Delivering a 
new dimension 
in healthcare
Epistem Holdings Plc  
Annual Report 2013
Epistem Holdings Plc Annual Report 2013 Welcome  
to Epistem
Strength
Core business driven by a solid 
performance from Preclinical Research 
Services with emerging strength in our 
Personalised Medicine Division.
Technology
Increased investment in our leading 
technologies accelerated their 
advancement over the reporting period 
with particular emphasis on our 
Genedrive
®
 platform and continued 
investment in Novel Therapies lead 
discovery programme.
Financial
A placing of shares during the  
period strengthening the Company 
cash reserves.
Investor
Clear investor communication of the 
Company’s strategy and performance 
remains key to our success. 
Highlights
•	 Total	sales	of	£5.4m	(2012:	£5.6m)	driven	by	a	firm	performance	from	
our Preclinical Research Services and Personalised Medicine Divisions.
•	 Following	high	levels	of	investment	in	our	Personalised	Medicine	technology	
(Genedrive
®
),	the	Company	reports	a	loss	of	£1.2m	(2012: £0.2m	loss	after	tax).
•	 Preparation	for	the	final	stages	of	Tuberculosis	(TB)	clinical	testing	and	Indian	
regulatory submission with launch of Genedrive
®
	expected	in	H2	2014.	Initial	
TB	clinical	papers	submitted	for	publication.
•	 Successfully	completed	first	patient	stratification	assessments	in	clinical	
trials for Genedrive
®
 pharmacogenomic applications. 
•	 Announcement	of	Euro	1.5m	‘Hepatitis	C’	collaboration	with	INSERM	and	
the Pasteur Institute. 
•	 Preclinical	Research	Services	sales	of	£2.9m	(2012:	£2.9m)	with	expanded	
offering	in	biodefence,	leukemia	imaging	and	rheumatoid	arthritis.
•	 Ongoing	investment	in	Novel	Therapies	lead	discovery	programme.	
•	 £4.2m	cash	placing	completed	in	December	2012	resulting	in	strengthened	
cash	balances	of	£6.5m	as	at	30	June	2013.	
“The 2013 year saw continued progress in Preclinical Research Services and Personalised 
Medicine, whilst we continued our development of Genedrive
®
 to gain regulatory approval  
for its launch into the clinically regulated marketplace.”
David Evans 
Chairman
About Us
Epistem is a biotechnology and personalised medicine company commercialising its expertise 
in epithelial stem cells and infectious disease.
Epistem develops innovative therapeutics, biomarkers and diagnostic products alongside 
providing preclinical research services for drug development companies.
The Group’s core expertise comprises a detailed understanding of the regulation of adult stem 
cells and novel and proprietary next generation molecular tools for use in patient stratification 
and personalised medicine. Epistem Holdings Plc  Annual Report 2013 1
Company Overview Business Review Governance Financials
Page 2
Page 6
Page 8
Page 10
Our Preclinical Research 
Services Division provides pre-
clinical efficacy testing, advanced 
immunohistochemistry services and 
cell biology expertise in the areas 
of oncology, oncology supportive 
care (mucositis), inflammatory 
bowel disease and dermatology.
Our Novel Therapies Division is 
discovering the body’s own key 
regulators of epithelial stem cells 
and tissues. Based on our highly 
sensitive molecular techniques 
and core cell biology expertise, 
we discover and develop our 
own novel drug agents.
Our Personalised Medicine: 
Pharmacogenomics Division 
provides highly sensitive molecular 
measures of biological processes 
that improve precision in drug 
development and disease treatment. 
The group provides a broad 
technology offering to discover, 
develop and translate biomarkers 
for clinical drug development.
Our Personalised Medicine: 
Diagnostics Division is changing 
the way healthcare and personalised 
medicine are delivered. Our 
innovative Genedrive
®
 platform is 
preparing for initial product sales 
in infectious disease in 2014.
Company Overview
02 Preclinical Research Services
04  P e r s ona l i s e d M e d i ci ne
06  Personalised Medicine: Pharmacogenomics
08 Personalised Medicine: Diagnostics
10 Novel Therapies
Business Review
12 Our Business and Strategy
13 Guiding Principles
14 Highlights 2013
16 Chairman’s Statement
18 Chief Executive’s Review
Governance
22 Board of Directors 
24 Directors’ Report
27 Directors’ Remuneration Report
29 Corporate Governance Report
Financials
31 Independent Auditors’ Report
32  Consolidated Statement of 
Comprehensive Income
33  Consolidated Statement of  
Changes in Equity
34  Consolidated Balance Sheet
35  Consolidated Statement of  
Cash Flows
36  Notes to the Financial Statements
54 Company Balance Sheet
55  Company Statement of  
Changes in Equity
56 Company Statement of Cash Flows
57  Notes to the Company  
Financial Statements
Our Divisions Epistem Holdings Plc  Annual Report 2013 2
Preclinical Research Services
A global approach 
to drug development
Expansion of US 
biodefence contract  
Growth in inflammatory 
bowel disease services  
New orthotopic  
and rheumatoid  
arthritis models  Epistem Holdings Plc  Annual Report 2013 3
Company Overview Business Review Governance Financials
+
The Preclinical Research Services Division provides 
preclinical efficacy testing, advanced immunohistochemistry 
services and cell biology expertise in the areas of oncology, 
oncology supportive care (mucositis), inflammatory bowel 
disease and dermatology.
During the year, Preclinical Research Services delivered a 27% operating 
margin on sales of £2.9m (2012: £2.9m). 
New model development 
The Division provides a high margin, niche, preclinical service offering across 
our core disease areas of oncology, mucositis, inflammatory bowel disease 
and dermatology. Alongside developing our cornerstone biodefence models 
for the US National Institutes of Health, the Division continues to strengthen its 
service model offering and during the year continued the development of its 
orthotopic and rheumatoid arthritis models. We look to extend our internal 
imaging capabilities, especially in leukemia, along with further investment in  
our inflammatory bowel disease models. 
Biodefence
Our collaboration with the US National Institutes of Health’s biodefence 
programme continues to expand and accounts for roughly a third of the 
Division’s revenues. We have collaborated as a partner to this programme for 
over 7 years and provide a role as ‘Subject Matter Experts’ (SME) in radiation 
exposure. Alongside a broadening client base, we are currently preparing to 
extend our service capability to set up a small laboratory facility in Baltimore to 
engage more closely with US government departments and our local US east 
coast clients. The US government remains committed to targeting treatment 
of radiation sickness following a nuclear incident/event. 
Outlook
Over the coming year, we expect to build on our new oncology (imaging) 
services, rheumatoid arthritis and inflammation models from which we expect 
to see continued ongoing growth. Forensics
DNA Amplification 
RNA Amplification (RNA AMP
®
) 
DNA Amplification
Epistem Holdings Plc  Annual Report 2013 4
Personalised Medicine
Pharmacogenomics: Identification of genomic markers of drug and 
disease effect to guide patient-specific drug treatment strategies
Diagnostics: Identification of bacterial, viral, fungal and gene mutations 
for tailored treatment, preventative action or human identification
Molecular Technology
Genedrive
®
Customers Patient applications 
(Companion Diagnostics)
Patient applications 
(Point of Care)
Applications 
(Point of Need)
Pharma and 
Biotech
Infectious Disease
Tuberculosis (TB)
Hepatitis C (HCV)
Dengue/Malaria
Patient genotypic 
characteristics
Oncogene/ 
Identification
Molecular Technology
Genedrive
®
Molecular Technology
Genedrive
®
Customers
Customers
Diagnostic 
partners
Diagnostic 
partners
Patient Stratification
Biosurveillance
Crops & agriculture
Veterinary
Food processing
Forensics
DNA Amplification
STIs Epistem Holdings Plc  Annual Report 2013 5
Company Overview Business Review Governance Financials
Guide to treatment
Guide to treatment
Guide to treatment
Patient therapeutic 
treatment
(predominantly based  
on human genomic 
markers)
Patient therapeutic 
treatment
(predominantly  
targeting disease 
pathogens)
DNA, Pathogen or 
other target identity 
for treatment, 
preventative action  
and/or human 
identification
“We believe that the launch of our first 
Genedrive
®
 product in TB coupled  
with the earlier reported India supply 
agreement provides very attractive growth 
opportunities. We are continuing to 
progress a range of partner discussions 
across multiple potential applications”
David Evans
Chairman
“We expect to see molecular diagnostics 
begin to dominate the next generation  
of diagnostic testing and to change the 
speed accuracy and workflows in near 
patient ‘Point of Care’ assessment”
Matthew H Walls
Chief Executive Officer Epistem Holdings Plc  Annual Report 2013 6
Continued development 
in patient stratification and 
personalised medicine
Personalised Medicine: Pharmacogenomics
Major pharmaceutical 
collaborations 
Ongoing development 
of oncogene mutation 
analysis 
Successful completion 
of initial clinical studies 
for patient stratification Epistem Holdings Plc  Annual Report 2013 7
Company Overview Business Review Governance Financials
+
Our pharmacogenomic offering provides highly 
sensitive molecular measures of biological 
processes that improve the precision with which 
we guide drug development and disease treatment.
Following last year’s strong growth, this year’s revenues remained steady at £2. 1m 
underpinned by our molecular studies for GlaxoSmithKline, Novartis and Sanofi 
Aventis. These studies utilise Epistem’s proprietary RNA amplification technology 
and oncology (cancer) bioinformatics to provide biomarker discovery and  
molecular analysis for drug development in oncology and fibrosis drug discovery 
programmes. The Pharmacogenomics Division (formerly Biomarkers) works with 
major pharmaceutical and biotech business groups to provide a suite of preclinical 
and clinical pharmacodynamic biomarkers to measure the effect of a drug on 
targeted tissue, identifying gene activated pathways. Our expertise in defining the 
consequences of gene target modulation in epithelial tissue continues to advance, 
with the discovery of several key oncology target signatures over the past year as 
well as continuing to be utilised in key target identification programmes for our 
business partners. 
Patient stratification
We are now developing our pharmacogenomics Genedrive
®
 applications with 
major pharmaceutical strategic partners. We are working closely with Novartis  
on the clinical expansion of our oncogene identification from whole blood and with 
GlaxoSmithKline for the rapid assessment of genotypes for ‘patient stratification’  
for therapeutic treatment. During the year we successfully completed 2 Genedrive
®
 
clinical assessments for ‘on the spot’ stratification of patients based on their 
genotypic characteristics. The identification of genotypic and/or target mutations will 
allow patients to be ‘stratified’ at the ‘Point of Care’ facilitating rapid administration of 
the correct course of ‘personalised’ therapeutic treatment. Over the coming year, 
we will continue our work developing Genedrive
®
 for use as a highly sensitive 
screening tool for identification and monitoring of the presence of mutation targets 
in blood. 
Outlook
The broadening adoption of Genedrive
®
 for use in pharmacogenomics applications 
is anticipated to lift the forecast sales of the Personalised Medicine Division over the 
coming year.  Epistem Holdings Plc  Annual Report 2013 8
A new dimension 
in healthcare
Case study:  
Hepatitis C (HCV): 
Between 150 and 180 million 
people (2.2-3.0% global 
population) live with HCV 
infection and together with 
Hepatitis B infection these 
infections cause around 1 
million deaths per annum. 
Hepatitis C is asymptomatic 
giving rise to liver cirrhosis, 
hepatocellular carcinoma  
and is the leading cause  
for liver transplantation  
and recognised as having  
a significant global healthcare 
and economic burden. 
Personalised Medicine: Diagnostics Epistem Holdings Plc  Annual Report 2013 9
Company Overview Business Review Governance Financials
1
2
3
4
Our key priority in this financial year is to gain approval for launch of Genedrive
®
 into a 
clinically regulated TB marketplace whilst continuing the broad menu of developments 
in clinical and non-clinical fields.
We expect to see molecular diagnostics featuring strongly in the next generation of 
diagnostic testing, enabling speed, accuracy and workflows in near patient ’Point  
of Care’ assessment. Over the coming year, we intend to accelerate our product 
developments through increased investment in our manpower resource and expertise, 
enhance our manufacturing and regulatory control and further develop our channel 
partner distribution strategy to take advantage of the substantial growth opportunities 
open to us. 
Tuberculosis and channel partner strategy
Over the past year, we have designed a TB assay capable of establishing a new 
standard in antibiotic resistance testing. The assay possesses several important 
technical advantages over competitor products and coupled with an industry-leading 
speed to result, ease of use and pricing, will, we believe, deliver a highly competitive 
product to market. We are beginning to build our case for World Health Organisation 
recommendation of our TB assay and over the coming months we will be publishing the 
first clinical data on our TB test and how this compares to industry leaders in addressing 
the US$1bn TB diagnostics market.
Hepatitis C (HCV)
We recently announced a Euro1.5m, three (3) year collaboration with INSERM the 
French National Institute of Health and Medical Research, starting from September 
2013, to develop a Point of Care predictive and prognostic test that will enable tangible 
improvements in the health and quality of life of chronic hepatitis C (HCV) patients. 
Technical completion of the assay is scheduled for mid way through 2014 with an 
expected launch in 2015. We will be seeking strategic partnerships with non-
governmental organisations, national health and development agencies.
Other infectious diseases
We are advancing our assay development across a range of other infectious diseases, 
with tests under development in malaria, dengue and a range of sexually-transmitted 
diseases. We expect to supply and distribute these high volume tests through our 
channel partner strategy. 
Biosurveillance
Alongside healthcare applications, we continue to see opportunities for the use of 
Genedrive
®
 for biosurveillance and forensic targets. We are working closely with the US 
government on a number of programmes to identify biothreats and infectious diseases 
in military settings. We are preparing to continue to the next phase of our US 
Government contract with the Defence Threat Reduction Agency (DTRA) for pathogen 
detection. We anticipate up to US$0.6m in development funding over the next 6 months 
and if successful, extend into broader US Department of Defence use. We expect 
further growth in the US Department of Defence areas over the coming year.
