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Biocompatibles International plc - Final Results.

 BIOCOMPATIBLES INTERNATIONAL PLC
 ("Biocompatibles" or the
"Company")
 UNAUDITED PRELIMINARY RESULTS
 FOR THE YEAR ENDED 31 DECEMBER 2009 


Farnham, UK, 18 March 2010: Biocompatibles International plc (LSE:BII), the medical technology company, today announces its unaudited preliminary results for the year ended 31 December 2009.

Highlights
 * Total revenue increase of 50% to [pounds]26.6m (2008:
[pounds]17.7m). Increase of 29% at
 constant currency.
 * Bead Products revenue increase of 100% to [pounds]12.0m (2008:
[pounds]6.0m). Increase of
 73% at constant currency.
 * Gross profit increase of 48% to [pounds]20.8m (2008: [pounds]14.0m).
 * Operating loss increase of 141% to [pounds]7.6m (2008:
[pounds]3.2m). Current year figure
 includes an asset impairment charge of [pounds]2.5m (2008:
[pounds]nil) and prior year
 figure includes a significant one-off item of income. Adjusting for
these
 items, the loss decreased.
 * Net funds at 31 December 2009 of [pounds]30.5m (2008:
[pounds]33.6m).
 * CE Mark Approval for Cosmetic Dermal Filler Bead (announced 18 March
2009).
 * Five pence per share dividend paid (announced 24 March 2009).
 * Eisai licences Drug-Eluting Bead products in Japan (announced 28
July
 2009).
 * Acquisition of Cancer Diagnostic Product and Related Intellectual
Property
 (announced 12 November 2009).
 * AstraZeneca and Biocompatibles agree to initiate Clinical Trial
Programme
 (announced 6 December 2009).
 * Clinical activity:
 + Clinical Trial in UK in Liver Metastases from Colorectal Cancer
 (announced 17 February 2009).
 + Drug-Eluting Bead data presented at ASCO GI (announced 17
February
 2009).
 + Update on US Drug-Eluting Bead Cancer Trials (announced 27 April
2009).
 + Positive Data from Combination Therapy Trial in Primary Liver
Cancer
 (announced 3 November 2009).


Post Period Highlights
 * First Volunteer treated in Clinical Trial for Type II Diabetes
Drug
 (announced 17 February 2010).
 * First patient treated in trial in China to support the DC Bead
Regulatory
 submission.
 * Initiation of PARAGON Germany (Drug-Eluting Bead together with
Cetuximab),
 the third trial to combine Drug-Eluting Bead therapy with a
 systemically-delivered drug marketed by a major pharmaceutical
company.
 * Encouraging start to EU launch of Novabel.
 * Financial guidance reaffirmed.


Principal 2010 Operating Goals:

Operating
 * Complete recruitment in the CM3(1) Phase I clinical trials in
Type 2 Diabetes.
 * Commence recruitment in the CM3 Phase II clinical trial.
 * File regulatory submission (PMA) for the DC Bead in Japan.
 * Complete recruitment in the clinical trial supporting the DC Bead
 regulatory submission for China.
 * Updates from our principal Drug-Eluting Bead clinical trials, which
include
 SPACE, PARAGON II and PARAGON Louisville.


Financial
 * Revenue in the range [pounds]28m to [pounds]32m.
 * Pay a dividend of 6.25 pence per share in May.
 * Closing cash of [pounds]25m after payment of the dividend of
[pounds]2.5m.
 Ends 


An analysts' presentation will be held on 18 March 2010 at 9.30am at the offices of Piper Jaffray, One South Place, London, EC2M 2RB. For those unable to attend a dial-in facility is available for analysts, for details please call Olga Holme at Piper Jaffray on +44 (0)20 3142 8769.

Contact:

Biocompatibles +44 (0)1252 732706
 Crispin Simon, Chief Executive Ian Ardill, Finance Director
 Anna Keeble +44 (0)7879 818876 


Biocompatibles International plc (www.biocompatibles.com)

Biocompatibles International plc

Biocompatibles International plc is a leading medical technology company in the field of drug-device combination products.

The Oncology Products Division supplies medical devices from facilities in Farnham, UK and Oxford, CT. These include Drug-Eluting Bead Products which are used in more than 40 countries for the treatment of primary liver cancer (HCC), liver metastases from colorectal cancer, and other cancers; and Brachytherapy products (Radiation-Delivering Seeds) which are used in the treatment of prostate cancer. Our distribution partners include AngioDynamics Inc., Terumo Corporation and Eisai Co. Ltd. We have a clinical collaboration agreement with Bayer Healthcare Pharmaceuticals Inc.

Our Licensing Division includes CellMed, in Alzenau, Germany, which is developing a Drug-Eluting Bead product for the treatment of stroke, based on proprietary stem cell technology; a GLP-1 analogue for the treatment of diabetes and obesity partnered with AstraZeneca; and a cosmetic Dermatology Bead partnered with Merz Pharmaceuticals GmbH. We also have a PC Licensing agreement with Medtronic Inc. in the field of Drug-Eluting Stents.

