other than the Chairman).
James Hill has agreed to serve as a non-executive director of CAT
following implementation of the Merger. His terms of appointment with CAT will
be on the same terms as those set out in the appointment letters described in
paragraph 4(b) above for the non-executive directors of CAT (other than the
Chairman).
5. Directors' shareholdings in CAT and other interests
(a) (i) As at 3 February 2003 (being the latest practicable date prior to the
publication of this document), save in respect of the beneficial interests set
out below and the options to acquire shares in CAT referred to in paragraph
5(a)(ii) below, no CAT Director or Proposed Director had any interest, whether
legal or beneficial, in shares in, or debentures of, CAT which has been notified
to CAT pursuant to section 324 or section 328 of the Companies Act or which is
required to be entered in the register maintained pursuant to section 325 of the
Companies Act nor has, so far as the CAT Directors or the Proposed Directors
know or could with reasonable diligence ascertain, any person who is connected
(within the meaning of section 346 of the Companies Act) with any CAT Director
or Proposed Director, any such interest which would, if the connected person
were a director of CAT, be required to be disclosed pursuant to section 324 or
section 328 of the Companies Act, or entered into the register maintained
pursuant to section 325 of the Companies Act.
Percentage Shareholding
Before After
Number of completion of completion of
CAT Shares the Merger the Merger ss.
P Garland1 40,017 0.11 0.07
P Chambre2 9,529 0.03 0.02
J Aston 28,798 0.08 0.05
D Glover 11,529 0.03 0.02
K Johnson3 64,087 0.18 0.11
U Bicker 3,481 0.01 0.01
J Foght 4,141 0.01 0.01
Sir Aaron Klug 28,950 0.08 0.05
P Nicholson 5,764 0.02 0.01
A Stavling -- -- --
J Stocker 79,622 0.22 0.14
P Ringrose -- -- --
D Ebsworth -- -- 0.00
R Parekh -- -- 0.04
J Hill -- -- 0.00
(1) This holding includes his spouse's holding of 8,833 CATShares.
(2) This holding includes his spouse's holding of 9,529 CAT Shares.
(3) This holding includes his spouse's holding of 31,250 CAT Shares.
ss. These numbers have been calculated on the assumption that:
(a) there is no increase in the share capital of the Company after 3
February 2003 (the latest practicable date prior to the date of
publication of this document);
(b) there is no increase in the share capital of OGS after 3
February 2003 (the latest practicable date prior to the date of
publication of this document); and
(c) there are no dealings in Existing CAT Shares or OGS Shares after
3 February 2003 (the latest practicable date prior to publication of this
document). On the basis of these assumptions, 21,907,094 New CAT Shares
will be issued pursuant to the Merger.
(ii) As at 3 February 2003 (being the latest practicable date prior to the
date of the publication of this document) the following CAT Directors have
options outstanding under the CAT Share Option Schemes (details of which are set
out in paragraph 10 below):
No. of
shares in
CAT Earliest Last
Exercise under Date of Exercise exercise
Name Scheme Price (p) option Grant Date Date
J Aston Old Option Schemes 300 100,000 04/09/96 04/09/99 03/09/03
CSOP 500 9,000 19/12/97 19/12/00 18/12/04
CSOP 242 9,964 27/11/98 27/11/01 26/11/05
CSOP 287 55,019 03/12/99 03/12/02 02/12/06
CSOP 1704 13,489 04/12/01 04/12/04 03/12/11
CSOP 513 7,579 22/11/02 22/11/05 21/11/12
P Chambre CSOP 1083 60,018 23/05/02 23/05/05 22/05/12
D Glover CSOP 500 15,000 19/12/97 19/12/00 18/12/04
CSOP 242 29,964 27/11/98 27/11/01 26/11/05
CSOP 287 55,019 03/12/99 03/12/02 02/12/06
CSOP 1704 13,260 04/12/01 04/12/04 03/12/11
CSOP 513 7,451 22/11/02 22/11/05 21/11/12
K Johnson CSOP 500 15,000 19/12/97 19/12/00 18/12/04
CSOP 242 28,324 27/11/98 27/11/01 26/11/05
CSOP 287 55,019 03/12/99 03/12/02 02/12/06
CSOP 1704 13,260 04/12/01 04/12/04 03/12/11
CSOP 513 7,451 22/11/02 22/11/05 21/11/12
The Company has agreed to make a further grant of options to P Chambre on
23 May 2003 or at the earliest opportunity after that, over such number of
shares in CAT as has a market value of two times Mr Chambre's basic
salary, with an exercise price equal to the then prevailing market price.
The number of CAT Shares held by the CAT Directors will not change as a
result of the issue of New CAT Shares pursuant to the Merger.
(b) No CAT Director or Proposed Director has or has had any interest in any
transaction which is or was unusual in its nature or conditions or significant
to the business of the CAT Group and which was effected by CAT during the
current financial year or for that ended 30 September 2002 or which was effected
by CAT during an earlier financial year and remains in any respect outstanding
or unperformed.
(c) There are no outstanding loans granted by any member of the CAT Group to the
CAT Directors or any guarantees provided by any member of the CAT Group for
their benefit.
(d) Set out below are, insofar as is known to CAT, the names of those persons
who, directly or indirectly, were interested in 3 per cent. or more of the
capital of CAT as at 3 February 2003 (the latest practicable date prior to the
date of the posting of this document):
Percentage Shareholding
Before After
Number of completion of completion of
CAT Shares the Merger the Merger ss.
FMR Corp, Fidelity International Limited and
Edward Johnson 3,155,086 8.68 5.42
HGSI 1,670,000 4.59 2.87
Oracle Partners L.P. 1,246,445 3.43 2.14
Legal & General Investment Management 1,102,025 3.03 1.89
Capital Group Inc. 1,089,995 3.00 1.87
ss. These numbers have been calculated on the assumption that:
(a) there is no increase in the share capital of the Company after 3
February 2003 (the latest practicable date prior to the date of
publication of this document);
(b) there is no increase in the share capital of OGS after 3 February 2003
(the latest practicable date prior to the date of publication of this
document); and
(c) there are no dealings in Existing CAT Shares or OGS Shares after 3
February 2003 (the latest practicable date prior to publication of this
document).
On the basis of these assumptions, 20,907,094 New CAT Shares will be
issued pursuant to the Merger.
Save as aforesaid, the CAT Directors are not aware of any person who is
interested, whether directly or indirectly, in 3 per cent. or more of the issued
ordinary share capital of CAT.
The CAT Directors are not aware of any persons who, directly or
indirectly, jointly or severally, exercise or could exercise control over CAT.
6. Share Capital
(a) As at 3 February 2003 (the latest practicable date prior to the date of the
publication of this document), the authorised and issued share capital of CAT
was as follows:
Nominal
Ordinary Shares of 10 pence each Number Amount
Authorised 50,000,000 (pound) 5,000,000
Issued and fully paid up 36,352,686 (pound)3,635,268.60
The issued, authorised and fully paid up ordinary share capital of CAT
(assuming the passing of the resolutions to be proposed at the CAT EGM and
the full implementation of the Merger and assuming no further OGS Shares
have been issued since the announcement of the Merger) is anticipated to
be as follows:
Nominal
CAT Shares Number Amount
Authorised 80,000,000 (pound)8,000,000
Issued and fully paid up 58,259,780 (pound)5,825,978
(b) CAT is subject to the continuing obligations of the Listing Rules and the
provisions of the Companies Act with regard to the issue of securities for cash.
The provisions of section 89 of the Companies Act (which, to the extent not
disapplied, confer on shareholders pre-emption rights in respect of the
allotment of equity securities which are, or are to be, paid up in cash other
than by way of allotment to employees under an employees share scheme as defined
in section 743 of the Companies Act) apply to the authorised but unissued share
capital of CAT, except to the extent to which the provisions have been
disapplied as referred to in paragraph 6(d) below.
(c) At the CAT EGM convened for 11 March 2003 it is proposed that the authorised
share capital of CAT be increased by the creation of an additional 30,000,000
ordinary shares of 10 pence each. This will represent an increase of
approximately 60.0 per cent. of the current authorised share capital of CAT.
Under the same resolution it is proposed to give the directors of CAT authority
to allot unissued share capital with a nominal value of up to
(pound)2,190,709.40 specifically for the purposes of the Merger and in respect
of the arrangements in respect of participants in the OGS Share Option Scheme,
which authority, if approved, would expire in 12 months. This authority is in
addition to and without prejudice to any existing authority. In addition,
further resolutions will be proposed at the CAT EGM to authorise the directors
of CAT: (i) generally, to allot unissued share capital with a nominal value of
(pound)1,884,225; and (ii) to allot shares for cash as if section 89 of the
Companies Act did not apply to any such allotment, provided that such power is
limited to the allotment of equity securities up to an aggregate nominal amount
of (pound)282,633. These authorities, if approved, would (unless earlier revoked
or amended by the Company in general meeting) expire on the earlier of the
annual general meeting of the Company in 2004 and 11 June 2004. These
authorities are in substitution for any existing authorities other than the
authority to allot shares specifically for the purposes of the Merger referred
to above.
The proposed increase in the authorised share capital of CAT and the
authorities to be granted to the directors of CAT at the CAT EGM to allot
securities and to disapply the statutory pre-emption rights are
conditional upon the Scheme becoming effective.
As at 3 February 2003 (the latest practicable date prior to the date of
the publication of this document) 1,777,935 options over ordinary shares
in CAT had been granted and were still outstanding under the CAT Share
Option Schemes. These options (which are set out in further detail in
paragraph 6(h) below) represented (as at 3 February 2003) approximately 5
per cent. of the issued share capital of the Company.
(d) By an ordinary resolution passed by the shareholders of CAT on 1 February
2002, the CAT Directors were authorised to allot relevant securities up to an
aggregate nominal amount of (pound)1,184,022 which authority will expire on the
earlier of 1 May 2003 and the annual general meeting of the Company in 2003,
save that the Company shall be entitled before such expiry to make an offer or
agreement which would or might require equity securities to be allotted after
such expiry. By a special resolution passed on the same date, the CAT Directors
were empowered to allot equity securities (within the meaning of Section 94 of
the Companies Act) for cash as if Section 89 of the said Act did not apply to
any such allotment, provided that such power is limited to the allotment of
equity securities up to an aggregate nominal amount of (pound)177,603. This
authority and power shall expire, unless earlier revoked or amended by the
Company in general meeting, on the earlier of 1 May 2003 and the annual general
meeting of the Company in 2003, save that the Company shall be entitled before
such expiry to make an offer or agreement which would or might require equity
securities to be allotted after such expiry.
CAT has recently convened its annual general meeting for 2003, to be held
on 7 February 2003. At this meeting, resolutions will be proposed, inter alia,
to give the CAT Directors authority: (i) to allot unissued share capital with a
nominal value of up to (pound)1,209,529, which authority, if approved, would
expire on the earlier of 7 May 2004 and the annual general meeting of the
Company in 2004, save that the Company would be entitled before such expiry to
make an offer or agreement which would or might require equity securities to be
allotted after such expiry; and (ii) to allot equity securities (within the
meaning of Section 94 of the Companies Act) for cash as if Section 89 of the
said Act did not apply to any such allotment, provided that such power is
limited to the allotment of equity securities up to an aggregate nominal amount
of (pound)181,429, which authority, if approved, would (unless earlier revoked
or amended by the Company in general meeting) expire on the earlier of 7 May
2004 and the annual general meeting of the Company in 2004, save that the
Company would be entitled before such expiry to make an offer or agreement which
would or might require equity securities to be allotted before such expiry. It
is proposed that these authorities will be substituted by the general
authorities to allot securities and to disapply the statutory pre-emption rights
to be proposed at the CAT EGM.
(e) The Existing CAT Shares are admitted to the Official List of the UK Listing
Authority and to trading on the London Stock Exchange's market for listed
securities under the symbol "CAT". The Company's ADSs are quoted on NASDAQ under
the symbol "CATG". Each CAT ADSs represents one Existing CAT Share.
CAT completed its initial public offering and listing on the London Stock
Exchange in March 1997, raising approximately (pound)38.4 million (net of
expenses). In April 2000, CAT raised approximately a further (pound)89.5
million (net of expenses) in a follow-on share offering. In June 2001, the
CAT ADSs commenced trading on NASDAQ.
Application has been made to the UK Listing Authority for the New CAT
Shares to be issued in connection with the Merger to be admitted to the
Official List and to the London Stock Exchange for the New CAT Shares to
be admitted to trading on the London Stock Exchange's market for listed
securities, commencing on the Effective Date. Admission to the Official
List together with admission to trading on the London Stock Exchange's
market for listed securities constitute admission to official listing on a
stock exchange. CAT will seek to have the New CAT ADSs quoted on Nasdaq
commencing on the Effective Date.
(f) None of the New CAT Shares will be sold or will be available in whole or in
part to the public in conjunction with the application for admission to the
Official List of the UK Listing Authority and admission to trading on the London
Stock Exchange's market for listed securities except pursuant to the Merger.
(g) New CAT Shares will be in registered form and not in bearer form. New CAT
Shares, following Admission, will be eligible for settlement within CREST.
(h) As at 3 February 2003 (being the latest practicable date prior to the date
of the publication of this document), the following options over ordinary shares
had been granted and were still outstanding under the CAT Share Option Schemes.
In respect of options granted under the Old Option Schemes, where the option is
over shares of CAT Limited and the option holder is obliged upon exercise to
exchange the shares of CAT Limited for shares in CAT (under the arrangements
described in paragraph 10(a) below), the relevant number of shares in CAT is
included in the table.
