osmetech annual report 2004    xx
osmetech plc
annual report and accounts 2006 xx    osmetech annual report 2004  
osmetech today
transforming molecular diagnostics into practical costeffective fda
cleared testing solutions
as the demand for and acceptance of molecular diagnostic tests
multiplies so does the rate of testing decentralization the movement
of molecular diagnostic testing into the clinical laboratories of mid
size hospitals requires greater simplicity flexible testing capabilities
and costeffectiveness
osmetech molecular diagnostics is focused on providing cutting
edge costeffective molecular diagnostic technologies and tools that
enable a broader range of hospitals and laboratories to offer
molecular diagnostic services for improved patient care
contents
1 highlights
2 chairman’s statement
3 chief executive officer’s review
8 board of directors
9 report of the directors
15 independent auditors’ report
17 consolidated profit and loss account
17 consolidated statement of total recognised gains and losses
18 consolidated balance sheet
19 company balance sheet
20 consolidated cash flow statement
20 reconciliation of net cash flow to movement in net funds
21 notes to the consolidated cash flow statement
23 notes forming part of the financial statements
42 notice of annual general meeting
45 form of proxy
ibc directors and advisers highlights
2006
• sales for 2006 of £106m 8 months ended 31 december 2005 – £56m – increase of 28
on the corresponding 12 month period
• operating losses of £124m 8 months ended 31 december 2005 – £55m reflects our
significant investment in our molecular diagnostics division including the first full
reporting period since clinical micro sensors inc was acquired in 2005
• fda clearance for esensor
®
cystic fibrosis screening test
• successful launch of first molecular diagnostics products and commencement of sales
• july 2006 share placing raises £128m before expenses
current period
• strategic partnership with epidauros biotechnologie ag to develop pharmaceutical
companion diagnostics and novel molecular diagnostic products
• sale completed of critical care division “ccd” for 449m in cash representing a
substantial return on the original acquisition price of 27m
• cash resources increased significantly on 31 january 2007 to £275m following the sale of
ccd
• agreement to buyback warrants over 78m shares from motorola representing 385 of
the issued share capital for £469000
• first pharmacogenetics assay for warfarin testing and second generation instrument
platform the esensor
®
xt8 planned for clinical trials and fda submission in the third
quarter of 2007
esensor
®
instrument esensor
®
microarray consumable genesensor
™ chairman’s statement
i am pleased to report that 2006 has been another year of considerable achievement for osmetech
our molecular diagnostics division received fda clearance for its esensor
®
cystic fibrosis screening
test and has achieved its first sales of diagnostics products in this rapidly developing and strategically
important market
in december 2006 we announced that the sale of our critical care division to our veterinary partner
idexx laboratories inc for 449m in cash had been agreed this sale was completed at the end of
january 2007 crystallising a considerable gain in the value of this business under osmetech’s ownership
and management since its acquisition from roche diagnostics in april 2003
i would like to take this opportunity to thank all of our critical care division employees for their
dedication enthusiasm and commitment over the past few years in helping to create a strong and
successful business in the blood gas market the board wishes them well for the future as they enter an
exciting new chapter under idexx’s ownership
the sale of the critical care division has demonstrated the skill of the osmetech management team in
acquiring and developing underexploited assets and now management is focussed solely on the major
opportunities available in molecular diagnostics market we are confident that we can deliver similar
success with our molecular diagnostics business which is now appropriately funded and i look forward
to updating shareholders on further progress in due course
gordon hall
chairman
20 march 2007
2 osmetech annual report and accounts 2006 chief executive officer’s review
introduction
through the recent sale of its critical care division osmetech has capitalised on the considerable value
created in that business since its acquisition from roche diagnostics inc in 2003 following its sale the
group is now wholly focussed on its molecular diagnostics business operating in pasadena and boston
in the us
sale of critical care division
2006 was another year of strong profitable growth for the critical care division sales of the blood gas
and electrolyte product range increased to £105m 194m in 2006 from £56m 99m for the 8 month
period ended 31 december 2005 sales increased by 29 when compared to the equivalent 12 month
period in 2005 of £81m benefiting in particular from vetstat sales to our veterinary distribution partner
idexx laboratories inc ‘idexx’
notwithstanding the highly satisfactory operating performance of the division this year on 18 december
2006 we announced the proposed sale of the critical care division to idexx for 449m in cash this
sale was approved by shareholders at an extraordinary general meeting on 9 january 2007 and the
transaction was completed on 31 january 2007
the critical care division was originally acquired by osmetech in april 2003 for 27m before costs
during the period of osmetech’s ownership sales more than doubled and a loss making business was
transformed into profitability this was achieved principally through selective new product investment
and the launch of the vetstat in the veterinary market with idexx osmetech’s developing commercial
relationship with idexx presented an opportunity to sell the division at an attractive price representing
a substantial return on investment
your board considered that this divestment was in the best interests of the group as a whole delivering
the following benefits
• realises excellent value creation for shareholders
• removes any shareholder concerns over the group’s funding requirements and strengthens its
balance sheet
• provides the necessary funding to enable the continued development of a successful molecular
diagnostics business
• osmetech is now well positioned in a high growth market sector with potentially high returns
molecular diagnostics market
the molecular diagnostics market is expected to continue to be the fastest growing segment within in
vitro diagnostics ivd with an estimated global market worth of 26bn in 2006 it is approaching 10
of the total ivd market and exhibiting annual growth rates of approximately 20 infectious disease and
genetic testing are the two most rapidly growing areas for molecular diagnostics accounting for
approximately half of the overall market segment
osmetech is primarily targeting genetic testing which can be divided broadly into three areas
• diagnosis and monitoring – evaluating genetic sequences to confirm the presence or progress of
disease
• susceptibility – evaluating genetic mutations to determine susceptibility to a future condition eg
cystic fibrosis
• pharmacogenetics – evaluating genetic variations to predict a patient’s response to a particular drug
osmetech annual report and accounts 2006 3 chief executive officer’s review
continued
pharmacogenetics or ‘personalised medicine’ is widely anticipated to grow rapidly as treatments are
more closely tailored to a patient’s genetic makeup for example osmetech is developing a genetic
test relevant for the anticoagulant warfarin where the market opportunity is substantial optimal doses
of warfarin vary among patients with incorrect starting dosages prescribed for 20 of patients resulting
in either insufficient or excessive blood thinning
warfarin testing is expected to lead to a reduction in the 85000 cases of severe bleeding and 17000
strokes occurring annually in the us and could decrease national healthcare spending by 11bn per
year as estimated by the american enterprise institute and the brookings institute more than 30m
prescriptions for warfarin are given annually in the us alone with 3m new patients each year suffering
from a heart attack or stroke the total annual number of patients worldwide with conditions for which
warfarin could potentially be prescribed is 85m
pharmacogenetics is also expected to play a larger role in drug development through the identification
of genetic mutations and creation of “companion” diagnostics
molecular diagnostics division
osmetech is developing a strong complementary portfolio of fdaapproved and developmentstage
products that address the rapidly growing molecular diagnostics market
we plan to expand and develop the division through the following means
• progress with the development and commercialisation of the group’s existing product pipeline
including the second generation instrument platform the esensor
®
xt8
• secure licensing agreements that will add assay content and therefore revenues for the group’s
instrument platforms
• continue to explore selective acquisition opportunities which will strengthen and expand the
group’s presence in the molecular diagnostics market
• negotiate licensing agreements and enter into strategic partnerships in nonhealthcare markets thereby
leveraging the strength of the group’s instrument platforms technology and intellectual property
osmetech’s two instrument platforms esensor
®
and genesensor™ previously known as opti gene
are directly targeting the demand for decentralised testing by providing practical cost effective
molecular diagnostic technologies and tools that will enable a broader range of hospitals and
laboratories to offer molecular diagnostic services our strategy has been to design low cost products
specifically for the diagnostics market rather than by adapting complicated high cost research 
products
esensor
®
the esensor
®
instrument and cartridge consumable system is primarily suited to undertaking relatively
complex molecular tests which require the analysis detection or identification of many different targets
at once the electrochemical detection technology is protected by strong international intellectual
property including 70 patents in the us alone which have benefited from an investment of
approximately 100m by motorola during its period of ownership
earlier this year osmetech received 510k clearance from the us fda for its cystic fibrosis carrier
detection test and its esensor
®
4800 dna detection instrument platform this fda approval is a first for
a combined instrument and consumable cystic fibrosis assay the system assesses whether an individual
carries mutations in the cystic fibrosis gene and is used by adult couples contemplating pregnancy
the core technology for the instrument platform and microarray consumable forming part of this
approval will also be used for running tests for other conditions to be launched in the future
4 osmetech annual report and accounts 2006 chief executive officer’s review
continued
esensor
®
xt8
later this year we shall be introducing our second generation instrument the esensor
®
xt8 with new
consumable cartridge which will be able to routinely run complex assays including the cytochrome p450
“cyp 450” pharmacogenomics assays described later
the esensor
®
xt8 system will deliver a number of operational design and performance benefits
including
• significant reduction in processing time
• smaller foot print
• modular and expandable with higher throughput potential
• integrated cpu
• programmable esensor
®
cartridge
• increased chip density to enable wider analysis of gene mutations
• improved data management capabilities
a successful third party evaluation for a fully functional prototype xt8 instrument and our first cyp450
assay for warfarin testing took place in december 2006 we now plan to exhibit the platform at the
clinical virology symposium in the us next month moving to clinical trials in support of an fda
submission in the third quarter of 2007 following fda approval we anticipate a launch in the us by the
end of 2007 with an international launch scheduled for 2008
sensitube™
the sensitube™ product line previously known as opti tube™ consists of plastic tubes and
ergonomically designed sealing caps and carousel for use in the roche lightcycler a market leading
instrument used in pcr analysis sensitube™ is a cost effective robust alternative to roche glass
capillaries that eliminates the dangers of glass breakage and minimises the risk of laboratory personnel
being exposed to potentially dangerous samples and glass shards the same plastic technology has
been incorporated into consumables to be supplied for use with osmetech’s genesensor™ instrument
osmetech has also granted a worldwide nonexclusive license to roche for the manufacture and sale of
plastic consumable vials using this proprietary plastic tube technology in respect of which the company
has recently been granted its first patent
genesensor™
the genesensor™ instrument is primarily suited to undertaking relatively simple molecular tests whilst
our primary objective is to further develop the commercial potential for our esensor
®
system we plan to
fully launch the genesensor™ as a research instrument later this year followed by the introduction of an
fdacleared instrument and accompanying factor v and factor ii ivd tests for thrombophilia in early
2008 in time we expect that the instrument platform and proprietary consumable will be used for
testing a wide range of conditions
the combination of the esensor
®
and genesensor™ products should enable both complex and simple
molecular diagnostic tests to be performed accurately by hospitals in a cost effective and easy to use
format unlike many competing products the two products combine both an instrument platform and