This news release contains forward-looking statements that reflect Biocompatibles' current expectation regarding future events. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors including the success of Biocompatibles' research strategy, the applicability of the discoveries made therein, the successful and timely completion of clinical studies and the uncertainties related to the regulatory and commercialisation processes.
 Notes to Editors:
 Operational Review 


Biocompatibles continued to make very good progress in 2009 - both in financial performance and progress with our three strategic priorities.

These are: first, delivering consistently strong overall sales growth, particularly with the flagship Drug-Eluting Bead products; second, progressing Drug-Eluting Bead clinical trials in new indications, to secure the next phase of growth; and third, delivering the GLP-1 peptide programme, partnered with Astra Zeneca. The detail of our progress with these three strategic priorities is set out below.

The financial highlights were the overall revenue growth rate of 50% (29% in constant currency) and the growth of the Bead Products' revenue of 100% (73% in constant currency).

In order to illustrate underlying performance, it is the Group's practice also to show its revenue growth in terms of constant currency growth. This represents growth calculated as if the exchange rates used to determine the revenue in Sterling had remained unchanged from those used in the previous year.

Oncology Products Division

The Oncology Products Division supplies medical devices from facilities in Farnham, UK and Oxford, CT. These include Drug-Eluting Bead Products which are used in more than 40 countries for the treatment of primary liver cancer (HCC), liver metastases from colorectal cancer, and other cancers; and Brachytherapy products (Radiation-Delivering Seeds) which are used in the treatment of prostate cancer. Our distribution partners include AngioDynamics Inc., Terumo Corporation and Eisai Co. Ltd. We have a clinical collaboration agreement with Bayer Healthcare Pharmaceuticals Inc.

Sales of Oncology Products, which consists of two business units - Bead Products and BrachySciences, grew by 66% (42% in constant currency) to [pounds]18.0m, including the pre acquisition period in 2008; and included, for the first time, full year sales of the lower growth Brachytherapy products. The Division traded at a loss, with BrachySciences' profit offset by the loss in Bead Products as we continued to implement our investment programmes.

Sales of Bead Products, Bead BlockTM, LC BeadTM, DC BeadTM and PRECISION BeadTM, grew by 100% (73% in constant currency) in comparison with 2008. This was led by growth in distributors' sales to hospitals of our flagship DC Bead and LC Bead products which delivered unit growth of 50% in Europe, 81% in the US and 40% in RoW - in comparison with the prior year.

To maintain this progress, we will need to deliver on our clinical trial programme for the Drug-Eluting Beads, which is focused on three key trials - PARAGON II and PARAGON Louisville in the field of liver metastases from colo-rectal cancer and one trial in HCC, known as SPACE, in collaboration with Bayer Pharmaceuticals Inc. PARAGON II has now treated 17 patients out of the target of 40, the target having been increased from 20 to provide a more substantial data set. Eight patients out of the pilot safety cohort of 10 patients have been treated in PARAGON Louisville. Shortly after the year end, final approval was secured for a new trial - the third trial to combine Drug-Eluting Bead therapy with a systemically-delivered drug marketed by a major pharmaceutical company. PARAGON Germany consists of the Drug-Eluting Bead loaded with Irinotecan and combined with a systemically-delivered dose of Cetuximab; and compares this regimen with a systemically-delivered dose of Irinotecan plus a systemically-delivered dose of Cetuximab. The question is therefore how delivery of irinotecan from the DC Bead compares with intra-venous delivery. Eighty patients will be treated at a number of hospitals in Germany with a primary end-point of progression-free survival. We hope that the trial will demonstrate that delivery from the DC Bead offers an improvement in survival and much better tolerability.

We are keen to develop the therapy of Drug-Eluting Beads in combination with the systemically-delivered drug regimens that are most commonly used in the treatment of cancer. This provides a higher profile for our technology to clinicians and to shareholders, and is expected to provide a clinical benefit to patients. Both Paragon Louisville and SPACE are of this type and further such trials are in development.

All these trials are expected to deliver data in the 2010-12 time-frame with the aim of expanding the use of our Bead Products and are a key element in the delivery of the next phase of growth.

Our Asian market entry strategies are also important, given the high prevalence of HCC in Asia and we are focused on China, Korea and Japan where we are working with experienced and well-qualified local partners. We have regulatory approval in Korea but full sales potential will require more local clinical experience and a good product reimbursement price in the country. We have initiated plans for the achievement of these requirements. The long regulatory programme in Japan is now well under way and the first patient has been treated in the small pilot trial required for China.

We were pleased to be notified that the first Drug-Eluting Bead cases were successfully completed in Argentina and Saudi-Arabia, thus raising the number of countries where the therapy is available to over 40.

We define our market as interventional oncology implants - with two competitors whose results are readily available. The market, thus defined, grew in 2009 by over 60% from around [pounds]35m to [pounds]57m, and our share rose to 33% in 2009 from 26% in 2008. The current market leader has a 59% global share and it is our ambition to become the market leader. All these numbers are Biocompatibles' estimates and state sales of Biocompatibles' products at the sales value as invoiced by our distribution partners.