(i) Old Option Schemes
Number of Shares Price per Share Dates of Exercise
16,350 (pound)1.28 15/09/1996 - 14/09/2003
25,000 (pound)1.28 28/04/1998 - 27/04/2005
75,000 US $4.80 19/04/2001 - 19/04/2006
114,179 (pound)3.00 04/09/1999 - 03/09/2003
(ii) CSOP
Number of Shares Price per Share Dates of Exercise
39,670 (pound)5.00 24/03/2000 - 23/03/2004
36,230 (pound)5.00 24/03/2000 - 23/03/2007
3,584 (pound)5.58 02/06/2000 - 01/06/2004
5,376 (pound)5.58 02/06/2000 - 01/06/2007
67,400 (pound)5.00 19/12/2000 - 18/12/2004
37,500 (pound)5.00 19/12/2000 - 18/12/2007
42,500 (pound)5.00 25/06/2001 - 24/06/2008
15,000 (pound)5.00 27/11/2001 - 26/11/2008
125,632 (pound)2.42 27/11/2001 - 26/11/2005
51,486 (pound)2.42 27/11/2001 - 26/11/2008
4,375 (pound)2.10 28/05/2002 - 27/05/2009
406,501 (pound)2.87 03/12/2002 - 02/12/2006
67,293 (pound)2.87 03/12/2002 - 02/12/2009
3,128 (pound)23.03 26/05/2003 - 25/05/2010
57,704 (pound)30.54 01/12/2003 - 30/11/2007
19,550 (pound)30.54 01/12/2003 - 30/11/2010
1,458 (pound)25.66 25/05/2004 - 24/05/2008
8,003 (pound)25.66 25/05/2004 - 24/05/2011
3,471 (pound)21.62 18/06/2004 - 17/06/2011
75,675 (pound)17.07 30/11/2004 - 29/11/2011
99,579 (pound)17.04 04/12/2004 - 03/12/2011
93,783 (pound)10.83 24/05/2005 - 23/05/2012
276,128 (pound)5.13 22/11/2005 - 22/11/2012
(i) Save as disclosed in this paragraph 6, no share or loan capital of CAT or
any of its subsidiary undertakings is under option or agreed conditionally or
unconditionally to be put under option.
(j) The following issues of shares, all of which are credited as fully paid,
were made by CAT during the three years preceding the date of this document:
Number Grant price Share price on
Date of issue of shares range date of issue Scheme name
10/01/00 20,000 (pound)1.28 (pound)5.83 Old Option Schemes
21/01/00 37,000 (pound)1.28-(pound)3.00 (pound)10.95 Old Option Schemes
28/01/00 90,250 (pound)1.28 (pound)10.95 Old Option Schemes
31/01/00 5,670 (pound)3.00 (pound)14.60 Old Option Schemes
04/02/00 22,500 (pound)3.00 (pound)13.75 Old Option Schemes
11/02/00 17,565 (pound)2.98 (pound)12.95 Old Option Schemes
18/02/00 6,635 (pound)1.28-(pound)3.00 (pound)16.20 Old Option Schemes
28/02/00 10,000 (pound)3.00 (pound)19.90 Old Option Schemes
07/03/00 9,500 (pound)2.97 (pound)41.38 Old Option Schemes
09/03/00 28,500 (pound)1.28-(pound)3.00 (pound)41.75 Old Option Schemes
14/03/00 10,000 (pound)3.00 (pound)27.00 Old Option Schemes
23/03/00 3,000 (pound)1.28 (pound)25.25 Old Option Schemes
31/03/00 12,500 (pound)2.97 (pound)20.38 Old Option Schemes
30/05/00 20,300 (pound)5.00 (pound)22.80 CSOP
30/05/00 21,250 (pound)1.28 (pound)22.80 Old Option Schemes
09/06/00 20,640 (pound)5.00-(pound)5.58 (pound)23.65 CSOP
16/03/00 2,500 (pound)5.00 (pound)24.10 CSOP
14/07/00 8,240 (pound)5.00-(pound)5.58 (pound)31.25 CSOP
01/08/00 178,025 (pound)1.28-(pound)3.00 (pound)28.75 Old Option Schemes
01/08/00 5,000 (pound)5.00 (pound)28.75 CSOP
17/08/00 7,200 (pound)5.00 (pound)29.25 CSOP
01/09/00 13,200 (pound)5.00 (pound)35.65 CSOP
15/09/00 18,400 (pound)5.00 (pound)41.00 CSOP
15/09/00 4,122 (pound)5.00 (pound)41.00 Old Option Schemes
22/09/00 4,480 (pound)5.58 (pound)38.80 CSOP
25/09/00 6,500 (pound)5.00 (pound)39.15 CSOP
28/09/00 28,800 (pound)5.00 (pound)41.00 CSOP
28/09/00 156,742 (pound)1.28-(pound)3.00 (pound)41.00 Old Option Schemes
29/11/00 2,500 (pound)5.00 (pound)30.00 CSOP
01/12/00 11,200 (pound)5.00 (pound)30.54 CSOP
08/12/00 13,230 (pound)33.02 (pound)33.02 AESOP (free)
08/12/00 85,000 (pound)1.28-(pound)3.00 (pound)34.63 CSOP
19/12/00 40,700 (pound)5.00 (pound)32.00 CSOP
19/12/00 2,435 (pound)2.98 (pound)32.00 Old Option Schemes
28/12/00 5,000 (pound)5.00 (pound)35.25 CSOP
12/01/01 5,000 (pound)5.00 (pound)28.75 CSOP
26/01/01 48,000 (pound)5.00 (pound)30.30 CSOP
19/02/01 4,000 (pound)5.00 (pound)33.45 CSOP
21/02/01 73,058 (pound)5.00 (pound)32.00 CSOP
21/02/01 45,758 (pound)1.28-(pound)3.00 (pound)32.00 Old Option Schemes
02/03/01 7,200 (pound)5.00 (pound)30.50 CSOP
30/03/01 2,500 (pound)5.00 (pound)19.25 CSOP
30/03/01 1,071 (pound)3.00 (pound)19.75 Old Option Schemes
24/05/01 10,000 (pound)5.00 (pound)25.30 CSOP
24/05/01 7,500 (pound)3.00 (pound)25.30 Old Option Schemes
22/06/01 4,000 (pound)1.28 (pound)20.80 CSOP
29/06/01 27,500 (pound)5.00 (pound)20.70 CSOP
06/07/01 2,500 (pound)5.00 (pound)21.25 CSOP
20/07/01 7,500 (pound)5.00 (pound)18.40 CSOP
27/07/01 2,500 (pound)5.00 (pound)16.90 CSOP
Number Grant price Share price on
Date of issue of shares range date of issue Scheme name
10/08/01 2,500 (pound)5.00 (pound)16.65 CSOP
23/08/01 2,200 (pound)5.00 (pound)14.79 CSOP
23/08/01 6,009 (pound)1.28 (pound)14.79 Old Option Schemes
27/09/01 2,800 (pound)5.00 (pound)13.60 CSOP
30/11/01 21,675 (pound)2.42-(pound)5.00 (pound)17.00 CSOP
30/11/01 24,536 (pound)17.07 (pound)17.07 AESOP (free)
04/12/01 12,605 (pound)2.42-(pound)5.00 (pound)17.00 CSOP
04/12/01 3,750 (pound)3.00 (pound)17.00 Old Option Schemes
07/12/01 12,302 (pound)16.92 (pound)16.92 AESOP (partnership
& matching)
20/12/01 625 (pound)2.42 (pound)17.55 CSOP
11/01/02 15,300 (pound)2.42-(pound)5.00 (pound)16.80 CSOP
18/01/02 5,000 (pound)2.42 (pound)16.75 CSOP
24/01/02 1,250 (pound)2.42 (pound)16.28 CSOP
31/01/02 400 (pound)17.82 (pound)16.00 CSOP
01/03/02 938 (pound)2.10 -(pound)2.87 (pound)13.75 CSOP
15/03/02 150,000 (pound)3.00 (pound)15.20 Old Option Schemes
15/03/02 16,166 (pound)2.42 (pound)15.20 CSOP
28/03/02 2,500 (pound)2.42 (pound)14.30 CSOP
31/05/02 10,000 (pound)3.00 (pound)11.64 Old Option Schemes
31/05/02 2,500 (pound)5.00 (pound)11.64 CSOP
14/06/02 625 (pound)1.28 (pound)10.60 Old Option Schemes
14/06/02 4,000 (pound)2.42 (pound)10.60 CSOP
28/06/02 625 (pound)2.10 (pound)10.35 CSOP
29/08/02 3,125 (pound)2.42 -(pound)5.00 (pound)7.82 CSOP
30/09/02 5,000 (pound)3.00 (pound)4.64 Old Option Schemes
22/11/02 63,281 (pound)5.13 (pound)5.42 AESOP
05/12/02 938 (pound)2.42 -(pound)2.87 (pound)4.92 CSOP
11/12/02 64,936 (pound)4.91 (pound)4.90 AESOP
12/12/02 1,875 (pound)2.42 -(pound)2.87 (pound)4.96 CSOP
(k) The following issues of shares, all of which were credited as fully paid,
were made by CAT to its non-executive directors as part of their remuneration
during the three years preceding the date of this document:
Number of
Date of Issue CAT Shares Issue price
03/12/99 12,194 (pound)2.87
01/12/00 1,142 (pound)30.54
30/11/01 2,194 (pound)17.07
22/11/02 7,307 (pound)5.13
(l) The following issues of shares, all of which were credited as fully paid,
were made by CAT to DRC under the agreement relating to the termination of the
royalty agreement made between CAT and DRC dated 30 April 2002, details of which
are summarised in paragraph 11(a)(iii) of Part X of these Listing Particulars:
Number of
Date of Issue CAT Shares Issue price
02/05/02 463,818 (pound)13.258
Save as disclosed in this paragraph 6, during the three years immediately
preceding the date of this document there was no change in the amount of the
issued share capital of CAT or of any other member of the CAT Group or in the
number and classes of which such capital was composed, other than intra group
issues by wholly-owned subsidiaries, pro rata issues by partly owned
subsidiaries and changes in the capital structure of subsidiaries which have
remained wholly-owned throughout the period.
7. CAT Group
CAT is the holding company of the CAT Group.
All of the following companies are wholly-owned and owned directly by CAT.
Name Registered Office Business Activity
United Kingdom
CAT Limited Milstein Building Research and
Granta Park development
Cambridge CB1 6GH
Cambridge Antibody Technology Milstein Building Share scheme
Group Employees' Trustees Limited Granta Park trust company
Cambridge CB1 6GH
USA
Optein, Inc. (trading as Aptein, Inc.) 2711 Centerville Road Research and
Suite 400 development
Wilmington
DE 19808
8. Principal establishments
CAT's principal establishments, and summary details of them, are as follows:
Size
Property Principal activity (square feet) Nature of title Unexpired term
Milstein Building Laboratories and offices and 66,000 Leasehold Approximately
Granta Park registered office 20 years
Cambridge CB2 6GH
The Franklin Building Laboratories and offices 20,000 Leasehold Approximately
Granta Park 14 years
Cambridgeshire
CB2 6HR
Beech House Laboratories and offices 23,000 Leasehold Approximately
The Science Park 9 years (see below)
Melbourn
Cambridgeshire
SG8 6JJ
Cambridge House Laboratories and offices 23,000 Freehold n/a
Back Lane
Melbourn
Cambridgeshire
SG8 6DD
During the 2001 financial year, CAT's pre-clinical and medical departments
occupied The Franklin Building. The lease for this building will expire in 2016
and is subject to CAT's right to terminate early in certain defined
circumstances. In November 2002, the majority of CAT's other operations moved to
the Milstein Building, a purpose-built building consisting of 66,000 sq ft of
laboratory and office space also on Granta Park in South Cambridgeshire which
has been tailored to meet CAT's specific requirements. CAT has the right to
lease additional space, if required.
The site at Beech House is subject to leases which expire in 2010. CAT has
entered into an agreement with the landlord to surrender the leases in March
2003 once CAT has vacated the premises. A buyer is currently being sought for
Cambridge House.
9. Memorandum and Articles of Association
(a) Memorandum of Association
The memorandum of association of CAT provides that its principal objects
include the carrying on of the business of a holding and investment
company. The objects of CAT are set out in full in clause 4 of the
memorandum of association.
(b) Articles of Association
(i) Voting rights
Subject to any rights or restrictions attached to any shares and to
any other provisions of the Articles, at any general meeting on a
show of hands every member who is present in person will have one
vote and on a poll every member will have one vote for every share
of which he is the holder. On a poll, votes may be cast either
personally or by proxy and a member may appoint more than one proxy
to attend on the same occasion. There are no special restrictions
attaching to the CAT Shares.
In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, will be accepted to
the exclusion of the votes of the other joint holders and seniority
will be determined by the order in which the names of the holders
appear in the register of members of the Company.
Unless the Board otherwise determines, no member, or person to whom
any of that member's shareholding is transferred other than by a
transfer approved under the Articles, may vote at any general
meeting or at any separate meeting of holders of any class of shares
in the Company either in person or by proxy: (A) in respect of any
share in the Company held by him unless all monies presently payable
by him in respect of that share have been paid; or (B) in respect of
any share comprised in the relevant share capital (as defined in
section 198(2) of the Companies Act) held by him, if he or any other
person appearing to be interested in the share has been given a
notice under section 212 of the Companies Act and has failed to give
the Company the information required by the notice within the
applicable period and the Company has then given the holder of that
share a further notice ("restriction notice") to the effect that
from the service of the restriction notice the share will be subject
to some or all of the relevant restrictions.
(ii) Dividends and other distributions
Subject to the provisions of the Companies Act, the Company may by
ordinary resolution declare dividends in accordance with the
respective rights of the members but not exceeding the amount
recommended by the Board. If it appears to the Board that such
payments are justified by the financial position of the Company, the
Board may pay: (A) interim dividends; or (B) at intervals settled by
it, any dividend payable at a fixed date.
Except insofar as the rights attaching to any share otherwise
provide, all dividends will be apportioned and paid proportionately
to the amounts paid up on the shares during any portion or portions
of the period in which the dividend is paid.
Dividends may be satisfied wholly or partly by the distribution of
assets and may be declared or paid in any currency. The Board may,
if authorised by an ordinary resolution of the Company, offer the
holders of CAT Shares the right to elect to receive new CAT Shares
credited as fully paid, instead of cash for all or part of the
dividend specified by that ordinary resolution.
The Company may stop sending any cheque or warrant through the post
for any dividend or other monies payable in respect of a share if in
respect of at least two consecutive dividends the cheques or
warrants have been returned undelivered or remain uncashed. The
Company must resume sending cheques or warrants if the shareholder
or person entitled by transmission claims the arrears.
Any dividend unclaimed for 12 years from the date when it became due
for payment will be forfeited and revert to the Company.
In a winding up, a liquidator may, with the sanction of a special
resolution of the Company and any other sanction required by the
Companies Act, divide among the members the whole or any part of the
assets of the Company (whether the assets are of the same kind or
not).
Unless the Board determines otherwise, no member holding shares
representing 0.25 per cent, or more in nominal value of the issued
shares of any class of share capital of the Company will be entitled
to receive payment of any dividend or other distribution if he or
any person appearing to be interested in such shares has been given
a notice under section 212 of the Companies Act and has failed to
give the Company the information required by the notice within the
applicable period and the Company has then given the holder of those
shares a restriction notice to the effect that from the service of
the restriction notice those shares will be subject to such
restrictions.