Genedrive
®
 is a novel, disruptive and highly 
sensitive molecular diagnostic tool with the 
capability of providing near patient testing at 
low cost with a rapid results across a broad 
spectrum of infectious disease areas. Epistem Holdings Plc  Annual Report 2013 10
Novel Therapies
Ongoing 
development
Ongoing investment 
in lead validation 
Advanced protein 
synthesis programme 
Extensive development  
of in vitro screening tools Epistem Holdings Plc  Annual Report 2013 11
Company Overview Business Review Governance Financials
+
The Novel Therapies Division is discovering the body’s 
own key regulators of epithelial stem cells and tissue. 
Based on our highly sensitive molecular techniques 
and core cell biology expertise, our mission is to 
discover and develop our own novel drug agents.
From our comprehensive mapping and gene expression profiling of epithelial 
tissue, Epistem scientists have begun to identify the key regulators of proliferation, 
differentiation, apoptosis and self-renewal. These novel key regulators of cells and 
tissue are responsible for restoring damaged tissue and for maintaining life-long 
tissue renewal. 
Technology development
The Novartis collaboration was completed in March 2013 and we now retain 
intellectual property rights over our collaborative leads and continue to progress 
discussions with partner groups over the development of our Novel Therapies 
lead programme. 
We have continued to define the mechanism of action of our lead candidates – 
understanding the cell biology and signalling pathways which regulate the cell/
stem cells in the areas of regenerative medicine and oncology and we are 
considering small molecule partnerships to establish a portfolio of agents 
which regulate signalling pathways and cell biology. 
We will evaluate other drug discovery and development opportunities with major 
industry players to identify new lead developments and to expand our discovery 
and early stage development platform. 
Outlook
Given the investment requirements of our Genedrive
®
 programme, we will 
maintain a controlled approach to ongoing investment in our Novel Therapies lead 
programme. The timing of a license opportunity and/or funding support remains 
difficult to judge, although we remain confident in our development programme.  Epistem Holdings Plc  Annual Report 2013 12
Pharmacogenomics
RNA Amp
®
Genedrive
®
Discovery Area of Income Field Division
Preclinical 
Research 
Services
Novel  
Therapies
Personalised  
Medicine
Pre-clinical Phase 1 Phase 3 Market
Infectious Disease
Biosurveillance
Phase 2
Partnering  
and licensing
Fee for 
service, 
partnering, 
licensing, 
product sales
Inflammatory 
bowel disease, 
dermatology, 
oncology, 
mucositis
Discovery hits/
leads  
and early stage 
development
Pre-clinical, 
clinical and
market 
programmes
Fee for service
+
+
Our business model is based on developing 
technologies and sustaining future growth. 
Epistem has an unrivalled knowledge of the 
behaviour of epithelial tissue which together with 
our proprietary amplification technologies and 
emerging first products will further strengthen 
our position in personalised medicine and 
disease diagnostics.
Matthew H Walls
Chief Executive Officer
Our Business and Strategy
Forward 
thinking
+ Epistem Holdings Plc  Annual Report 2013 13
Company Overview Business Review Governance Financials
Operational
Integrated business model
Epistem’s independent Divisions bring together a strong 
and complementary portfolio of business units rarely 
seen in a biotechnology business model. Our strategy is 
focussed on the scientific, technical and financial growth 
of each of our independent Divisions with the potential 
for significant financial gain driven by our investment in 
leading technologies targeted at delivering healthcare 
advances in areas of unmet medical need.
Partnering programme
We work closely with our collaborative partners and 
major industry groups to build on and nurture greater 
collaborative development in conjunction with our 
partners. As our business changes, we expect our 
partners to change and evolve too, but we remain 
committed to developing and enhancing our scientific 
relationships to unlock the potential of our technologies 
and further develop the growth of our Company.
Internationally respected technology and expertise
Our investments in technology and expertise are targeted 
at meeting the aspirations of the market and leading 
international companies in our industry. Our investment 
in technology remains a key mainstay underpinning the 
growth of our Divisions.
Product focus
The development of our first diagnostic product 
Genedrive
®
 within the Company portfolio brings a fresh 
dimension to the Company’s profile and business model. 
Genedrive’s
®
 application across multiple disease areas is 
providing a new growth driver in our integrated business 
model as well as complementing our more established 
technology and service offerings.
Strategic
Strategic Goals Delivery
The launch of our first product Genedrive
®
 will bring a 
new profile to our business, based on globally leading 
technology, high quality and technical reliability. The 
enhancement and recruitment of new scientists and 
operational teams with recognised expertise will be an 
on-going feature of our business in order to enable the 
Company to achieve its growth potential.
Technical reputation
The company’s leading industry presence in epithelial 
stem cells, personalised medicine and disease 
diagnostics will be developed by on-going investment 
in our core technologies of cell and molecular biology.
Financial
The Company will continue to pursue its goal of 
establishing sustainable and growing income streams 
whilst increasing the potential for substantial financial 
growth from its invested technologies.
Investor
We strive to deliver on our Company objectives and 
the realisation of our plans to provide an increasingly 
attractive investment opportunity for both our existing 
and new investors. Substantial and growing income 
streams from our pharmacogenomics and diagnostics 
offering will signal Epistem as a company with significant 
upside potential.
Guiding Principles Epistem Holdings Plc  Annual Report 2013 14
Epistem reports increased investment in its 
diagnostic platform, Genedrive
®
, and in new 
pharmacogenomic and infectious disease 
assays with product launches expected in 2014. 
Revenue generation in Preclinical Services 
and Personalised Medicine remain a key 
cornerstone in the Company’s diversified 
business model.
Strengthening investment 
for future growth
Highlights
£2.5m
2013
£2.7m
2012
£2.9m
2013
£2.9m
2012
£5.4m
2013
£5.6m
2012
Preclinical Research Services 
Revenues
Preclinical Research Services delivered 
£2.9m revenue, as in 2012. Continued 
US NIH growth.
Group Revenues
Overall steady year on year sales 
with continued improvement in 
UK performance.
Personalised Medicine & Novel 
Therapies Revenue
Personalised Medicine Revenue slightly 
reduced in 2013 following rapid growth 
in 2012. Revenue includes £0.4m 
Genedrive
®
 development income 
(2012: £0.4m).
Novel Therapies Revenue produced £nil 
revenue in 2013 (2012: £nil). Epistem Holdings Plc  Annual Report 2013 15
Company Overview Business Review Governance Financials
59% 
United States 
27 % 
United Kingdom
 1 4% 
Europe (ex UK)/ROW
Genedrive
®
  
molecular diagnostic
•  2013 figures reflect 
significant uplift in our 
investment in Genedrive
®
.
•  Revenues from Genedrive
®
 
product sales are 
anticipated to accrue 
from 2014.
£2.3m
2012
£3.1m
2013
£4.7m
2012
£6.5m
2013
£1.1m
2012
£1.4m
2013
£5.4m 
Turnover 
£ 1.2m 
Loss after Tax
Results After Tax
After tax, Development and Admin Costs 
exceeded contribution from sales by 
£1.2m (2012: £0.2m).
Discovery, Development and 
Admin Costs
Discovery and Development costs 
charged to the P&L grew strongly in 
2013 to £1.7m (2012: £1.0m). Reflecting 
our Genedrive
®
 investment. Admin costs 
steady at £1.4m (2012: £1.3m). 
Cash Reserves
Including £4.2m proceeds of placing of 
shares in December 2012, cash reserves 
strengthened to £6.5m. 
Intangible Asset Investment
Additional to Discovery & Development 
costs above, the Company invested 
£1.4m in intellectual property assets 
(2012: £1.1m).
(£1.2m)
2013
(£0.2m)
2012 Epistem Holdings Plc  Annual Report 2013 16
its first application in Tuberculosis (TB) diagnosis. We 
expect to complete the work necessary to enter into the 
Indian TB regulatory process over the coming months in 
preparation for a market launch in the second half of 2014. 
We are also in discussions with prospective distribution 
partners in relation to tests from our broader infectious 
disease and pharmacogenomic portfolio. 
Our key priority at the current time is to resolve the 
outstanding technical and manufacturing issues we have 
had with Genedrive
®
 and we are confident that these 
issues, which are small in number, are resolvable and 
that we will be in a position to have our TB assay 
independently field tested around the end of 2013.
We believe that the launch of our first Genedrive
®
 product 
in TB coupled with the earlier reported India supply 
and distribution agreement with Xcelris provides very 
attractive growth opportunities and we are continuing to 
progress a range of partner discussions across multiple 
potential applications. 
Financial Results 
Further details of the results for the period are covered in 
the Chief Executive’s review, but financially the year to 
30 June 2013 saw the Company deliver revenues of 
£5.4m (2012: £5.6m). Following high levels of investment 
made in our Personalised Medicine (Genedrive
®
) and 
Novel Therapies programmes, the Company reported 
a loss of £1.2m (2012: £0.2m loss after tax). After the 
successful completion of the £4.2m cash placing in 
December 2012, cash reserves at 30 June 2013 were 
£6.5m (2012: £4.7m). Reported cash reserves at the end 
of June 2013 included the BD upfront technology access 
fee payment of £0.6m, subsequently returned to BD on 
termination of the agreement post the year end. Unaudited 
cash reserves at 30 September 2013 were £5.4m. 
The Company continues to make progress across each 
of its 3 Divisions as outlined below: 
•  Preclinical Research Services revenues remained 
steady over the year at £2.9m (2012: £2.9m). We 
continue to develop our range of high-margin service 
offerings alongside our cornerstone US government 
bio-defence contract. The Division is building and 
extending its core scientific strengths, especially in 
the US, to maintain a solid platform for future growth. 
•  Following last year’s significant step up in growth, 
Personalised Medicine revenues remained broadly 
flat at £2.5m (2012: £2.7m), supported by our ongoing 
pharmaceutical collaborations and an increased 
investment in our Genedrive
®
 developments.  
In the results for the year ended 30 June 2013, we report 
a steady trading position which alongside a strengthened 
and accelerated investment in the advancement of our 
molecular diagnostic technology Genedrive
®
 has resulted 
in widening reported losses. It had been our intention 
to finalise the prelaunch stages of our TB assay on the 
Genedrive
®
 platform during the 2013 financial year and to 
recognise milestone payments, but due to technical and 
manufacturing issues we are disappointed that this was 
not achieved as part of the collaboration with Becton 
Dickinson (BD). Whilst we failed to meet the milestones in 
the timescale agreed with BD, resulting in the termination 
of our supply and distribution agreement, we remain in 
dialogue with the group. We are now finalising the technical 
development and scale up of our Genedrive
®
 platform for 
“I remain wholly convinced that 
through our investors’ funding and 
support we have developed a 
strategically valuable asset of real 
importance to those operating in 
the field of molecular diagnostics.”
Chairman’s Statement
Major progress Epistem Holdings Plc  Annual Report 2013 17
Company Overview Business Review Governance Financials
In addition to gearing up Genedrive
®
 for use in TB and 
infectious diseases, the Division is preparing tests for 
pharmacogenomic analysis including near patient 
clinical management in areas such as cancer 
treatment, Hepatitis C therapeutic intervention and 
‘patient stratification’ for clinical trials. We are also 
pleased to report on the successful completion of our 
first 2 patient stratification clinical studies which we 
expect to see emerge as an exciting area of growth  
for the Company. Further details are set out in the  
Chief Executive’s Review. The reported Personalised 
Medicine revenues for the year included Genedrive
®
 
development income, primarily from our work with the 
US department of defence, of £0.4m (2012: £0.4m). 
•  Our Personalised Medicine Division also recently 
announced the initiation of a three (3) year, Euro 1.5m 
‘Hepatitis C’ collaboration with INSERM and the 
Pasteur Institute for development of ‘Hepatitis C’ (HCV) 
Point-of-Care test. The global need for this test is 
substantial and we will be developing this test as part 
of our expanding menu of infectious disease assays.
•  We are in the final stages of completing our Genedrive
®
 
unit testing and TB assay manufacturing scale up. GE 
Healthcare have commenced scale up of our TB assay 
product and the final phase of the Genedrive
®
 unit 
testing is now underway in preparation for independent 
field testing and our India clinical trials. We anticipate 
sales of Genedrive
®
 in the second half of 2014 which 
will mark the beginning of Epistem’s first product-
related revenues and disrupt traditional methods 
of TB diagnosis by offering the ability to undertake 
‘near patient’ Point-of-Care molecular diagnosis. 
The Board believes that Genedrive
®
 will bring about 
a breakthrough in rapid, high sensitivity and low cost 
molecular (DNA) diagnostic testing across a broad 
range of disease areas. 
•   Novel Therapies’s drug development programme 
continues and we are carefully investing in a limited 
number of leads with the Division reporting nil revenues 
for the year (2012: £0.0m). Collaborative discussions with 
potential partners are ongoing to progress our leads in 
the areas of Regenerative Medicine and Oncology. 
•  Based on the ongoing investment in our Genedrive
®
 
and Novel Therapies programmes, the Company 
reports a loss for the year of £1.2m (2012: £0.2m loss 
for the year) and loss per share of 12.5p (2012: 2.9p 
loss per share).
Outlook
Our key priority in this financial year is to gain approval  
for the launch of Genedrive
®
 into a clinically-regulated 
marketplace whilst continuing its broad menu of 
development in clinical and non-clinical fields.
I remain wholly convinced that through our investors’ 
funding and support we have developed a strategically 
valuable asset of real importance to those operating in 
the field of molecular diagnostics. 
To be able to realise this value we need not only to resolve 
the current technical issues, which I believe are resolvable, 
but to invest further in resource and infrastructure to 
support our future partnerships. We will need to 
demonstrate our ability to scale up production and have 
sufficient depth in management to ensure deliverability 
as we move from the innovation phase to the industrial 
phase – these processes take time and extreme diligence, 
issues of which we are fully aware given the recent BD 
experience. Over the coming months we are targeting the 
following key objectives in relation to Genedrive
®
 and within 
the wider Personalised Medicine group:
•  Entering into the final stages of Indian regulatory 
approval and completion of the TB clinical trial process.