Within the market for interventional oncology implants, we see two substantial opportunities - HCC, where we estimate that the market opportunity is up to $400m; and hepatic colorectal metastases where we believe the market opportunity is larger. The strong market growth, described above, together with the absence of any material sales to date in Asia by any competitor, suggest that there is a significant market opportunity available to us.

We are coming to the conclusion of the investment phase for the Bead Products and the high gross margin suggests that we will be able to achieve the high operating margin that we are committed to achieving for all our business units.

BrachySciences' sales grew by 24% (4% in constant currency) compared with full year 2008 including the pre acquisition period. Conditions in the Brachytherapy market remain challenging, with a number of BrachySciences' competitors reporting declines in sales and one filing for bankruptcy.

In January 2010 the results of a study on AnchorSeed by Dr. Thomas G. Shanahan of Memorial Medical Center, Springfield, Illinois, were published in the official Journal of the American Brachytherapy Society(2). The paper concluded "The report is the first to show the unique "fixity" of AnchorSeed to remain in position after deployment from the Mick applicator. Minimizing seed drag can reduce dose to the penile bulb, and maximize radiation coverage to the apex of the gland". Our internationalisation strategy sustained early successes in Germany and, over the year as a whole, sales outside the US grew to 11% of the total. Our strategy is to focus on the development of the Anchorseed opportunity both within and outside the US and to control cost in operations to permit further investment in sales and marketing.

BrachySciences traded profitably before intangible amortization and impairment charges.

In our new field of SIAscopy we made our first sales of the MoleMate product, which we acquired from Astron Clinica Limited ("Astron") (in administration). MoleMate is a non-invasive melanoma visualisation, diagnostic and data storage system that is sold to General Practitioners, Dermatologists and cancer screening clinics.

Licensing

Our Licensing Division consists of two units, CellMed and PC Licensing. CellMed, in Alzenau, Germany, is developing a GLP-1 analogue for the treatment of diabetes and obesity partnered with AstraZeneca, a cosmetic Dermatology Bead partnered with Merz Pharmaceuticals GmbH and a Drug-Eluting Bead product for the treatment of stroke, based on proprietary stem cell technology. PC Licensing's principal relationship is with Medtronic Inc. in cardiovascular medicine.

Licensing revenues - declined by 9% (21% in constant currency) to [pounds]8.5m due to the absence of the one-off PC Licensing milestone received in 2008. The Division traded profitably with losses at CellMed more than offset by the profit recorded in PC Licensing as a result of the Medtronic royalties. It is in the nature of Licensing that sales and profits are likely to remain more volatile than the results in Oncology Products. We are looking at significant value opportunities but on the basis of deals with partners whose timing is not always easy to predict.

Sales at CellMed in Germany grew by 239% (202% in constant currency) to [pounds]3.9m in comparison with 2008, the growth driven principally by revenue from the R&D agreement with AstraZeneca.

We announced in December 2009 that CellMed would be initiating clinical trials for CM3, our type II diabetes drug, under development with AstraZeneca, in January 2010. The pre-clinical phase of the programme was completed ahead of schedule with positive results. The first Phase I study is now under way and a second Phase I and Phase II studies are expected to start later in 2010.

The agreement for the development of CM3 provides AstraZeneca with an exclusive option to license relevant patents for further exploitation, at any time during the course of the development programme, which is expected to be completed in 2012. On the exercise of the option to license, AstraZeneca would pay a licence fee of [euro]25m and would assume financial and management responsibility for the programme. Further milestones of [euro]37.5m would be payable prior to first sale of product.

After launch, royalties in the single to mid-teens digit range would apply, the rate depending on the level of sales achieved. In addition there is provision for sales-related milestones up to a maximum value of [euro]256m.

In 2010, 280m people worldwide will have diabetes and it is predicted that, by 2030, more than 430m people worldwide will suffer from this disease. This is an important programme.

Our development and marketing partner Merz Pharmaceuticals GmbH received CE Mark approval for the Cosmetic Dermal Filler Bead, now called Novabel(TM), and initiated a limited market launch. We have started a capital investment programme, largely funded by Merz, to deliver significant capacity for Novabel manufacture. Merz has reported to us an encouraging start to the European launch of Novabel.

The CellBeads Stroke trial has now recruited six patients. The safety profile remains good and we are exploring Licensing opportunities for CellBeads across a variety of clinical indications.

CellMed traded at a loss due to ongoing research and development expenditure; the loss was lower than expected.

PC Licensing revenues from Medtronic's Endeavor Drug-Eluting Stent programme were lower than those in the corresponding period in 2008. Revenues in 2008 benefited from a one-off milestone received on the US launch of Endeavor whilst 2009 saw a full year of competition in the US market from stents from Abbott and Boston Scientific with related market share decline for Endeavor. Biocompatibles has limited activity in PC Licensing and incurs only minimal manufacturing costs. Profit margins are correspondingly attractive.

Financial Review

The loss for the year ended 31 December 2009 was [pounds]5.8m (2008: [pounds]0.5m).