proprietary test specific consumables new tests launched will use the same instrument platform and
consumable format thereby increasing sales revenues for each instrument in use
osmetech annual report and accounts 2006 5  chief executive officer’s review
continued
the increase in administrative expenses and operating loss for the continuing operations of the group
for 2006 reflects both the comparison with an 8 month period for 2005 and the inclusion of the results of
clinical micro sensors inc for a full 12month period following its acquisition on 26 july 2005 we
anticipate that administrative expenses for continuing operations will show a marginal increase in 2007
as more of our molecular division’s products reach commercialisation
the operating loss for the period of £124m compared to a net cash outflow from operating activities of
£112m with the difference of £12m largely explained by the share compensation charge of £08m a
noncash item accounted for in accordance with financial reporting standards no20 “share based
payment” frs 20 also in accordance with frs 20 we have restated the prior year charge for share
compensation charges
at 31 december 2006 cash and liquid resources were £71m following the receipt of the proceeds net
of expenses from the sale of the critical care division cash and liquid resources on 31 january 2007
were £275m the majority of our cash and liquid resources are denominated in us dollars and will be
retained as such to meet the anticipated funding requirements of our molecular diagnostics division
arising in the same currency
we have announced today that we have agreed to acquire the warrants issued to motorola as
consideration for the acquisition of clinical micro sensors in july 2005 the warrants are over 7811428
ordinary shares representing 385 of the issued share capital and will be cancelled by the company
thereby removing any dilution effects that would result from their exercise the cash cost to the
company is approximately £469000 representing 6 pence per warrant which were exercisable into
ordinary shares at 175 pence
outlook
the importance of the developing global molecular diagnostics market with high product margin
potential is becoming increasingly recognised by healthcare companies for example geneohm and tm
biosciences were recently acquired by larger players furthermore healthcare giant abbott laboratories
recently announced that it was to sell its core laboratory diagnostics business to ge healthcare but
would retain its molecular diagnostics and diabetes care glucose monitoring businesses it is also
likely that the growth of “companion” diagnostics in the pharmacogenomics market segment will lead
to closer alliances with pharmaceutical companies
the sale of our critical care blood gas and electrolyte analyser business has enabled osmetech to
become a ‘pure play’ well funded molecular diagnostics business operating in a high growth market
the company’s recent business development activities have given osmetech the financial flexibility to
execute its strategy of building a portfolio of commercialstage molecular diagnostic products we
expect to be able to add further content in order to develop a pipeline of new molecular diagnostic
tests to be run on the company’s instrument platforms in addition we anticipate that we will be able to
secure license agreements and partnerships to leverage the company’s assets in nonhealthcare
diagnostic markets where predicted growth rates are similarly attractive
we have a growing presence in this exciting market with our experienced management and a proven
product technology backed by a strong intellectual property portfolio osmetech has considerable
scope to build significant value in its molecular diagnostics division
james white
chief executive officer
20 march 2007
osmetech annual report and accounts 2006 7 board of directors
for the 12 months ended 31 december 2006
gordon james hall
nonexecutive chairman
gordon hall aged 64 was managing director of shield diagnostic group plc now axisshield plc until october 1997 and prior to
this held senior positions at abbott laboratories he was appointed to the board as executive chairman on 24 september 1998
becoming nonexecutive chairman on 1 february 2001
james nicholas gerald white
chief executive officer
james white aged 36 was previously a senior consultant in arthur d little limited’s corporate finance practice where he
specialised in advising venture capitalists on investments in small and medium sized companies he was operations manager of
osmetech from september 1998 until appointed to the board as chief operating officer on 1 october 1999 he was appointed
chief executive officer on 22 december 2000
david anthony sandilands
chief financial officer
david sandilands aged 45 was group financial director at bluebird toys plc until its takeover by mattel inc of the usa mr
sandilands qualified as a chartered accountant with price waterhouse and was appointed to the board as chief financial officer
on 1 july 1999
gordon bruce kuenster
nonexecutive
gordon kuenster aged 73 has founded and developed major medical diagnostic companies he was appointed group vice
president and a director of squibb corporation following its acquisition of advance technology laboratories inc he is chairman
of umd technology inc a medical technology company he was appointed to the board on 3 february 1998 as director of
development and was appointed chief technology officer on 1 october 1999 becoming a nonexecutive director on
3 september 2002
alfred marek
executive resigned 31 january 2007
alfred marek aged 61 was president of osmetech’s critical care division based in atlanta having joined the company at the time
of the opti acquisition in april 2003 he was previously with avl and was instrumental in developing their entire blood gas
business prior to its sale to roche in 2000 mr marek was appointed to the board on 21 april 2004 and resigned on 31 january
2007 following the sale of the critical care division to idexx laboratories inc
bruce allen huebner
executive appointed 12 february 2007
bruce huebner aged 56 is president of osmetech’s molecular diagnostics division and joined the group in may 2005 just prior to
the acquisition of clinical micro sensors inc from motorola inc he was previously executive vice president and chief operating
officer of genprobe and president and chief operating officer of nanogen two major international companies in the genetics
and infectious diseases markets
8 osmetech annual report and accounts 2006 report of the directors
for the 12 months ended 31 december 2006
the directors submit their report together with the audited financial statements for the 12 months ended 31 december 2006
results and dividends
the results of the group for the year are set out on page 17
the directors do not recommend the payment of a dividend 31 december 2005 £nil
as the company has adopted frs 20 ‘sharebased payments’ prior year figures have been restated to reflect the impact of equity
settled share based compensation plans as set out in notes 1 and 24
principal activities trading review and future developments
the principal activity of the group is the design development manufacture and sale of healthcare diagnostics and medical
devices incorporating sensing technology
the principal activities of the subsidiaries osmetech inc and clinical micro sensors inc are the same as osmetech plc osmetech
technology inc is a holding company osmetech gmbh was established as a sales operation having exclusive rights to distribute
osmetech’s critical care division products in germany prior to the disposal of the division molecular sensing limited molecular
sensors limited are dormant companiesthe principal activity of the seventh subsidiary osmetech aesop trustee limited is to
act as a trustee to an employee share ownership trust
enhanced business review
operations
osmetech is a fast developing international healthcare diagnostics business with operations in boston and pasadena in the us
serving the high growth molecular diagnostics market targeting hospitals and reference laboratories osmetech molecular
diagnostics has been built through the acquisitions and subsequent development of the businesses of molecular sensing plc in
2004 and clinical micro sensors inc ‘cms’ in 2005
on 31 january 2007 the group’s critical care blood gas and electrolyte analyser business based in atlanta us was sold for
449m representing a significant return on the original investment made when this business was acquired in 2003 whilst the
results for 2006 and 2005 include those of the critical care division “ccd” these have been separately disclosed as discontinued
operations detailed commentary in relation ccd is not relevant to the future performance of the group and therefore this review
concentrates on our molecular diagnostics business
the financial position and performance of the group is set out on pages 17 to 20 a review of the business its markets and future
developments is included in the chairman’s statement and chief executive officer’s reports set out on pages 2 to 7
business risks
the board considers that the principal risks and uncertainties facing the group may be summarised as follows
• recruitment and retention of employees the group operates in a knowledge based industry employing many highly skilled
specialist staff the group aims to provide a challenging and rewarding working environment for its employees and has share
options incentives for key staff
• regulatory compliance osmetech operates in a regulated industry with its us based operations and market governed by the
requirements of the us food and drug administration “fda” we have received fda 510k premarketing approval for our
cystic fibrosis carrier detection test and esensor
®
4800 dna detection instrument platform and it is our intention to produce
other fda cleared tests in the future both of our us sites operate under current good manufacturing practice cgmp
securing and maintaining the necessary regulatory approvals accreditations and quality standards is of fundamental
importance to the future success of the group
osmetech annual report and accounts 2006 9 report of the directors
continued
enhanced business review continued
• product development although the directors believe that there is a strong and growing demand for the molecular diagnostics
products being developed by the group the ability of these products to meet the specifications demanded and therefore the
speed of market penetration and the achievability of target prices is not certain prior to acquisition or license by osmetech
the group’s core technologies have received considerable investment and we believe that the principal technological and
scientific risks have now largely been overcome additional efforts are continuing in production scale up in order to meet
increasing market demands
• market acceptance of osmetech’s products commercial success will be dependent upon on the market acceptance of the
group’s products including the ability to convince customers that the enlarged group’s technology is an attractive alternative
to other technologies manufacture products in sufficient quantities with acceptable quality and at an acceptable cost and sell
place and service sufficient quantities of the products the group believes that the market opportunities for genetic testing in
particular are considerable driven by improved patient care and healthcare cost management these benefits have been
recognised by the fda who welcome the prospect of further approved tests to promote the wider use of such testing
• intellectual property rights “ip” the group’s success relies in part on maintaining meaningful patent protection on its
inventions technologies and discoveries to compete effectively the group will depend on its ability to develop and maintain
proprietary aspects of its technology and to operate without infringing the proprietary rights of others or if necessary to
obtain rights to thirdparty proprietary rights whilst this is a complex area the directors believe that osmetech has a strong ip
position particularly in the field of electrochemical detection the molecular diagnostics market is at a relatively early stage of
development and we believe that osmetech’s ip will create barriers to entry
key performance indicators
the principal key performance indicators “kpis” are detailed below
• as reported on page 27 research and development costs in the year amounted to £5601000 8 months ended 31 december
2005 – £2665000 included within these total amounts are £4768000 8 months ended 31 december 2005 – £2120000
relating to continuing operations in addition to the specific comments in the chief executive’s report we consider that
successful progress with product development activities is critical to the future success of the business for which kpis are
difficult to quantify product development programmes for our molecular diagnostics division are described in detail in the
chief executive’s report
• as reported on page 20 operating cash outflows during the period were £112m 8 months ended 31 december 2005 – £43m
of which £112m 8 months ended 31 december 2005 – £45m related to continuing operations
• as reported on page 18 the group had a total of £7089000 of cash and liquid resources at 31 december 2006 2005 –
£7207000 these balances increased significantly on 31 january following the sale of the critical care division
• as reported on page 27 the group increased its average headcount in the year by 34 to 159 fulltime equivalent employees
2005 – 119 of these totals average headcount relating to continuing operations was 75 in the year 2005 – 41 voluntary staff
turnover in the year for continuing operations was 15 2005 – 15 which we believe to be relatively stable compared with
our industry peers
charitable and political contributions
the group did not make any charitable or political contributions during the year 31 december 2005 £nil