•  Entering Genedrive
®
 into preliminary clinical studies for 
TB as a forerunner to a WHO recommendation.
•  The strengthening of management in Diagnostics with 
the appointment of a domain relevant COO for that 
Division with main Board representation.
•  Progress with the HCV and other core development 
programmes.
•  Progress our discussions with potential pharmaceutical 
partners in relation to the use of Genedrive
®
 for use in 
clinical trials re patient stratification.
We are dedicated to driving the process with Genedrive
®
 so 
that we can crystallise the strategic value of this technology.
Whilst the outlook is naturally dominated by Genedrive
®
, 
I see the continued solid progress in Preclinical 
Research Services and the pharmacogenomics offering 
within Personalised Medicine helping to underpin the 
fundamentals of Epistem and whilst we have scaled back 
our investment into Novel Therapies we continue to 
examine ways in which we can realise the value and 
heritage of this key area.
I would like to thank the CEO for his support and 
leadership, the Board and our employees for their effort 
and commitment in driving Epistem’s progress over the 
past year, as well as our investors whose support has 
provided a stable platform for our continued growth plans. 
David Evans 
Chairman
22 October 2013 Epistem Holdings Plc  Annual Report 2013 18
Chief Executive’s Review
Whilst we continue to develop and strengthen our 
service-based revenue generating businesses, the delays 
around the completed development of our first product 
Genedrive
®
 have weighed heavily on our anticipated 
outturn and market expectations for the year. The 
financial results for the Group presented in this 
announcement reflect the Group’s trading for the year  
to 30 June 2013 and for the comparative period to  
30 June 2012.
Financial review
The Company reports a turnover of £5.4m (2012: £5.6m) 
for the year ended 30 June 2013. Revenues were 
underpinned by the Preclinical Research Services 
Division, which delivered sales of £2.9m (2012: £2.9m). 
The Personalised Medicine Division delivered sales of 
£2.5m (2012: £2.7m), with the Novel Therapies Division 
reporting no sales over the period. 
Consolidated territory revenues were split US 59%  
(2012: 68%), EU/ROW 14% (2012: 19%) and UK 27% 
(2012: 13%). Year-on-year Preclinical Research Services 
sales remained steady delivering a similar year-on-year 
operating profit of £0.8m (2012: £0.8m). Personalised 
Medicine sales were broadly similar to last year, which 
alongside our increased resource and investment in 
Genedrive
®
 saw the Division report an operating loss of 
£0.1m (2012: £0.4m profit) over the year. Novel Therapies, 
investing in its lead development programme, reported an 
operating loss of £0.8m (2012: operating loss £0.8m) with 
central administration costs largely unchanged over the 
year at £1.4m (2012: £1.3m) giving rise to an overall group 
operating loss for the year of £1.5m (2012: loss £0.8m). 
The benefit of a £0.3m R&D and other tax credits saw  
the Group report a loss after tax for the year of £1.2m 
(2012: loss £0.2m) with year-end headcount in the 
Company at 67 (2012: 63).
Continuing innovation and 
new product development
“Our business model continues 
to balance a heritage of service-
based revenue growth with 
emerging new and disruptive 
product technologies capable 
of delivering significant 
investor returns.” Epistem Holdings Plc  Annual Report 2013 19
Company Overview Business Review Governance Financials
Cash balances at the end of June 2013 were £6.5m 
(2012: £4.7m) following the completion of the £4.2m cash 
placing in December 2012. Reported cash reserves at the 
end of June 2013 included the BD upfront technology 
access fee payment of £0.6m, subsequently returned to 
BD on termination of the agreement. Unaudited cash 
reserves at 30 September 2013 were £5.4m. 
Reported loss per share was 12.5p (2012: 2.9p loss 
per share). 
The Company’s annual audit was completed in October 
2013 by HW Chartered Accountants and their audit 
report will be included with the annual accounts which 
are expected to be distributed to shareholders shortly.
Operating review
Preclinical Research Services
Preclinical Research Services delivered a steady year-on-
year revenue performance whilst maintaining a 27% 
operating margin (£0.8m operating profit). The Division 
provides a high margin, niche, preclinical service offering 
across our core disease areas of oncology, mucositis, 
inflammatory bowel disease and dermatology. The year 
saw the initiation of our first rheumatoid arthritis (RA) and 
oncology imaging leukaemia models, strong demand for 
our inflammatory bowel disease models and attainment 
of GcLP accreditation for our histology services.
Our collaboration with the US National Institutes of 
Health’s biodefence programme continues to expand  
and accounts for roughly a third of the Division’s 
revenues. We have collaborated as part of this 
programme for over 7 years and provide a role as 
‘Subject Matter Experts’ (SME) in radiation exposure. 
Alongside a broadening client base, we are currently 
preparing to extend our service capability to set up small 
laboratory facility in Baltimore to engage more closely 
with the US government departments and our local  
US East Coast clients. The US government remains 
committed to targeting treatment of radiation sickness 
following a nuclear incident/event. 
Over the coming year, we expect to build on our new 
oncology (imaging) services, RA and inflammation models 
from which we expect to see continued ongoing growth.
Personalised Medicine
Pharmacogenomics 
Following the previous year’s strong uplift in revenues, 
this year’s revenues remained steady at £2.1m  
(2012: £2.3m) underpinned by our molecular studies  
for GlaxoSmithKline, Novartis and Sanofi Aventis.  
These studies utilise Epistem’s proprietary RNA 
amplification technology and oncology (cancer) 
bioinformatics to provide biomarker discovery  
(hair and other tissues) and translational support for 
oncology drug development and fibrosis drug discovery 
programmes. The Pharmacogenomics Division (formerly 
Biomarker Division) works with major pharmaceutical  
and biotech business groups to provide a suite of 
preclinical and clinical pharmacodynamic biomarkers  
to measure the effect of a drug on targeted tissue  
(gene activated pathways). Our expertise in defining  
the consequences of gene target modulation in  
epithelial tissue continues to advance, with the  
addition of several key oncology target signatures over 
the past year as well as being utilised in key target 
identification programmes with business partners. 
We are now beginning to implement our 
pharmacogenomics Genedrive
®
 applications with  
major pharmaceutical strategic partners. We are  
working closely with Novartis on the clinical expansion  
of our oncogene identification from whole blood for 
myeloproliferative disorders and with GlaxoSmithKline 
for the rapid assessment of genotypes for ‘patient 
stratification’ for therapeutic treatment. During the  
year we successfully completed 2 Genedrive
®
 clinical 
assessments for ‘on the spot’ stratification of patients 
based on their genotypic characteristics. The 
identification of genotypic and/or target mutations  
will allow patients to be ‘stratified’ for ‘Point of Care’ 
administration of the correct course of ‘personalised’ 
therapeutic treatment. Over the coming year we will 
continue our work developing Genedrive
®
 for use as 
a highly sensitive screening tool for identification and 
monitoring of the presence of mutation targets in blood. 
The broadening adoption of Genedrive
®
 for use in 
pharmacogenomics applications is anticipated to present 
additional revenue generating opportunities over the 
coming year.  Epistem Holdings Plc  Annual Report 2013 20
We have also recently announced a Euro1.5m, three (3) 
year collaboration with INSERM the French National 
Institute of Health and Medical Research, starting from 
September 2013, to develop a Point-of-Care predictive 
and prognostic test that will enable tangible 
improvements in the health and quality of life of chronic 
hepatitis C (HCV) patients. Technical completion of the 
assay is scheduled for mid way through 2014 with an 
expected launch in 2015. Alongside retaining full freedom 
to operate for our HCV test, we will be seeking strategic 
partnerships with non-governmental organisations, 
national health and development agencies. Between 
150 and 180 million people live with HCV infection globally 
and together with HBV infection – these infections cause 
around 1 million deaths each year. 
Diagnostics
Genedrive
®
 is a novel, disruptive and highly sensitive 
molecular diagnostic tool with the capability of targeting 
a near patient, low cost and rapid turnaround diagnosis 
(30-60mins including sample preparation) across a broad 
spectrum of bacterial, viral, fungal and somatic mutational 
disease areas. We expect to see molecular diagnostics 
begin to dominate the next generation of diagnostic testing 
and to change the speed, accuracy and workflows in near 
patient ’Point of Care’ assessment. Over the coming year, 
we intend to accelerate our product developments through 
increased investment in our manpower resource and 
expertise, enhance our manufacturing and regulatory 
control and further develop our channel partner distribution 
strategy to take advantage of the substantial growth 
opportunities open to us. 
Despite the recent setback with the Becton Dickinson 
agreement, we are focused on finalising our core 
Genedrive
®
 developments with the objective of promptly 
gaining Indian regulatory approval and the launch of our first 
major infectious disease assay in Tuberculosis (TB). During 
the year we worked closely with the Xcelris and Becton 
Dickinson teams to prepare our first product for market. 
Unfortunately we have experienced assay manufacturing 
delays and more recently Genedrive
®
 unit technical 
problems, which are being resolved and are undergoing 
final phase validation. The assay manufacturing delays were 
in relation to scale up of manufactured product, which after 
a detailed and thorough assessment of the manufacturing 
process with GE Healthcare has yielded a product which  
is operating consistently under analytical, clinical and  
field testing conditions. More recently, we identified unit 
problems related to firmware and software arising from  
our internal stress testing of the unit. We are carefully and 
diligently working through these identified problems to 
ensure that verification and validation of our unit is assured. 
This has delayed our final submission for Indian regulatory 
approval which we anticipate in H1 2014.
We maintain an ongoing dialogue with Becton Dickinson 
and we will be extending our discussions with other 
potential partners as appropriate. The Xcelris Indian 
commercial collaboration alone (supply and distribution 
arrangement in Tuberculosis) includes escalating annual 
volume requirements for units and assays is capable of 
delivering significant revenues to Epistem over the next 
3-5 years from H2 2014 which is when we expect to 
commence commercial sales. TB represents our first 
significant revenue prospect and the initial opportunity to 
see the application of our Genedrive
®
 platform used both 
inside and outside laboratory settings enabling ‘near 
patient’ testing or testing in remote field locations. 
Over the past year, we have designed a TB assay capable 
of establishing a new standard in antibiotic resistance 
testing. The assay possesses several important technical 
advantages over competitor products and coupled with 
an industry leading speed to result, ease of use and 
pricing, will we believe deliver a highly competitive 
product to market. We are also working with the 
Foundation for Innovative New Diagnostics (FIND, 
Geneva) to build our case for WHO recommendation 
of our TB assay. Over the coming months we will be 
publishing our first clinical data on our TB test and how 
this compares to the industry leaders in addressing the 
US$1bn TB diagnostics market.
We are advancing our assay development across a range 
of other infectious diseases, with tests under development 
in malaria, dengue and a range of sexually transmitted 
diseases. We expect to supply and distribute these high 
volume tests through our channel partner strategy. 
Alongside healthcare applications, we continue to see 
opportunities for the use of Genedrive
®
 for biosurveillance 
and forensic targets. We are working closely with the  
US government on a number of programmes to identify 
biothreats and infectious diseases in military settings. 
We are preparing to continue to the next phase of our US 
Government contract with the Defence Threat Reduction 
Agency (DTRA) for pathogen detection. This has been 
recently delayed due to the US government budgetary 
issues, but is anticipated to generate up to USD$0.6m 
in development funding over the next 6 months and if 
successful, extend into broader US Department of 
Defence use. We anticipate further growth in the US 
Department of Defence areas over the coming year. 
Chief Executive’s Review continued Epistem Holdings Plc  Annual Report 2013 21
Company Overview Business Review Governance Financials
Novel Therapies
The Novartis collaboration was completed in March 2013 
and we now retain intellectual property rights over our 
collaborative leads and continue to progress discussions 
with partner groups over the development of our Novel 
Therapies lead programme. Given the investment 
requirements of our Genedrive
®
 programme, we will 
maintain a controlled approach to our ongoing investment 
in our Novel Therapies lead programme. The timing of 
a license opportunity and/or funding support remains 
difficult to judge although we remain confident in our 
development programme. 
We have continued to define the mechanism of action of 
our lead candidates – understanding the cell biology and 
signalling pathways which regulate the cell/stem cells in 
the areas of regenerative medicine and oncology and we 
are considering small molecule partnerships to establish 
a portfolio of agents which regulate signalling pathways 
and cell biology. 
We will evaluate our other drug discovery and 
development opportunities with major industry players 
to identify new lead developments and to expand our 
discovery and early stage development platform. 
Integrated business model
The establishment of our independent Divisions has 
created a portfolio of revenue-driven business units. 
Epistem’s objective is to provide a financially robust 
business, whilst offering the potential for significant 
financial upside from the development of our 
Personalised Medicine, Novel Therapies and Preclinical 
Research Services Divisions. We continue to enhance 
and exploit our competence in epithelial cell biology, gene 
pathways and molecular (personalised) medicine, whilst 
retaining a high degree of commercial independence 
across each Division. 
Outlook
Over the coming months we will be focusing on the 
resolution of the technical issues with the Genedrive
®
 
unit before entering the process of Indian regulatory 
assessment for our TB assay. We will also commence 
initial evaluation studies as a forerunner to targeting a 
WHO recommendation, as well as completing our Indian 
trials in preparation for launch of our TB assay in H2 2014. 
Alongside the continued growth of our Preclinical Research 
Services and Pharmacogenomic Divisions, we will be 
advancing our new HCV programme with INSERM/Pasteur 
and other ongoing programmes with the US Department 
of Defence, alongside the development of Genedrive
®
 for 
use in clinical trials for patient stratification. 
Our business model continues to balance a heritage of 
service-based revenue growth with new and disruptive 
product technologies capable of delivering significant 
investor returns. 