(iii) Capitalisation of profits
If the Board so recommends, the Company may pass an ordinary
resolution to capitalise all or any part of any undivided profits of
the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or all or any
part of any sum standing to the credit of any reserve or fund
(whether or not available for distribution). The Board may
appropriate the capitalised sum to those members who would have been
entitled to it if it were distributed by way of dividend and in the
same proportions and apply such sum on their behalf either in or
towards paying up the amounts, if any, for the time being unpaid on
any shares held by them respectively, or in paying up in full
unissued shares or debentures of the Company or a nominal amount
equal to that sum and allot the shares or debentures credited as
fully paid to those members, or as they may direct, in those
proportions, or partly one way and partly in the other; but for the
purposes of the Articles the share premium account, the capital
redemption reserve, and any reserve or fund representing profits
which are not available for distribution may only be applied in
paying up in full unissued shares of the Company.
(iv) Variation of rights
Subject to every statute (including any statutory instrument, order,
regulation or subordinate legislation made under it) for the time
being in force concerning companies and affecting the Company (the
"Statutes"), all or any of the rights attached to any class of share
may (unless otherwise provided by the terms of issue of the shares
of that class) be varied with the written consent of the holders of
three-fourths in nominal value of the issued shares of that class,
or with the sanction of an extraordinary resolution passed at a
separate meeting of the holders of the shares of that class. The
provisions of the Statutes and of the Articles relating to general
meetings will mutatis mutandis apply to any such separate meeting,
except that: (A) the necessary quorum will be a person or persons
holding or representing by proxy not less than one-third in nominal
amount of the issued shares of that class or, at any adjourned
meeting of holders of shares of that class at which such a quorum is
not present, any such holder who is present in person or by proxy
whatever the number of shares held by him; (B) any holder of shares
of that class present in person or by proxy may demand a poll; and
(C) every holder of shares of that class will, on a poll, have one
vote in respect of every share of that class held by him.
(v) Transfer of shares
CREST, a paperless settlement system, was introduced in July 1996.
The Articles provide for shares to be settled through CREST and the
Company has made the CAT Shares eligible for settlement in CREST by
means of a resolution of the Board dated 26 February 1997 as
contemplated by the Regulations.
Subject to such restrictions of the Articles as may be applicable, a
member may transfer all or any of his shares, in the case of shares
held in certificated form, by an instrument of transfer in any usual
form or in any other form which the Board may approve or, in the
case of shares held in uncertificated form, in accordance with the
Regulations and the rules of the CREST system and otherwise in such
manner as the Board in its absolute discretion shall determine. An
instrument of transfer must be executed by or on behalf of the
transferor and (unless the share is fully paid) by or on behalf of
the transferee. Subject to the Statutes, the transferor will be
deemed to remain the holder of the share until the name of the of
the transferee is entered in the register of members in respect of
it.
Subject to the Statutes, the Board may refuse to register the
transfer of a share which is not fully paid without giving any
reason for so doing, provided that where such shares are admitted to
the Official List such discretion may not be exercised in such a way
as to prevent dealings in shares of that class from taking place on
an open and proper basis.
The Board may also refuse to register the transfer of a share: (A)
in the case of shares held in certificated form, if it is not
lodged, duly stamped (if necessary), at the registered office of the
Company or at such other place as the Board may appoint and
accompanied by the certificate for the shares to which it relates
(where a certificate has been issued in respect of the shares)
and/or such other evidence as the Board may reasonably require to
show the right of the transferor to make the transfer; (B) if it is
not in respect of one class of share only; (C) if it is in favour of
more than four transferees; (D) if it is in favour of a minor; (E)
in the case of shares held in certificated form, if it is in favour
of a bankrupt or person of mental ill health; and (F) in the case of
shares held in uncertificated form, in any other circumstances
permitted by the Regulations and/or the CREST system's rules.
If the Board refuses to register a transfer it will, in the case of
shares held in certificated form, within two months after the date
on which the transfer was lodged and, in the case of shares held in
uncertificated form, within two months after the date on which the
relevant operator instruction was received by or on behalf of the
Company send to the transferee a notice of refusal. The registration
of transfers may be suspended at such times and for such period (not
exceeding 30 days in any calendar year) as the Board may determine.
No fee will be charged for the registration of any transfer or other
document relating to or affecting the title to any share. Any
instrument of transfer which is registered may be retained by the
Company, but any instrument of transfer which the Board refuses to
register will be returned to the person lodging it when notice of
the refusal is given.
Unless the Board otherwise determines, no member holding shares
representing 0.25 per cent. or more in nominal value of the issued
shares of any class of relevant share capital (as defined in section
198(2) of the Companies Act) in the Company will be entitled to
transfer any such shares otherwise than pursuant to an arm's length
sale (as defined in the Articles), if he or any person appearing to
be interested in such shares has been given a notice under section
212 of the Companies Act and has failed to supply the Company with
the information required by the notice within the applicable period
and the Company has then given the holder of those shares a
restriction notice to the effect that from the service of the
restriction notice those shares will be subject to such
restrictions.
(vi) Alteration of capital
The Company may by ordinary resolution increase, consolidate, divide
and sub-divide its share capital and cancel any shares. Subject to
the Statutes, the Company may by special resolution reduce its share
capital, any capital redemption reserve and any share premium
account or other undistributable reserve in any manner.
(vii) Purchase of own shares
Subject to the Companies Act and to any rights conferred on the
holder of any class of shares, the Company may purchase all or any
of its shares of any class (including any redeemable shares).
(viii) Directors
At every annual general meeting one-third of the directors who are
subject to retirement by rotation or, if their number is not three
of a multiple of three, the number nearest to but not exceeding
one-third shall retire from office. The directors to retire on each
occasion are those who have been longest in office since their last
appointment or reappointment but, as between persons who became or
were reappointed on the same day, those to retire shall (unless they
agree among themselves otherwise) be determined by lot.
No person shall be disqualified from being appointed a director, and
no director shall be required to vacate that office, by reason only
of the fact that he has attained the age of 70. However, any
director having attained the age of 70 will be required to disclose
his age to the Company and will be required to stand for
reappointment at the next annual general meeting and at each
subsequent annual general meeting.
Unless otherwise determined by ordinary resolution of the Company,
the number of directors shall not be less than two but shall not be
subject to a maximum number. No shareholding qualification for
directors is required.
Directors may be appointed by ordinary resolution or by the Board.
Any director appointed by the Board holds office until the next
following annual general meeting and is not taken into account in
determining the directors who are to retire by rotation.
(ix) General meetings
Subject to the Statutes, annual general meetings shall be held at
such time and place as the Board may determined.
The Board may convene an extraordinary general meeting whenever it
thinks fit.
10. CAT Share Schemes
The Company operates and has operated a number of employee share schemes for
employees of CAT Group. These are summarised below:
(a) Old Option Schemes
Prior to March 1997, CAT Limited operated the Old Option Schemes. Two of
these were unapproved share option schemes and one was an Inland Revenue
approved share option scheme. Options granted under the unapproved schemes
included options to consultants and non-executive directors. These schemes
were closed prior to flotation. Options under these schemes have either
been exchanged for equivalent options over shares of the Company or the
option holders have entered into share exchange option agreements whereby
shares allotted in CAT Limited on exercise are immediately exchanged for
shares in the Company. Certain options were granted in one scheme in
parallel with options in a different scheme under arrangements whereby the
exercise of options in one scheme would cause a corresponding number of
options to lapse in the other scheme. The effect of these linked options
is to provide a choice of alternative schemes under which options can be
exercised. Where relevant in this document, pairs of linked options are
counted as a single option.
(b) Staff Share Scheme
Prior to the adoption of the AESOP (see (d) below), the Company made
grants under the Cambridge Antibody Technology Group Staff Share Scheme
(the "Staff Share Scheme"). The scheme provides for the purchase of, or
subscription for, shares in the Company by the trustee of the scheme out
of funds provided by participating CAT Group companies, and is an Inland
Revenue approved profit sharing scheme. The shares were appropriated to
participating employees in accordance with objective formulae set out in
the trust deed of the scheme. Participating employees were employees or
full-time directors of the CAT Group who had at least six months' service
in the preceding financial year.
The Finance Act 2000 introduced a provision which meant that no further
appropriations of shares could be made under the staff share scheme after
31 December 2002. No shares have been appropriated under the scheme since
December 1999, and all shares held on the terms of the scheme have now
been released to participants.
(c) Company Share Option Plan
The Company adopted the Cambridge Antibody Technology Group Company Share
Option Plan ("CSOP") on 26 February 1997. There are two parts to the CSOP.
Part A of the CSOP ("Part A") was formally approved by the UK Inland
Revenue on 18 March 1997. Part B of the CSOP ("Part B") is not approved by
the UK Inland Revenue. The summary below applies to both parts unless
expressly indicated to the contrary.
Options to acquire shares in CAT may be granted at the discretion of the
Board with the approval of the remuneration committee of the Board (the
"Remuneration Committee") to any full-time or part-time employee of the
Company or any participating company, who is not within 2 years of
retirement, including any director required to devote 25 hours or more a
week to working for the Company. Options will normally only be granted
within 42 days of the announcement of the Company's annual or interim
results. Participation in the CSOP is entirely separate and does not
affect any pension right or the terms or conditions of employment of any
eligible employee.
The CSOP is subject to an overall limit on the number of shares inCAT
which may be acquired by subscription, such that, on any date, the
aggregate number of shares in CAT in respect of which options may be
granted may not, when added to the number of shares in CAT placed under
option in the previous 10 years under Part A and Part B of the CSOP (when
aggregated with the number of shares issued or remaining issuable under
any other employee share scheme adopted by the Company or a subsidiary, or
in respect of certain options granted in exchange for the release of other
options, in the preceding ten years), exceed 10 per cent. of the issued
ordinary share capital of the Company immediately prior to that date. For
the purposes of this limit, options which have lapsed or been released,
surrendered or cancelled, or which were granted prior to 26 February 1997,
shall be disregarded.
No option may be granted to any individual if, as a result, either: (a) in
the case of options granted under Part A, the aggregate market value of
the shares which remain to be acquired pursuant to options granted to the
option holder in the previous 10 years under Part A or any other UK Inland
Revenue approved discretionary share option scheme (not being a savings
related share option scheme) of the Company or any associated company,
would exceed (pound)30,000; or (b) in the case of options granted under
Part B, the aggregate market value of shares in CAT which remain to be
acquired pursuant to options granted to the option holder in the previous
12 months under Part B or any other discretionary share option scheme (not
being a savings related share option scheme) of the Company or any
associated company of the Company, would exceed either two times the
annual salary of the option holder (excluding bonuses payable in cash and
benefits in kind) for the current or preceding tax year (whichever is the
greater) or, if the option holder did not receive an annual salary in the
current or preceding tax year, two times his annual salary for the 12
months beginning on the first day on which the option holder receives an
annual salary during the current tax year. For the purposes of both (a)
and (b), the market value of shares under an option is determined at the
date of grant of that option.
The exercise price of options granted after the flotation of the Company
shall not be less (or, in the case of options granted under Part A, not
manifestly less) than the higher of the nominal value of a share in CAT
and the market value of a share inCAT determined by reference to the
average of the middle market quotations of a share derived from the Daily
Official List on the three dealing days preceding the relevant date of
grant. The exercise price and the number of shares in CAT subject to an
option may be adjusted in the event of any issue of shares or other
securities of the Company (other than as consideration for an acquisition)
and/or any capitalisation, consolidation or sub-division or reduction of
the share capital of the Company and/or any other variation in the share
capital of the Company which, in the opinion of the auditors, justifies
such an adjustment, subject to the receipt by the Board of the written
confirmation of the auditors that such adjustment is fair and reasonable
(except in the case of a capitalisation issue) and (in the case of Part A
only) the approval of the UK Inland Revenue.
In normal circumstances, options may be exercised at any time between the
third and tenth anniversaries of their date of grant, provided that any
exercise conditions to which they are subject have been fulfilled and that
the option holder is an employee or director of the Company or any
participating company. Exercise conditions will be set by the Board acting
on the recommendation of the Remuneration Committee. Options will become
exercisable on the death of a participant or on the option holder ceasing
to be an eligible employee by reason of injury, disability, sickness or
redundancy even though the exercise condition has not been satisfied, or,
subject to the satisfaction of the exercise condition, on retirement or on
the company for which the option holder works ceasing to be a company
within the CAT Group or on the business or part business in which the
option holder works being transferred to a person who is not a member of
the CAT Group. Rights of exercise arise on a change of control or a
reconstruction of the Company and in the event of a winding up. Options
will lapse if they are not exercised within 10 years of the date of grant
or if the option holder ceases to be employed in circumstances other than
those mentioned above, unless the Directors permit otherwise.
Shares in CAT issued pursuant to the CSOP will rank pari passu in all
respects with the shares in CAT already then in issue except that they
will not rank for the rights attaching to shares inCAT by reference to a
record date falling prior to the date of allotment and, in the case of the
transfer of existing shares in CAT, the participant shall not acquire any
rights attaching to the shares in CAT by reference to a record date prior
to the date of transfer. Options granted under the CSOP are
non-transferable.
The CSOP is administered on behalf of the Board by the Remuneration
Committee, which may amend the CSOP or terms of any option granted under
the CSOP at any time. The prior approval of the shareholders of the
Company in general meeting will be required for amendments to the
advantage of participants. The prior approval of a majority of those
option holders who responded to an invitation to indicate whether or not
they approved of an alteration or addition, will be required for any
alterations or additions to their disadvantage. All amendments to Part A
require the approval of the UK Inland Revenue. As soon as reasonably
practicable after making an amendment the Board shall give notice of the
amendment to all option holders affected and in the case of Part A only,
notice shall also be given to the UK Inland Revenue.
The CSOP may be terminated at any time by a resolution of the Board or by
the Company in general meeting. Termination shall not affect outstanding
rights of participants.
Certain amendments to the CSOP are proposed, subject to the approval of
shareholders and, in respect of Part A only, approval of the Inland
Revenue, in connection with the proposed adoption of the Cambridge
Antibody Technology Group plc Executive Incentive Plan (see (e) below).