10 osmetech annual report and accounts 2006 report of the directors
continued
directors
the directors of the company at 31 december 2006 and their interests all held beneficially in the ordinary share capital of the
company at the balance sheet date were as follows
ordinary shares of 010p each
31 december 2006 31 december 2005
g j hall 104965 104965
j n g white 208093 208093
d a sandilands 61597 61597
a marek 26190 26190
g b kuenster 613950 33054
directors’ options are disclosed in note 6
mr a marek resigned as a director on 31 january 2007 mr b a huebner was appointed as a director on 12 february 2007
mr d a sandilands was granted long term incentive awards to acquire 253963 ordinary shares of 010p each in the capital of the
company at nominal value on 30 january 2007
save as mentioned above there have been no changes in the directors or movements in the directors’ interests in the company’s
share capital between 31 december 2006 and 20 march 2007
in accordance with the articles of association and having been appointed since the date of the last annual general meeting
mr b a huebner retires and being eligible offers himself for election as a director at the annual general meeting to be held on
3 may 2007 mr huebner’s appointment is terminable by up to 3 months’ notice
in accordance with the articles of association mr g j hall will retire by rotation and being eligible offers himself for reelection
mr g b kuenster who is 73 years of age will retire and being eligible offers himself for reelection mr hall and mr kuenster do
not have service agreements with the company mr hall’s and mr kuenster’s appointments are terminable by at least 12 months’
notice
directors’ interests in contracts
no director was or is materially interested in any contract subsisting during or at the end of the financial year which was
significant in relation to the business of the group
substantial shareholdings
in addition to the directors’ shareholdings shown above the directors have been notified or are aware of the following interests in
3 per cent or more of the issued ordinary share capital of the company as at 5 march 2007
shareholder number of shares per cent
mofo nominees limited 18000000 888
chase nominees limited account usslend 14050000 693
vidacos nominees limited 2303 account 13246698 653
chase nominees limited account sutl 12892312 636
apollo nominees limited cre account 11111111 548
goldman sachs securities nominees limited ilseg account 10527497 519
bny gil client account nominees limited lst account 7235932 357
pershing keen nominees limited psl981 account 7021501 346
hsbc global custody nominee uk limited 934567 account 6744718 326
osmetech annual report and accounts 2006 11 report of the directors
continued
compliance
the company is mindful of the provisions of the combined code however as an aim listed company the combined code is not
mandatory and the company has therefore not produced a separate corporate governance or directors’ remuneration report
going concern
having reviewed the group’s budgets and financial projections and after making enquiries the directors have a reasonable
expectation that the group has adequate resources to continue in operational existence for the foreseeable future the financial
statements therefore are prepared on a going concern basis
directors’ responsibilities
the directors are responsible for preparing the annual report and financial statements in accordance with applicable laws and
regulations company law requires the directors to prepare financial statements for each financial year under that law the
directors have elected to prepare the financial statements in accordance with united kingdom accounting standards and
applicable law the financial statements are required by law to give a true and fair view of the state of the affairs of the company
and of the group and of the profit and loss of the group for that period in preparing those financial statements the directors are
required to
• select suitable accounting policies and then apply them consistently
• make judgements and estimates that are reasonable and prudent and
• state whether applicable uk accounting standards have been followed and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business
each person who is a director at the date of the approval of this report confirms that
1 so far as the director is aware there is no relevant audit information of which the company’s auditors are unaware and
2 the director has taken all steps that he ought to have taken as a director in order to make himself aware of any information and
to establish that the company’s auditors are aware of that information
this confirmation is given and should be interpreted in accordance with the provisions of s234za of the companies act 1985
the directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
financial position of the company and group and to enable them to ensure that the financial statements comply with the
companies act 1985 they are also responsible for the system of internal control for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities
the maintenance and integrity of the web site is the responsibility of the directors the work carried out by the auditors does not
involve consideration of these matters and accordingly the auditors accept no responsibility for any changes that have occurred
to the information contained in the financial statements since they were initially presented on the web site
legislation in the united kingdom governing the preparation and dissemination of the financial statements and other information
included in the annual reports may differ from legislation in other jurisdictions
supplier payment policy
the company has due regard to the payment terms of suppliers and settles all undisputed accounts in accordance with the
payment terms agreed with the supplier for each business transaction the group had 15 days 31 december 2005 – 39 days of
purchases outstanding at the end of the financial year
12 osmetech annual report and accounts 2006 report of the directors
continued
crest
the company’s ordinary shares are eligible for settlement through crest the system for securities to be held and transferred in
electronic form rather than in paper shareholders are not obliged to use crest and can continue to hold and transfer shares in
paper without loss of rights
independent auditors
a resolution to reappoint deloitte  touche llp as the company’s auditor will be proposed at the annual general meeting
electronic communications
the company may deliver shareholder information including annual and interim reports forms of proxy and notices of general
meetings in an electronic format to shareholders
shareholders wishing to receive shareholder information in the conventional printed form will continue to do so and need take no
further action if you would like to receive shareholder information in electronic format please register your request on the
company’s registrar’s electronic database at wwwcapitaregistrarscom you will initially need your unique “investor code” which
you will find at the top of your share certificate there is no charge for this service if you wish to subsequently change your mind
you may do so by contacting the company’s registrars by post or through their web site
if you elect to receive shareholder information electronically please note that it is the shareholder’s responsibility to notify the
company of any change to their name address email address or other contact details shareholders should also note that with
electronic communication the company’s obligations will be satisfied when it transmits the notification of availability of
information or such other document as may be involved to the electronic address it has on file the company cannot be held
responsible for any failure in transmission beyond its control any more than it can for postal failure in the event of the company
becoming aware that an electronic notification is not successfully transmitted a further two attempts will be made in the event
that the transmission is still unsuccessful a hard copy of the notification will be mailed to the shareholder in the event that specific
software is required to access information placed on the company’s website it will be available via the website without charge
before electing for electronic communications shareholders should ensure that they have the appropriate equipment and
computer capabilities sufficient for the purpose the company takes all reasonable precautions to ensure no viruses are present in
any communication it sends out but cannot accept responsibility for loss or damage arising from the opening or use of any email
or attachments from the company and recommends that shareholders subject all messages to virus checking procedures prior to
use any electronic communication received by the company that is found to contain any virus will not be accepted
should you have any further questions on this please contact the company’s registrars capita registrars on 0870 162 3131
annual general meeting – explanation of special business
resolution 6
the directors may only allot shares or grant rights over shares if authorised to do so by shareholders the general authority
granted at the annual general meeting held on 3 may 2006 is due to expire at the annual general meeting in 2007 accordingly
resolution 6 will be proposed as an ordinary resolution to grant a new authority to allot unissued share capital up to an aggregate
nominal value of £67605 representing 67605000 ordinary shares of 010p each being approximately one third of the total issued
ordinary share capital as at 20 march 2007 if given this authority will expire at the earlier of a 30 june 2008 and b the
conclusion of the next annual general meeting of the company to be held in 2008 other than in respect of the company’s
obligations under its employee share schemes the directors have no present intention of utilising the authority set out in this
resolution to issue any of the authorised but unissued share capital of the company
osmetech annual report and accounts 2006 13 report of the directors
continued
resolution 7
the directors also require additional authority from shareholders to allot shares or grant rights over shares or sell treasury shares
where they propose to do so for cash and otherwise than to existing shareholders pro rata to their holdings the general authority
granted at the annual general meeting held on 3 may 2006 is due to expire at the annual general meeting in 2007 accordingly
resolution 7 will be proposed as a special resolution to grant such authority if given this authority will expire at the earlier of a
30 june 2008 and b the conclusion of the next annual general meeting of the company to be held in 2008 apart from rights
issues open offers and other preemptive issues the authority will be limited to the issue of shares and sale of treasury shares for
cash up to an aggregate nominal value of £ 40563 being 40563000 ordinary shares of 010p each representing approximately 20
per cent of the issued ordinary share capital at 20 march 2007 this authority does not accord with ipc guidelines but the
directors regard the authority as desirable to maximise the options open to the company in the coming year
resolution 8
resolution 8 will give the company authority to purchase its own shares in the markets up to a limit of 10 per cent of its issued
ordinary share capital as at 20 march 2007 the company will only be able to purchase its own shares pursuant to this authority to
the extent that it has sufficient distributable reserves the company does not currently have any distributable reserves
nevetheless the directors believe it is advantageous for the company to have this authority in place so that if and when it does
have such reserves the company has the flexibility to make market purchases of its own shares in order to manage its capital
base
if the company were to be in a position to be able to utilise this authority the maximum and minimum prices at which it can
purchase its own shares are stated in the resolution in the event that shares are purchased they would either be cancelled and
the number of shares in issue would be reduced accordingly or subject to the companies acquisition of own shares treasury
shares regulations 2003 the “regulations” retained as treasury shares the regulations enable companies to hold shares
repurchased as treasury shares with a view to possible resale at a future date rather than having to cancel them the company will
consider holding repurchased shares pursuant to the authority conferred by this resolution as treasury shares this would give the
company the ability to reissue treasury shares quickly and cost effectively and would provide the company with additional
flexibility in the management of its capital base in the event that the company has sufficient distributable reserves the directors
will only exercise this authority if they are satisfied that a purchase would result in an increase in expected earnings per share and
would be in the interests of shareholders generally
by order of the board
s a craig
secretary
20 march 2007
14 osmetech annual report and accounts 2006 independent auditors’ report
independent auditors’ report to the members of osmetech plc
we have audited the group and individual company financial statements the “financial statements” of osmetech plc for the year
ended 31 december 2006 which comprise the consolidated profit and loss account the consolidated and individual company
balance sheets the consolidated cash flow statement and its associated notes a to c the consolidated statement of total
recognised gains and losses the statement of accounting polices and the related notes 1 to 27 these financial statements have
been prepared under the accounting policies set out therein
this report is made solely to the company’s members as a body in accordance with section 235 of the companies act 1985 our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body for our audit work for this report or for the opinions