Revenue increased by 50% to [pounds]26.6m in 2009 (2008: [pounds]17.7m); this was ahead of our expectations at the start of the year. Sales of Bead Products grew by 100% to [pounds]12.0m (2008: [pounds]6.0m). BrachySciences sales grew by 161% to [pounds]6.1m (2008: [pounds] 2.3m); if we had owned BrachySciences for all of 2008, the growth would have been 24%. PC Licensing revenue decreased by 44% to [pounds]4.6m (2008: [pounds]8.3m) due to the absence of the one-off milestone received in H1 2008. CellMed revenue grew by 239% to [pounds]3.9m (2008: [pounds]1.1m), as a result of the revenue recognised on the AstraZeneca Agreement. Movements in exchange rates impacted the growth rates significantly and the constant currency analysis is shown in the Operational Review.

Gross profit increased by 48% to [pounds]20.8m (2008: [pounds]14.0m) as a result of the growth in Drug-Eluting Bead sales, the full year impact of the acquisition of BrachySciences and the AstraZeneca Agreement, offset by the milestone payment received in 2008 which did not repeat in 2009.

Operating expenses increased by 63% to [pounds]28.6m in 2009 (2008: [pounds]17.6m). Selling and marketing costs increased by 215% to [pounds]9.4m (2008: [pounds]3.0m) driven by the full year effect of the acquisition of, additional sales and marketing expenditure by and the impairment of the intangible assets of BrachySciences. Selling and marketing expenditure behind the Bead Products also increased significantly. Research and development costs increased by 22% to [pounds]14.5m (2008: [pounds]11.9m), mainly due to CellMed's additional costs in support of the AstraZeneca Agreement and further investment into clinical activities. Administrative expenses increased by 73% to [pounds]4.7m (2008: [pounds]2.7m), driven by foreign exchange losses and again by the full year effect of the acquisition of BrachySciences.

The Group has recognised an impairment charge of [pounds]2.5m (2008: [pounds]nil) on the intangible assets arising from the BrachySciences' acquisition in 2008. Although the business has grown its sales and trading profit (operating profit before intangible amortisation and impairment), it is not achieving the financial results anticipated at acquisition. The Group has also released [pounds]3.3m (2008: [pounds]nil) of contingent consideration against the BrachySciences' goodwill of [pounds]2.8m; the balance of [pounds]0.5m being recognised in the statement of comprehensive income. This contingent consideration has been released as it is not believed that it will become payable.

Overall, the operating loss increased to [pounds]7.6m in 2009 (2008: [pounds]3.2m).

Interest receivable has decreased to [pounds]0.6m (2008: [pounds]2.0m), the previous year being characterised by higher interest rates, a higher cash balance and interest received on a significant reclaim of VAT from prior years.

The Group has recognised Research and Development tax credits of [pounds]1.0m (2008: [pounds] 0.6m), which are receivable from HM Revenue & Customs.

At the year-end the Group had 164 employees (2008: 152).

The Group generated net cash of [pounds]1.4m from operating activities (2008: [pounds]0.9m). Net cash used in investing activities was [pounds]17.5m (2008: [pounds]11.0) and included [pounds] 0.3m in relation to the acquisition of BrachySciences (2008: [pounds]2.9m) and the purchase of [pounds]15.1m of held to maturity financial assets (2008: [pounds]7.7). Purchases of property, plant and equipment were [pounds]1.6m (2008: [pounds]0.5m) as CellMed commenced its investment in its Novabel manufacturing facility; this high level of capital expenditure will continue in 2010. The Company paid a dividend of [pounds]2.0m (2008: [pounds]nil) in May and received [pounds]2.5m (2008: [pounds]nil) from borrowings from CellMed's licencee to part-fund the capital expenditure mentioned above. The Group has recognised a financial liability of [pounds]2.5m (2008: [pounds]nil) in relation to these borrowings.

Net assets at 31 December 2009 were [pounds]39.1m (2008: [pounds]48.3m) which included cash, cash equivalents and held to maturity financial assets of [pounds]33.0m (2007: [pounds]33.6m) and goodwill and intangible assets arising from the acquisitions of CellMed and BrachySciences of [pounds]10.3m (2008: [pounds]17.1m).

Guidance

The Company expects to achieve consolidated revenue for 2010 in the range of [pounds] 28m to [pounds]32m, the mid point of which represents growth of 13% over 2009 (21% at constant currencies). This growth is expected to be generated by the Oncology Products Division. In addition to unfavourable foreign exchange impacts, the Company's overall growth rate is held back by flat revenues from the lower growth components of our sales mix, namely the Medtronic ENDEAVOR Drug-Eluting Stent royalty and revenues recognised from the AstraZeneca development agreement.

The Company expects cash, cash equivalents and held to maturity financial assets to be around [pounds]25m at 31 December 2010. The outflow of [pounds]8.0m results from an expected operating utilisation of [pounds]5.5m and the proposed dividend payment of [pounds]2.5m. The operating utilisation includes capital expenditure of around [pounds]3.5m, a significant part of which is for the Novabel manufacturing facility at CellMed. The majority of this expenditure is funded by our marketing partner, Merz Pharmaceuticals GmbH, the cash having been received in 2009.