Following the amendments, the two times limit will apply to awards granted
under Parts A and B of the CSOP in any financial year of the Company
(rather than any rolling 12 month period), and the rate of annual salary
will be calculated by reference to a financial year of the Company (rather
than a fiscal year). The rules of the CSOP will also be amended to provide
that all awards of Restricted Shares under the Executive Incentive Plan
will count towards the two times limit, and that awards of Matching Shares
under that plan will be outside of this two times limit.
Further amendments are proposed in connection with the Merger, again
subject to shareholder approval, and, where appropriate, Inland Revenue
approval. Following these amendments, any options granted in consideration
for the release of options over another company which is acquired by CAT
will be deemed to have been granted on the date of grant of the original
option for the purposes of the two times salary individual limit referred
to above, and any such options granted in connection with the Merger in
respect of options over shares in OGS granted before 10 May 2001 shall be
disregarded for the purposes of the overall limits described above.
(d) All Employee Share Ownership Plan
The Company established the Cambridge Antibody Technology Group plc Inland
Revenue Approved Share Ownership Plan (the "AESOP") in 2000 which replaced
the Staff Share Scheme and which complies with the Finance Act 2000. All
employees and executive directors of the Company and participating
subsidiaries employed on 1 April in the relevant financial year are
eligible to participate. The AESOP has three elements: free shares,
partnership shares and matching shares. Free shares can be awarded to
employees up to a maximum market value of (pound)3,000 per employee per
tax year.
The shares are offered on similar terms to all eligible employees and may
include a performance related element. Partnership shares may be purchased
by employees out of their pre-tax salary up to (pound)1,500 (or 10 per
cent. of salary if lower) per year. Where employees purchase partnership
shares they can be awarded additional free shares on a matching basis
("matching shares"). The ratio for matching shares to partnership shares
is set by the directors, but cannot exceed 2 matching shares for each
partnership share. The free shares and matching shares will be forfeited
if the employee leaves the group within 12 months of the date of grant.
The number of shares inCAT issued or issuable pursuant to rights granted
in the preceding ten years under the AESOP and any other employees' share
scheme adopted by the Company shall not exceed 10 per cent. of the
Company's issued share capital at that time.
(e) Executive Incentive Plan
The Company intends to adopt the Cambridge Antibody Technology Group plc
Executive Incentive Plan (the "EIP"), subject to obtaining shareholder
approval at the annual general meeting to be held on 7 February 2003.
The operation of the EIP will be supervised by the Remuneration Committee.
The EIP will be capable of granting awards in broadly two different ways.
1. To deliver shares ("Restricted Shares") to an executive after three
years, subject to meeting a pre-specified performance target; and
2. As a co-investment scheme whereby an investment made by an executive,
on the London Stock Exchange, from personal funds ("Invested Shares"), for
example through a reinvestment of part of his annual bonus, is matched
with free shares ("Matching Shares"). These Matching Shares would be
subject to continued employment for not less than three years and the
meeting of a pre-specified performance target.
All employees of the Company and its subsidiaries (including directors who
are required to devote substantially the whole of their working time to
the business of the Group) who are not under notice nor within six months
of their contractual retirement ages will be eligible to receive
invitations to participate in the EIP at the discretion of the
Remuneration Committee.
Awards may be made within the six weeks following the announcement by the
Company of its results for any period, or the removal of any statutory or
regulatory restriction which had previously prevented an award being
granted, or at other times considered by the Remuneration Committee to be
exceptional.
No awards may be made more than ten years after the adoption of the EIP by
the Company. The Remuneration Committee will formally review the operation
of the EIP after no more than five years.
An award consists of the right to acquire shares in the Company for
payment equal to a nominal sum. In respect of rights to subscribe for
shares this sum is the nominal value of the Company's shares (10 pence per
share). Awards are not transferable.
No awards may be granted over shares in any financial year whose value is
greater than one times an employee's annual rate of salary for Restricted
Awards and 45 per cent. of salary for Matching Shares.
For those purposes, the value of a share on any day will be the average of
the Closing Prices on the three preceding dealing days.
The Remuneration Committee may decide that awards granted to an individual
should be phased throughout a financial year (for instance, by granting an
award in two instalments). In such a case, that employee's entitlement to
participate in the EIP will be calculated by reference to share values,
and salary levels, at the date the first award is made to him - those
calculations shall then apply to all subsequent awards made to the
individual in the same financial year.
Where the EIP is operated in the same financial year as the CSOP the
aggregate value of shares over which options and Restricted Awards can be
made in any one financial year to an individual is two times his annual
salary. All awards of Restricted Shares made under the plan will count
towards this two times salary limit. Awards of Matching Shares will not
count towards this limit.
An award will normally vest no earlier than the third anniversary of its
grant to the extent that the applicable performance condition has been
satisfied, the participant is still employed by the Group and, if operated
as a co-investment scheme, the Invested Shares have been retained. It will
then remain capable of exercise for a period of three years. The
conditions are not contained within the EIP rules, but will be set by the
Remuneration Committee at each grant of awards under the EIP.
An award will lapse upon cessation of employment, except where, and to the
extent that, the Remuneration Committee considers that circumstances
warrant otherwise.
In the event of a winding up of the Company, an award will vest early, pro
rata to the time that the award has been outstanding compared to the
anticipated award period of three years (or four, or five years
respectively in the case of certain elements of awards of Matching
Shares). However, in the event of a takeover or scheme of arrangement of
the Company, if replacement awards are offered over shares in the new
holding company on broadly similar terms unvested awards will lapse unless
the award holders accept the replacement awards offered, and vested awards
will also lapse unless they are exercised whilst the offer of replacement
awards is open to acceptance or the replacement awards are accepted. If
such replacement awards are not offered then any unvested original awards
will become exercisable to the extent determined by the Remuneration
Committee. All unexercised awards shall lapse no later than six months
after the change of control.
The EIP may operate over newly issued shares or market-purchased shares.
The number of new shares that may be issued under the EIP or any other
employees' share scheme or certain options granted in exchange for the
release of other options will be restricted to 10 per cent. of the issued
ordinary share capital over any ten year period.
Shares allotted or transferred under the EIP will rank pari passu with all
other ordinary shares of the Company for the time being in issue (except
for rights arising by reference to a record date prior to their allotment
or transfer).
In the event of any increase or variation of share capital or on a
demerger, payment of a capital dividend or similar event involving the
Company, adjustments considered by the auditors to be appropriate may be
made to the total number of shares subject to awards.
The EIP may at any time, on the recommendation of the Remuneration
Committee, be amended or added to by the directors in any respect,
provided that the prior approval of the Company in general meeting has
been obtained for alterations or additions to the rules of the EIP to the
advantage of participants in respect of the rules governing eligibility,
individual limits on participation, the terms on which awards may be
exercised, overall EIP limits and the adjustment of awards as described
above. Minor amendments to those rules to benefit the administration of
the EIP, to take account of a change in legislation or to obtain or
maintain favourable tax, exchange control or regulatory treatment for
participants or group companies would not require approval in general
meeting. This does not inhibit the ability of the Remuneration Committee
to adjust performance targets to take account of supervening events so
that they will meet their original purpose.
The right is also reserved up to the annual general meeting to make such
amendments to the EIP as are considered appropriate provided they do not
conflict in any material respect with this summary of the rules of the
EIP.
Amendments to the EIP are proposed in connection with the Merger, subject
to shareholder approval. The effect of these amendments is similar to
those described above for the CSOP in connection with the Merger.
11. Material Contracts
(a) CAT
Neither CAT nor any other members of the CAT Group has entered into any
contract otherwise than in the ordinary course of business (a) within the
two years immediately preceding the date of this document which is or may
be material or (b) which contains any provision under which any member of
the CAT Group has any obligation or entitlement which is or may be
material to the CAT Group as at the date of this document, other than:
(i) A support agreement dated 16 January 2002 (the "Support Agreement"),
under which CAT agreed to make an offer (the "DRC Offer") for DRC through
its wholly owned Canadian subsidiary CAT Canada, which has since been
wound up.
The DRC Offer was made in accordance with the terms of the Support
Agreement on 1 February 2002 with an initial expiry date of 12 March 2002.
However, a competing proposal was received by DRC prior to the expiry of
the DRC Offer which the board of directors of DRC considered to be
superior to the DRC Offer. Accordingly DRC terminated the Support
Agreement with CAT in accordance with its terms and entered into a new
support agreement with the competing bidder. CAT extended the expiry time
of the DRC Offer to 26 April 2002 notwithstanding that it no longer had
the support of DRC. The DRC Offer expired on 26 April 2002 with the
minimum tender condition not having been met.
(ii) Concurrent with entering into the Support Agreement, CAT entered into
a lock-up agreement (the "Lock-Up Agreement") with MDS Capital Corp.,
Canadian Medical Discoveries Fund Inc. and The Health Care and
Biotechnology Venture Fund (together, the "Locked-Up Shareholders") dated
16 January 2002 pursuant to which the Locked-Up Shareholders agreed to
accept CAT's offer for their DRC shares and tender to the DRC Offer.
Upon the termination of the Support Agreement by DRC, the Locked-Up
Shareholders terminated the Lock-Up Agreement in accordance with its terms
and entered into a new lock-up agreement with the competing bidder.
(iii) In connection with entering into the Support Agreement, CAT, CAT
Limited and DRC entered into an amending deed dated 16 January 2002
pursuant to which the royalty agreement between CAT Limited and DRC dated
31 March 1994 (the "Royalty Agreement") was amended to permit CAT to
terminate the Royalty Agreement in certain circumstances in the event of a
change of control of DRC upon written notice. As a result of the
successful bid for DRC by the competing bidder, a change of control
occurred and CAT terminated the Royalty Agreement with DRC on 30 April
2002. In accordance with the terms of the amending deed, CAT made a C$14
million (14 million Canadian dollars) termination payment to DRC through
the allotment of 463,818 CAT Shares. Under the terminated Royalty
Agreement with DRC, DRC was entitled to a percentage of the cash
receivable by CAT in respect of revenues from contracts and products and,
in the case of contracts or commercial transactions concerning products
where a corporate partner subscribes for share capital or instruments
convertible into share capital ("equity"), the value of that equity. DRC's
rights, as described above, would have continued until 13 November 2009,
with the percentage of cash receivable to which DRC is entitled reducing
over time. Until 30 September 2004, DRC would have been entitled to 3.5
per cent., declining to 2.5 per cent. until 13 November 2009.
(iv) A sponsorship agreement between CAT and Merrill Lynch dated 1
February 2002, under which the Company agreed to appoint Merrill Lynch as
sponsor to the Company in connection with the DRC Offer, which provided
for the payment by CAT of all expenses incurred by Merrill Lynch in
connection with the admission to the Official List of the CAT Shares which
would have been issued under the DRC Offer had that offer been successful.
(v) An agreement dated 1 February 2002, between CAT and Merrill Lynch
Canada, Inc. (the "Dealer Manager") under which the Dealer Manager was
retained as financial adviser and to act as dealer manager in connection
with the DRC Offer. The Dealer Manager undertook to form a soliciting
dealer group comprised of members of the Investment Dealers Association of
Canada and members of the stock exchanges in Canada to solicit acceptances
of the DRC Offer.
(vi) The Merger Agreement which sets out provisions relating to the
implementation of the Merger and imposes an obligation on both parties to
use their reasonable endeavours to achieve the satisfaction of the
conditions set out in paragraph 1 of Part V of these Listing Particulars
and to meet the timetable for implementation of the Scheme which has been
agreed between the parties. The Merger Agreement provides that CAT shall
only be entitled to invoke a condition to the Merger if the Panel has
determined that it is entitled to do so. The parties have agreed that OGS
shall only be entitled to invoke a condition to the Merger in
circumstances where it would be able to invoke the condition if it were an
offeror for CAT in an offer governed by the City Code.
(vii) An inducement fee agreement dated 22 January 2003 between CAT and
OGS. Pursuant to the agreement each party has agreed to pay the sum of
(pound)1,096,292 to the other party in the event that: (a) its
shareholders fail to pass any shareholder resolution required to implement
the Merger; or (b) its board of directors fails to recommend or withdraws
or modifies it recommendation of the Merger or fails to take any steps
which are necessary to implement the Merger (including failing to put any
shareholders resolutions to the vote or adjourning or permitting the
adjournment of any meetings at which such resolutions are to be put). The
inducement fee referred to above will not be payable in circumstances
where the relevant party is entitled to invoke a condition to the Merger
in accordance with the Merger Agreement.
(viii) A non-solicitation agreement dated 22 January 2003 between CAT and
OGS. Pursuant to this agreement OGS has given certain undertakings
relating to the non-solicitation of any third party alternative offer, or
other merger transaction and restrictions and discussions or negotiation
with, and the provision of information to, any third party in connection
with any such alternative offer or other merger transaction.
(ix) A sponsorship agreement between CAT and Merrill Lynch dated 3
February 2003, pursuant to which CAT agreed to appoint Merrill Lynch as
sponsor to the Company in connection with the application for listing of
the New CAT Shares and the issue of these Listing Particulars. The
sponsorship agreement provides for the payment by CAT of all expenses
incurred by Merrill Lynch in connection with the admission to the Official
List of the New CAT Shares and contains: (i) certain warranties by CAT as
to the accuracy of the information contained in these Listing Particulars;
(ii) an indemnity from CAT to Merrill Lynch; and (iii) certain
undertakings from CAT relating, inter alia, to consultation with, and the
provision of information to, Merrill Lynch in its capacity as sponsor. The
sponsorship agreement also sets out certain circumstances in which it will
or may be terminated.
(b) Neither OGS nor any other member of the OGS Group has entered into any
contract otherwise than in the ordinary course of business (a) within the two
years immediately preceding the date of this document which is or may be
material or (b) which contains any provision under which any member of the OGS
Group has any obligation or entitlement which is or may be material to the OGS
Group as at the date of this document, other than:
(i) A joint venture agreement dated 15 June 2001 between Marconi (a wholly
owned subsidiary of Marconi PLC), OGS (UK) and Confirmant (as
supplemented, the "Joint Venture Agreement"). Pursuant to the Joint
Venture Agreement, Marconi and OGS (UK) established a 50:50 joint venture
(Confirmant) primarily for the marketing of genomics and proteomics
databases to companies in the pharmaceutical and biotechnology sectors for
use in their research. Confirmant was also intended to provide
communication and information technology services to OGS and other
companies in the biotechnology sector but this activity ceased following a
restructuring effected by Marconi.
Marconi and OGS (UK) each subscribed for 15,000,000 shares in
Confirmant (at a subscription price of (pound)1 each) on execution of the Joint
Venture Agreement.