we have formed
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable united
kingdom law and united kingdom accounting standards united kingdom generally accepted accounting practice are set out in
the statement of directors’ responsibilities
our responsibility is to audit the financial statements in accordance with relevant united kingdom legal and regulatory
requirements and international standards on auditing uk and ireland
we report to you our opinion as to whether the financial statements give a true and fair view in accordance with the relevant
financial reporting framework and are properly prepared in accordance with the companies act 1985 we also report to you
whether in our opinion the directors’ report is consistent with the financial statements in addition we report to you if in our
opinion the company has not kept proper accounting records if we have not received all the information and explanations we
require for our audit or if information specified by law regarding directors’ remuneration and other transactions with the company
and other members of the group is not disclosed
we read the directors’ report and the other information contained in the annual report and consider whether it is consistent with
the audited financial statements we consider the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements our responsibilities do not extend to any further information outside the
annual report
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices
board an audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the financial
statements it also includes an assessment of the significant estimates and judgments made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate to the circumstances of the company and the
group consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatement whether caused by fraud or other irregularity or error in forming our opinion we also evaluated the overall adequacy
of the presentation of information in the financial statements
osmetech annual report and accounts 2006 15 independent auditors’ report
continued
opinion
in our opinion
• the financial statements give a true and fair view in accordance with united kingdom generally accepted accounting practice
of the state of the group’s and the individual company’s affairs as at 31 december 2006 and of the group’s loss for the year
then ended
• the financial statements have been properly prepared in accordance with the companies act 1985 and
• the information given in the directors’ report is consistent with the financial statements
deloitte  touche llp
chartered accountants and registered auditors
manchester
20 march 2007
16 osmetech annual report and accounts 2006 consolidated profit and loss account
for the 12 months ended 31 december 2006
osmetech annual report and accounts 2006 17
12 months ended 8 months ended
311206 311205
restated
note £ £
turnover 2
continuing operations 48635 –
discontinued operations 10522461 5588121
10571096 5588121
cost of sales
continuing operations 31350 –
discontinued operations 6948233 3428516
6979583 3428516
gross profit
continuing operations 17285 –
discontinued operations 3574228 2159605
3591513 2159605
administrative expenses
continuing operations 12523868 5428154
discontinued operations 3431356 2251987
total administrative expenses 15955224 7680141
operating lossprofit 4
continuing operations 12506583 5428154
discontinued operations 142872 92382
12363711 5520536
net finance income 284582 190769
loss on ordinary activities before taxation 12079129 5329767
taxation 8 126211 185397
loss for the period transferred from reserves 20 11952918 5144370
basic and diluted earnings per share
continuing operations 731p 461p
discontinued operations 009p 008p
722p 469p
prior year results have been restated to show the effects of the applying frs 20 ‘sharebased payments’ as outlined in notes 1 and 24
consolidated statement of total recognised gains and losses
for the 12 months ended 31 december 2006
12 months ended 8 months ended
311206 311205
restated
£ £
loss for the financial yearperiod 11952918 5144370
currency translation lossgain on on foreign currency net investments 901680 370553
total recognised losses relating to the yearperiod 12854598 4773817
prior year adjustment – frs 20 see note 24 80419
total gains and losses recognised since last annual report 12774179 consolidated balance sheet 
at 31 december 2006
18 osmetech annual report and accounts 2006
2006 2005
restated
note ££ ££
fixed assets
intangible assets 11 2049019 2062949
tangible assets 12 1740419 1451766
3789438 3514715
current assets
stocks 14 2261293 1719302
debtors 15 2020270 3019365
investments 16 5686021 6300000
cash at bank and in hand 1403085 907177
11370669 11945844
creditors amounts falling due within one year 17 2328575 2676401
net current assets 9042094 9269443
net assets 12831532 12784158
capital and reserves
called up share capital 18 7028640 6957640
share premium account 18 51703745 39654069
merger reserve 18 1885533 1885533
other reserves 18 2136021 1354725
profit and loss account 20 49922407 37067809
equity shareholders’ funds 21 12831532 12784158
these financial statements were approved by the board of directors on 20 march 2007 company balance sheet
at 31 december 2006
osmetech annual report and accounts 2006 19
2006 2005
restated
note ££ ££
fixed assets
intangible assets 11 36619 24132
tangible assets 12 76705 2345
investments 13 23423893 11225312
23537217 11251789
current assets
debtors 15 254916 865789
investments 16 5686021 6300000
cash at bank and in hand 368641 397570
6309578 7563359
creditors amounts falling due within one year 17 385064 414580
net current assets 5924514 7148779
net assets 29461731 18400568
capital and reserves
called up share capital 18 7028640 6957640
share premium account 18 51703745 39654069
merger reserve 18 1885533 1885533
other reserve 18 2136021 1354725
profit and loss account 20 33292208 31451399
equity shareholders’ funds 21 29461731 18400568
these financial statements were approved by the board of directors on 20 march 2007
signed on behalf of the board of directors
d a sandilands director consolidated cash flow statement
for the 12 months ended 31 december 2006
20 osmetech annual report and accounts 2006
12 months ended 8 months ended
311206 311205
note £ £
net cash outflow from operating activities a 11154209 4327016
returns on investments and
servicing of finance c 277996 178414
taxation c 384093 –
capital expenditure and financial investment c 1285738 576498
acquisitions and disposals 13 c – 340751
cash outflow before management of liquid 11777858 5065851
resources and financing
management of liquid resources c 613979 5300000
financing c 12120676 10291875
increasedecrease in cash 956797 73976
reconciliation of net cash flow to movement in net funds
for the 12 months ended 31 december 2006
12 months ended 8 months ended
311206 301205
note £ £
increasedecrease in cash in the period 956797 73976
decreaseincrease in liquid resources 613979 5300000
exchange differences 460889 97441
change in net funds 118071 5323465
net funds at beginning of yearperiod 7207177 1883712
net funds at end of yearperiod c ii 7089106 7207177 notes to the consolidated cash flow statement
for the 12 months ended 31 december 2006
osmetech annual report and accounts 2006 21
a reconciliation of operating loss to operating cash flows
12 months ended 8 months ended
311206 311205
£ £
operating lossprofit
continuing operations 12506583 5428154
discontinued operations 142872 92382
12363711 5520536
depreciation and amortisation
continuing operations 493810 278551
discontinued operations 251709 158092
745519 436643
loss on disposal of fixed assets
continuing operations – 27831
discontinued operations 8064 109082
8064 136913
increase in stocks
continuing operations 284475 190763
discontinued operations 453815 201204
738290 391967
share compensation charge
continuing operations 620442 385658
discontinued operations 160854 45923
781296 431581
decreaseincrease in debtors
continuing operations 519162 278184
discontinued operations 19334 63004
499828 215180
decreaseincrease in creditors
continuing operations 5004 723649
discontinued operations 91919 71881
86915 795530
net cash outflowinflow from operating activities
continuing operations 11152638 4481412
discontinued operations 1571 154396
11154209 4327016
b major noncash transactions
there are no major noncash transactions in the 12 months ended 31 december 2006the major noncash transaction in the eight
months to 31 december 2005 was the consideration for the acquisition of clinical micro sensors inc this comprised entirely of the
issue of a warrant over ordinary shares the fair value of the warrant issued was £923144 notes to the consolidated cash flow statement
continued
22 osmetech annual report and accounts 2006
c analysis of cash flows
i gross cash flows
12 months ended 8 months ended
311206 311205
£ £
returns on investments and servicing of finance
interest received 277996 178414
taxation
research and development tax credit received 384093 –
capital expenditure and financial investment
payments to acquire intangible fixed assets 257580 9997
payments to acquire tangible fixed assets 1028158 566501
1285738 576498
management of liquid resources
transfer fromto term deposits 613979 5300000
financing
shares issued 12780000 11000000
share issue expenses 659324 708125
12120676 10291875
ii analysis of changes in net funds
at cash exchange at
311205 flows differences 311206
£££ £
cash at bank and in hand 907177 956797 460889 1403085
current asset investments 6300000 613979 – 5686021
net funds 7207177 342818 460889 7089106 notes forming part of the financial statements
for the 12 months ended 31 december 2006
osmetech annual report and accounts 2006 23
1  accounting policies
the financial statements have been prepared under the historical cost convention and are in accordance with applicable united
kingdom law and accounting standards the company has taken advantage of the exemption conferred by section 230 of the
companies act 1985 from presenting its own profit and loss account the following accounting policies have all been applied
consistently throughout the year with the exception of the policy for sharebased payments which is explained in note 24
basis of preparation
the financial statements have been prepared on a going concern basis under the historical cost convention and in accordance
with the companies act 1985 and applicable united kingdom accounting standards
basis of consolidation
the consolidated accounts incorporate the financial statements of osmetech plc and all of its subsidiary undertakings made up to
31 december 2006 the company uses the acquisition method of accounting to consolidate the results of its subsidiary
undertakings the results of subsidiary undertakings are included from the date of acquisition
changes in accounting policies
the financial statements reflect the adoption of frs 20 ‘sharebased payments’ ‘frs 20’ the prior period figures have been
restated as set out in note 24 to include the cost and balance sheet position under frs 20
investments
investments held as fixed assets are stated at cost less provision for impairment
acquisitions and disposals
on acquisition of a business fair values are attributed to the group’s share of net separable assets under the acquisition method in
frs 6 ‘acquisitions and mergers’ where there is no readily ascertainable market the fair value of intangible assets purchased as
part of a business acquisition is limited to an amount that does not create or increase negative goodwill the results and cash flow
relating to a business are included in the consolidated profit and loss account and the consolidated cash flow statement from the
date of acquisition
goodwill
purchased goodwill representing the excess of the fair value of the consideration over the fair value of the assets acquired is
capitalised and amortised on a straight line basis over its useful economic life this is presumed to be between 10 and 15 years
depending on the business acquired unless circumstances change significantly resulting in an impairment of the carrying value
turnover
turnover represents sales of goods and services to third parties as well as income received from licence and development
agreements turnover is stated exclusive of value added tax and other sales related taxes revenue from the sale of goods
typically instruments and consumables is recognised when the goods are shipped or despatched revenue from services is
recognised either in the period invoiced or if the service relates to a specific period the revenue is recognised evenly over the
period to which the charges relate
income from licence and development agreements is typically in the form of fees on signature milestone payments on the
achievement of predetermined events and royalties on the sale of the product once marketed turnover is recognised when
licence rights are granted to the extent that the group has performed its contractual obligations based on the fair value of the
right to consideration for each component of the agreement unearned amounts are carried forward as deferred income
tangible fixed assets
tangible fixed assets are stated at cost net of depreciation and any provision for impairment notes forming part of the financial statements
continued
24 osmetech annual report and accounts 2006
1  accounting policies continued
depreciation
depreciation is provided to write off the cost less estimated residual values of all tangible fixed assets except for assets under
construction over expected useful lives it is calculated at the following rates
short leasehold improvements – over the life of lease
plant machinery and laboratory equipment – 10 – 35 per annum on cost
office equipment – 25 – 50 per annum on cost
no depreciation is charged in respect of assets under construction until the assets are fully completed at which point they are