Alongside the growth of the group, we expect to 
strengthen our Board and management of the Diagnostics 
Division with the appointment of a Chief Operating Officer 
with relevant sector expertise. We will also bolster our staff 
and senior management with individuals who fit with the 
culture and dynamism of the Company. 
I would like to thank the Board, management and 
employees for their help and support over the past  
year and I look forward to updating our investors on  
our progress in the coming months. 
Matthew H Walls
Chief Executive Officer
22 October 2013 Epistem Holdings Plc  Annual Report 2013 23
Company Overview Financials Business Review Governance
1. David Evans (53)  
Chairman
David joined Epistem as a Non-executive Director in June 2005 
and became Executive Chairman in March 2006 until the flotation 
in April 2007, when he reverted to a non-executive position. David, 
a qualified accountant, has many years’ experience both as an 
executive and as a non-executive of publicly listed diagnostic and 
life science companies. In addition to his chairmanship of Epistem, 
he is currently Non-executive Chairman of the following AIM listed 
companies: EKF Diagnostics plc, Omega Diagnostics Group plc 
and Scancell Holdings Plc.
2. Matthew Walls (49)  
Chief Executive Officer
Matthew joined Epistem in February 2007 as Chief Executive Officer. 
He is an experienced CEO, most recently with Oxford Biosignals 
Limited, where he led the strategic collaboration with Rolls Royce 
Plc and Covance Inc. Matthew spent the early part of his career 
with ICI Plc, progressing through to AstraZeneca Plc prior to its 
plant crop biotechnology group merger with Novartis to form 
Syngenta Plc. Matthew has led the growth of several technology 
and biotechnology companies as CEO, including Internexus Limited 
and Zylepsis Limited. He holds a non-executive post at The REPIN 
Group and Riyada Oxford Investments Limited and is a chartered 
accountant and a member of CIMA.
3. John Rylands (59)  
Finance Director
John originally joined Epistem as an investor and Non-executive 
Director, and in 2005, he took over his current role. John provided 
corporate finance advice to private companies before joining 
Epistem. Prior to 1999 he was an investor in and consultant to the 
SDS group of companies. John holds a degree in Economics and 
Accountancy from Manchester University and is a fellow of ICAEW.
4. Catherine Booth, Ph.D. (48)  
Managing Director, Contract Research Services
Catherine is a co-founder of Epistem and prior to starting Epistem 
she worked for ten years with Prof. Chris Potten at the Paterson 
Institute. Whilst at the Paterson Institute she developed many 
pre-clinical assays. This knowledge is at the core of the Epistem 
Contract Research Service. Catherine received her Ph.D. from 
Emmanuel College, University of Cambridge.
5. Robert Nolan, Ph.D. (70)  
Non-executive Director
Robert has been a Non-executive Director of the Company since 
2004. Having gained US post doctoral experience at Dartmouth 
Medical School and MIT, he joined the SANDOZ Forschungsinstitut 
in Vienna in 1972 to work on mechanism of antibiotic action and 
was also coopted on to Sandoz global strategic planning group. He 
joined ICI pharmaceuticals (which became AstraZeneca) in 1979 to 
head up a natural products discovery programme and subsequently 
joined their product licensing group. He brings with him a wealth of 
expertise in partnering and licensing negotiations with both small 
biotechnology and large pharmaceutical companies. Prior to his 
retirement he was Director, Global Licensing, at AstraZeneca. He is 
also a Non-executive Director of Phico Therapeutics Ltd.
6. Roger Lloyd, Ph.D. (65)  
Non-executive Director
Roger joined the Board as a Non-executive Director on 1 July 2007. 
Trained as a biochemist, Roger has 36 years’ experience in the 
healthcare and biotechnology sector, particularly in the areas of 
strategic planning and business development. International business 
management with ICI Plc and AstraZeneca Plc included living and 
working in the United States and Germany, and having territorial 
responsibilities for Europe, Japan, Korea, Mexico and the Middle 
East. As Executive Director of Global Licensing at AstraZeneca he 
personally completed 24 transactions. He operates as a Board 
Adviser in the Biotech sector. Epistem Holdings Plc  Annual Report 2013 24
Directors’ Report
For the year ended 30 June 2013
The Directors present their report for Epistem Holdings Plc (‘the Company’) and its subsidiaries (together ‘Epistem’ or ‘the 
Group’) for the year ended 30 June 2013.
Principal activities and review of the business
The principal activity of the Group during the year was the provision of services to the biotechnology and pharmaceutical 
industries, covering preclinical testing and gene biomarker & diagnostic services and the development of novel therapeutics 
for partner companies. The trading activities of the Group are currently principally undertaken in the subsidiary undertaking, 
Epistem Limited, and a detailed overview of these activities is outlined in the Business Overview on the inside front cover 
to page 11 of this report. The Group operates a US office in Boston, MA, trading through its wholly owned subsidiary 
Epistem Inc.
A review of the business during the year which summarises overall progress, research and development, on going research 
and future development and key performance indicators, as well as risks and developments is detailed in the Business Review 
on pages 12–21 of this report.
Results and dividends
The trading results for the year and the Group’s financial position at the end of the financial year are shown in the financial 
statements on pages 32–58 of this report.
The Directors do not recommend payment of a final dividend.
Going concern
After due consideration, the Directors have a reasonable expectation that the Group has adequate resources to continue in 
operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing 
the accounts.
Directors and their interests in shares
The Directors of the Company who held office throughout the year, unless otherwise stated, and their interests in the share 
capital of the Company, including family and pension scheme trust interests, were as follows:
30 June
2013
1 July
2012
David Evans 80,645 80,645
Chris Potten (died 3 August 2012) 519,320* 519,320
Catherine Booth 984,727 983,884
Roger Lloyd – –
Jeffrey Moore (resigned 10 October 2013) 14,052 16,209
Robert Nolan 5,065 5,065
John Rylands 194,625 193,782
Matthew Walls 10,372 9,529
* As at 3 August 2012. Epistem Holdings Plc  Annual Report 2013 25
Company Overview Business Review Governance Financials
Significant shareholdings
In addition to the Directors’ holdings, the Company has been advised of the following interests of over 3% of the issued 
ordinary shares:
Percentage 
Holding
Percentage 
holding
Blackrock 913,023 9%
Investec 702,000 7%
ODEY Asset Management 664,000 7%
M&G Investments 531,623 5%
Calculus Capital 495,926 5%
Aerion 370,857 4%
Liquid Capital 354,500 4%
Henderson Investment Management 318,224 3%
Policy on payments to suppliers
It is the policy of the Company in respect of all of its suppliers, where reasonably practicable, to settle the terms of payment 
with those suppliers when agreeing the terms of each transaction, to ensure that those suppliers are made aware of the terms 
of payment, and to abide by those terms. The Group has complied with this policy during the year. The average number of 
creditor days for the Group was 45 (2012: 64) based on the average monthly amount invoiced by suppliers during the year.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial 
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have 
prepared the Group financial statements in accordance with International Reporting Standards (IFRSs) as adopted by the 
European Union.
In preparing those financial statements, the Directors are required to:
•	 select suitable accounting policies and then apply them consistently;
•	 make suitable judgements and estimates that are reasonable and prudent;
•	 state that the financial statements comply with IFRSs as adopted by the European Union, subject to any material 
departures being adequately disclosed and explained; and
•	 prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will 
continue in business.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s 
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure 
that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also 
responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection 
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the 
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements 
may differ from legislation in other jurisdictions. Epistem Holdings Plc  Annual Report 2013 26
Principal risks
The Board meets regularly to review operations and to discuss risk areas. The Review of the Year on pages 12–21 report on 
the factors which are key to the on-going development of the Company. The Corporate Governance Report contains details 
of the Group’s system of internal control. Details of the financial risks are disclosed in Note 18 to the financial statements. The 
Directors regularly assess and monitor the business risks faced by the Group. Risk is an inherent feature of business and set 
out below are some key risks, together with associated mitigating factors. This list does not purport to be exhaustive.
Development risk
The Group undertakes significant activity with the aim of launching new products, therapies and services. There can be no 
guarantee that the development activity will enable the programmes to meet the technical and intellectual property hurdles 
required for a commercial launch to be undertaken in advance of competing technologies coming to market. The Group seeks 
to mitigate this risk by ensuring that development programmes are planned and undertaken by staff with the requisite skills. 
The Group monitors industry trends and customer needs to ensure that its development targets remain relevant.
Regulatory risk
There can be no guarantee that the Group’s products or services will be able to obtain or maintain the necessary approval for 
the orderly conduct of its business. Approvals can require evaluation of data relating to safety, quality and efficacy standards. 
The Group seeks to mitigate regulatory risk by conducting its operations within recognised quality assurance standards and 
by undergoing external assessment.
Management & Employees
The Group’s future success is dependent on its management team and staff. There is an on-going risk that staff will leave 
to join competitor companies. The Group seeks to mitigate this risk by establishing effective management organisation and 
leading staff incentive schemes.
Economic risk
The Group’s programmes are targeted to meet the commercial requirements of its clients. In the current economic climate, 
clients’ plans may be subject to changes which may adversely affect the financial performance of the Group. The Group 
seeks to mitigate this risk by operating a diversified business model across various technologies and territories.
Provision of information to auditors
The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 22 and 23. 
Having made enquiries of fellow Directors and of the Group’s auditors, each of these Directors confirms that:
•	 to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the Group’s 
auditors in connection with preparing their report) of which the Group’s auditors are unaware; and
•	 each Director has taken all the steps that a Director might reasonably be expected to be taken to be aware of relevant 
audit information and to establish that the Group’s auditors are aware of that information.
Approved by the Board
H J J Rylands
Company Secretary
22 October 2013
Directors’ Report continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 27
Company Overview Business Review Governance Financials
Introduction
This report has been prepared in accordance with the requirements of Schedule 2 Pt1 to the Companies Act 2006 (‘the 
Schedule’) and also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes 
how the Board has applied the Principles of Good Governance relating to Directors’ Remuneration. In accordance with 
Section 439 of the Companies Act 2006 (‘the Act’), a resolution to approve the report will be proposed at the Annual General 
Meeting of the Company at which the financial statements are to be approved.
Section 497 of the Act requires the auditors to report to the Company’s members on the ‘auditable part’ of the 
Directors’ Remuneration Report and to state whether, in their opinion, that part of the report has been properly prepared 
in accordance with Part 3 of the Schedule. This report has therefore been divided into separate sections for audited 
and unaudited information.
Unaudited information
Remuneration policy
Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the necessary calibre 
and to reward them for enhancing value to shareholders. The performance measurement of the Executive Directors and key 
members of senior management and the determination of their annual remuneration package is undertaken by the 
Remuneration Committee. The remuneration of the Non-executive Directors is determined by the Board within limits set out in 
the Articles of Association.
Executive Directors are entitled to accept appointments outside the Company providing the Board’s permission is sought.
Non-executive Directors’ terms of engagement
The Non-executive Directors have specific terms of engagement. Their remuneration is determined by the Board. In the event 
that a Non-executive Director undertakes additional assignments for the Company, the Non-executive Director’s fee will be 
agreed by the Company in respect of each assignment.
Audited information
Aggregate Directors’ remuneration
Salary
& fees
£
Bonus
£
Pension
£
2013 total
£
2012 total
£
Executive
Catherine Booth 99,138 5,000 29,431 133,569 138,568
Jeffrey Moore (resigned 10 October 2013) 128,269 – – 128,269 130,000
John Rylands 125,000 5,000 – 130,000 140,000
Matthew Walls 200,000 100,000 – 300,000 300,000
Non-executive
David Evans 35,000 – – 35,000 35,000
Chris Potten (died 3 August, 2012) – – – – 13,964
Roger Lloyd 24,000 – – 24,000 24,000
Robert Nolan 24,000 – – 24,000 24,000
635,407 110,000 29,431 774,838 805,532
Directors’ Remuneration Report
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 28
Directors’ share options
Details of the options for Directors who served during the year are as follows:
As at
1 July 2012
Exercised/
Lapsed
Options 
granted
As at
30 June 
2013
Exercise
price
Earliest
exercise date Expiry date
Executive
Catherine Booth
(2)
15,528 – – 15,528 £1.20 Exit 09/01/2016
Jeffrey Moore
(3)
54,333 – – 54,333 £1.20 04/04/2007 09/01/2016
Jeffrey Moore
(1)
100,000 – – 100,000 £1.20 04/04/2007 09/01/2016
Jeffrey Moore
(1)
83,333 – – 83,333 £1.20 01/09/2007 09/01/2016
Jeffrey Moore
(1)
83,333 – – 83,333 £1.20 01/09/2008 09/01/2016
John Rylands
(3)
83,333 – – 83,333 £1.20 04/04/2007 09/01/2016
John Rylands
(1)
127,847 – – 127,847 £1.20 04/04/2007 09/01/2016
Matthew Walls
(4)
177,653 – – 177,653 £1.24 31/10/2010 27/03/2017
Matthew Walls
(5)
80,644 – – 80,644 £1.24 31/10/2010 27/03/2017
Matthew Walls
(6)
254,631 – – 254,631 £3.73 30/09/2013 29/03/2021
Matthew Walls
(6)
5,369 – – 5,369 £3.60 30/09/2013 10/05/2021
Matthew Walls
(7)
– – 23,758 23,758 £5.50 26/03/2016 25/03/2024
Non-executive
David Evans
(1)
62,112 – – 62,112 £1.20 04/04/2007 09/01/2016
Robert Nolan
(1)
78,000 – – 78,000 £1.29 31/05/2005 30/03/2015
Robert Nolan
(1)
15,528 – – 15,528 £1.20 10/01/2006 09/01/2016
Chris Potten
(8)
  
(died 03 August, 2012) 15,528 15,528 – £1.20 n/a n/a
1. Unapproved stand-alone agreement, no performance criteria.
2. EMI Company scheme, no performance criteria.
3. EMI stand-alone scheme, no performance criteria.
4. EMI and Unapproved stand-alone scheme, with performance criteria which were satisfied in 2010.
5. EMI stand-alone scheme, with performance criteria as detailed in (5) above.
6. 2007 Epistem Share Option Scheme, with performance criteria which allow the options to vest when the Remuneration Committee determine that the 
Company has achieved a compound annual growth in EBITDA of at least 15% for the three-year period commencing 01 July 2010.