The Joint Venture Agreement contains certain representations and
warranties given by OGS (UK) to Marconi in respect of the databases licensed by
OGS (UK) to Confirmant pursuant to the Database and Software Licence Agreement
(see sub-paragraph (ii) below). The claims period for the majority of such
warranties will expire on 15 June 2004 and OGS (UK)'s maximum potential
liability in respect of all such claims is (as at the date of this document)
(pound)15,000,000. OGS(UK) has also indemnified Confirmant in respect of certain
categories of possible third party claims.
The Joint Venture Agreement contains, amongst other things,
provisions relating to the management of Confirmant, restrictions on the
transfer of shares in Confirmant and restrictions on the business activities of
the Marconi and OGS groups which are customary for agreements of its type.
OGS has guaranteed the obligations of OGS (UK) under the Joint
Venture Agreement, the Database and Software Licence Agreement and the Database
Services Agreement (see sub-paragraphs (ii) and (iii) below).
(ii) A database and software licence agreement dated 15 June 2001 between
OGS (UK) and Confirmant (the "Database and Software Licence Agreement") pursuant
to which OGS (UK) granted licences of its exon map (commonly referred to as the
"protein atlas of the human genome"), cerebro-spinal fluid and serum databases
(together with any additions or improvements thereto) and the associated
software to Confirmant. The database licences are exclusive in the field of
Confirmant's business (see sub-paragraph (i) above) while the software licence
is non-exclusive. The aggregate consideration paid by Confirmant for the
licences was (pound)6,500,000.
(iii) A database services agreement dated 15 June 2001 between OGS (UK)
and Confirmant (the "Database Services Agreement") pursuant to which OGS (UK)
undertook to Confirmant to complete the population of the three databases
licensed under the Database and Software Licence Agreement (see sub-paragraph
(ii) above). OGS (UK) received (pound)3,000,000 from Confirmant on execution of
the Database Services Agreement and is otherwise remunerated by reference to
costs incurred and progress made in populating the three databases. The maximum
aggregate sum which may become payable to OGS (UK) pursuant to the Database
Services Agreement (including the initial (pound)3,000,000) is
(pound)22,500,000.
(iv) A subscription agreement dated 15 June 2001 between OGS and Marconi
pursuant to which Marconi subscribed for 645,162 ordinary shares in OGS. The
subscription price paid by Marconi was (pound)10,000,011.
(v) The agreements entered into between OGS and CAT prior to the Merger
and summarised above at paragraphs 11(a)(vi) to (viii).
12. Litigation
(a) Save as disclosed in these Listing Particulars, neither CAT nor any other
member of the CAT Group is or has been engaged in any legal or arbitration
proceedings which may have or have had during the twelve months prior to the
date of this document a significant effect on the CAT Group's financial position
and, so far as CAT is aware, no such legal arbitration or claim is pending or
threatened by or against any member of the CAT Group:
(i) CAT brought a patent infringement action against MorphoSys relating to
the European Winter II and McCafferty patents in Munich. MorphoSys brought
various actions against CAT in the US seeking a declaration that MorphoSys was
not infringing the US Griffiths patent. This litigation has now been settled
under a settlement agreement dated 23 December 2002 between CAT Limited and
MorphoSys under which the parties agreed to settle all patent disputes between
them. This agreement covers all past, present and future use and
commercialisation of all versions of the MorphoSys HuCAL(R) libraries, including
the most recent development, HuCAL(R)GOLD. This agreement included settlement of
litigation in the United States regarding CAT Limited's Griffiths, McCafferty,
Winter II and Winter/Lerner/Huse patents, as well as oppositions launched by
MorphoSys at the European Patent Office against CAT Limited's Winter II and
McCafferty patents.
CAT Limited will receive an annual payment of A1.0 million over the
five years following the date of this agreement, together with other
financial consideration from the activities of MorphoSys relating to the
HuCAL GOLD libraries for a defined period of time. CAT Limited also will
receive milestones payments, royalty payments and will receive an equity
stake of 588,160 ordinary shares in MorphoSys in consideration for which
MorphoSys will receive a licence to CAT Limited's patent estate in respect
of the HuCAL libraries. MorphoSys has the option to buy out its
obligations (other than certain royalty obligations) to CAT Limited for a
pre-defined fixed sum at any time during the term of the agreement.
MorphoSys is free to develop and commercialise its HuCAL
technologies, and CAT Limited undertakes not to sue MorphoSys in relation
to present HuCAL GOLD libraries and all future derivatives of those
libraries.
(ii) In 2000, Crucell issued writs against the MRC, Scripps and Stratagene
in a Dutch national court, seeking a declaration that the Winter II patent was
invalid or that Crucell did not infringe the claims of this patent. A separate
writ against MRC sought a similar declaration in respect of the McCafferty
patent. Pursuant to its agreements with the defendants, CAT Limited was
responsible for the defence of these proceedings.
The litigation was settled under a settlement agreement dated 19
December 2002 between CAT Limited and Crucell under which Crucell received from
CAT Limited a worldwide non-exclusive licence to certain of CAT Limited's
antibody phage display technology patents, both pending and granted. As a result
of this agreement, all litigation which had been ongoing between CAT Limited and
Crucell was withdrawn. CAT Limited was granted an option to develop certain
antibodies covered by the agreement.
Under this settlement agreement CAT Limited received an initial
licence fee from Crucell and Crucell and its partners are permitted to develop
and commercialise human antibody products against certain targets using CAT
Limited's phage display technology patents. Use of this technology should allow
Crucell to exploit its proprietary MAbstract(TM) technology or other phage
display technology.
CAT Limited will receive milestone payments and royalties for any
antibody products that Crucell or its partners develop which are derived from
Crucell MAbstract technology or other technology covered by phage display
technology patents controlled by CAT.
(iii) Following certain share issues by CAT Limited, Continental Venture
Capital Limited ("CVC") issued proceedings in the State of New York claiming
that it is entitled to anti-dilution shares (equivalent to 25,790 ordinary
shares of 10 pence each). If CVC succeeds then the CAT Directors would be
obliged to issue anti-dilution shares to all similarly situated participants
(approximately 763,000 ordinary shares of 10 pence each). Both parties issued
cross motions for summary judgment which were denied in May 2000. There has been
no change in the status of proceedings and the CAT Directors continue to
believe, on the basis of legal advice they have received, that the proceedings
have no merit.
(b) Neither OGS nor any other member of the OGS Group is or has been engaged in
any legal or arbitration proceedings which may have or have had during the
twelve months prior to the date of this document a significant effect on the
Group's financial position and, so far as OGS is aware, no such legal,
arbitration or claim is pending or threatened by or against any member of the
OGS Group.
13. Taxation
(a) United Kingdom Taxation
The comments set out below summarise the UK taxation treatment of holders
of OGS Shares under the Scheme and of holders of New CAT Shares. They are based
on current UK law and published Inland Revenue practice currently in force. They
are intended as a general guide and apply only to shareholders resident or (if
individuals) ordinarily resident for tax purposes in the UK who hold OGS Shares
and New CAT Shares as investments (otherwise than under any scheme which
benefits from special tax exemptions, such as personal equity plans or
individual savings accounts) and not as trading stock and who are the beneficial
owners of those shares. Shareholders who are in any doubt about their taxation
position, or who are resident in a jurisdiction outside the UK, should consult
their own professional advisers.
(i) Dividends
Under current UK taxation legislation, no tax will be deducted from
dividends paid by CAT.
A New CAT Shareholder who is an individual resident (for tax
purposes) in the UK and who receives a dividend paid by CAT will be entitled to
a tax credit equal to 1/9th of the dividend. The individual will be taxable on
the total of the dividend and the related tax credit (the "gross dividend"),
which will be regarded as the top slice of the individual's income. The tax
credit will, however, be treated as discharging the individual's liability to
income tax in respect of the gross dividend, unless and except to the extent
that the gross dividend falls above their threshold for the higher rate of
income tax, in which case the individual will, to that extent, pay tax on the
gross dividend of an amount determined by applying the Schedule F upper rate
(currently 32.5%) to the dividend and the tax credit, and then deducting the tax
credit. So, for example, a dividend of (pound)80 will carry a tax credit of
(pound)8.89 (1/9th of (pound)80) and to the extent that the dividend and the
related tax credit fall above the threshold for the higher rate of income tax, a
taxpayer would be subject to income tax on (pound)88.89 ((pound)80 +
(pound)8.89) at the 32.5% i.e. (pound)28.89 less a tax credit of (pound)8.89,
leaving a tax charge of (pound)20.
With limited exceptions, New CAT Shareholders whose liability to
income tax for the relevant year of assessment is less than the amount of the
tax credits in respect of dividends paid by CAT will not be entitled to claim
payment of the tax credit.
A New CAT Shareholder that is a company resident (for tax purposes)
in the UK will not normally be liable to corporation tax on any dividend it
receives from CAT.
(ii) Taxation of chargeable gain ("CGT")
Subject to the following paragraphs, roll-over relief should be
available to OGS Shareholders in respect of the cancellation of their existing
OGS Shares and the issue to them of New CAT Shares. Accordingly, such OGS
Shareholders should not be treated as having made a disposal of their OGS Shares
for CGT purposes, and the New CAT Shares issued should be treated as the same
asset and as having been acquired at the same time as the OGS Shares. The New
CAT Shares should therefore have the same base cost as the OGS Shares which they
replace.
To the extent that OGS Shareholders receive cash in respect of
fractional entitlements to New CAT Shares and do not receive New CAT Shares,
this will generally be treated as a disposal of OGS Shares for CGT purposes
which may, depending on the shareholders' individual circumstances; give rise to
a liability to CGT. OGS Shareholders who receive cash and also receive New CAT
Shares should not generally be treated as making a disposal or part disposal of
OGS Shares in respect of the receipt of cash. Instead, the cash received should
be deducted from the base cost otherwise attributable to the CAT Shares for CGT
purposes.
OGS Shareholders who, alone or together with persons connected with
them, hold more than 5 per cent. of any class of the OGS Shares will be eligible
for the above treatment only if the Scheme is effected for bona fide commercial
reasons and does not form part of a scheme or arrangement of which the main
purpose, or one of the main purposes, is an avoidance of liability to CGT or
corporation tax. OGS Shareholders are advised that clearance has been applied
for in respect of the Scheme under Section 138 of the Taxation of Chargeable
Gains Act 1992. On the basis that such clearance is obtained, any such
Shareholder should be treated in the manner described above.
OGS and CAT have applied for confirmation from the Inland Revenue
under Section 707 of the Income and Corporation Taxes Act 1988 that Section 703
of the Act, which allows for the cancellation of tax advantages arising from
certain transactions and securities and which would affect the statements made
above if it were to apply to the Scheme, will not be applicable to the Scheme.
A disposal of New CAT Shares by a shareholder resident or ordinarily
resident for tax purposes in the UK or a shareholder who carries on a trade,
profession or vocation in the UK through a branch or agency and who has used,
held or acquired the New CAT Shares for the purposes of such trade, profession
or vocation or such branch or agency may, depending on the shareholder's
circumstances, and subject to any available exemption or relief, give rise to a
chargeable gain or an allowable loss for CGT purposes.
A shareholder who is an individual and who has, on or after 17 March
1998, ceased to be resident or ordinarily resident for tax purposes
in the United Kingdom for a period of less than five tax years of
assessment and who disposes of New CAT Shares during that period may
also be liable on his return to CGT (subject to any available
exemption or relief).
(iii) UKStamp Duty and SDRT
No UK stamp duty or SDRT should be payable by OGS Shareholders in
relation to the allotment and issue to them of New CAT Shares pursuant to the
Scheme. Special rules may apply to shares held in or issued into depositary
receipt or clearance service arrangements, although no stamp duty or SDRT should
generally be payable by holders of OGS ADSs on the cancellation of those ADSs
and the issue of New CAT ADSs under the Scheme.
A subsequent transfer for value of New CAT Shares will generally be
subject to UK stamp duty or to SDRT. Stamp duty and SDRT are
normally the liability of the purchaser.
Stamp duty at the rate of 0.5 per cent. of the amount or value of
the actual consideration given (rounded up to the nearest multiple
of (pound)5) is generally payable on an instrument transferring New
CAT Shares. A charge to SDRT will also normally arise on an
unconditional agreement to transfer New CAT Shares (equal to 0.5 per
cent. of the amount or value of the consideration payable for the
transfer). However, if within six years of the date on which the
agreement is made (or, if that agreement is conditional, the date on
which the condition is satisfied), an instrument of transfer is
executed pursuant to the agreement and is duly stamped, any SDRT
already paid will be refunded (generally, but not necessarily, with
interest) provided that a claim for repayment is made within the six
year period, and any outstanding liability to SDRT will be
cancelled.
Paperless transfers of New CAT Shares within CREST are generally
liable to SDRT, rather than stamp duty, at the rate of 0.5 per cent.
of the amount or value of the consideration payable. CREST is
obliged to collect SDRT on relevant transactions settled with CREST.
Deposits of New CAT Shares within CREST will not be subject to stamp
duty and, unless the transfer into CREST is itself for
consideration, will not be subject to SDRT.
The above statements are intended as a general guide to the current
position.
(b) United States Taxation
(i) United States income tax considerations to US shareholders
The following is a general discussion of the material US federal
income tax consequences of the Scheme to OGS Shareholders and OGS ADS
holders. The discussion is based upon the current provisions of the US
Internal Revenue Code of 1986, as amended (the "IRS Code"), applicable
Treasury Regulations, court decisions and administrative rulings and
practice, all as in effect on the date hereof and all of which are subject
to change, which change could be retroactive and could affect the tax
consequences to OGS Shareholders or OGS ADS holders. This discussion is
also based on the current double taxation treaty between the US and United
Kingdom (the "Treaty"). The US and the United Kingdom have recently signed
a new treaty (the "New Treaty") that, if ratified, would replace the
Treaty. OGS Shareholders and OGS ADS Holders are urged to consult with
their own tax advisers regarding the potential impact of the New Treaty on
the tax consequences described below. There can be no assurance that the
IRS will not take a contrary view to that described below, and no ruling
from the IRS has been or will be sought regarding the tax consequences of
the Scheme.