transferred into plant machinery and laboratory equipment
taxation
current tax including uk corporation tax research and development tax credits and foreign tax is provided at amounts expected
to be paid or recovered using the tax rates enacted or substantively enacted by the balance sheet date
deferred taxation
deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax or a
right to pay less tax at a future date at rates expected to apply when they crystallise based on current tax rates and law timing
differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in
which they are included in the financial statements deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered deferred tax assets and liabilities are not discounted
finance costs
finance costs associated with the issue of debt are deducted from the proceeds of the issue and charged to profit over the term
of the debt so that the amount charged is at a constant rate on the carrying amount
financial instruments
in relation to the disclosures made in note 26
• short term debtors and creditors are not treated as financial assets or financial liabilities
• the group does not hold or issue derivative financial instruments for trading purposes
• forward exchange contracts are used to fix the value of the related asset or liability in the contract currency and at the contract
rate and any gains or losses on these instruments are offset where the instrument is used to hedge a committed or probable
future transaction gains and losses are deferred until the transaction occurs
foreign currency
profit and loss accounts of foreign subsidiary undertakings are translated into sterling at the average rate assets and liabilities of
the foreign subsidiary undertakings are translated into sterling at the rates of exchange ruling on the balance sheet date
exchange differences which arise from translation of the net investment in foreign subsidiary undertakings and the translation of
the profit and loss between closing rate and average rate are taken to reserves
all other differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings
which to the extent that they are used to finance or provide a hedge against foreign equity investments are taken directly to
reserves to the extent of the exchange differences arising on the net investment in those enterprises notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 25
1  accounting policies continued
intellectual property rights
patent costs are capitalised and written off on a straight line basis over the shorter of the life of the patent or its useful economic
life the group’s other intellectual property rights are stated at cost and amortised over their useful economic lives in relation to
revenues generated
licences
licences are depreciated over the life of the product to which it relates after the first sale of the product
all research and development expenditure is charged to the profit and loss account in the year in which it is incurred
stock
stocks are valued at the lower of cost or net realisable value cost is calculated as follows
raw materials – cost of purchase on first in first out basis
finished goods – cost of raw materials and labour and attributable overheads based on the normal level of activity
net realisable value is based on estimated selling price less further costs to completion and disposal
pension costs
contributions to defined contribution pension schemes are charged to the profit and loss account in the year in which they
become payable
operating leases
rentals under operating leases are charged on a straight line basis over the lease term even if the payments are not made on
such a basis
share based compensation arrangements
the group operates equitysettled share based compensation plans in accordance with transitional provisions frs 20 has been
applied to all grants of equity instruments after 7 november 2002 that were unvested as at 1 may 2005
the group issues equitysettled share based payments to certain employees equitysettled share based payments are measured
at fair value at the date of grant the fair value determined at the grant date is expressed on a straight line basis over the vesting
period based on estimates of the number of options that are expected to vest fair value is based on both blackscholes and
binomial models according to the relevant measures of performance
at each balance sheet date the group revises its estimate of the number of options that are expected to become exercisable with
the impact of any revision being recognised in the profit and loss account and a corresponding adjustment to reserves over the
remaining vesting period the proceeds received net of any transaction costs are credited to share capital nominal value and
share premium when the options are exercised notes forming part of the financial statements
continued
26 osmetech annual report and accounts 2006
2  turnover
the turnover is wholly attributable to the group’s principal activity and is analysed as follows
by destination
8 months ended
12 months ended 311206 311205
continuing discontinued discontinued
operations operations total operations
£££ £
united kingdom – 85400 85400 160378
rest of europe – 1383726 1383726 810330
usa 48635 6166832 6215467 2589017
far east – 2303960 2303960 1724266
rest of world – 582543 582543 304130
48635 10522461 10571096 5588121
by country of origin
usa 48635 10027500 10076135 5280235
germany – 494961 494961 307886
48635 10522461 10571096 5588121
all of the turnover in the eight months ending 31 december 2005 related to discontinued operations
3  analysis of lossprofit before taxation and net assets
lossprofit before taxation by geographical segment
12 months ended 311206 8 months ended 311205 restated
continuing discontinued continuing discontinued
operations operations total operations operations total
£££ £££
uk 2468910 – 2468910 2302790 – 2302790
rest of europe – 83090 83090 – 74802 74802
usa 9753091 225962 9527129 2943629 8546 2952175
12222001 142872 12079129 5246419 83348 5329767
net assets by geographical segment
as at 311206 as at 311205 restated
continuing discontinued continuing discontinued
operations operations total operations operations total
£££ £££
uk 6903667 – 6903667 8137896 – 8137896
rest of europe – 155782 155782 – 196938 196938
usa 1873651 3898432 5772083 1384912 3064412 4449324
8777318 4054214 12831532 9522808 3261350 12784158
net assets are allocated to geographical area based on the location of the asset notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 27
4  operating loss
12 months ended 8 months ended
311206 311205
restated
£ £
this is arrived at after charging
amortisation of intangible fixed assets 147576 89763
depreciation 597943 346880
auditors’ remuneration – audit services osmetech plc 39000 36500
– audit services other group companies 42663 45773
– non audit services 41624 143502
operating lease rentals – plant and machinery 31966 19618
– other 764816 428275
research and development 5601235 2665491
loss on disposal of fixed assets 8064 136913
share compensation charge 781296 431581
5  employees
12 months ended 8 months ended
311206 311205
£ £
staff costs for all employees including executive directors consist of
wages and salaries 7032936 4037277
social security costs 579465 507785
other pension costs 250473 133753
7862874 4678815
the average monthly number of employees of the group during the year including executive directors was as follows
number number
311206 311205
manufacturing 58 46
research and development 47 41
selling and administration 54 32
159 119
6  directors
12 months ended 8 months ended
311206 311205
£ £
emoluments
emoluments 671645 465398
defined contribution pension scheme payments 63376 45342
735021 510740 notes forming part of the financial statements
continued
28 osmetech annual report and accounts 2006
6  directors continued
12 months ended 8 months ended
311206 311205
£ £
highest paid director
emoluments 282628 202818
defined contribution pension scheme payments 25550 15800
308178 218618
there are 3 20053 directors who are members of defined contribution schemes
directors’ interests
the interests of the directors in ordinary shares of osmetech plc which are all held beneficially as reported in the report of the
directors on page 11
options
total options total options
on ordinary on ordinary
shares of lapsedwaived granted shares of exercise
010p during the during the 010p date of price per excersisable
director 311205 period period 311206 grant share from to
g j hall 100000 – – 100000 250998 200p 211001 210108
j n g white 6590248 – – 6590248 020905 01p 030905 020915
493822 – – 493822 020905 01p 021005 020915
2070280 – – 2070280 020905 01p 021005 020915
d a sandilands 3295124 – 3295124 020905 01p 030905 020915
493822 – 493822 020905 01p 021005 020915
788229 – 788229 020905 01p 021005 020915
g b kuenster 135000 – – 135000 260400 2625p 260403 260410
100000 – – 100000 200301 1100p 200304 200311
100000 – – 100000 290102 1275p 290105 290112
a marek 1000000 – – 1000000 010403 233p 010404 010413
1977074 – – 1977074 020905 01p 030905 020915
the midmarket price of the shares at 31 december 2006 was 2525p 31 december 2005 – 2700p and the range during the period was between 1575p and 3375p 31 december 2005
– 1400p and 2700p
7  net finance income
12 months ended 8 months ended
311206 311205
£ £
interest on bank balances and term deposits 284582 190769
284582 190769 notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 29
8  tax on loss on ordinary activities
the tax credit comprises
12 months ended 8 months ended
311206 311205
restated
£ £
current tax
uk corporation tax receivable 126146 185397
adjustment in respect of prior years research and development tax credit 65 –
total tax on loss on ordinary activities 126211 185397
the difference between the total current tax shown above and the amount calculated by applying the standard rate of uk
corporation tax to the loss before tax is as follows
12 months ended 8 months ended
311206 311205
restated
£ £
loss on ordinary activities before tax 12079129 5329767
tax credit at 30 3623739 1598930
effects of
– losses which are available to set against future profits 3502082 1361221
– research and development tax creditcharge 93578 46349
– expenses not deductible for tax purposes 75352 6630
– depreciation in excess of capital allowances 6192 1659
– movement in short term timing differences 7545 2326
adjustment in respect of prior year 65 –
total current tax credit 126211 185397
factors that may affect the future tax charge
a deferred tax asset has not been recognised in respect of timing differences relating to tax losses carried forward as there is
insufficient evidence that the asset will be recovered the amount of the asset not recognised at a standard rate of 30 is
£111 million 31 december 2005 – £85 million in addition a deferred tax asset in respect of capital allowances of £110000
31 december 2005 – £335000 has not been recognised these assets will be recoverable if the group generates profits in the
future from the same trade in which the losses were incurred
9  loss attributable to the company
the loss for the financial year dealt with in the financial statements of the parent company was £1840809 eight months ended
31 december 2005 as restated – £1467667 as permitted by section 230 of the companies act 1985 no separate profit and loss
account is presented in respect of the parent company notes forming part of the financial statements
continued
30 osmetech annual report and accounts 2006
10  earnings per share
12 months ended 8 months ended
311206 311205
weighted average number of shares in issue during the yearperiod 165457028 109740819
lossprofit loss per loss in loss per
in year share period share
£ pence £ pence
continuing operations 12095789 731 5061022 461
discontinued operations 142871 009 83348 008
total 11952918 722 5144370 469
frs 22 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would
decrease net profit or increase net loss per share for a loss making company with outstanding share options net loss per share
would only be increased by the exercise of outofthemoney options since it is inappropriate to assume that option holders
would act irrationally no adjustment is made to diluted earnings per share for outofthemoney share options
11  intangible assets
patents and intellectual licence
trademarks property goodwill costs total
££££ £
group
cost
at beginning of year 278273 600000 1512759 730117 3121149
additions 16716 – – 240864 257580
currency translation adjustment – – 68324 65230 133554
at end of year 294989 600000 1444435 905751 3245175
amortisation
at beginning of year 254142 600000 204058 – 1058200
charge for the year 4228 – 134892 8456 147576
currency translation adjustment – – 9587 33 9620
at end of year 258370 600000 329363 8423 1196156
net book value
at 31 december 2006 36619 – 1115072 897328 2049019
at 31 december 2005 24131 – 1308701 730117 2062949
company
cost
at beginning of year 278273 600000 878273
additions 16715 – 16715
at end of year 294988 600000 894988
amortisation
at beginning of year 254141 600000 854141
charge for the year 4228 – 4228
at end of year 258369 600000 858369
net book value
at 31 december 2006 36619 – 36619
at 31 december 2005 24132 – 24132 notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 31
12  tangible assets
short plant machinery
leasehold assets under and laboratory office
improvements construction equipment equipment total
££££ £
group
cost
at beginning of year 159311 44825 1326886 628446 2159468
additions 13166 348894 340363 325735 1028158
disposals – 8064 – 16228 24292
currency translation adjustment 18826 5297 156812 72195 253130
at end of year 153651 380358 1510437 865758 2910204
depreciation
at beginning of year 24483 – 437521 245698 707702
provided in the year 38478 – 338204 221261 597943
disposals – – – 16228 16228
currency translation adjustment 5334 – 74277 40021 119632