7. 2007 Epistem Share Option Scheme, with performance criteria determined by the Remuneration committee and which correlate to shareholder value.
8. Gain on exercise of Directors’ share options. In 2013 Chris Potten exercised options over 15,528 shares. The gain of market price over exercise price was 
£44,255. In 2012, Jeffrey Moore exercised options over 29,000 shares. The gain of market price over exercise price was £66,700.
Share Investment Plan
The details of the Epistem Share Investment Plan are outlined in Note 17 (b) to the accounts. The Directors’ interests in the 
shares of the Company include shares acquired under the Share Investment Plan as follows:
Partnership 
Shares
No
Cost of 
Matching 
Shares
£
Matching 
Shares
No
Total SIP 
Shares
30 June  
2013
No
No SIP 
Shares
30 June  
2012
No
Catherine Booth 1,576 13,000 3,151 4,727 3,884
Jeffrey Moore 1,576 13,000 3,151 4,727 3,884
John Rylands 1,576 13,000 3,151 4,727 3,884
Matthew Walls 1,576 13,000 3,151 4,727 3,884
Approved by the Board
D E Evans
Chairman
22 October 2013
Directors’ Remuneration Report continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 29
Company Overview Business Review Governance Financials
The Group is subject to the continuing requirements of the AIM Rules and is committed to adhering to corporate governance 
standards appropriate for a company of its size. The Group follows the Quoted Companies Alliance guidelines and has 
Remuneration, Audit and Nomination committees with written terms of reference and a schedule of matters reserved for 
the Board, which generally meets each month.
The Board has established an Audit Committee, a Remuneration Committee and a Nomination Committee. The membership 
of these committees and attendance at meetings is as follows:
Audit 
Committee
Remuneration 
Committee
Nominations 
Committee
David Evans (Non-executive Chairman) 2 3 1
Robert Nolan (Non-executive Director) 2 3 1
Roger Lloyd (Non-executive Director), Remuneration/Nominations Committees only na 3 1
Remuneration Committee
The Remuneration Committee reviews the scale and structure of the Executive Directors’ and senior management’s 
remuneration and the terms of their service contracts. The remuneration and terms of appointment of the Non-executive 
Directors are set by the Board. The Remuneration Committee also approves the issue of share options under schemes 
approved by the Board.
None of the Committee members have any personal financial interest (other than as shareholders), conflicts of interest arising 
from cross-directorships, or day-to-day involvement in the running of the business. No Director plays a part in any discussion 
about his or her own remuneration.
Audit Committee
The Audit Committee has responsibility for receiving accounts and reviewing reports from the management and the 
Company’s auditors, relating to Annual and Interim Accounts and the accounting and internal controls in place throughout  
the Group. At this stage of the Group’s size and development the Committee has decided that an internal audit function is not 
required as the Group’s internal controls system in place is appropriate for its size. The Audit Committee has met twice during 
the year.
Nomination Committee
The Nomination Committee has responsibility for reviewing the size, structure and composition of the Board, as well as 
retirements and appointments of replacement and additional Directors, and for making appropriate recommendations to 
the Board.
Relations with shareholders
The Group recognises the importance of communicating with its shareholders to ensure that its strategy and performance 
is understood and that it remains accountable to shareholders. The Board as a whole is responsible for ensuring that a 
satisfactory dialogue with shareholders takes place, while the Chairman and Chief Executive ensure that the views of the 
shareholders are communicated to the Board as a whole. The Board ensures that the Group’s strategic plans have been 
carefully reviewed in terms of their ability to deliver long-term shareholder value.
Internal controls
The Board acknowledges its responsibility for establishing and maintaining the Group’s system of internal controls and will 
continue to ensure that management keeps these processes under regular review and improves them where appropriate. 
The system of internal controls is designed to manage, rather than eliminate, the risk of failure to achieve business objectives 
and can provide only reasonable and not absolute assurance against material misstatement or loss.
Corporate Governance Report
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 30
Social and ethical matters
The Board recognises the growing awareness of social and ethical matters and it endeavours to take into account the 
interests of the Group’s stakeholders, including its investors, employees, suppliers and business partners, when operating the 
business.
Employment
At a subsidiary level the individual company has established policies which address key corporate objectives in the management 
of employee relations, communications and employee involvement, training and personal development and equal opportunities.
Health, safety and environmental issues
The Board recognises its legal responsibilities to ensure the well-being, safety and welfare of its employees and to maintain a 
safe and healthy working environment for them and for its visitors and sub-contractors. Health and Safety is on the agenda for 
regularly scheduled Board meetings.
By their nature, the Group’s regular operations are judged to have a low environmental impact and are not expected to give 
rise to any significant, inherent environmental risks over the next 12 months.
The Group is committed to maintaining high standards in implementing appropriate health, safety and environmental 
protection policies. Waste materials are recycled where possible, and hazardous waste is catalogued and handled by 
licensed specialist disposal companies.
Corporate Governance Report continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 31
Company Overview Business Review Governance Financials
We have audited the group and parent company financial 
statements (the ‘Financial Statements) of Epistem Holdings 
Plc for the year ended 30 June 2013 which comprise the 
consolidated statement of comprehensive income, the 
consolidated and parent company balance sheets, the 
consolidated and parent company statement of cash flows, 
the consolidated and parent company statements of changes 
in equity and the related notes. The financial reporting 
framework that has been applied in their preparation is 
applicable law and International Financial Reporting 
Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as 
a body, in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006. Our audit work has been undertaken 
so that we might state to the company’s members those 
matters we are required to state to them in an auditor’s 
report and for no other purpose. To the fullest extent 
permitted by law, we do not accept or assume responsibility 
to anyone other than the company and the company’s 
members as a body, for our audit work, for this report,  
or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ 
responsibilities set out in the Directors Report the Directors 
are responsible for the preparation of the financial statements 
and for being satisfied that they give a true and fair view. Our 
responsibility is to audit and express an opinion on the 
financial statements in accordance with applicable law and 
International Standards on Auditing (UK and Ireland). Those 
standards require us to comply with the Auditing Practices 
Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free 
from material misstatement, whether caused by fraud or 
error. This includes an assessment of: whether the 
accounting policies are appropriate to the group’s and the 
parent company’s circumstances and have been consistently 
applied and adequately disclosed; the reasonableness of 
significant accounting estimates made by the directors; and 
the overall presentation of the financial statements. In 
addition, we read all the financial and non-financial 
information in the Annual Report to identify material 
inconsistencies with the audited financial statements. If we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
•	 the financial statements give a true and fair view of the 
state of the group’s and the parent company’s affairs as 
at 30 June 2013, and of the group’s loss for the year 
then ended;
•	 the group financial statements have been properly 
prepared in accordance with IFRSs as adopted by the 
European Union; and
•	 the financial statements have been prepared in 
accordance with the requirements of the Companies 
Act 2006.
Opinion on other matters prescribed by the 
Companies Act 2006
In our opinion:
•	 the part of the Directors’ Remuneration Report to be 
audited has been properly prepared in accordance with 
the Companies Act 2006; and
•	 the information given in the Directors’ Report for the 
financial year for which the financial statements are 
prepared is consistent with the financial statements.
Matters on which we are required to report by 
exception
We have nothing to report in respect of the following matters 
where the Companies Act 2006 requires us to report to you 
if, in our opinion:
•	 adequate accounting records have not been kept by the 
parent company, or returns adequate for our audit have 
not been received from branches not visited by us; or
•	 the parent company financial statements and the part of 
the Directors’ Remuneration Report to be audited are not 
in agreement with the accounting records and returns; or
•	 certain disclosures of Directors’ remuneration specified by 
law are not made; or
•	 we have not received all the information and explanations 
we required for our audit.
Carol Graham FCA
(Senior Statutory Auditor)
For and on behalf of
HW, Chartered Accountants & Statutory Auditor
Bridge House
157 Ashley Road
Hale
Altrincham
Cheshire
WA14 2UT
22 October 2013
Independent Auditors’ Report  
to the Members of Epistem Holdings Plc 
Year Ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 32
Notes
2013
£’000
2012
£’000
Revenue 2 5,356 5,560
Contract costs (3,800) (4,112)
Discovery and development costs (1,679) (996)
General administrative costs (1,396) (1,287)
Operating (loss) 3 (1,519) (835)
Finance income 6 60 109
(Loss) on ordinary activities before taxation (1,459) (726)
Taxation on ordinary activities 7 296 482
Total Comprehensive Income for the financial year (1,163) (244)
Loss per share (pence)
– Basic 9 (12.5)p (2.9)p
– Diluted 9 (12.5)p (2.9)p
All of the activities of the Group are classed as continuing.
The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its own Income Statement.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 33
Company Overview Business Review Governance Financials
Share 
capital
£’000
Share 
premium 
account
£’000
Employee 
share 
incentive plan 
reserve
£’000
Share 
options 
reserve
£’000
Reverse 
acquisitions 
reserve
£’000
Retained 
earnings
£’000
Total
£’000
Balance at 1 July 2011 119 11,206 (88) 691 (2,484) (3,262) 6,182
Allotment of ordinary shares 12 2,765 – – – – 2,777
Share issue costs – (60) – – – – (60)
Purchase of own shares (SIP) – – (48) – – – (48)
Exercise of options 2 96 – (14) – – 84
Lapse of options – – – (1) – 1 –
Recognition of equity-settled share-based 
payments – – – 171 – – 171
Total comprehensive income for the year – – – – – (244) (244)
At 30 June 2012 133 14,007 (136) 847 (2,484) (3,505) 8,862
Allotment of ordinary shares 12 4,312 – – – – 4,324
Share issue costs – (140) – – – – (140)
Purchase of own shares (SIP) – – (46) – – – (46)
Exercise of options 1 51 – (13) – – 39
Lapse of options – – – (8) – – (8)
Recognition of equity-settled share-based 
payments – – – 187 – – 187
Total comprehensive income for the year – – – – – (1,163) (1,163)
At 30 June 2013 146 18,230 (182) 1,013 (2,484) (4,668) 12,055
Consolidated Statement of Changes in Equity
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 34
Notes
2013
£’000
2012
£’000
Non-current assets
Intangible assets 10 3,495 2,189
Plant and equipment 11 710 573
Deferred taxation 12 977 1,002
5,182 3,764
Current assets
Trade and other receivables 13 2,006 1,978
Tax receivables 362 41
Cash and cash equivalents 14 6,522 4,684
8,890 6,703
Liabilities
Current liabilities
Deferred income 15 210 198
Trade and other payables 16 1,807 1,407
2,017 1,605
Net current assets 6,873 5,098
Total assets less current liabilities 12,055 8,862
Non-current liabilities
Liabilities payable 1–5 years – –
Net assets 12,055 8,862
Capital and reserves
Called-up equity share capital 21 146 133
Share premium account 22 18,230 14,007
Employee share incentive plan reserve 22 (182) (136)
Share options reserve 22 1,013 847
Reverse acquisition reserve 22 (2,484) (2,484)
Retained earnings 22 (4,668) (3,505)
Total shareholders’ equity 12,055 8,862
These financial statements were approved by the Directors and authorised for issue on 22 October 2013 and are signed on 
their behalf by:
D E Evans    H J J Rylands
Chairman    Finance Director
Epistem Holdings Plc
Company number: 06108621
Consolidated Balance Sheet
As at 30 June 2013 Epistem Holdings Plc  Annual Report 2013 35
Company Overview Business Review Governance Financials
2013
£’000
2012
£’000
Cash flows from operating activities
Operating (loss) for the year (1,519) (835)
Depreciation, amortisation and impairment 284 193
Share-based payment expense 179 171
Operating (loss) before changes in working capital and provisions (1,056) (471)
(Increase) in trade and other receivables (28) (68)
Increase in deferred income 12 123
Increase/(decrease) in trade and other payables 400 (40)
Net cash (outflow) from operations (672) (456)
Finance income 60 109
Finance costs – –
Tax received – 76
60 185
Net cash (outflow) from operating activities (612) (271)
Cash flows from investing activities 
Acquisition of non-current assets (1,727) (1,313)
Net cash (outflow) from investing activities (1,727) (1,313)
Cash flows from financing activities
Proceeds from issue of share capital 4,363 2,861
Expenses of share issue (140) (60)
Purchase of own shares (46) (48)
Movement in borrowings – (105)
Net cash inflow from financing activities 4,177 2,648
Net increase in cash equivalents 1,838 1,064
Cash and cash equivalents at beginning of year 4,684 3,620
Cash and cash equivalents at end of year 6,522 4,684
Analysis of net funds
Cash at bank and in hand 6,522 4,684
Net funds 6,522 4,684
Consolidated Statement of Cash Flows
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 36
1. Significant accounting policies
Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 
(‘IFRS’) as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, International 
Financial Reporting Interpretations Committee (‘IFRIC’) interpretations and with those parts of the Companies Act 2006 
applicable to companies reporting under IFRS.
Epistem Holdings Plc is a company incorporated in the UK.
The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the 
‘Group’). They are presented in pounds sterling and all values are rounded to the nearest one thousand (£k) except where 
otherwise indicated.
The consolidated financial statements have been prepared and approved by the Directors in accordance with International 
Financial Reporting Standards as adopted by the EU.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods represented in 
these consolidated financial statements.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect 
the application of accounting policies and the reported amounts of assets, liabilities, duration of contracts, income & expenses 
and taxation.
•	 Determining the value of deferred income and expenditure requires an assessment of the duration of the contract to which 
the deferred income and expenditure relates, which informs decisions as to when to recognise revenue and whether to 
carry forward costs.