The discussion addresses only the US federal income tax consequences
to OGS Shareholders and OGS ADS holders who are for US federal income tax
purposes citizens or residents of the United States, corporations
organised under the laws of the United States or any state thereof,
estates subject to US federal income tax on their net income, regardless
of source or trusts if both (A) a US court is able to exercise primary
supervision over the administration of the trust and (B) one or more US
persons have the authority to control all substantial decisions of the
trust ("US Holders"). The discussion does not purport to discuss the US
federal income tax consequences applicable to all categories of USHolders,
and is limited to USHolders who hold OGS Shares or OGS ADSs as capital
assets. The discussion may not fully describe the US federal income tax
considerations relevant to certain categories of USHolders, such as
USHolders that own OGSShares and/or OGS ADSs representing at least 10 per
cent. of the total combined voting power of OGS, insurance companies,
broker-dealers, individual retirement accounts, dealers in securities and
USHolders who acquired their OGS Shares or OGS ADSs upon the exercise of
employee stock options or otherwise as compensation. The discussion is not
intended to constitute advice to any particular US Holder. Accordingly,
USHolders are urged to consult their own tax advisors as to the specific
US federal income tax consequences of the Scheme as well as any additional
US state, local or non-US tax consequences of the Scheme.
The discussion below also is based on the assumptions that: (i)
there is no current plan or intention by CAT, any person related to CAT
(as defined in US Treasury Regulations Section 1.368-1(e)(3)) (a "Related
Person") or any partnership in which CAT or any Related Person is a
partner to acquire or redeem any of the New CAT Shares issued in the
Scheme, either directly or through any transaction, agreement, or
arrangement with any other person; (ii) prior to the Scheme, neither CAT,
any Related Person nor any partnership in which CAT or any Related Person
is a partner will have acquired, directly or through any transaction,
agreement or arrangement with any other person, OGS Shares with
consideration other than CAT Shares; (iii) there will be a continuation of
the historic business of OGS by CAT; (iv) CAT will issue New Cat Shares
and New CAT ADSs in consideration for the cancellation of OGS Shares and
OGS ADSs; (v) CAT will continue to use a significant portion of OGS'
assets in its business; (vi) CAT, OGS and the OGS Shareholders will pay
their respective expenses, if any, incurred in connection with the Scheme;
(vii) after the Scheme, with the exception of the OGS Shares held by CAT,
OGS will not have outstanding any of its shares or more than a de minimis
amount of warrants, options, convertible securities or other types of
rights that, if exercised or converted, would result in the holder thereof
holding shares of OGS or CAT; (viii) the payment of cash in lieu of
fractional shares is solely for purposes of avoiding the expense and
inconvenience to CAT of issuing fractional shares and does not represent
separately bargained-for consideration; (ix) CAT is not aware of any plan
to combine CAT with another corporation, to sell or otherwise dispose of
the stock of CAT or to sell or otherwise dispose of any of the assets of
OGS acquired in the Scheme, except for dispositions made in the ordinary
course of business or transfers to a wholly-owned subsidiary; and (x) OGS
was a passive foreign investment company ("PFIC") for the year ending 31
December 2002.
(ii) Taxation of dividends
This discussion of the taxation of dividends is subject to the
discussion on "PFIC Status" at (v) below.
Under the Treaty, certain US Holders are generally entitled to a tax
credit payment in respect of dividends equal to one-ninth (1/9) of
the dividend paid (the "Tax Credit Amount"). This tax credit payment
is reduced by a UK withholding (the "UK Withholding") of up to 15
per cent. of the gross dividend paid. Therefore, such US Holders
will not actually receive any payment of this credit.
If the New Treaty enters into force, US Holders will no longer be
able to claim the Tax Credit Amount because the New Treaty does not
provide for that entitlement.
The gross amount of a distribution paid on a New CAT Share
(including a New CAT ADS), including any Tax Credit Amount
associated with such distribution if the USHolder elects to claim a
foreign tax credit with respect to the UKWithholding, will be a
dividend for US federal income tax purposes to the extent paid out
of current or accumulated earnings and profits. To the extent that a
distribution exceeds CAT's current or accumulated earnings and
profits, it will be treated as a nontaxable return of capital and
thereafter as a capital gain. Dividends paid by CAT and any claimed
Tax Credit Amount generally will be treated, for US foreign tax
credit limitation purposes, as foreign source passive income (or, in
the case of certain USHolders, foreign source financial services
income) and will not be eligible for the dividends received
deduction allowed to corporate shareholders under the IRS Code.
Under the Treaty, a US Holder who elects to include the Tax Credit
Amount in income may, subject to complex limitations, credit the UK
Withholding against the holder's US federal income tax liability.
Under the New Treaty, no foreign tax credit will be available.
The amount of any distribution paid in pounds sterling will equal
the fair market value in US dollars of the pounds sterling received
on the date received by a holder of New CAT Shares, or by the CAT
ADSDepositary, in the case of New CAT ADSs, based on the spot
exchange rate on such date. A holder of New CAT Shares will have a
basis in any pounds sterling distributed, equal to the dollar value
of pounds sterling on the date received by that holder of New CAT
Shares, or by the CAT ADSDepositary, in the case of New CAT ADSs.
Any gain or loss recognised upon a subsequent disposition of pounds
sterling will be US source ordinary income or loss.
(iii) Taxation of capital gains
Subject to the discussion on "PFIC Status" at (v) below, upon the
sale or exchange of a New CAT Share or a New CAT ADS, a US Holder
generally will recognise capital gain or loss for US federal income
tax purposes in an amount equal to the difference between the amount
realized and the adjusted tax basis in the New CAT Share or the New
CAT ADS. Such gain or loss will be capital gain or loss and will
generally be treated as US source gain or loss. If a US Holder is an
individual, such capital gain will generally be subject to US
federal income tax at preferential rates if specified minimum
holding periods are met.
The surrender of a New CAT ADS to the CAT ADS Depositary in exchange
for a New CAT Share will not be a taxable event for US federal
income tax purposes.
(iv) US information reporting and backup withholding
Dividend payments with respect to New CAT Shares and proceeds from
the sale, exchange or redemption of New CAT Shares may be subject to
information reporting to the IRS and possible US backup withholding
at the rate specified in the IRS Code. Backup withholding will not
apply to a US Holder, however, if it furnishes a correct taxpayer
identification number and makes any other required certification or
if it is otherwise exempt from backup withholding.
Amounts withheld as backup withholding may be credited against a US
Holder's US federal income tax liability, and it may obtain a refund
of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS and furnishing
any required information.
(v) PFIC Status
In general, US Holders will be treated as owning stock in a PFIC if,
for any taxable year in which the New CAT Shares or New CAT ADSs are
held:
o at least 75 per cent. of CAT's gross income for the taxable year
is passive income, or
o at least 50 per cent. of the value, determined on the basis of a
quarterly average, of CAT's assets is attributable to assets that
produce or are held for the production of passive income.
Passive income generally includes dividends, interest, royalties,
rents (other than certain rents and royalties derived in the active
conduct of a trade or business), annuities and gains from assets
that produce passive income. If a foreign corporation owns at least
25 per cent. by value of the stock of another corporation, the
foreign corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other
corporation, and as receiving directly its proportionate share of
the other corporation's income.
For the 2002 taxable year, CAT believes that it was not a PFIC.
However, based on the current value of CAT's and OGS' passive assets
and the current market capitalisation of CAT and OGS, there is a
significant risk that CAT and OGS will be PFICs for the 2003 taxable
year. If CAT is treated as a PFIC, and a US Holder does not make a
mark-to-market election (as described below), the US Holder will be
subject to special rules with respect to any gain realised on the
sale or other disposition of New CAT Shares or New CAT ADSs.
Under these rules:
o the gain will be allocated ratably over the US Holder's holding
period for the New CAT Shares or New CAT ADSs,
o the amount allocated to the taxable year in which the gain is
realised and to any taxable year before CAT became a PFIC will be
taxed as ordinary income,
o the amount allocated to each other year, with certain exceptions,
will be taxed at the highest tax rate in effect for that year, and
o the interest charge generally applicable to underpayments of tax
will be imposed in respect of the tax attributable to each such
other year to which such gain is allocated.
CAT does not intend to pay dividends for the foreseeable future. If,
however, CAT should make an "excess distribution" to shareholders
(generally, any distributions to shareholders during a single
taxable year that are greater than 125 per cent. of the average
annual distributions received by shareholders in respect of the New
CAT Shares or New CAT ADSs during the three preceding taxable years
or, if shorter, the holding period for the New CAT Shares or New CAT
ADSs) and CAT is treated as a PFIC, the excess distribution would be
treated the same way as gain would be treated, as described in the
preceding paragraph.
The New CAT Shares are expected to be traded publicly. If CAT is a
PFIC and the New CATShares are traded publicly, a US Holder may make
a mark-to-market election. If this election is made, the PFIC rules
described above will not apply. Instead, in general, a US Holder
will include as ordinary income for each taxable year the excess, if
any, of the fair market value of its New CAT Shares or New CAT ADSs
at the end of the taxable year over its adjusted basis in the New
CAT Shares or New CAT ADSs. A US Holder will also be allowed to take
an ordinary loss in respect of the excess, if any, of the US
adjusted basis of its New CAT Shares or New CAT ADSs over their fair
market value at the end of the taxable year (but only to the extent
of the net amount of previously included income as a result of the
mark-to-market election). The basis in the New CAT Shares or New CAT
ADSs will be adjusted to reflect any such income or loss amounts.
Any US Holder that owns New CAT Shares or New CAT ADSs during any
year that CAT is a PFIC must file IRS Form 8621.
If CAT is a PFIC for a taxable year, a US Holder would, under a
proposed regulation (which has a retroactive proposed effective
date), also be treated as owning its pro rata share of the equity of
any PFIC owned by CAT (e.g., OGS if OGS is also a PFIC for the
taxable year) or owned by a subsidiary of CAT which is also a PFIC.
Similar rules to those described above, except that no
mark-to-market election would be available, would apply to a US
Holder with respect to, among other circumstances, any excess
distributions received by CAT with respect to the stock of a PFIC
subsidiary and any gain CAT realises with respect to a disposition
of the stock of a PFIC subsidiary. Under these circumstances, the
excess distribution or gain realised by CAT would be currently
taxable to a US Holder even though the US Holder may not actually
receive any cash with respect to such distribution or gain.
(vi) The Scheme
Based on the foregoing assumptions, the cancellation of OGS Shares
or OGSADSs and the issue of New CAT Shares or New CAT ADSs pursuant
to the Scheme should qualify as a tax-free reorganisation for US
federal income tax purposes. Although a tax-free reorganisation
normally results in the tax consequences to US Holders described
below, special PFIC rules may apply in the case of a US Holder who
held OGS Shares or OGS ADSs during 2002 or any other taxable year in
which OGS was a PFIC (including the current taxable year, if OGS is
a PFIC for 2003). If the normal tax-free reorganisation rules apply:
(a) A US Holder should recognise no gain or loss.
(b) The aggregate basis of the New CAT Shares or New CAT ADSs
received by a USHolder in the Scheme (including fractional shares
deemed to be received in the Scheme) should be the aggregate basis
of the OGS Shares or OGS ADSs surrendered therefor.
(c) The holding period of the New CAT Shares or New CAT ADSs
received by a USHolder should include the holding period of the OGS
Shares or OGS ADSs surrendered therefor.
In the absence of any effective regulations, the application of the
special PFIC rules with respect to the Scheme is unclear because by
their terms the special PFIC rules only apply to the extent that
there are regulations in effect to implement the rules. Presently,
regulations have been proposed which, if made effective, would
implement the rules retroactively. Very generally, under those
proposed regulations, if OGS was a PFIC for any taxable year during
which a US Holder held OGS Shares or OGS ADSs and CAT is not a PFIC
for the 2003 taxable year, a US Holder would recognise gain (but not
loss) in connection with the Scheme equal to the difference between
the fair market value of the New CAT Shares or New CAT ADSs received
and the tax basis in the OGS Shares or OGS ADSs surrendered
therefor. Such gain generally would be taxable in a manner
comparable to that discussed under "PFIC Status" at (v) above. In
addition, the US Holder would have a new holding period for its New
CAT Shares or New CAT ADSs and such asset would have a tax basis
equal to its fair market value on the date of the Scheme. However,
if, as the case may be, CAT is also a PFIC for the 2003 taxable
year, the proposed regulations would provide for the tax
consequences described in the preceding paragraph (i.e.,
non-recognition of gain and loss). Because these PFIC-related
consequences are only described in proposed regulations, it is
unclear whether they would apply to the Scheme.
US Holders are urged to consult their own tax advisors regarding any
PFIC considerations with respect to the Scheme.
In addition, if any of the assumptions noted at (i) above proves to
be incorrect or if there is any change in the law, the Scheme may
not qualify as a tax-free reorganisation. Furthermore, the IRS may
disagree with the characterisation of the transaction as a tax-free
reorganisation. In such events, US Holders would recognise gain or
loss on the exchange equal to the difference between the fair market
value of the New CAT Shares or New CAT ADSs received in the exchange
and the tax basis of the OGS Shares or OGS ADSs surrendered
therefor. Any gain would generally be taxable in a manner comparable
to that discussed under "PFIC Status" at (v) above. Any loss would
be long term capital loss if the holding period in the OGS Shares or
OGS ADSs is more than one year on the date of the Scheme. In
addition, the US Holder would have a new holding period for its New
CAT Shares or New CAT ADSs and such asset would have a tax basis
equal to its fair market value on the date of the Scheme.
(vii) Requirement of notice filing
Any US Holder that receives New CAT Shares or New CATADSs pursuant
to the Scheme will be required to file a notice with such US
Holder's US federal income tax return for such holder's taxable year
in which the Scheme occurs. The notice must contain certain
information specifically enumerated in US Treasury Regulation
Section 1.368-3, and US Holders are advised to consult their tax
advisors for assistance in preparing such notice.
(viii) Fractional shares
A US Holder who receives a payment of cash in lieu of a fraction of
an OGS Share or OGSADS will be treated as if a fractional New CAT
Share or New CAT ADS was issued to such OGS Shareholder and sold for
cash and will generally be taxed in a manner comparable to that
discussed under "PFIC Status" at (v) above.
OGS SHAREHOLDERS AND OGS ADS HOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISERS AS TO THE SPECIFIC US FEDERAL INCOME TAX CONSEQUENCES
OF THE SCHEME AS WELL AS ANY ADDITIONAL US FEDERAL, STATE, LOCAL OR
NON-US TAX CONSEQUENCES OF THE SCHEME ON THEIR PARTICULAR
CIRCUMSTANCES.