Dividend

The company paid its first dividend of 5 pence per share in May 2009. The Board intends to increase the dividend by 25% to 6.25 pence per share, to be paid in May 2010. The Board will meet in March and plans to approve the payment of the dividend based on the Biocompatibles International plc audited 2009 accounts. The Company will then publish the details of the dividend, including the record date.

Unaudited Consolidated Statement of Comprehensive Income

For the year ended 31 December
 Notes 2009 2008
 [pounds]000 [pounds]000
Revenue 2 26,562
17,685
Cost of sales (5,759)
(3,657)
Gross profit 20,803
14,028
Selling and marketing costs (9,411)
(2,992)
Research and development costs (14,531)
(11,885)
Administrative expenses (4,691)
(2,712)
Other operating income 207
400
Operating loss (7,623)
(3,161)
Finance income 611
2,032
Finance costs (186)
(60)
Finance income - net 425
1,972
Loss before income tax (7,198)
(1,189)
Tax credit 1,349
732
Loss for the year attributable to (5,849)
(457) ordinary shareholders
Currency translation differences (797)
2,459
Total comprehensive (loss)/income for (6,646)
2,002 the year attributable to ordinary shareholders
Loss per share (basic & diluted) 3 (15.2)p
(1.2)p


Unaudited Consolidated Balance Sheet
 At 31 December
 2009
2008
 [pounds]000
[pounds]000
ASSETS
Non-current assets
Property, plant and equipment 2,572
1,415
Goodwill 2,776
5,495
Intangible assets 8,030
11,793
 13,378
18,703
Current assets
Inventories 999
945
Current income tax assets 1,502
1,232
Trade and other receivables 10,454
7,886
Held to maturity financial assets 22,734
7,662
Cash and cash equivalents 10,313
25,964
 46,002
43,689
Total assets 59,380
62,392
EQUITY
Capital and reserves attributable to equity holders
Ordinary shares 8,467
8,417
Share premium 2,523
2,366
Shares to be issued 228
2,121
Merger reserve 12,243
12,089
Other reserves 49,781
49,781
Retained losses (34,142)
(26,432)
Total equity 39,100
48,342
LIABILITIES
Non-current liabilities
Borrowings 2,534
-
Deferred income tax liabilities 1,326
1,781
Provisions for other liabilities and 275
220 charges
 4,135
2,001
Current liabilities
Trade and other payables 15,848
11,725
Provisions for other liabilities and 297
324 charges
 16,145
12,049
Total liabilities 20,280
14,050
Total equity and liabilities 59,380
62,392 


Unaudited Consolidated Statement of Changes in Equity
 Ordinary Share Shares Merger Other Retained Total
 shares premium to be reserve reserves
losses equity
 issued
 [pounds]000 [pounds]000 [pounds]000
[pounds]000 [pounds]000 [pounds]000 [pounds]000
Balance at 1 January 8,053 49,781 50 20,789 47,800
(85,751) 40,722 2008
Comprehensive - - - - -
(457) (457) income:
- Loss for the year
Other comprehensive - - - - -
2,459 2,459 income:
- Currency translation differences
Total comprehensive - - - - -
2,002 2,002 income
Transactions with owners:
- New share capital 111 316 - - -
- 427 issued
- Acquisition of - - - - -
(43) (43) treasury shares
- Shares in respect 8 - 114 46 -
- 168 of acquisition of subsidiary
- Shares in respect 245 1,507 1,952 - -
- 3,704 of acquisition of trade and net assets
- Revaluation of - - 5 - -
- 5 consideration
- Refunded of share - 543 - - -
- 543 issue costs
- Capital reduction - (49,781) - (8,746) 1,981
56,546 -
- Share based schemes:
- value of employee - - - - -
814 814 services
Transactions with 364 (47,415) 2,071 (8,700) 1,981
59,319 7,620 owners
Balance at 1 January 8,417 2,366 2,121 12,089 49,781
(26,432) 48,342 2009
Comprehensive - - - - -
(5,849) (5,849) income:
- Loss for the year
Other comprehensive - - - - -
(797) (797) income:
- Currency translation differences
Total comprehensive (6,646) (6,646) loss
Transactions with owners:
- New share capital 35 157 - - -
- 192 issued
- Shares in respect 15 - 59 154 -
- 228 of acquisition of subsidiary
- Contingent - - (1,952) - -
- (1,952) consideration release
- Dividend paid - - - - -
(1,950) (1,950)
- Share based schemes:
- value of employee - - - - -
886 886 services
Transactions with 50 157 (1,893) 154 -
(1,064) (2,596) owners
Balance at 31 8,467 2,523 228 12,243 49,781
(34,142) 39,100 December 2009 