•	 Determining the value of intangible assets requires a judgement about the extent to which the relevant asset will be brought 
into economic use by the Company. The filing of a Patent will generally lead to a judgement that the cost of filing the Patent 
will have future economic use. Research and Development expenditure will generally be expensed unless associated 
income can be identified.
•	 Determining the value of the deferred tax asset requires an estimation of future taxable profits against which the 
accumulated tax losses may be utilised.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. 
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern 
the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting 
rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included 
in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions 
between Group companies are eliminated on consolidation.
On 16 March 2007, Epistem Holdings Plc merged with Epistem Limited, and on that date the shareholders of Epistem Limited 
exchanged their shares for equivalent shares in Epistem Holdings Plc. As Epistem Holdings Plc was newly incorporated at 
the time of the transaction under the terms of IFRS 3 ‘Business Combinations’, this transaction has been accounted for as 
a reverse acquisition, on the basis that the shareholders of Epistem Limited gained a controlling interest in the Group. The 
financial statements therefore represent a continuation of the financial statements of Epistem Limited, which continues as 
a trading subsidiary.
Revenue
Revenue is measured at the fair value of the consideration received or receivable, net of discounts and sales-related taxes.
Notes to the Financial Statements
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 37
Company Overview Business Review Governance Financials
1. Significant accounting policies continued
Revenue recognition
a. Contract revenue
Contract revenue is recognised by reference to the stage of completion of the related transaction at the end of the 
reporting period.
b. Collaboration & licensing revenue
Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence 
agreements which are not directly related to on-going research activity are recorded as deferred income and recognised as 
revenue over the anticipated duration of the agreement. Where the anticipated duration of the agreement is modified, the 
period over which revenue is recognised is also modified.
Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological 
or regulatory hurdles in the research and development process are recognised as revenue upon the achievement of the 
specified milestone.
Income which is related to on-going research activity is recognised as the research activity is undertaken, in accordance with 
the contract.
Segment reporting
A segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks 
and returns that are different from those of other parts of the business.
Research and development
Research expenditure is written off as it is incurred. Development expenditure is written off as it incurred up to the point of 
technical and commercial validation. Thereafter, costs are carried forward as intangible assets, subject to having met the 
following criteria – technical feasibility, intention and ability to sell the product or model and the availability of resources to 
complete the development. All intangible assets are subject to impairment review and amortisation in each financial reporting 
period. In assessing value in use, the estimated future cash flows are discounted to their net present values using a pre-tax 
discount rate that reflects current market assessments of the time value of money and the risks specific to that asset.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is 
calculated so as to write off the cost of an intangible asset, less its estimated residual value, over the useful economic life of 
that asset, as follows:
•	 Acquired intellectual property – the shorter of 5% straight-line basis or their estimated useful life
•	 Developed intellectual property – the shorter of 10% straight-line basis or their estimated useful life
•	 Patents – over the shorter of 17 years or their estimated useful lives on a straight-line basis
No amortisation is charged on those assets which are not yet available for use.
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation 
is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset 
as follows:
•	 Plant & machinery – 25% reducing balance basis
•	 Fixtures & fittings – 25% reducing balance basis
•	 Equipment – 25% reducing balance basis
Finance lease agreements
Assets held under finance lease agreements are capitalised and disclosed under tangible fixed assets at their fair value. The 
capital element of the future payments is treated as a liability and the interest is charged to the consolidated income account 
so as to produce a constant periodic rate of interest on the remaining balance of the liability. Epistem Holdings Plc  Annual Report 2013 38
1. Significant accounting policies continued
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are 
charged against profits over the period of the lease.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets 
and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. 
Non-monetary items carried at fair value and denominated in foreign currencies are retranslated at the rates prevailing on 
the date when fair value is determined. The foreign currency risks relating to assets and liabilities are detailed in Note 18.
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are taken to 
the income account. Exchange differences arising on non-monetary items, carried at fair value, are included in the income 
account, except for such non-monetary items in respect of which gains and losses are recorded in equity.
Share-based payments
The Group issues equity-settled share-based payments to certain employees (including Directors). Equity-settled share-based 
payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled 
share-based payments is expensed on a straight line basis over the vesting period, together with a corresponding increase 
in equity, based upon the Group’s estimate of the shares that will eventually vest.
Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based 
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Where the terms of an equity settled transaction are modified, as a minimum an expense is recognised as if the terms had 
not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the 
modification, as measured at the date of modification.
Where an equity settled transaction is cancelled, it is treated as if it had vested on the date of the cancellation, and any 
expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is substituted for the 
cancelled transaction, and designated as a replacement transaction on the date that it is granted, the cancelled and new 
transactions are treated as if they were a modification of the original transaction, as described in the previous paragraph.
The issuance by the Company of share options to employees of its subsidiary represents additional capital contributions and 
the fair value of such options and awards is therefore recognised as an increase in the Company’s investment in Group 
undertakings with a corresponding increase in total equity shareholders’ funds.
Share Incentive Plan
The Company operates a HMRC qualifying Share Incentive Plan. Under the scheme, the Company will contribute Matching 
shares to employees who elect to invest in Epistem shares under the scheme.
The Matching shares have vesting conditions which require participants to remain employed with the Company and retain 
their investment in Epistem shares for at least 3 years. The cost of the Matching shares is expensed as and when the vesting 
conditions have been satisfied.
Pension Contributions
Contributions to personal pension plans of employees on a defined contributions basis are charged to the income statement 
in the year in which they are payable.
Financial instruments
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either 
financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest 
in the assets of the Company after deducting all of its liabilities.
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 39
Company Overview Business Review Governance Financials
1. Significant accounting policies continued
Trade and other receivables
Trade and other debtors are recognised and carried forward at invoiced amounts less provisions for any doubtful debts. 
Bad debts are written off when identified.
Cash and cash equivalents
Cash and cash equivalents are included in the balance sheet at cost. Cash and cash equivalents comprise cash at bank and 
in hand and short-term deposits with an original maturity of three months or less.
Interest-bearing loans and borrowings
All loans and borrowings are recognised initially at cost, which is the fair value of the consideration received, net of issue costs 
associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest 
method. Gains or losses are recognised in the consolidated income account when liabilities are de-recognised or impaired, 
as well as through the amortisation process.
Investments
Investments in subsidiaries are stated at cost less any provisions for impairment. An impairment is recognised when the 
recoverable amount of the investment is less than the carrying amount.
Taxation
Current 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.
Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except to the extent that 
the deferred tax arises from the initial recognition of goodwill (if amortisation of goodwill is not deductible for tax purposes) 
or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the 
transaction affects neither accounting profit nor taxable profit and loss. Temporary differences are differences between the 
carrying amount of the Group’s assets and liabilities and their tax base.
Deferred tax liabilities may be offset against deferred tax assets within the same taxable entity. Any remaining deferred tax 
asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable 
taxation profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can 
be utilised.
Deferred tax is provided on temporary differences arising in subsidiaries, jointly controlled entities and associates, except 
where the timing of reversal of the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at 
the average tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax 
rates and laws that have been enacted or substantially enacted by the balance sheet date. Measurement of deferred tax 
liabilities and assets reflects the tax consequence expected to fall from the manner in which the asset or liability is recovered 
or settled.
Parent Company Assets
The assets of the parent Company are subject to impairment review in each financial period. Epistem Holdings Plc  Annual Report 2013 40
1. Significant accounting policies continued
New standards and interpretations not applied
The International Accounting Standards Board (‘IASB’) and IFIRC have issued the following standards and interpretations with 
an effective date for financial years beginning on or after 1 July 2013:
•	 IAS 19 (revised) Employee benefits
•	 IAS 27 (revised) Consolidated financial statements
•	 IAS 28 (revised) Joint arrangements
•	 IAS32 (revised) Financial instruments: presentation
•	 IFRS 1 (revised) Government loans
•	 IFRS 7 (revised) Financial instruments set-off of assets and liabilities
•	 IFRS 9 (revised) Financial instruments classification and measurement
•	 IFRS 10 Consolidated financial statements
•	 IFRS 11 Joint arrangements
•	 IFRS 12 Disclosure of interests in other entities
•	 IFRS 13 Fair value measurement
The Directors do not anticipate that the adoption of these standards and interpretations will have a material effect on the 
Group’s financial statements in the period of initial application.
2. Segment information
For internal reporting, the Group is organised into 3 operating Divisions – Preclinicial Research Services, Personalised 
Medicine and Novel Therapies. Preclinical Research Services provides preclinical testing services. Personalised Medicine 
specialises in molecular measures of biological effect and point of care molecular diagnostic testing. Novel Therapies is 
discovering key regulators of epithelial stem cells.
The results of the operating Divisions of the Company are detailed below.
Business segments
Preclinical 
Research 
Services
£’000
Personalised 
Medicine
£’000
Novel 
Therapies
£’000
Unallocated
£’000
Total
£’000
Twelve months ended 30 June 2013
Revenue 2,851 2,505 – – 5,356
Segment trading result 878 15 (718) (1,231) (1,056)
less depreciation and amortisation (108) (79) (62) (35) (284)
less equity-settled share-based payments (13) (33) (3) (130) (179)
Operating profit/(loss) 757 (97) (783) (1,396) (1,519) 
Twelve months ended 30 June 2012
Revenue 2,895 2,665 – – 5,560
Segment trading result 856 503 (700) (1,130) (471)
less depreciation and amortisation (68) (48) (52) (25) (193)
less equity-settled share-based payments (6) (31) (2) (132) (171)
Operating profit/(loss) 782 424 (754) (1,287) (835) 
Twelve months ended 30 June 2013
Segment assets 1,330 4,249 431 8,062 14,072
Segment capital expenditure 68 1,569 39 51 1,727
Twelve months ended 30 June 2012
Segment assets 1,352 2,598 505 6,012 10,467
Segment capital expenditure 343 763 171 36 1,313
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 41
Company Overview Business Review Governance Financials
2. Segment information continued
Geographical segments
The Group’s operations are located in the United Kingdom. The following table provides an analysis of the Group’s revenue by 
geographical market:
2013
£’000
2012
£’000
United Kingdom 1,491 720
Europe 563 977
United States of America 3,144 3,778
Asia 158 85
5,356 5,560
Revenues from customers accounting for more than 10% of total revenue are detailed below:
(a) £1,016k revenue was derived from the University of Maryland on behalf of the US Government with revenue included within 
Preclinical Research Services (2012 – £922k);
(b) £736k revenue was derived from international pharmaceutical company, Sanofi Aventis, with revenue included within 
Preclinical Research Services and Personalised Medicine (2012 – £1,674k); and
(c) £714k revenue was derived from international pharmaceutical company, Glaxo SmithKline, with revenue included within 
Preclinical Research Services and Personalised Medicine (2012 – £249k).
3. Operating (loss)
The Group operating loss is stated after charging:
2013
£’000
2012
£’000
Discovery and development expenditure 1,679 996
Amortisation of intangible assets 74 8
Depreciation of owned tangible fixed assets 180 185
Loss in disposal of fixed assets 30 –
Auditors’ remuneration
– as auditors 25 23
– for other services – –
Operating lease costs – property rent 175 189
4. Particulars of employees
The average number of staff employed by the Group during the financial year amounted to:
2013
No
2012
No
Contract services 43 41
Research and development 13 12
Administrative 9 9
65 62
The aggregate employee costs (including Directors) were:
2013
£’000
2012
£’000
Wages and salaries 3,030 2,708
Social security costs 339 286
Equity settled share-based payments 179 171
Pension payments 74 65
3,622 3,230 Epistem Holdings Plc  Annual Report 2013 42
5. Directors’ remuneration (key management)
Group
2013
£’000
2012
£’000
Remuneration 745 778
Pension contribution 29 29
Equity-settled share-based payments 135 131
909 938
One Director (2012: 1) accrues benefits in a money purchase pension scheme. Full details of the Directors’ remuneration and 
Directors’ options are contained in the Directors’ Remuneration Report.
6. Finance income and costs
Group
2013
£’000
2012
£’000
Finance income
– interest receivable 15 15
– foreign exchange surpluses 45 94
60 109
7. Taxation on ordinary activities
(a) Recognised in the income statement
Group
2013 
£’000
2012 
£’000
Current tax
Research and development tax credits (191) –
Adjustments in respect of prior periods (131) –
Total current tax (322) –
Deferred tax
Impact of tax rate change on brought forward deferred tax balances 30 91
Prior year tax losses now recognised 284 (196)
Current year tax losses (733) (860)
Current year capital allowances in excess of depreciation 345 224
Revenue recognition of items prior to amortisation 102 216
In respect of current year share options charges (2) 43
Total deferred tax 26 (482)
Total tax (credit) for the year (296) (482)
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 43
Company Overview Business Review Governance Financials
7. Taxation on ordinary activities continued
(b) Reconciliation of the total tax charge
Group
2013 
£’000
2012 
£’000
Loss before taxation (1,459) (726)
Tax using the UK corporation tax rate of 23% (2012: 24%) (336) (174)
Effect of difference in tax rate 30 91
Movement in share options 42 –
Revenue recognition of items prior to amortisation 102 216
Capital allowances in excess of depreciation (7) –
Item not deductible/chargeable for tax purposes (5) 38
Adjustments in respect of research and development tax credits (276) (457)
Adjustment relating to a previous year 154 (196)
Total tax in income statement (296) (482)
At 30 June 2013, the change in the corporation tax rate to 23% had been substantially enacted and therefore the deferred 
taxation assets included within these results have been calculated using a UK corporation tax rate of 23%.
The Group had trading losses, as computed for tax purposes, of approximately £8,581k (2012: £6,577k) available to carry 
forward to future periods.
In accordance with the provisions of the Finance Act 2000 in respect of research and development allowances, the Group 
is entitled to claim tax credits for certain research and development expenditure. The amount included in the financial 
statements in respect of the year ended 30 June 2013 is £191k (2012: £nil).
8. Profit attributable to members of the parent company
The profit dealt with in the accounts of the parent company was £15k (2012: £14k).