at end of year 57627 – 701448 410710 1169785
net book value
at 31 december 2006 96024 380358 808989 455048 1740419
at 31 december 2005 134828 44825 889365 382748 1451766
company
cost
at beginning of year – 4897 4897
additions 90771 – 90771
at end of year 90771 4897 95668
depreciation
at beginning of year – 2552 2552
provided in the year 15170 1241 16411
at end of year 15170 3793 18963
net book value
at 31 december 2006 75601 1104 76705
at 31 december 2005 – 2345 2345 notes forming part of the financial statements
continued
32 osmetech annual report and accounts 2006
13  fixed asset investments
a subsidiary undertakings
investments loan total
££ £
company
cost
at beginning of year 3871273 14152659 18023932
additions – 12398165 12398165
repayments – 199584 199584
at end of year 3871273 26351240 30222513
provision for impairment
at beginning and end of year 645 6797975 6798620
net book value
at 31 december 2006 3870628 19553265 23423893
at 31 december 2005 3870628 7354684 11225312
the following were subsidiary undertakings at the end of the year and have all been included in the consolidated accounts
proportion of
country of voting rights and
incorporation ordinary share
name or registration capital held nature of business
osmetech technology inc usa 100 holding company
osmetech inc usa 100 same as ultimate parent company
clinical micro systems inc usa 100 same as ultimate parent company
osmetech gmbh germany 100 sales operation
molecular sensing limited uk 100 dormant
molecular sensors limited uk 100 dormant
osmetech aesop trustee limited uk 100 dormant
the country of operation is the same as its country of incorporation or registration
shares held by osmetech technology inc
b other investments
proportion of
country of voting rights and
incorporation ordinary share
name or registration capital held nature of business
atlas genetics limited uk 117 electrochemical dna detection
ohmx corporation usa 54 electrochemical detection
 shares held by clinical micro sensors inc
both of these investments are in unquoted private companies the investments were received in exchange for noncash
consideration the fair value of these investments is considered to be zero
c acquisitions and disposals
on 26 july 2005 the group acquired the entire share capital of clinical micro sensors inc from motorola inc for a total
consideration of £923144 being the deemed value under the blackscholes model for pricing of a warrant issued to motorola to
subscribe for 7811428ordinary shares at a price of 175 pence per share and acquisition costs of £340751 notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 33
13  fixed asset investments continued
the acquisition has been accounted for using the acquisition method of accounting after adjustments to the valuation of assets
and liabilities to reflect their fair value the fair value of the assets acquired amounted to £1263895 the fair value of these assets
has now been finalised in the period ended 31 december 2006 and remains unchanged
14  stocks
311206 311205
£ £
raw materials and work in progress 1752110 1232552
finished goods 509183 486750
2261293 1719302
there is no material difference between the replacement cost of stocks and the amount at which they are stated in the financial
statements
the company has no stock
15  debtors
311206 311205
group company group company
££ ££
due within one year
trade debtors 1422103 – 1797700 3583
other debtors 116237 10812 360408 66756
called up share capital not paid –– 290000 290000
taxation recoverable 126146 126146 384027 384027
prepayments and accrued income 355784 117958 187230 121423
2020270 254916 3019365 865789
16  investments – term deposits
311206 311205
£ £
group and company
cash deposits with terms in excess of 7 days 5686021 6300000
17  creditors amounts falling due within one year
311206 311205
group company group company
££ ££
trade creditors 647053 78697 1124036 172220
taxation and social security 21758 9524 36248 25337
accruals and deferred income 1659764 296843 1516117 217023
2328575 385064 2676401 414580 notes forming part of the financial statements
continued
34 osmetech annual report and accounts 2006
18  share capital and other reserves group and company
311206 311205
£ £
authorised
ordinary share capital
1120000000 shares of 010p each 31 december 2005 – 1120000000 shares of 010p each 1120000 1120000
1200000000 deferred shares of 099p each 31 december 2005 – 1200000000 shares of 099p each 11880000 11880000
authorised share capital – total 13000000 13000000
allotted called up and fully paid
ordinary share capital
201354973 shares of 010p each 31 december 2005 – 130354973 shares of 01p each 201355 130355
674978300 deferred shares of 099p each 31 december 2005 – 674978300
deferred shares of 099p each 6682285 6682285
6883640 6812640
allotted and called up ordinary share capital
ordinary share capital
1450000 shares of 010p 31 december 2005 – 1450000 shares of 01p 1450 1450
14500000 deferred shares of 099p each 31 december 2005 – 14500000 shares of 099p each 143550 143550
145000 145000
called up share capital – total 7028640 6957640
share
share premium merger other
capital account reserve reserve
££££
movement in the year
at 1 january 2006 as previously reported 6957640 39654069 1885533 1435144
prior year adjustment note 24 – – – 80419
at 1 january 2006 restated 6957640 39654069 1885533 1354725
shares issued in the period 71000 12709000 – –
share issue costs – 659324 – –
share compensation charge – – – 781296
at 31 december 2006 7028640 51703745 1885533 2136021
the following ordinary shares of 010p each were issued during the year for cash consideration
date number consideration
11 july 2006 71000000 18p
on 25 july 2005 the company’s issued and unissued ordinary shares of 1p each in the share capital of the company were
subdivided into 1 ordinary share of 001p each and 1 deferred share of 099p each on 30 september 2005 a special resolution
was passed by shareholders consolidating the ordinary shares of 001p each in the share capital of the company into ordinary
shares of 010p each on the basis of 1 ordinary share of 010p for every 10 ordinary shares of 001p each the deferred shares have
no dividend or voting rights notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 35
18  share capital and other reserves group and company continued
warrants
the company had warrants outstanding as follows
number of ordinary shares
under warrant as at subscription
date 311206 311205 price exercisable between
26 july 2005 7811428 7811428 175p 27 july 2005 to 26 july 2010
7811428 7811428
the warrants were issued to motorola inc as consideration for the acquisition of clinical micro sensors inc they are exercisable by
motorola inc in whole or in part at any time prior to the close of business on 26 july 2010 any exercise of subscription rights
must be accompanied by remittance for the subscription price
an agreement has been reached post year end to buy back these warrants as disclosed in note 27
19  share based payments
the company has granted options under the osmetech plc enterprise management incentive plan “emi plan” the osmetech
plc 2003 us equity compensation plan “us plan” and long term incentive awards “ltip’s” and has entered into individual
option agreements and unapproved options as follows
1 emi plan
number of ordinary shares
under option as at subscription
date 311206 311205 price exercisable between
17 september 2002 75000 75000 175 p 17 december 2002 and 17 september 2012
24 february 2003 142601 142601 239 p 17 december 2003 and 24 february 2013
13 october 2004 – 1175 936 p 13 october 2004 and 30 july 2011
2 september 2005 987644 987644 010p 2 october 2005 and 2 september 2015
1205245 1206420 notes forming part of the financial statements
continued
36 osmetech annual report and accounts 2006
19  share based payments continued
2 us plan
number of ordinary shares
under option as at subscription
date 311206 311205 price exercisable between
1 april 2003 1825000 2100000 233p 1 april 2004 and 1 april 2013
3 august 2005 2600000 2870000 1925p 3 august 2006 to 3 august 2015
29 august 2005 – 275000 1925p 29 august 2006 to 29 august 2015
7 september 2005 – 50000 1925p 7 september 2006 to 7 september 2015
26 september 2005 25000 25000 1810p 26 september 2006 to 26 september 2015
5 october 2005 500000 500000 17p 5 october 2006 to 5 october 2015
24 october 2005 25000 25000 1475p 24 october 2006 to 24 october 2015
1 november 2005 515000 540000 1425p 1 november 2006 to 1 november 2015
7 november 2005 – 50000 175p 7 november 2006 to 7 november 2015
14 november 2005 – 25000 205p 14 november 2006 to 14 november 2015
2 december 2005 100000 100000 2425p 2 december 2006 to 2 december 2015
8 december 2005 170000 170000 2275p 8 december 2006 to 8 december 2015
24 march 2006 2810000 – 2225p 24 march 2007 to 24 march 2016
27 march 2006 35000 – 2250p 27 march 2007 to 27 march 2016
18 may 2006 50000 – 2225p 18 may 2007 to 18 may 2016
21 june 2006 780000 – 1850p 21 june 2007 to 21 june 2016
5 july 2006 970000 – 2125p 5 july 2007 to 5 july 2016
10 august 2006 110000 – 1875p 10 august 2007 to 10 august 2016
5 october 2006 250000 – 1650p 5 october 2007 to 5 october 2016
28 november 2006 150000 – 2500p 28 november 2007 to 28 november 2016
10915000 6730000
3 individual option agreements
number of ordinary shares
under option as at subscription
date 311206 311205 price exercisable between
25 september 1998 111700 111700 20p 21 october 2001 and 21 october 2008
26 april 2000 135000 135000 2625p 26 april 2003 and 26 april 2010
20 march 2001 25000 25000 110p 1 march 2004 and 20 march 2011
20 march 2001 75000 75000 110p 20 march 2004 and 20 march 2011
29 january 2002 100000 100000 1275p 29 january 2005 and 29 january 2012
24 february 2003 4500 4500 239p 24 february 2004 and 24february 2013
13 october 2004 76375 76375 34p 13 october 2004 and 22 november 2008
527575 527575
4 unapproved options
number of ordinary shares
under option as at subscription
date 311206 311205 price exercisable between
2 september 2005 2858509 2858509 010p 2 october 2005 to 2 september 2015
2858509 2858509 notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 37
19  share based payments continued
5 ltip’s
number of ordinary shares
under option as at subscription
date 311206 311205 price exercisable between
2 september 2005 14498544 14498544 010p 3 september 2005 to 2 september 2015
14498544 14498544
employee participation in these schemes is at the discretion of the remuneration committee or senior management of the
company share options granted under ltips emi plan and unapproved options dated 2 september 2005 are exercisable at a
price of 01 pence per share subject to the achievement of specific nonmarket based performance criteria for ltips exercise is
also subject to the achievement of share price targets all other options are exercisable at a price equal to equal to the average
quoted market price of the company’s shares on the date of grant and generally vest between 1 and 3 years
options are generally exercisable for a period up to 10 years after grant and are forfeited if the employee leaves the group before
the options vest at 31 december 2006 all options are equitysettled following the sale of the company’s critical care division
“ccd” on 31 january 2007 the us plan was amended to allow the company to cash settle options held by ccd employees
leaving the group “ccd options” for those option holders wishing to exercise and immediately sell their shares the company
intends to cash settle any appreciation in value calculated on the difference between the closing bid price of an osmetech share
on the date of exercise and the related exercise price at 31 december 2006 the ccd options totalled 5055000 2005 –
2600000 and have an exercise period expiring on 31 december 2007
equity settled sharebased payments are measured at fair value at the date of grant the fair value determined at the date of grant
of equity settled sharebased payments is expensed on a straightline basis over the vesting period based on the group’s
estimate of shares that will eventually vest
the fair value of the ltips is measured by use of a binomial model the black scholes model is used to determine the fair value of
other options the models include adjustments based on management’s best estimate for the effects of exercise restrictions and
behavioural considerations the option life is derived by the models based on these assumptions and other assumptions identified
below expected volatility is calculated using an analysis of volatility over an historical 3 year period
the total expense included within operating loss in respect of sharebased payments was £781000 8 months ended 31 december
2005 – £432000
details of the share options outstanding are as follows
12 months ended 311206 ltips emi plan and unapproved other options exercise price other options exercise price
options dated 020905 at or below 25 pence per share above 25 pence per share
weighted weighted weighted
average average average
number exercise price number exercise price number exercise price
of options pence of options pence of options pence
outstanding at beginning of period 18344697 010 7063801 2013 412550 14986
granted during the period – – 5230000 2124 – –
forfeited during the period – – 1045000 2036 1175 3400
exercised during the period ––––––
expired during the period ––––––
outstanding at end of period 18344697 010 11248801 2062 411375 15019
range of prices 010 1425 – 2425 3400 – 26250
contractual remaining life 867 years 848 years 370 years
exercisable at end of period 3846153 010 3470468 2130 411375 15019 notes forming part of the financial statements
continued
38 osmetech annual report and accounts 2006
19  share based payments continued
8 months ended 311205 ltips emi plan and unapproved other options exercise price other options exercise price
options dated 020905 at or below 25 pence per share above 25 pence per share
weighted weighted weighted
average average average