Unaudited Consolidated Statement of Cash Flows

For the year ended 31 December
 Notes 2009 2008
 [pounds]000
[pounds]000
Cash flows from operating activities
Cash generated from/(used in) operations 5 472
(1,362)
Interest received 186
1,636
Tax credit received 756
670
Taxation paid (1)
(71)
Net cash generated from operating 1,413
873 activities
Cash flows from investing activities
Acquisition of subsidiary (102)
(44)
Acquisition of trade and net assets, net (303)
(2,817) of cash received
Purchase of intangible assets (837)
(124)
Purchases of property, plant and (1,564)
(508) equipment
Purchases of held to maturity financial (15,072)
(7,662) assets
Interest received 412
162
Net cash used in investing activities (17,466)
(10,993)
Cash flow from financing activities
Proceeds from the issue of ordinary 192
384 shares
Refund of share issue costs -
543
Interest received on refund of share -
311 issue costs
Repayment of borrowings arising on -
(406) acquisition of trade and net assets
Dividend paid (1,950)
-
Proceeds from borrowings 2,454
-
Net cash generated from financing 696
832 activities
Net decrease in cash and cash (15,357)
(9,288) equivalents
Cash and cash equivalents at beginning 25,964
34,346 of year
Exchange (losses)/gains on cash and cash (294)
906 equivalents
Cash and cash equivalents at end of year 10,313
25,964 


Notes to the consolidated financial statements

1. Significant Accounting Policies

The preliminary results for the year ended 31 December 2009 have been prepared using the accounting policies set out in the financial statements for the year ended 31 December 2008.

The financial information presented is unaudited and does not constitute the Company's statutory accounts for the year ended 31 December 2009. The auditors reported on the 31 December 2008 financial statements and their report was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985.

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements.

Deposits that have an original maturity greater than three months are now classified as held to maturity financial assets, having previously been classified as short-term deposits.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009.
 * IAS 1 (Revised), 'Presentation of financial
statements'. The revised
 standard requires non-owner changes in equity to be presented in a
 performance statement separately from owner changes in equity.
Entities can
 choose whether to present one performance statement (the statement
of
 comprehensive income) or two statements (the income statement and
statement
 of comprehensive income). The Group has elected to present a single
 statement of comprehensive income. The financial statements have
been
 prepared under the revised disclosure requirements.
 * IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14,
'Segment reporting',
 and requires a 'management approach', under which segment
information is
 presented on the same basis as that used for internal reporting
purposes.
 The reported segments have been changed to reflect the management
approach
 and reporting adopted in 2009. BrachySciences is now a reported
segment
 having previously been included within Oncology Products. The old
segment
 of Drug delivery has been separated into the new PC licensing
segment with
 the Bead R&D and manufacturing activities now included within
the Bead
 Products segment.


2. Segmental Reporting

The chief operating decision-maker has been identified as the Group Executive Committee. This Committee is responsible for allocating resources, monitoring performance and instigation of any corrective actions. Management has determined the operating segments based on financial reports to the Committee.

The Committee monitors the performance of the operating segments based on adjusted operating profit (operating profit before exchange gains and losses and intangible amortisation and impairment) and contribution to R&D (adjusted operating profit before research and development costs and other operating income). Contribution to R&D is used as a measure internally to monitor the profitability of segments while the Group is making significant investments in research and development. Interest income and costs are not included as the treasury function is managed on a group-wide basis.

The segment information provided to the Group Executive Committee for the reportable segments for the year ended 2009 and 2008 is as follows:
 Oncology Products Licensing
 Bead Brachy-Sciences PC CellMed All
other Total
 Products Licensing
segments Group
 [pounds]000
[pounds]000
 [pounds]000 [pounds]000
[pounds]000 [pounds]000
Year ended 31 December 2009
Total Segment 12,736 6,064 4,649 3,850
39 27,338 Revenue
Inter-segment (776) - - -
- (776) Revenue
Revenue from 11,960 6,064 4,649 3,850
39 26,562 external customers
Contribution to R&D 5,328 493 4,304 2,036
(295) 11,866
Adjusted operating (4,720) 203 4,290 (1,324)
(295) (1,846) (loss)/profit
Depreciation 208 39 5 77
- 329
Impairment of 289 2,530 - -
- 2,819 intangible fixed assets
Year ended 31 December 2008
Total Segment 6,398 2,325 8,249 1,136
- 18,108 Revenue
Inter-segment (423) - - -
- (423) Revenue
Revenue from 5,975 2,325 8,249 1,136
- 17,685 external customers
Contribution to R&D 2,238 210 7,781 464
- 10,693
Adjusted operating (6,687) 116 7,770 (1,348)
- (149) (loss)/profit
Depreciation 166 10 - 82
- 258
Impairment of - - - -
- - intangible fixed assets
Total Assets
31 December 2009 4,212 1,530 2,124 6,091
- 13,957
31 December 2008 3,253 1,405 1,284 4,304
- 10,246
A reconciliation of adjusted operating loss to loss before income tax is
provided as follows:
 2009
2008
 [pounds]000 [pounds]000
Operating loss before amortisation, (1,846)
(149) impairment and exchange gains and losses
Unallocated overheads (2,115)
(2,901)
Exchange gains and losses (436)
682
Amortisation of intangible assets (1,235)
(793)
Release of contingent consideration 539
-
Impairment of intangible assets (2,530)
-
Operating loss (7,623)
(3,161)
Finance income 611
2,032
Finance costs (186)
(60)
Loss before income tax (7,198)
(1,189) 


Reportable segments' assets are reconciled to total assets as follows:
 2009 2008
 [pounds]000 [pounds]000
Total segment assets 13,957
10,246
Goodwill 2,776
5,495
Intangible assets 8,030
11,793
Current income tax assets 1,502
1,232
Cash, cash equivalents and 33,047
33,626 held-to-maturity financial assets
Unrealised profit on forward currency 68
- deals
Total assets 59,380
62,392
3. Loss per share 


The calculation of basic loss per ordinary share has been based on the loss of [pounds]5,849,000 (2008: [pounds]457,000) and on 38,471,738 (2008: 37,305,862) ordinary shares, being the weighted average number of ordinary shares in issue.