14. Working Capital
CAT is of the opinion that the CAT Group, as enlarged by the acquisition
of OGS, has sufficient working capital for its present requirements, that is,
for the following twelve months from the date of publication of this document.
15. Significant Changes
(a) CAT
There has been no significant change in the financial or trading position
of the CAT Group which has occurred since 30 September 2002, being the end of
the latest financial period for which audited financial statements were
published.
(b) OGS
Save for the reduction in net cash in the ordinary course of business of
the OGS Group from approximately (pound)153.4 million as at 30 June 2002 to
approximately (pound)136.4 million as at 31 December 2002, there has been no
significant change in the financial or trading position of the OGS Group which
has occurred since 30 June 2002, being the end of the latest financial period
for which interim financial statements were published.
16. Miscellaneous
(a) The expenses relating to the Merger (which include stamp duty and stamp duty
reserve tax, UKLA listing fees, Panel fees, printing and other expenses) which
are payable by CAT, are estimated to amount to approximately (pound)5.3 million
(excluding Value Added Tax). This amount represents the maximum amount of
expenses of the Merger, assuming that the Merger is completed, to be borne by
CAT.
(b) The registrar of CAT is Computershare Investor Services PLC, PO Box 82, The
Pavilions, Bridgwater Road, Bristol, BS99 7NH and the register of members is
held at Computershare Investor Services PLC as above.
(c) The consolidated accounts of CAT for the financial years ended 30 September
2000 and 30 September 2001 respectively were audited by Arthur Andersen of
Betjeman House, 104 Hills Road, Cambridge CB2 1LH, Chartered Accountants and
Auditors and those for the financial year ended 30 September 2002 were audited
by Deloitte & Touche of Leda House, Station Road, Cambridge CB1 2RN, Chartered
Accountants and Auditors and all received unqualified audited reports within the
meaning of Section 271 of the Companies Act and contained no statement under
sub-section 237(2) and sub-section 237(3) of the Companies Act. Statutory
accounts for the years ended 30 September 2000, 2001 and 2002 have been
delivered to the Registrar of Companies.
(d) Merrill Lynch, which is a member of and regulated by the Financial Services
Authority, has given and has not withdrawn its written consent to the issue of
this document with the inclusion herein of the references to its name in the
form and context in which it appears.
(e) Goldman Sachs, which is a member of and regulated by the Financial Services
Authority, has given and has not withdrawn its written consent to the issue of
this document with the inclusion herein of the references to its name in the
form and context in which it appears.
(f) Deloitte & Touche has given and has not withdrawn its written consent to the
inclusion of their reports on the accounting policies reconciliation in Part
III(B) of this document and on the pro forma financial information in Part IV of
this document, and to the references thereto, and their name and in the form and
context in which they appear and have authorised the contents of their reports
for the purposes of Regulation 6(1)(e) of The Financial Services and Markets Act
2000 (Official Listing of Securities) Regulations 2001.
(g) The average number of employees (including executive directors) of the CAT
Group over the last three financial years was as follows:
2000 2001 2002
Total 161 224 274
17. Bases and sources of information
(a) General
Unless otherwise stated, financial information on CAT and OGS and their
respective Groups has been extracted without material adjustment from the
published audited annual report and accounts and, where appropriate, interim
statements of the relevant Group for the relevant period.
(b) Net cash of CAT and OGS
The amount of net cash and liquid resources of CAT and the OGS Group as at 31
December 2002 of (pound)123.7 million and (pound)136.4 million respectively has
been taken from internal management information of CAT and OGS respectively.
(c) Share capital of CAT
References to the issued share capital of CAT are to its issued share capital as
at 22 January 2003 of 36,352,686 shares.
(d) Share capital of OGS
References to the issued share capital of OGS are to its issued share capital as
at 22 January 2003 of 55,729,534 shares.
References to the issued and to be issued share capital of OGS are to 56,082,073
OGS Shares as at 22 January 2003 at a price of 195.5 pence per OGS Share, and
where based on the volume weighted average trading price, to 56,151,126 OGS
Shares at a price of 210.6 pence.
(e) Volume weighted average trading prices
The volume weighted average trading prices of CAT Shares and OGS Shares in the
last ten Business Days prior to announcement of the Merger have been sourced
from Bloomberg.
18. Documents Available for Inspection
Copies of the following documents will be available for inspection during usual
business hours on any weekday (Saturdays, Sundays and public holidays excepted)
at the offices of Mayer, Brown, Rowe & Maw LLP, 11 Pilgrim Street, London EC4V
6RW up to and including the Effective Date:
(a) the Memoranda and Articles of Association of CAT and OGS;
(b) the audited consolidated accounts of CAT for the three financial years ended
30 September 2000, 2001 and 2002;
(c) the audited consolidated accounts of OGS for the three financial years ended
31 December 1999, 2000 and 2001;
(d) the unaudited interim results of OGS for the six months ended 30 June 2002;
(e) the report on the accounting policies reconciliation contained in Part
III(B) of this document;
(f) the report on the pro forma financial information contained in Part IV of
this document;
(g) the service contracts referred to in paragraph 4 above;
(h) the material contracts referred to in paragraph 11 above;
(i) the written consents referred to in paragraph 16 above;
(j) the irrevocable undertakings from OGS Directors to vote in favour of the
Scheme;
(k) the commitments from CAT Directors to vote in relation to their CAT Shares
in favour of the resolutions proposed to be passed at the CAT EGM;
(l) the rules of the CAT Share Schemes;
(m) the rules of the Cambridge Antibody Technology Group Company Share
OptionPlan and the Cambridge Antibody Technology Group plc Executive Incentive
Plan amended as will be proposed at the CAT EGM;
(n) the CAT ADS Depositary Agreement;
(o) these Listing Particulars;
(p) the Scheme Document; and
(q) the CAT Shareholder Circular.
6 February 2003
DEFINITIONS
"1989 Scheme" the Oxford GlycoSystems Limited 1989
Share Option Scheme.
"1994 Scheme" the Oxford GlycoSystems Group Plc 1994
Share Option Scheme.
"AACR" American Academy for Cancer Research.
"Abbott Laboratories"
or "Abbott" Abbott GmbH & Co. KG.
"Actelion" Actelion Pharmaceuticals Ltd.
"Admission" the admission of the New CAT Shares to
the Official List becoming effective in
accordance with the Listing Rules and
the admission of such shares to the
London Stock Exchange's market for
listed securities becoming effective.
"ADR" an American depositary receipt.
"ADS" an American depositary share.
"Amgen" Amgen Inc.
"Aptein" Optein, Inc. (trading as Aptein, Inc.),
a subsidiary of CAT.
"Australia" the commonwealth of Australia, its
states, territories and possessions and
all areas subject to its jurisdiction or
any political sub-division thereof.
"Bayer" Bayer AG.
"Biolnvent" Biolnvent International AB.
"Board" the board of directors of CAT or OGS, as
the context requires.
"Business Day" a day (not being a Saturday or Sunday)
when banks generally are open in the
City of London for the transaction of
general banking business, other than for
settlement of the Euro.
"Canada" Canada, its provinces, territories and
possessions and all areas subject to its
jurisdiction or any political
subdivision thereof.
"CAT" or "Company" Cambridge Antibody Technology Group plc.
"CAT ADS Deposit Agreement" the deposit agreement, dated 7 June
2001, among CAT, the CATADS Depositary
and all holders of CAT ADSs issued
thereunder.
"CAT ADS Depositary" the depositary under the CAT ADS Deposit
Agreement, which is The Bank of New
York.
"CAT ADRs" ADRs evidencing CAT ADSs.
"CAT ADSs" ADSs of CAT, each of which represent one
Existing CAT Share.
"CAT Board" the board of directors of CAT.
"CAT Canada" 3982904 Canada Inc, previously a
subsidiary of CAT.
"CAT Directors" the directors of CAT, whose names are
set out in paragraph 3(a) of Part X of
this document and "CAT Director" means
any of them.
"CAT EGM" the extraordinary general meeting of CAT
to be held on 11 March 2003 to consider
any resolutions to approve and implement
the Merger, including any adjournment
thereof.
"CAT Group" CAT and its subsidiary undertakings.
"CAT Limited" Cambridge Antibody Technology Limited, a
subsidiary of CAT.
"CAT Registrar" Computershare Investor Services PLC, PO
Box 82, The Pavilions, Bridgwater Road,
Bristol, BS99 7NH.
"CAT Shareholder Circular" the circular to be sent to CAT
Shareholders containing a notice
convening the CAT EGM.
"CAT Shareholders" holders of Existing CAT Shares.
"CAT Shares" the Existing CAT Shares and/or as the
context requires, the New CAT Shares.
"CAT Share Option Schemes" the Old Option Schemes and the CSOP.
"CAT Share Schemes" the CAT Share Option Schemes, the
Cambridge Antibody Technology Group
Staff Share Scheme, the Cambridge
Antibody Technology Group plc Inland
Revenue Approved Share Ownership Plan
and the proposed Cambridge Antibody
Technology Group plc Executive Incentive
Plan.
"CAT Voting Record Time" in relation to the CAT EGM, 6.00 p.m. on
9 March 2003, or if the CAT EGM is
adjourned, 48 hours before the date of
the adjourned meeting.
"certificated" or
"in certificated form" where a share or other security is not
in uncertificated form.
"Chugai" Chugai Pharmaceutical Co., Ltd.
"City Code" The City Code on Takeovers and Mergers.
"Closing Price" the closing price of the relevant share
as derived from the Daily Official List.
"Companies Act" the Companies Act 1985.
"Confirmant" Confirmant Limited.
"Court" The High Court of Justice in England and
Wales.
"CREST" the computerised settlement system to
facilitate the transfer of title to
shares in uncertificated form, operated
by CRESTCo.
"CRESTCo" CRESTCo Limited.
"Crucell" Crucell Holland BV.
"CSOP" the Cambridge Antibody Technology Group
Company Share Option Plan.
"Daily Official List" the Daily Official List of the London
Stock Exchange.
"DRC" Drug Royalty Corporation, Inc.
"DuPont" E.I DuPont de Nemours & Co.
"Dyax" Dyax Corporation.
"Effective Date" the date on which the Scheme becomes
effective and the Merger completes.
"EMEA" European Agency for the Evaluation of
Medicinal Products.
"Enlarged Group" CAT and its subsidiary undertakings
following completion of the Merger.
"European Union" Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Republic of
Ireland, Italy, Luxembourg, The
Netherlands, Portugal, Spain, Sweden and
the United Kingdom, and other countries
as may from time to time be a member of
the European Union.
"Executive Scheme" the Oxford GlycoSciences Executive Share
Option Scheme.
"Existing CAT Shares" the existing unconditionally allotted or
issued and fully paid ordinary shares of
10 pence each in the capital of CAT and
any further such shares which are
unconditionally allotted or issued
(including pursuant to the exercise of
options under the CAT Share Option
Schemes) on or prior to the Effective
Date.
"FDA" the US Food and Drug Administration.
"Genzyme" Genzyme Corporation.
"Goldman Sachs" Goldman Sachs International.
"Group" the CAT Group or the OGS Group, as the
context requires.
"GSK" GlaxoSmithKline plc.
"Hearing Date" the date on which the Order is made.
"HGSI" Human Genome Sciences, Inc.
"Inland Revenue" the UK Inland Revenue.
"Japan" Japan, its cities, prefectures,
territories and possessions.
"Listing Rules" the Listing Rules of the UK Listing
Authority.
"London Stock Exchange" London Stock Exchange plc or its
successor(s).
"Marconi" Marconi Corporation PLC.
"Medarex Medarex, Inc.
"Member States" the countries that from time to time
make up the European Union.
"Merck" Merck & Co., Inc.
"Merger" the proposed merger of OGS and CAT, to
be effected by way of the Scheme.
"Merger Agreement" the merger agreement dated 22 January
2003 entered into between CAT and OGS,
details of which are set out in
paragraph 11(a)(vi) of Part X of this
document.
"Merrill Lynch" Merrill Lynch International.
"MorphoSys" MorphoSys AG.
"MRC" the Medical Research Council.
"NASDAQ" the Nasdaq Stock Market, Inc.
"NDA" New Drug Application.
"NeoGenesis" NeoGenesis Drug Discovery, Inc.
"NeoGenesis Inc" NeoGenesis Pharmaceuticals Inc.
"New CAT ADSs" the CAT ADSs proposed to be issued
pursuant to the Merger, each of which
represent one New CAT Share.
"New CAT Shares" the ordinary shares of 10 pence each in
the capital of CAT proposed to be
issued, credited as fully paid pursuant
to the Scheme and the Merger.
"New CATShareholders" holders of New CATShares.
"Official List" the Official List of the UK Listing
Authority.
"OGS" Oxford GlycoSciences Plc.
"OGS ADS Deposit Agreement" the deposit agreement, dated 14 December
2000, amongst OGS, the OGS ADS
Depositary and all holders of OGS ADSs
issued thereunder, as such agreement
will be amended as of the Effective
Date.
"OGS ADS Depositary" the depositary under the OGS ADS Deposit
Agreement, which is The Bank of New
York.
"OGS ADSs" ADSs of OGS, each of which represents
one OGS Share.
"OGS Articles" the articles of association of OGS.
"OGS Board" the board of directors of OGS.
"OGS Court Hearing" the hearing by the Court of the petition
to sanction the Scheme.
"OGS Court Meeting" the meeting of OGS Shareholders convened
by order of the Court pursuant to
section 425 of the Companies Act to
consider and, if thought fit, approve
the Scheme (including any adjournment
thereof).
"OGS Directors" the directors of OGS, whose names are
set out in paragraph 3(d) of Part X of
this document and "OGS Director" means
any one of them.
"OGS EGM" the extraordinary general meeting of OGS
to be held on 11 March 2003 (including
any adjournment thereof).
"OGS Group" OGS and its subsidiary undertakings.
"OGS GTLtd" Oxford GlycoTherapeutics Limited, a
subsidiary of OGS.
"OGS Inc" Oxford GlycoSciences Inc., a subsidiary
of OGS.
"OGS Shareholders" holders of OGS Shares.
"OGS Share Option Schemes" the Executive Scheme, the Sharesave
Scheme, the 1994 Scheme and the 1989
Scheme.
"OGS Shares" the existing unconditionally allotted or
issued and fully paid ordinary shares of
5 pence each in OGS and any further such
shares which are unconditionally
allotted or issued (including pursuant
to the exercise of options under the OGS
Share Option Schemes) on or prior to the
Effective Date.
"OGS (UK)" Oxford GlycoSciences (UK) Ltd., a
subsidiary of OGS.