number exercise price number exercise price number exercise price
of options pence of options pence of options pence
outstanding at beginning of period – – 6711053 2306 893753 8656
granted during the period 18344697 010 4630000 1862 – –
forfeited during the period – – 4277252 2308 481203 3229
exercised during the period ––––––
expired during the period ––––––
outstanding at end of period 18344697 010 7063801 2013 412550 14986
range of prices 010 1425 – 2500 3400 – 26250
contractual remaining life 967 years 875 years 470 years
exercisable at end of period 769231 010 1733801 2289 412550 14986
for those share options granted in the period the assumptions including revisions thereto in relation to ltips used in the
calculation of the fair values were as follows
12 months ended 311206 8 months ended 311205
ltips other options ltips other options
vesting period years 42 25 136
expected volatility  699 585 699 699
expected life years 43 4 345
risk free rate  414 462 414 419
expected dividend yield  00 00
probability of achieving nonmarket based performance
criteria where applicable  50 100 70 100
20  profit and loss account group and company
group company
££
at 1 january 2006 as previously reported 37148228 31531818
prior year adjustment note 24 80419 80419
at 1 january 2006 restated 37067809 31451399
loss for the period 11952918 1840809
exchange gain on consolidation 901680 –
at 31 december 2006 49922407 33292208 notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 39
21  reconciliation of movements in equity shareholders’ funds
311206 311205
restated
group company group company
££ ££
loss for the period 11952918 1840809 5144370 1467667
other recognised losses relating to the yearperiod 901680 – 370553 –
new share capital subscribed including premium 12120676 12120676 10291875 10291875
share compensation charge 781296 781296 512000 512000
warrants issued –– 923144 923144
net increasedecrease in equity shareholders’ funds 47374 11061163 6953202 10259352
opening equity shareholders funds as previously stated 12784158 18400568 5911375 8221635
prior year adjustment note 24 –– 80419 80419
opening equity shareholders funds as restated 12784158 18400568 5830956 8141216
closing equity shareholders funds as restated 12831532 29461731 12784158 18400568
22  commitments
at the balance sheet date the group had annual commitments under noncancellable operating leases as set out below
311206 311205
land and land and
buildings other buildings other
££ ££
operating leases which expire
within one year – 15395 ––
between two and five years 777852 48406 859749 35200
over five years –– ––
777852 63801 859749 35200
23  related party transactions
the company has taken advantage of the exemption not to disclose transactions with other group undertakings as voting rights
are controlled within the group and consolidated financial statements are publicly available
no director was or is materially interested in any contract subsisting during or at the end of the financial year which was
significant in relation to the business of the group notes forming part of the financial statements
continued
40 osmetech annual report and accounts 2006
24  prior year adjustment
as a result of adopting frs 20 “share based payments” the balance sheet has been restated to reflect the impact of equity
settled share based compensation plans the effects of this change in accounting policy on the financial statements are disclosed
below
per 2005 restated 2005
financial frs 20 financial
statements adoption statements
£££
group
profit and loss account
operating loss 5600955 80419 5520536
net finance income 190769 – 190769
taxation 185397 – 185397
loss for the period transferred from reserves 5224789 80419 5144370
balance sheet
fixed assets 3514715 – 3514715
current assets 11945844 – 11945844
creditors amounts falling due within one year 2676401 – 2676401
net assets 12784158 – 12784158
called up share capital 6957640 – 6957640
share premium account 39654069 – 39654069
merger reserve 1885533 – 1885533
other reserve 1435144 80419 1354725
profit and loss account 37148228 80419 37067809
12784158 – 12784158
25  pension costs
the company makes contributions into money purchase pension schemes for the benefit of its employees the assets of the
schemes are held separately from those of the company in independently administered funds the pension cost charge represents
contributions payable and paid by the company to the funds and amounted to £250473 for the year 8 months ended 31
december 2005 – £133753 at 31 december 2006 the company had £33450 of unpaid pension contributions 31 december 2005
– £7900
26  financial instruments
the numerical disclosures in this note deal with financial assets and financial liabilities as defined in financial reporting standard
13 frs 13 and financial reporting standard 25 frs 25– “derivatives and other financial instruments disclosures” certain
financial assets such as investments in subsidiaries are excluded from the scope of these disclosures
as permitted by frs 13 and frs 25 shortterm debtors and creditors have been excluded from the disclosures other than the
currency risk disclosures
there is no material difference between the fair values and book values of the group’s financial instruments either in the current or
prior year
the group’s treasury activities are designed to provide suitable flexible funding arrangements to satisfy its requirements the
group uses financial instruments comprising cash and term deposits the main risks arising from the group financial instruments
are interest rate and liquidity risks the board reviews policies for managing each of these risks and they are summarised below
these policies have remained unchanged from previous years notes forming part of the financial statements
continued
osmetech annual report and accounts 2006 41
26  financial instruments continued
the group aims to achieve a balance between continuity and flexibility of funding by maintaining a range of maturities on its liquid
resources the group also mixes the duration of its deposits to reduce the impact of interest rate fluctuations
the group has limited foreign currency risk since overseas subsidiaries derive revenues and incur expenses denominated
predominantly in the currencies of the countries in which they operate all monetary assets and liabilities of the group are materially
denominated in the operating or functional currency of the operating unit involved
there is no material difference between the fair values and book values of the group’s financial instruments
interest bearing financial assets
functional currency of operations
311206 311205
group sterling us dollar euro group sterling us dollar euro
££££ ££££
cash 1403085 368640 957108 77337 907177 412109 370735 124333
term deposits 5686021 1900000 3786021 – 6300000 6300000 – –
7089106 2268640 4743129 77337 7207177 6712109 370735 124333
the sterling and us dollar cash balances attract interest at floating rates based on the bank of england base rate and us prime
rate respectively
the term deposits are of 34 day’s duration at a weighted average fixed rate of 487 31 december 2005 – 1 month’s duration
455
27  post balance sheet events
sale of critical care division
as noted on pages 2 and 3 the critical care division was sold on 31 january 2007 for a cash sum of 44900000 before costs the
gain on disposal will be accounted for in the 12 months ended 31 december 2007
cancellation of warrants
on 20 march 2007 the company acquired 7811428 warrants previously held by motorola inc “motorola” the warrants were
originally issued to motorola in consideration for osmetech’s acquisition of clinical micro sensors inc which was completed in july
2005 the warrants entitled motorola to subscribe for up to 7811428 ordinary shares of 01 pence each in the capital of osmetech
representing 385 of the current issued share capital at a price of 175 pence per share at any time up to 26 july 2010
osmetech has in return for the cancellation of the warrants paid to motorola a total of £468686 which represents a price of six
pence per warrant 42 osmetech annual report and accounts 2006
notice of annual general meeting
notice is hereby given that the annual general meeting of osmetech plc the “company” will be held at the offices of ashurst
broadwalk house 5 appold street london ec2a 2ha on 3 may 2007 at 1100 am for the purpose of considering and if thought
fit passing the following resolutions
ordinary business
1 to receive and consider the accounts for the 12 months ended 31 december 2006 together with the reports of the directors
and auditors thereon
2 to elect b a huebner as a director
3 to reelect g j hall as a director
4 to reelect g b kuenster as a director
5 to reappoint deloitte  touche llp as auditors of the company until the conclusion of the next annual general meeting and
to authorise the directors of the company to determine their remuneration
special business
to consider and if thought fit to pass the following resolutions of which number 6 will be proposed as an ordinary resolution and
numbers 7 and 8 will be proposed as special resolutions
6 that the directors be and they are hereby generally and unconditionally authorised for the purposes of and pursuant to
section 80 of the companies act 1985 the “act” to exercise all the powers of the company to allot relevant securities within
the meaning of section 802 of the act up to an aggregate nominal amount of £67605 representing 67605000 ordinary
shares of 010p each provided that this authority shall unless renewed varied or revoked expire at the earlier of a 30 june
2008 and b the conclusion of the next annual general meeting of the company to be held in 2008 and provided further that
the company may before the expiry of such period make any offer agreement or arrangement which would or might require
relevant securities to be allotted after such expiry and the directors of the company may allot relevant securities pursuant to
any such offer agreement or arrangement as if the authority hereby conferred had not expired
7 that subject to the passing of resolution 6 above the directors of the company be and they are hereby empowered to both
allot equity securities within the meaning of section 942 of the act of the company for cash pursuant to the authority
conferred by resolution 6 above and to sell relevant shares as defined in section 945 of the act held by the company as
treasury shares as defined in section 943a of the act “treasury shares” for cash as defined in section 162d2 of the act in
each case as if section 891 of the act did not apply to any such allotment or sale provided that this power shall unless
renewed varied or revoked expire at the earlier of a 30 june 2008 and b the conclusion of the next annual general
meeting of the company to be held in 2008 and provided further that this power shall be limited to the allotment of equity
securities for cash and the sale of treasury shares
i in connection with a rights issue open offer or other preemptive issue in favour of ordinary shareholders where the
equity securities respectively attributable to the interests of all ordinary shareholders are proportionate as nearly as
practical to the respective numbers of ordinary shares held by them but subject to such exclusions or other arrangements
as the directors may deem necessary or desirable in relation to fractional entitlements treasury shares record dates or
legal or practical problems arising in or pursuant to the laws of any territory or the requirement of any regulatory body or
stock exchange in any territory and
ii otherwise than pursuant to paragraph i above up to an aggregate nominal amount of £40563 representing 40563000
ordinary shares of 010p each and provided further that the company may at any time before the expiry of such power
make any offer or enter into any agreement which would or might require equity securities to be allotted or treasury
shares to be sold after the expiry of such power and the directors may allot equity securities or sell treasury shares in
pursuance of any such offer or agreement as if such power conferred hereby had not expired osmetech annual report and accounts 2006 43
notice of annual general meeting
continued
8 that the company is hereby generally and unconditionally authorised for the purposes of section 166 of the act to make
market purchases within the meaning of section 1633 of act of any of its ordinary shares of 010p each in the capital of the
company on such terms and in such manner as the directors of the company may from time to time determine and where
such shares are held as treasury shares the company may use them for the purposes of its employee share schemes provided
that
i the maximum number of ordinary shares which may be purchased is 20281500 representing approximately 10 per cent
of the issued ordinary share capital at 20 march 2007
ii the minimum price which may be paid for each ordinary share is 010p which amount shall be exclusive of expenses if any
iii the maximum price which may be paid for each ordinary share is an amount equal to 105 per cent of the average of the
middle market quotations for the ordinary shares of the company as derived from the aim appendix to the daily official
list of the london stock exchange plc for the five business days immediately preceding the day on which such share is
contracted to be purchased
iv unless previously renewed revoked or varied this authority shall expire at the earlier of a 30 june 2008 and b the
conclusion of the annual general meeting of the company to be held in 2008 and
v under this authority the company may make a contract to purchase ordinary shares which would or might be executed
wholly or partly after the expiry of this authority and may make purchases of ordinary shares pursuant to it as if this
authority had not expired
by order of the board registered office
s a craig co ashurst
secretary broadwalk house
5 appold street
london ec2a 2ha
29 march 2007
notes