Potential ordinary shares are not treated as dilutive as their conversion to ordinary shares does not increase the net loss per ordinary share from continuing operations.
 4. Business combinations
 CellMed AG 


On 7 March 2005, the Group acquired 100% of the share capital of CellMed AG, a medical technology company developing medical device and drug delivery products in Germany. The remaining element of the purchase consideration for the acquisition of CellMed AG is as follows:

Contingent Consideration

The total consideration included contingent consideration, which may become payable in shares and cash, calculated on cash received from the commercialisation of certain intellectual property. The Company has valued an element of this consideration based on cash that has been received or the receipt of which is probable. It continues not to value the consideration that is uncertain because it is not able to measure the consideration reliably. The maximum contingent consideration payable is [euro]3,608,000 in cash and the issue of 2,418,823 shares. The Company has accounted for 94,880 (2008: 70,405) shares to be issued in 2010, valued at [pounds]228,000 (2008: [pounds]172,000) and [pounds]127,000 (2008: [pounds] 102,000) of cash to be paid in 2010.

BrachySciences

On 1 August 2008, the Group acquired the trade and net assets of BrachySciences Inc. and its affiliated companies. The remaining elements of the purchase consideration for the acquisition of BrachySciences included the following:

Conditional Consideration

The total consideration included conditional consideration which may become payable in cash in the event of positive outcomes on specific warranties and indemnities. The maximum conditional consideration payable is US$1.0m with US$0.5m outstanding at the end of 2009 (2008: US$1.0m).

Contingent Consideration

The total consideration included contingent consideration which may become payable in shares and cash calculated on the achievement of individual EBIT and sales targets in each of the financial years 2009-2011. Management believes that the likelihood of payment of the consideration is remote and therefore no longer carries such contingent consideration on its balance sheet. The release of the contingent consideration in 2009 first reduced goodwill by [pounds]2.8m with a resulting credit to the statement of comprehensive income of [pounds]0.5m. The maximum contingent consideration payable is $4.2m in cash and the issue of 2.5m shares.

Impairment Charge

The Group performed an impairment review of the BrachySciences goodwill and assets as at 31 December 2009. Although the business has grown its sales and trading profit (operating profit before intangible amortisation and impairment), it is not achieving the financial results anticipated at acquisition. As a result, the Group has recognised an impairment charge of [pounds] 2.5m (2008: [pounds]nil) on the intangible assets arising from the BrachySciences acquisition in 2008. The charge is partly offset by the release of [pounds]0.5m of the contingent consideration to the statement of comprehensive income.

5. Cash generated from operations
 2009 2008
 [pounds]000
[pounds]000
Continuing operations
Loss for the year after tax (5,849)
(457)
Adjustments for:
Tax (1,349)
(732)
Depreciation 329
258
Amortisation and impairment 4,054
793
Loss on disposal of machinery and equipment -
7
Share-based schemes: value of employee 886
814 services
Finance income (611)
(2,032)
Finance costs 186
60
Net exchange losses/(gains) 273
(743)
Fair value gains on foreign forward contracts 51
121
Changes in working capital:
Increase in inventories (95)
(209)
Increase in trade and other receivables (2,664)
(3,860)
Increase in trade and other payables 4,909
4,563
Increase in provisions 352
55
Cash generated from /(used in) operations 472
(1,362) 


Glossary of Terms:
 Arteriovenous A knot of distended blood vessels often
overlying and malformation compressing the surface of the brain.
 Bead Block This product has a CE Mark and 510k clearance from
the
 FDA. Bead Block is intended for the embolisation of
 hypervascularised tumors and arteriovenous
malformations.
Brachytherapy The implantation of "seeds" that deliver
radiation for
 the treatment of prostate cancer.
CE Mark A European standard for medical devices, a CE Mark
 indicates that a device meets the requirements of
the
 Medical Device Directive and appropriate Quality
System
 standards.
CellBeadsTM Stem Cells encapsulated in alginate microspheres,
 designed to deliver a therapeutic protein when
implanted
 in a patient's body. CellMed's stem cells
were derived
 from a single adult bone marrow donor and are stored
and
 processed in a GMP-certified facility.