9. Earnings per share
The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the 
weighted average number of ordinary shares in issue during the year.
The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to 
assume conversion of all dilutive potential ordinary shares in relation to share options and share warrants and also the 
weighted average Matching Shares held by the Epistem SIP which are not yet vested. The number of share options has been 
adjusted to take into account the issue price and the fair value, consistent with IAS 33, ‘Earnings per share’.
Group
2013 
£’000
2012 
£’000
(Loss) for the year after taxation (1,163) (244)
Group
2013 
Number
2012 
Number
Weighted average number of ordinary shares in issue 9,299,263 8,471,693
Dilutive ordinary shares from options and warrants in issue 1,172,965 996,381
Dilutive weighted average number of ordinary shares 10,472,228 9,468,074
(Loss) per share
– basic (12.5)p (2.9)p
– diluted (12.5)p (2.9)p Epistem Holdings Plc  Annual Report 2013 44
10. Intangible assets
Group
Patents 
£’000
Acquired 
Intellectual 
Property 
£’000
Developed 
Intellectual 
property 
£’000
Total 
£’000
Cost
At 1 July 2012 369 287 1,579 2,235
Additions 13 – 1,367 1,380
At 30 June 2013 382 287 2,946 3,615
Amortisation
At 1 July 2012 8 38 – 46
Charge for the year 11 4 59 74
At 30 June 2013 19 42 59 120
Net book value
At 30 June 2012 361 249 1,579 2,189
At 30 June 2013 363 245 2,887 3,495
Cost
At 1 July 2011 199 287 627 1,113
Additions 170 – 952 1,122
At 30 June 2012 369 287 1,579 2,235
Amortisation
At 1 July 2011 4 34 – 38
Charge for the year 4 4 – 8
At 30 June 2012 8 38 – 46
Net book value
At 30 June 2011 195 253 627 1,075
At 30 June 2012 361 249 1,579 2,189
During the year to 30 June 2013, the cost of the Company’s Patents assessed as not being available for economic use 
amounted to £334k (2012 – £322k).
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 45
Company Overview Business Review Governance Financials
11. Plant and equipment
Group
Lab 
equipment 
£’000
Fixtures & 
fittings
£’000
Other 
Equipment 
£’000
Total 
£’000
Cost
At 1 July 2012 1,428 31 199 1,658
Additions 296 19 32 347
Disposals (188) – – (188)
At 30 June 2013 1,536 50 231 1,817
Depreciation
At 1 July 2012 943 24 118 1,085
Charge for the year 145 6 29 180
Depreciation on disposed assets (158) – – (158)
At 30 June 2013 930 30 147 1,107
Net book value
At 30 June 2012 485 7 81 573
At 30 June 2013 606 20 84 710
Group
Lab 
equipment 
£’000
Fixtures & 
fittings 
£’000
Other 
Equipment 
£’000
Total 
£’000
Cost
At 1 July 2011 1,274 30 163 1,467
Additions 154 1 36 191
At 30 June 2012 1,428 31 199 1,658
Depreciation
At 1 July 2011 783 20 97 900
Charge for the year 160 4 21 185
At 30 June 2012 943 24 118 1,085
Net book value
At 30 June 2011 491 10 66 567
At 30 June 2012 485 7 81 573 Epistem Holdings Plc  Annual Report 2013 46
12. Deferred Taxation
Recognised
Group
2013 
£’000
2012 
£’000
Tax losses carried forward 1,974 1,578
Excess of tax allowances over depreciation (804) (478)
Excess of revenue recognition over amortisation (309) (216)
Share-based payment transactions 115 118
Other timing differences 1 –
977 1,002
Deferred tax assets are recognised to the extent that the Directors, having reviewed expectations of future profitability, 
consider it is probable that there will be sufficient profit available against which the deferred tax asset may be utilised.
The Group did not recognise deferred tax assets in respect of share-based payment transactions of £2,755k (2012 – £2,942k).
13. Trade and other receivables
Group
2013 
£’000
2012 
£’000
Trade receivables 1,746 1,188
Accrued income – 565
Other receivables 65 146
Prepayments 195 79
2,006 1,978
Analysis of trade receivables
2013 
£’000
2012 
£’000
Neither impaired nor past due 1,088 892
Past due but not impaired 658 296
Trade receivable 1,746 1,188
Aging of past due but not impaired trade receivables
There is no other class of financial assets that is past due but not impaired except for trade receivables. The Group’s credit 
period generally ranges up to 60 days. The age analysis of the trade receivables have been considered from the date of the 
invoice and, net of allowances that are past due, is given below:
2013 
£’000
2012 
£’000
Not later than 1 month 345 107
Later than 1 month but not later than 3 months 91 132
Later than 3 months 222 57
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 47
Company Overview Business Review Governance Financials
14. Cash and cash equivalents
Group
2013 
£’000
2012 
£’000
Cash at bank and in hand 65 73
Short-term bank deposits 6,457 4,611
6,522 4,684
Cash and cash equivalents comprise current accounts held by the Group with immediate access and short-term bank 
deposits with a maturity of 3 months or less. Market rates of interest are earned on such deposits. The credit risk on such 
funds is limited because the counter parties are banks with high credit ratings assigned by international credit rating agencies.
15. Deferred income
The items recorded as Deferred income are to be recognised over future periods as follows:
Group
2013 
£’000
2012 
£’000
Amounts to be recognised within 1 year 210 198
16. Trade and other payables
Group
2013 
£’000
2012 
£’000
Trade payables 751 609
Accruals 306 587
Other payables 750 211
1,807 1,407 Epistem Holdings Plc  Annual Report 2013 48
17. Share-based payments
(a) Share options outstanding at 30 June 2013
Prior to 28 November 2007, the Company operated a number of HMRC approved and unapproved share option schemes 
for employees (including Directors). The original options were granted by Epistem Limited but, following the acquisition by 
Epistem Holdings Plc, these were released in exchange for equivalent options over the ordinary shares of Epistem Holdings 
Plc. On 28 November 2007, the Company established the 2007 Epistem Share Option Scheme.
Share Options
Award
Number 
of awards
Exercise 
price Period within which options are exercisable
Fair value 
per option
Fair value 
£
EMI – Approved 4,400 £0.75 21 Jul 2004 to 20 Jul 2014 £0.27p 1,188
Share Warrants (Note 21) 198,554 £1.61 18 Mar 2005 to 17 Mar 2015 £0.56p 111,389
EMI – Unapproved 78,000 £1.29 31 Mar 2005 to 30 Mar 2015 £0.45p 35,022
EMI – Approved 30,624 £1.20 25 Nov 2005 to 24 Nov 2015 £0.43p 13,168
EMI – Unapproved 472,153 £1.20 10 Jan 2006 to 09 Jan 2016 £0.43p 201,137
EMI – Approved 153,194 £1.20 10 Jan 2006 to 09 Jan 2016 £0.43p 65,873
EMI – Approved 8,200 £1.20 29 Sept 2006 to 28 Sept 2016 £0.43p 3,526
EMI – Approved 80,644 £1.24 28 Mar 2007 to 27 Mar 2017 £0.42p 33.870
EMI – Unapproved 177,653 £1.24 28 Mar 2007 to 27 Mar 2017 £0.42p 74,615
EMI – Approved 24,703 £1.67 27 Jul 2007 to 26 Jul 2017 £0.39p 9,634
EMI – Unapproved 57,727 £1.60 15 Oct 2007 to 14 Oct 2017 £0.36p 20,782
2007 Epistem Share Option Scheme 71,918 £1.53 03 Mar 2011 to 02 Mar 2018 £0.36p 25,890
2007 Epistem Share Option Scheme 63,550 £1.77 31 Jul 2011 to 30 Jul 2018 £0.37p 23,514
2007 Epistem Share Option Scheme 40,600 £4.03 10 Dec 2013 to 09 Dec 2020 £1.64p 66,584
2007 Epistem Share Option Scheme 30,000 £3.60 10 May 2014 to 09 May 2021 £1.46p 43,800
2007 Epistem Share Option Scheme 254,631 £3.73 29 Mar 2014 to 28 Mar 2021 £1.51p 384,492
2007 Epistem Share Option Scheme 5,369 £3.60 10 May 2014 to 09 May 2021 £1.51p 8,107
2007 Epistem Share Option Scheme 14,700 £3.60 10 Feb 2015 to 09 Feb 2022 £1.46p 21,462
2007 Epistem Share Option Scheme 30,192 £5.50 26 Mar 2016 to 25 Mar 2024 £2.23p 67,328
2007 Epistem Share Option Scheme 23,758 £5.50 26 Mar 2016 to 25 Mar 2024 £2.23p 52,980
Option valuations
The options were valued using the Black-Scholes option-pricing model. Where appropriate, performance conditions were 
included in the fair value calculations. The fair value per option granted and the assumptions used in the calculations are in the 
table below. The Group’s effective date for IFRS 2, (‘Share-Based Payments’) implementation is 1 July 2006 and the IFRS has 
been applied to all options granted after 7 November 2002 which have not been vested by this effective date.
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 49
Company Overview Business Review Governance Financials
17. Share-based payments continued
Award Grant date
Expected 
term 
(Note a)
Expected 
dividend 
yield % 
(Note b)
Expected 
volatility % 
(Note c)
Risk % rate 
(Note d)
Performance 
condition
EMI – Approved 21 Jul 2004 5 years 0 60 4.50 None
Share Warrants 18 Mar 2005 5 years 0 60 4.75 None
EMI – Unapproved 31 Mar 2005 5 years 0 60 4.75 None
EMI – Approved 25 Nov 2005 5 years 0 60 4.50 None
EMI – Unapproved 10 Jan 2006 5 years 0 60 4.50 Note (e)
EMI – Approved 10 Jan 2006 5 years 0 60 4.50 None
EMI – Approved 29 Sept 2006 5 years 0 60 4.50 None
EMI – Approved 28 Mar 2007 5 years 0 60 5.25 Note (f)
EMI – Unapproved 28 Mar 2007 5 years 0 60 5.25 Note (f)
EMI – Approved 27 Jul 2007 5 years 0 45 5.50 None
EMI – Unapproved 15 Oct 2007 5 years 0 45 5.75 Note (g)
2007 Epistem Share Option Scheme 03 Mar 2008 5 years 0 45 5.75 Note (g)
2007 Epistem Share Option Scheme 31 Jul 2008 5 years 0 45 5.25 Note (h)
2007 Epistem Share Option Scheme 10 Dec 2010 5 years 0 40 5.00 Note (h)
2007 Epistem Share Option Scheme 10 May 2011 5 years 0 50 0.50 Note (h)
2007 Epistem Share Option Scheme 29 Mar 2011 5 years 0 50 0.50 Note (i)
2007 Epistem Share Option Scheme 10 May 2011 5 years 0 50 0.50 Note (h)
2007 Epistem Share Option Scheme 10 Feb 2012 5 years 0 50 0.50 Note (h)
2007 Epistem Share Option Scheme 26 Mar 2013 5 years 0 50 0.50 Note (h)
2007 Epistem Share Option Scheme 26 Mar 2013 5 years 0 50 0.50 Note (j)
(a) The expected term used in the model is 5 years and is based upon the Directors’ best estimates for the effects of exercise restrictions and behavioural 
considerations.
(b) The dividend yield of 0% reflects the absence of a history of paying dividends and a clear dividend policy at the relevant grant dates.
(c) Prior to 2011, the expected volatility was estimated by the Directors after inspection of the financial statements of comparable businesses in the same business 
sector as the Group. Thereafter, the expected volatility has been calculated by reference to the historic share price of the Company.
(d) The risk free rate used is based upon the prevailing UK bank base rate at the date of the grant.
(e) These options vest on dates dependant on anniversaries of commencing employment with the Group which commenced 1 September 2005 with the final 
tranche vesting on 1 September 2008.
(f) The performance conditions for these options to vest were satisfied in 2010.
(g) These options are subject to performance criteria which are appropriate to the option holders’ role within the Company and which are assessed by the 
Remuneration Committee.
(h)  These options may be exercised following the third anniversary of grant and are subject to performance criteria which are appropriate to the option holders’ 
role within the Company and which are assessed by the Remuneration Committee.
(i)  These options may be exercised when the Remuneration Committee determine that the Company has achieved a compound annual growth in EBITDA of at 
least 15% for the three-year period commencing 01 July 2010.
(j)  These options may be exercised on achievement of performance criteria determined by the Remuneration committee which correlate to shareholder value. Epistem Holdings Plc  Annual Report 2013 50
17. Share-based payments continued
The number of options and their weighted average exercise prices are as follows:
Number
Weighted average  
exercise price
Weighted average remaining 
contracted life – Years
Group 2013 2012 2013 2012 2013 2012
Outstanding as at 1 July 1,808,098 1,918,548 £1.78 £1.41 – –
Granted during the year 54,525 18,450 £5.50 £3.60 – –
Exercised during the year (36,628) (123,400) £1.04 £0.69 – –
Lapsed during the year (5,425) (5,500) £3.89 £1.06 – –
Outstanding as at 30 June 1,820,570 1,808,098 £1.82 £1.78 4.03 4.83
Options exercisable at 30 June 1,304,402 1,341,030 £1.30 £1.31 2.75 3.80
The weighted average share price at the exercise dates was £4.89 (2012 – £3.53).
(b) Share Investment Plan
The Company operates a share investment plan, (The Epistem Share Investment Plan or SIP) which is open to Directors and 
employees in accordance with HMRC approved rules. Under the terms of the SIP, Directors and employees may invest up to 
£125 per month to be invested in ordinary shares (‘Partnership Shares’) in the Company at the prevailing market price. At the 
same time as each monthly subscription, a maximum of 2 Matching Shares for each Partnership Share will be acquired on 
behalf of the SIP’s participants. Both the Partnership and the Matching Shares are purchased on behalf of the scheme’s 
participants by Epistem SIP Trustee Limited, a wholly owned subsidiary of the Company. Participants, who must be employed 
by the Company, may withdraw their Matching Shares once their associated Partnership Shares have been held for 3 years. 