"Old Option Schemes" the Cambridge Antibody Technology
Limited Share Option Scheme, the
Cambridge Antibody Technology Limited
Unapproved Share Option Scheme and the
Cambridge Antibody Technology Limited
Executive Share Option Scheme.
"Order" the order of the Court sanctioning the
Scheme under section 425 of the
Companies Act and confirming the
reduction of capital of OGS pursuant to
the Scheme under section 137 of the
Companies Act.
"Panel" the Panel on Takeovers and Mergers.
"Pfizer" Pfizer, Inc.
"Pharmacia" Pharmacia P-L Biochemicals Inc.
"Pioneer Hi-Bred" Pioneer Hi-Bred International, Inc.
"Proposed Directors" the persons listed as proposed directors
of CAT in paragraph 3(b) of Part X of
this document and "Proposed Director"
means any one of them.
"R&D" research and development.
"Regulatory Information Service" any of the services set out in schedule
12 of the Listing Rules.
"Scheme" the proposed scheme of arrangement under
section 425 of the Companies Act between
OGS and the OGS Shareholders (details of
which are set out in Part I of this
document) to give effect to the Merger,
with, or subject to, any modification,
addition or condition approved or
imposed by the Court and agreed by CAT
and OGS.
"Scheme Document" the document to be circulated to OGS
Shareholders in relation to the Scheme,
which includes an explanatory statement
in accordance with Section 425 of the
Companies Act.
"Scheme Record Time" 6.00 p.m. on the last Business Day
before the Effective Date.
"Scripps" the Scripps Research Institute.
"SDRT" UK Stamp Duty Reserve Tax.
"SEC" the US Securities and Exchange
Commission.
"Securities Act" the US Securities Act of 1933, as
amended.
"Sharesave Scheme" the Oxford GlycoSciences Sharesave
Scheme.
"Substantial Interest" a direct or indirect interest in 20 per
cent. or more of the voting equity
capital of an undertaking.
"Teva" Teva Pharmaceuticals Industries Limited.
"UK GAAP" generally accepted accounting principles
in the United Kingdom.
"uncertificated" or
"in uncertificated form" recorded on the relevant register of the
share or security concerned as being in
uncertificated form in CREST and title
to which may be transferred by means of
CREST.
"United Kingdom" or "UK" the United Kingdom of Great Britain and
Northern Ireland.
"UK Listing Authority" the Financial Services Authority acting
in its capacity as the competent
authority for the purposes of Part VI of
the Financial Services and Markets Act
2000.
"United States" or "US" the United States of America, its
territories and possessions, any state
of the United States of America and the
District of Columbia and all other areas
subject to its jurisdiction and any
political subdivision thereof.
"US GAAP" generally accepted accounting principles
in the United States.
"Voting Record Time" in relation to both the OGS Court
Meeting and the OGS EGM, 6.00 p.m. on 9
March 2003 or, if either the OGS Court
Meeting or the OGS EGM is adjourned, 48
hours before the time set for the
adjourned meeting.
"Wider CAT Group" CAT and the subsidiaries and subsidiary
undertakings of CAT and associated
undertakings, including any joint
venture, partnership, firm or company in
which any member of the CAT Group is
interested or any undertaking in which
CAT and such undertakings (aggregating
their interests) have a Substantial
Interest.
"Wider OGS Group" OGS and the subsidiaries and subsidiary
undertakings of OGS and associated
undertakings, including any joint
venture, partnership, firm or company in
which any member of the OGS Group is
interested or any undertaking in which
OGS and such undertakings (aggregating
their interests) have a Substantial
Interest.
"Wyeth" or "Wyeth Research" Wyeth Ayerst Research, a division of
Wyeth Pharmaceuticals, Inc.
"Xoma" Xoma Technology Limited and Xoma Ireland
Limited.
For the purposes of this document, subsidiary, subsidiary undertaking,
undertaking and associated undertaking have the meanings given by the Companies
Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the
Companies Act).
GLOSSARY OF SCIENTIFICTERMS
"agonistic" a positive response induced by the
binding of a target molecule to a cell
surface receptor.
"allergic conjunctivitis" inflamation of the white of the eye
caused by exposure to substances to
which an individual may be allergic.
"allergic rhinitis" inflammation of the nose caused by
allergy - also known as hayfever.
"Alzheimer's disease" a progressive, neurodegenerative disease
characterized by loss of function and
death of nerve cells in several areas of
the brain leading to loss of cognitive
function such as memory and language.
The most common cause of dementia.
"angioplasty" a surgical repair or reconstruction of a
narrowed or completely obstructed
artery. Can be performed with a balloon
within the coronary arteries.
"antibody" a protein produced by B-lymphocytes
(white blood cells) of the immune
system, which specifically recognises a
target molecule known as an antigen.
"anti-eotaxin" an antibody that targets eotaxin
molecules.
"antigen" a foreign or toxic molecule recognised
by an antibody.
"Anti-IL-18R" an antibody that recognises IL-18R.
"autoimmune disease/disorder" conditions which occur when the human
immune system reacts against a component
of the human body.
"B-lymphocyte (B-Cell)" a cell produced by the bone marrow
which, when stimulated by an antigen,
becomes either a memory cell or a plasma
cell that produces antibodies against
the antigen.
"cancer" a malignant tumour in which cells grow
unrestrained in an organ or tissue in
the body. Acancer is usually named after
the originating organ. Cancer can spread
to tissues around it and destroy them or
be transported through blood or lymph
pathways to other parts of the body.
"CDR grafted" when the CDRs of a mouse antibody are
grafted into a human antibody framework
also known as "humanisation".
"cell surface proteins" proteins which are embedded in or bound
to the plasma membrane of cells and are
exposed at the cell surface.
"chimaeric antibodies" antibodies composed of a mixture of
antibody fragments from different
species.
"complimentary determining the highly variable domain regions of an
regions (CDRs)" antibody which interact with antigens.
"Crohn's disease" a chronic inflammatory disorder of the
bowels.
"cytokine" a low molecular weight protein released
by one cell and acting upon another at
tissue level; cytokines stimulate or
inhibit the differentiation,
proliferation or function of immune
cells.
"diabetic nephropathy" a disease of the kidney caused by
diabetes.
"disease indication" the specific clinical condition for
which a drug is intended to be used.
"DNA" deoxyribonucleic acid, the genetic code
of higher organisms.
"efficacy" the measure of the effectiveness of a
drug in treating a particular condition.
"eosinophil" a cell which is part of the immune
system, which is particular adept at
attacking parasites and is also
implicated in allergic disease.
"eotaxin" a protein that attracts eosinophils into
tissues, where they degranulate and
cause tissue damage.
"eukaryote" a cell or an organism with a
membrane-bound, structurally discrete
nucleus and other well-developed
subcellular compartments.
"Fab" the portion of the immunoglobulin or
antibody molecule which contains the
binding site for antigens. The exact
sequence of amino acids in the area
varies widely from molecule to molecule
to accommodate a wide variety of
antigens which the body may encounter.
"fibrosis" a pathological process characterised by
the proliferation of fibrous connective
tissue, the main component of scar
tissue, which may occur as a result of
repeated injury of tissue.
"Gaucher disease" a rare inherited disease in which a
reduced activity of an enzyme
responsible for degrading glycolipids
(glycocerebrosidase) leads to
accumulation of undegraded material in
cells in various parts of the body. This
glycolipid storage leads to enlargement
of the liver and the spleen, to low
haemoglobin and platelet counts (anaemia
and thrombocytopenia) and bone disease.
"genes" the biological units of heredity. They
contain the blueprint for synthesising
every protein found in the body.
"genome" the total DNA content of an organism.
"genomics" analysis of composition and interaction
of genetic information.
"glaucoma" a group of eye conditions in which the
optic nerve is permanently damaged at
the point where it leaves the eye
resulting in significant loss of vision
or blindness. The major cause of the
damage is thought to be raised pressure
inside the eye.
"glycolipid" a fatty molecule with sugars attached.
"Glycolipid Storage Disorder" a disorder where the body is unable to
metabolise glycolipids effectively,
leading to a build up of storage
material in specific areas of the body,
carried by a genetic defect.
"granulocyte-macrophage a cytokine that stimulates the formation
colony stimulating factor" of granulocyte or macrophage colonies
from myeloid stem cells isolated from
bone marrow.
"high throughput" automated assays that search through
large numbers of substances to rapidly
and cost-effectively identify a
molecule's specific activity.
"HIV" an acronym for Human Immunodeficiency
Virus, the virus which causes AIDS, an
acronym for the epidemic disease
Acquired Immunodeficiency Syndrome.
"humanised" conversion of mouse or other antibodies
into a humanised form is conceived by
grafting the mouse CDRs into a human
antibody framework.
"hybridoma" an immortalised, antibody-secreting cell
line that is used to produce certain
desirable antibodies; a hybridoma is
created by fusing a lymphocyte with a
special myeloma.
"IND" Investigational New Drug as defined in
the Federal Regulations Title 21, Part
312.3.
"inflammation" the primary response reaction of living
tissue to injury or infection.
"inflammatory disorders" this covers a number of disorders,
including rheumatoid arthritis, multiple
sclerosis, and Crohn's disease, that are
characterised by or caused by
inflammation.
"interference" a proceeding in the US Patent and
Trademark Office which determines
ownership rights for a patent by
identifying the first inventor from
among one or more parties claiming
ownership rights to the invention. This
process is unique to the United States
where patent rights are awarded to a
first inventor satisfying certain
requirements as compared to most other
countries, in which patent rights are
granted to the first to file a patent
application on a given invention.
"IL-12" interleukin -12, a biological molecule
that mediates inflammation in a number
of severe autoimmune and inflammatory
disorders.
"IL-18R" an interleukin receptor that binds to
interleukin-18 and evokes intra-cellular
signalling in the target cell.
"intravenous" injection into a vein.
"in vivo" in a living organism.
"ISD" inherited storage disorders.
"macrophage" a cell of the immune system which plays
a key role in engulfing pathogens and
aiding their destruction.
"monoclonal antibody" an antibody derived from a single clone
of cells, specifically
recognising/binding a single antigen.
"multiple sclerosis" a disorder of the central nervous system
involving decreased neurological
function associated with the loss of
insulating covering of nerve cells.
"neoplastic" any new or abnormal growth, which is
uncontrolled in nature. This term is
often used to describe cancers.
"Non-Hodgkin's Lymphoma" a type of malignant tumour arising from
lymphoid tissue (found mostly in the
spleen and lymph glands).
"orphan drug" denotes a drug for a rare disease (less
than 5 per 10,000 population in Europe).
Orphan designation brings commercial
benefits for the company developing the
drug.
"pathogen" a microbe or other organism that causes
disease.
"phage" abbreviation for bacteriophage, a
filamentous virus that infects bacteria.
"phage display" CAT's proprietary technology in which
individual antibodies are displayed on
the tip of a phage.
"phagemid" a cloning vector that can replicate
either as a plasmid or as a
bacteriophage.
"pharmacology" the study of how drugs affect a living
organism or cell.
"pharmacokinetics" the study of the time course of a drug
in the body following administration.
"pharmacovigilance" surveillance of the safety of a drug.
"Phase I clinical trials" study conducted in healthy subjects to
determine the biological effects of a
drug, especially safety, tolerability
and pharmacokinetics.
"Phase I/II clinical trials" initial studies in patients with the
disease for which the product candidate
is being developed.
"Phase II clinical trials" studies in a limited number of patients
to determine the preliminary efficacy of
a drug to provide proof of principle as
well as in some cases evaluate drug
doses and to establish drug doses for
use in a Phase III clinical trial.
"Phase II/III clinical trial" trial in patients that investigates or
establishes the efficacy of a drug.
"Phase III clinical trials" trial with larger patient numbers to
confirm a drug's efficacy and safety,
prior to filing for marketing approval.
"Placebo" a pharmacologically inactive treatment
used as a yardstick for comparing two
drugs under evaluation in clinical
trials.
"prokaryote" a cell or an organism lacking a
membrane-bound, structurally discrete
nucleus and other subcellular
compartments i.e. bacteria,
cyanobacteria, mitochondria or plastids.
"protein" large molecules made of smaller
biological units known as amino acids.
Proteins are responsible for the
functioning and much of the structure of
all living beings.
"proteomics" analysis of functions and interactions
of proteins of an organism.
"pulmonary" belonging to, connected with or
affecting the lungs.
"receptor" typically a protein located on or inside
a cell with which a different molecule
may interact to produce or inhibit a
biological response.
"rheumatoid arthritis" a condition associated with chronic
inflammation and destruction of the
joints.
"ribosome" a particle that synthesises proteins
inside cells.
"ribosome display" CAT's proprietary technology in which
individual antibodies are displayed on a
ribosome.
"scFv" a single-chain antibody, a fragment of
an antibody consisting of one variable
light chain and one variable heavy
chain, bound by a linker peptide
creating a single antigen binding
domain.
"scleroderma" disorders in which the skin becomes
hardened especially in the face and
hands. Often associated with similar
disease affecting internal organs.
"systemic fibrotic conditions" diseases where fibrosis affects internal
organs such as kidneys, lungs and heart.
"systemic lupus erythematosus" a chronic autoimmune connective tissue
disease affecting the skin
(characteristic butterfly rash), the
joints, the kidneys, brain and other
organs with characteristic antibodies
appearing in the circulation.
"TGF(beta)" transforming growth factor beta is a
family of biological molecules
associated with fibrosis and scarring.
"TGF(beta)1" a molecule linked to fibrosis and
scarring in the skin as well as most
internal organs and tissues.
"TGF(beta)2" a molecule associated with scarring in
and around the eye.
"TNF(alpha)" tumour necrosis factor alpha belongs to
the cytokine family of biological
molecules; it is responsible for
increasing tissue damage in inflammatory
disorders such as rheumatoid arthritis.
"target" target molecule for therapeutic
intervention; e.g. surface of diseased
cell.
"TRAIL-R1 mAb" a human monoclonal antibody, which may
act as an anti-cancer drug by mimicking
the activity of a naturally occurring
molecule in the human body (TRAIL)and
inducing cell death.
"TRAIL-R2 mAb" a human monoclonal antibody, which may
act as an anti-cancer drug by mimicking
the activity of a naturally occurring
molecule in the human body (TRAIL)and
inducing cell death.
"transgenic" organism containing an extra piece of
foreign (i.e. from a different species)
genetic information (i.e. gene
construct) which has been artificially
inserted.