Chemoembolisation Embolisation incorporating a chemotherapy drug.
 CIRSE The Cardiovascular and Interventional
Radiological
 Society of Europe.
CM3 An investigational drug in the GLP-1 class; unique
 because it contains the complete human amino acid
 sequence of GLP-1 in its primary structure.
Conventional Trans-Arterial Chemo-Embolisation - a procedure
whereby a
 chemotherapeutic agent is mixed into a slurry and
TACE injected via a catheter, locally at a tumour site.
Cosmetic Dermal This product is an alginate bead for use as a dermal
Filler Bead filler to address facial wrinkles.
DC BeadTM This product has a CE Mark. In Europe, DC Beads are
 intended to be loaded with doxorubicin for the
purpose
 of:
 - Embolisation of vessels supplying malignant
 hypervascularised tumour(s),
 - Delivery of a local, controlled, sustained dose of
 doxorubicin to the tumour(s).
DEBIRI Treatment involving the Drug-Eluting Bead with
 Irinotecan.
Doxorubicin A widely used chemotherapeutic agent for the
treatment of
 a large number of cancers. It is a powerful
cytotoxic
 drug that is not cell cycle specific.


Drug-Eluting Beads Polymer embolisation microspheres designed to load and
 elute drugs.
 Drug-Eluting Stent A small metal scaffold coated with a drug which is
placed (DES) in a blood vessel following angioplasty to
keep the
 vessel open.
Embolisation The introduction of material to reduce or completely
 obstruct bloodflow.
Endeavor Stent Manufactured by Medtronic, the Endeavor Drug-Eluting
 Stent is coated with phosphorylcholine (PC),
sub-licensed
 from Biocompatibles, and ZotarolimusTM, licensed
from
 Abbott.
Endovascular Endovascular Delivery accesses treatment sites via
major delivery blood vessels.
FDA The United States Food and Drug Administration,
which
 regulates drugs and medical devices.
FOLFIRI A chemotherapy regimen for the treatment of
colorectal
 cancer, made up of the drugs FOLinic Acid
(Leucovorin), F
 luorouracil (5-FU) and IRInotecan (Camptosar).
GLP-1 Glucagon-like peptide-1, a protein that helps the
 pancreas' [eth]-cells produce insulin and has
been shown to
 induce weight loss in overweight Type II diabetes
 patients. It also has shown strong anti-apoptotic
effects
 that enable it to reduce programmed cell death.
HCC Hepatocellular Carcinoma, primary tumour of the
liver.
Hepatic colo-rectal Colo-rectal cancer that has spread to the liver.
metastases
Hypervascular A growth of tissue with an abnormally increased
blood tumour supply which may be malignant or benign.
IDE Investigational Device Exemption - The approval by
the US
 Food and Drug Administration (FDA) to carry out a
 clinical trial in the US with an unapproved device.
Interventional Interventional oncology is the treatment of cancer
and Oncology cancer-related problems using minimally
invasive,
 targeted treatments performed under imaging
guidance.
Irinotecan A widely used chemotherapeutic agent for the
treatment of
 colorectal cancer. It is a topoisomerase I inhibitor
that
 interferes with DNA replication during cell
division,
 leading to cell death.
LC BeadTM This product has 510k clearance from the FDA. LC
Bead is
 intended for the embolization of hypervascularised
tumors
 and arteriovenous malformations.
mCRC Metastatic colo-rectal cancer is cancer of the colon
or
 rectum that has spread, or metastasised to other
parts of
 the body, such as the liver or lung.


Metastatic disease The spread of a cancer from its original site (primary)
 to other locations within the body (secondary). In the
 case of colorectal cancer, the liver is the most
common
 site of secondary tumours.
MoleMate(TM) A non-invasive melanoma visualisation, diagnostic
and
 data storage system.
Nexavar Nexavar is an oral multikinase inhibitor for the
(sorafenib) treatment of two common types of cancer,
hepatocellular
 carcinoma (HCC) and advanced renal cell carcinoma
(RCC)
Non-vascular Non-vascular delivery accesses treatment sites by
means delivery other than endovascular delivery. These will
include
 direct access in a surgical site and percutaneous,
or
 through the skin, injection.
PARAGON BeadTM Biocompatibles' proprietary irinotecan HCl,
Drug-Eluting
 Bead.
PMA Pre-Marketing Approval
PRECISION BeadTM Biocompatibles' proprietary Drug-Eluting Bead
product
 containing doxorubicin.
PRECISION Clinical A family of clinical trials sponsored by
Biocompatibles Trials for the evaluation of the
Drug-Eluting Bead with
 Doxorubicin.
PRECISION TACE The use of either PRECISION Bead or DC Bead in the
TACE
 procedure. PRECISION TACE results in a lower
systemic
 drug exposure and more drug at the tumour site.
Pre-loaded Bead A Drug-Eluting Bead incorporating a drug which has
been
 loaded into the Bead in Biocompatibles'
facility.
SIAscopy Assists in the diagnosis and management of skin
cancer by
 producing Siascans which use multi-spectral images
and
 clinically-based software to produce an optical
biopsy on
 skin.
SIMSYS Skin Image Management System enabling Dermatologists
to
 capture and organise images of any skin lesion.
SIAscopy
 is also part of SIMSYS for capturing dermascopic and
 Siascopic images.
Systemic Treatment with anticancer drugs that travel through
the chemotherapy bloodstream, reaching and affecting cells all
over the
 body. 


(1) CM3 is a GLP-1 drug for Type 2 diabetes which is under development with AstraZeneca (2) Published by Elsevier Inc.
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Date:Mar 18, 2010
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