The cost of the Matching Shares is expensed as and when this vesting condition is met.
2013 2012
Partnership shares held at 30 June 21,578 18,092
Matching Shares held at 30 June 43,153 36,181
Group
2013 
£’000
2012 
£’000
Unamortised cost of Matching shares
(Comprising Employee SIP reserve) 182 136
18. Financial risk management objectives and policies
The Group holds or issues financial instruments in order to achieve 2 main objectives, being:
(a) to finance its operations; and
(b) to manage its exposure to interest and currency risks arising from its operations and from its sources of finance.
In addition, various financial instruments (e.g. trade receivables, trade payables, accruals and prepayments) arise directly from 
the Group’s and the Company’s operations.
Transactions in financial instruments result in the Group assuming or transferring to another party 1 or more of the financial 
risks described below.
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 51
Company Overview Business Review Governance Financials
18. Financial risk management objectives and policies continued
Interest rate risk
The Group currently finances its operations through reserves of cash and liquid resources and does not have a borrowing 
requirement. Surplus cash at bank is placed on deposits at variable rates. The Board monitors the financial markets and the 
Group’s own requirements to ensure that the policies are exercised in the Group’s best interests.
The following table demonstrates the sensitivity to a possible change in interest rates on the Group’s profit before tax through 
the impact of floating rate cash balances.
Decrease 
in the basis 
points
Effect on loss 
before tax 
and equity 
£’000
2013
Cash and cash equivalents 25 12
2012
Cash and cash equivalents 25 5
An increase in 25 basis points would have a similar opposite effect.
Credit risk
The Group monitors credit risk closely and considers that its current policies of credit checks meet its objectives of managing 
exposure to credit risk.
The Group has no significant concentrations of credit risk. Amounts shown in the balance sheet best represent the maximum 
credit risk exposure in the event that other parties fail to perform their obligations under financial instruments.
Liquidity risk
The Board’s policy aims to ensure that sufficient funds are held on a short-term basis in order to meet operational needs.
Currency risk
The Group’s functional currency is sterling. The exposure to currency risk relates to licence income and those short-term trade 
receivables which are not invoiced in sterling. There are no significant costs incurred that involve payments in foreign currency.
The Group has no forward contracts at the year end (2011 – nil) to manage foreign currency risk.
Balances which are denominated in US Dollars are detailed below:
Group
2013 
£’000
2012 
£’000
Trade and other receivable 764 702
Cash and cash equivalent 1,392 1,694
2,156 2,396 Epistem Holdings Plc  Annual Report 2013 52
18. Financial risk management objectives and policies continued
The following table demonstrates the sensitivity to a possible change in currency rates on the Group’s loss before tax through 
the impact of sterling weakening against the US dollar.
Decrease in 
the currency 
rate
Effect on loss 
before tax 
and equity 
£’000
2013
Trade and other receivable 5% 38
Cash and cash equivalents 5% 70
2012
Trade and other receivable 5% 35
Cash and cash equivalents 5% 85
An increase in currency rate of 5% would have a similar opposite effect.
Fair values of financial assets and liabilities
There is no material difference between the book value and the fair value of the Group’s financial assets or liabilities.
19. Commitments under operating leases
At 30 June 2013 the Group had annual commitments under non-cancellable operating leases as set out below.
Land and buildings
Group
2013 
£’000
2012 
£’000
Operating leases which expire:
Within 1 year 180 157
The operating leases are in respect of the company’s office and laboratories are held under short-term leases.
20. Related party transactions
At the balance sheet date, the amounts owed to the following Director, D Evans, was £9k (2012: £9k.) The transactions during 
the year with these related parties relate entirely to Directors’ remuneration for the year and the amounts for each are detailed 
in the Directors’ Remuneration Report.
21. Share capital
Allotted and called up share capital:
2013 
No
2013 
£’000
2012 
No
2012 
£’000
Brought forward at 1 July 8,850,781 133 7,933,983 119
Private placing 793,398 12 793,398 12
Exercise of options 36,628 1 123,400 2
Ordinary shares of £0.015 each 9,680,807 146 8,850,781 133
On 16 March 2007, the Company entered into a warrant instrument in respect of the subscription for up to 198,554 ordinary 
shares of £0.015 each in Epistem Holdings Plc. This warrant instrument replaced a previous warrant instrument created by 
Epistem Limited on 18 March 2005. Each warrant confers the right to subscribe for 1 ordinary share at a subscription price of 
£1.61 per ordinary share. The subscription rights under the warrants may be exercised up to 21 September 2015.
Notes to the Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 53
Company Overview Business Review Governance Financials
22. Reserves
Employee 
share 
incentive plan 
reserve 
£’000
Share 
premium 
account 
£’000
Share 
options 
reserve 
£’000
Reverse 
acquisition 
reserve 
£’000
Retained 
Earnings 
£’000
Balance as at 1 July 2011 (88) 11,206 691 (2,484) (3,262)
Comprehensive income for the year – – – – (244)
Allotment of ordinary shares – 2,765 – – –
Share issue costs – (60) – – –
Unamortised cost of Matching Shares (SIP) (48) – – – –
Exercise of options – 96 (14) – –
Lapse of options – – (1) – 1
Recognition of equity settled share-based payments in the year – – 171 – –
Balance at 30 June 2012 (136) 14,007 847 (2,484) (3,505)
Balance as at 1 July 2012 (136) 14,007 847 (2,484) (3,505)
Comprehensive income for the year – – – – (1,163)
Allotment of ordinary shares – 4,312 – – –
Share issue costs – (140) – – –
Unamortised cost of Matching Shares (SIP) (46) – – – –
Exercise of options – 51 (13) – –
Lapse of options – – (8) – –
Recognition of equity settled share-based payments in the year – – 187 – –
Balance at 30 June 2013 (182) 18,230 1,013 (2,484) (4,668)
The reverse acquisition reserve arises as a difference on consolidation under merger accounting principles and is solely in 
respect of the merger of the Company and Epistem Limited on 16 March 2007.
The employee share incentive plan reserve represents 43,153 shares in Epistem Holdings Plc (2012: 36,181 shares) all of 
which are held by Epistem SIP Trustee Limited. These shares are listed on the Alternative Investment Market and their market 
value at 30 June 2013 was £248k (2012: £140k). The nominal value held at 30 June 2013 was £647 (2012: £526). Epistem Holdings Plc  Annual Report 2013 54
Notes
2013 
£’000
2012 
£’000
Non-current assets
Investments a 6,070 5,891
Current assets
Amounts receivable from Group undertakings and other receivables b 9,498 6,458
Cash and cash equivalents c 4,064 2,867
13,562 9,325
Current liabilities
Corporation taxation – –
Net current assets 13,562 9,325
Total assets less current liabilities 19,632 15,216
Capital and reserves
Called-up equity share capital 21 146 133
Share premium account 22 18,230 14,007
Share options reserve 1,013 847
Retained Earnings 243 229
Total shareholders’ funds equity 19,632 15,216
These financial statements were approved by the Directors and authorised for issue on 22 October 2013 and are signed on 
their behalf by:
D E Evans    H J J Rylands
Chairman    Finance Director
Epistem Holdings Plc
Company number: 06108621
Company Balance Sheet
As at 30 June 2013 Epistem Holdings Plc  Annual Report 2013 55
Company Overview Business Review Governance Financials
Share  
capital 
£’000
Share 
premium 
account 
£’000
Share  
options 
reserve 
£’000
Retained 
earnings 
£’000
Total 
£’000
At 1 July 2011 119 11,206 691 215 12,231
Allotment of ordinary shares 12 2,765 – – 2,777
Share issue costs – (60) – – (60)
Recognition of equity settled share-based payments – – 171 – 171
Exercise of options 2 96 (14) – 84
Lapse of options – – (1) 1 –
Profit for the year – – – 13 13
At 30 June 2012 133 14,007 847 229 15,216
Allotment of ordinary shares 12 4,312 – – 4,324
Share issue costs – (140) – – (140)
Recognition of equity settled share-based payments – – 187 – 187
Exercise of options 1 51 (13) – 39
Lapse of options – – (8) – (8)
Profit for the year – – – 14 14
At 30 June 2013 146 18,230 1,013 243 19,632
Company Statement of Changes in Equity
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 56
2013
 £’000
2012 
£’000
Cash flows from operating activities
Profit for the year – –
Operating profit before changes in working capital and provisions – –
(Increase) in trade and other receivables (3,040) (2,390)
(Decrease) in trade and other payables – –
Cash (outflow) from operations (3,040) (2,390)
Interest received 14 14
Tax (paid)/received – –
14 14
Net cash outflow from operating activities (3,026) (2,377)
Cash flows from financing activities
Proceeds from issue of share capital 4,363 2,861
Expenses of share issue (140) (60)
Net cash inflow from financing activities 4,223 2,801
Net (decrease)/increase in cash equivalents 1,197 425
Cash and cash equivalents at beginning of year 2,867 2,442
Cash and cash equivalents at end of year 4,064 2,867
Analysis of net funds
Cash at bank and in hand 4,064 2,867
Bank overdrafts – –
Net funds 4,064 2,867
Company Statement of Cash Flows
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 57
Company Overview Business Review Governance Financials
a. Investments
Company
The Company is the holding company of the Group.
The Company owns 100% of the issued share capital of Epistem Limited, Epistem SIP Trustees Limited and Visible Genomics 
Limited (companies registered in England and Wales) and Epistem Inc. incorporated in the United States of America. The principal 
activities of the subsidiary companies are:
•	 Epistem Limited and Epistem Inc. – the provision of services to the biotechnology and pharmaceutical industries;
•	 Epistem SIP Trustees Limited – to act as trustee to the Epistem Share Incentive Plan; and
•	 Visible Genomics Limited – a dormant company dissolved 14 August 2012.
On 28 July 2010, Epistem Holdings Plc acquired 100% of the share capital of Visible Genomics Limited, whose principal 
activity had been the development of diagnostic assays and equipment. The assets of Visible Genomics Limited on 27 July 
2010 are summarised below:
£’000
Acquired intangible assets 100
Short-term liabilities (25)
Long-term liabilities (75)
–
On 28 July 2010, the above assets and liabilities were hived into Epistem Limited and Visible Genomics Limited ceased to 
trade. The consideration payable to the vendors of Visible Genomics Limited is related to performance (an earnout) during the 
three-year period to 30 June 2013 and is capped at £2.85m. The Directors have assessed the performance during the period 
since 28 July 2010 and have concluded that the criteria will not be met and, accordingly, that no consideration would be 
payable. However, the performance criteria are currently being reviewed with new criteria being considered. If agreed, these 
criteria are likely to be met during the current financial period, leading to the full amount of the earnout (£2.85m) becoming 
payable. The consideration may be paid either by the issue of shares in Epistem Holdings Plc or by the issue of loan notes.
Year ended 30 June 2013
Investment in 
subsidiaries 
£’000
Cost
At 1 July 2012 5,891
Additions net of lapsed shares 179
At 30 June 2013 6,070
Net book value
At 30 June 2013 6,070
Notes to the Company Financial Statements
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 58
a. Investments continued
Year ended 30 June 2012
Investment in 
subsidiaries 
£’000
Cost
At 1 July 2011 5,721
Additions 170
At 30 June 2012 5,891
Net book value
At 30 June 2012 5,891
Additions in the year ended 30 June 2013 comprised the fair value of the share options issued to employees of the subsidiary 
undertaking during the year of £179k (2012: £170k). Full details of the share options issued are set out in note 17 to the 
consolidated financial statements.
b. Amounts receivable from Group undertaking and other receivables
Company
2013 
£’000
2012 
£’000
Amounts receivable from Group undertaking 9,498 6,458
9,498 6,458
c. Cash and cash equivalents
Company
2013 
£’000
2012 
£’000
Cash at bank and in hand 128 89
Short-term bank deposits 3,936 2,778
4,064 2,867
Cash and cash equivalents comprise current accounts held by the Group with immediate access and short-term bank 
deposits with a maturity of 3 months or less. Market rates of interest are earned on such deposits. The credit risk on such 
funds is limited because the counter parties are banks with high credit ratings assigned by international credit rating agencies.
d. Related party transactions
During the course of the year, Epistem SIP Trustee acquired 15,548 (2012: 19,910) shares in Epistem Holdings Plc on behalf 
of the Epistem Share Investment Plan at a cost of £87k (2012: £71k).
e. Impairment review
The carrying value of Investments and Amounts Receivable are subject to an annual impairment review. In the view of the 
Directors, no impairment provision has been required during the period (2012 – nil).
Notes to the Company Financial Statements continued
For the year ended 30 June 2013 Epistem Holdings Plc  Annual Report 2013 59
Company Overview Business Review Governance Financials
Directors
David Evans
Matthew Walls
Catherine Booth
Roger Lloyd
Robert Nolan
John Rylands
Company Secretary
John Rylands
Registered Office
48 Grafton Street
Manchester M13 9XX
United Kingdom
Registrars
Neville Registrars Limited
18 Laurel Lane
Halesowen B63 3DA
Principal Banker
Natwest Commercial Banking
1 Spinningfields Square
Deansgate
Manchester M3 3AP
Nominated Adviser & Broker
Peel Hunt Limited LLP
Moor House
120 London Wall
London EC2Y 5ET
Auditors
HW Chartered Accountants
Bridge House
Ashley Road
Hale
Cheshire WA14 2UT
Legal Advisers
Pinsent Masons LLP
Princes Exchange
1 Earl Grey Street
Edinburgh EH3 9AQ
Directors, Secretary and Advisers Epistem Holdings Plc  Annual Report 2013 60
Notes  +
Epistem Holdings Plc  
48 Grafton Street
Manchester M13 9XX
United Kingdom
 
T +44 (0)161 606 7258
F +44 (0)161 606 7348
www.epistem.co.uk
Epistem Holdings Plc Annual Report 2013