1 a member of the company may appoint one or more proxies to attend and on a poll to vote instead of the member a proxy
of a member need not also be a member
2 the instrument appointing a proxy and the power of attorney or other authority if any under which it is signed or a notarially
certified copy of that power or authority must be deposited with the company’s registrars capita registrars proxy processing
centre telford road bicester ox26 4ld you may also deliver it by hand to the registry 34 beckenham road beckenham
kent br3 4tu during normal business hours not less than 48 hours before the time for holding the meeting a form of proxy
accompanies this document for use by members
3 completion of the form of proxy will not preclude a member from attending and voting in person
4 as permitted by regulation 41 of the uncertificated securities regulations 2001 only those holders of ordinary shares who are
registered on the company’s share register as at 1100 am on 1 may 2007 shall be entitled to attend the annual general
meeting and to vote in respect of the number of shares registered in their names at that time changes to entries on the share
register after 1100 am on 1 may 2007 shall be disregarded in determining the rights of any person to attend andor vote at
the annual general meeting
5 the register of directors’ interests in the share capital of the company copies of service agreements under which the directors
of the company are employed and copies of terms and conditions of appointment of nonexecutive directors are available for
inspection at the company’s registered office during normal business hours from the date of the notice of this meeting until
the date of the annual general meeting and will be available for inspection at the place of the annual general meeting for at
least 15 minutes prior to and during the meeting 44 osmetech annual report and accounts 2006 please insert iwe
full name
please use block letters
and address of
of
being members of the abovenamed company hereby appoint the chairman of the annual general meeting
or see note 1
as myour proxy to vote for meus and on myour behalf at the annual general meeting of the company to be held at the offices
of ashurst broadwalk house 5 appold street london ec2a 2ha on 3 may 2007 at 1100 am and at any adjournment thereof
iwe request such proxy to vote on the following resolutions as mentioned below see note 2
signature see note 3 dated this day of 2007
joint holders if any see note 5
name name 
name name 
notes
1 if you wish to appoint some other person as your proxy please insert hisher name and address initial and strike out the words “the chairman of the meeting” a
proxy need not be a member of the company appointing a proxy will not preclude you from personally attending and voting at the meeting in substitution for your
proxy vote if you subsequently decide to do so
2 please indicate with an “x” in the appropriate box how you wish your votes cast unless otherwise instructed the proxy will exercise hisher discretion as whether and
if so how heshe will vote a withheld vote is not a vote in law and will not be counted in the calculation of votes
3 this form of proxy must in the case of an individual be signed by the appointer or hisher attorney or in the case of a corporation be given under its common seal
or signed on its behalf by an attorney or a duly authorised officer or if it is subject to the companies act 1985 as amended in accordance with section 36a thereof
4 to be valid this form of proxy and any power of attorney or other authority under which it is executed or a duly notarised copy thereof must be lodged with the
registrars of the company capita registrars proxy processing centre telford road bicester ox26 4ld you may also deliver it by hand to the registry 34
beckenham road beckenham kent br3 4tu during normal business hours not less than 48 hours before the time appointed for the meeting or adjourned meeting
at which it is to be used
5 in the case of joint holders of a share the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the
other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the statutory register of members in respect of the
share
6 any alteration in this form of proxy must be initialled by the person in whose hand it is signed or executed
ordinary business for against withheld
1 to receive and consider the accounts for the 12 months ended 31 december 2006
together with the reports of the directors and auditors thereon
2 to reelect b a huebner as a director
3 to reelect g j hall as a director
4 to reelect g b kuenster as a director
5 to reappoint deloitte  touche llp as auditors of the company until the conclusion of
the next annual general meeting and to authorise the directors of the company to 
determine their remuneration
special business
6 to authorise the directors to allot shares of the company up to a maximum
amount of £67605
7 to empower the directors to allot shares for cash on a preemptive basis and otherwise
up to a maximum amount of £40563
8 to authorise the company to make market purchases of its ordinary shares up to
a maximum number of 20281500 ordinary shares
osmetech annual report and accounts 2006 45
✄
osmetech plc proxy for use at annual general meeting business reply licence number
rrhbrsxjgkcy
proxy processing centre
telford road
bicester
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2 2 2
third fold
first fold
second fold   directors 
gordon j hall nonexecutive chairman
james n g white chief executive officer
david a sandilands chief financial officer
gordon b kuenster nonexecutive
bruce a huebner executive
secretary
sally a craig
corporate governance standing committees
audit committee
gordon j hall chairman
gordon b kuenster
remuneration committee
gordon j hall chairman
gordon b kuenster
correspondence address
1 liverpool street
london
ec2m 7qd
tel 020 7849 6027
fax 020 7956 2001
registered office not for correspondence
co ashurst
broadwalk house
5 appold street
london ec2a 2ha
website httpwwwosmetechcom
registered number
2849544
stockbroker and financial advisor 
hoare govett limited
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london
ec2m 4aa
auditors
deloitte  touche llp
po box 500
2 hardman street
manchester
m3 3hf
solicitors
ashurst
broadwalk house
5 appold street
london
ec2a 2ha 
registrars and transfer office
capita registrars
northern house
woodsome park 
fenay bridge
huddersfield
hd8 0la
tel 0870 162 3131
principal banker
national westminster bank plc
41 greengate street
stafford
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directors and advisers xx    osmetech annual report 2004  


Summary:
 chief executive officer’s review
introduction
through the recent sale of its critical care division osmetech has capitalised on the considerable value
created in that business since its acquisition from roche diagnostics inc in 2003 following its sale the
group is now wholly focussed on its molecular diagnostics business operating in pasadena and boston
in the us
sale of critical care division
2006 was another year of strong profitable growth for the critical care division sales of the blood gas
and electrolyte product range increased to £105m 194m in 2006 from £56m 99m for the 8 month
period ended 31 december 2005 sales increased by 29 when compared to the equivalent 12 month
period in 2005 of £81m benefiting in particular from vetstat sales to our veterinary distribution partner
idexx laboratories inc ‘idexx’
notwithstanding the highly satisfactory operating performance of the division this year on 18 december
2006 we announced the proposed sale of the critical care division to idexx for 449m in cash this
sale was approved by shareholders at an extraordinary general meeting on 9 january 2007 and the
transaction was completed on 31 january 2007
the critical care division was originally acquired by osmetech in april 2003 for 27m before costs
during the period of osmetech’s ownership sales more than doubled and a loss making business was
transformed into profitability this was achieved principally through selective new product investment
and the launch of the vetstat in the veterinary market with idexx osmetech’s developing commercial
relationship with idexx presented an opportunity to sell the division at an attractive price representing
a substantial return on investment
your board considered that this divestment was in the best interests of the group as a whole delivering
the following benefits
• realises excellent value creation for shareholders
• removes any shareholder concerns over the group’s funding requirements and strengthens its
balance sheet
• provides the necessary funding to enable the continued development of a successful molecular
diagnostics business
• osmetech is now well positioned in a high growth market sector with potentially high returns
molecular diagnostics market
the molecular diagnostics market is expected to continue to be the fastest growing segment within in
vitro diagnostics ivd with an estimated global market worth of 26bn in 2006 it is approaching 10
of the total ivd market and exhibiting annual growth rates of approximately 20 infectious disease and
genetic testing are the two most rapidly growing areas for molecular diagnostics accounting for
approximately half of the overall market segment
osmetech is primarily targeting genetic testing which can be divided broadly into three areas
• diagnosis and monitoring – evaluating genetic sequences to confirm the presence or progress of
disease
• susceptibility – evaluating genetic mutations to determine susceptibility to a future condition eg
cystic fibrosis
• pharmacogenetics – evaluating genetic variations to predict a patient’s response to a particular drug
osmetech annual report and accounts 2006 3 chief executive officer’s review
continued
pharmacogenetics or ‘personalised medicine’ is widely anticipated to grow rapidly as treatments are
more closely tailored to a patient’s genetic makeup for example osmetech is developing a genetic
test relevant for the anticoagulant warfarin where the market opportunity is substantial optimal doses
of warfarin vary among patients with incorrect starting dosages prescribed for 20 of patients resulting
in either insufficient or excessive blood thinning
warfarin testing is expected to lead to a reduction in the 85000 cases of severe bleeding and 17000
strokes occurring annually in the us and could decrease national healthcare spending by 11bn per
year as estimated by the american enterprise institute and the brookings institute more than 30m
prescriptions for warfarin are given annually in the us alone with 3m new patients each year suffering
from a heart attack or stroke the total annual number of patients worldwide with conditions for which
warfarin could potentially be prescribed is 85m
pharmacogenetics is also expected to play a larger role in drug development through the identification
of genetic mutations and creation of “companion” diagnostics
molecular diagnostics division
osmetech is developing a strong complementary portfolio of fdaapproved and developmentstage
products that address the rapidly growing molecular diagnostics market
we plan to expand and develop the division through the following means
• progress with the development and commercialisation of the group’s existing product pipeline
including the second generation instrument platform the esensor
®
xt8
• secure licensing agreements that will add assay content and therefore revenues for the group’s
instrument platforms
• continue to explore selective acquisition opportunities which will strengthen and expand the
group’s presence in the molecular diagnostics market
• negotiate licensing agreements and enter into strategic partnerships in nonhealthcare markets thereby
leveraging the strength of the group’s instrument platforms technology and intellectual property
osmetech’s two instrument platforms esensor
®
and genesensor™ previously known as opti gene
are directly targeting the demand for decentralised testing by providing practical cost effective
molecular diagnostic technologies and tools that will enable a broader range of hospitals and
laboratories to offer molecular diagnostic services our strategy has been to design low cost products
specifically for the diagnostics market rather than by adapting complicated high cost research 
products
esensor
®
the esensor
®
instrument and cartridge consumable system is primarily suited to undertaking relatively
complex molecular tests which require the analysis detection or identification of many different targets
at once the electrochemical detection technology is protected by strong international intellectual
property including 70 patents in the us alone which have benefited from an investment of
approximately 100m by motorola during its period of ownership
earlier this year osmetech received 510k clearance from the us fda for its cystic fibrosis carrier
detection test and its esensor
®
4800 dna detection instrument platform this fda approval is a first for
a combined instrument and consumable cystic fibrosis assay the system assesses whether an individual
carries mutations in the cystic fibrosis gene and is used by adult couples contemplating pregnancy
the core technology for the instrument platform and microarray consumable forming part of this
approval will also be used for running tests for other conditions to be launched in the future
4 osmetech annual report and accounts 2006 chief executive officer’s review
continued
esensor
®
xt8
later this year we shall be introducing our second generation instrument the esensor
®
xt8 with new
consumable cartridge which will be able to routinely run complex assays including the cytochrome p450
“cyp 450” pharmacogenomics assays described later
the esensor
®
xt8 system will deliver a number of operational design and performance benefits
including
• significant reduction in processing time
• smaller foot print
• modular and expandable with higher throughput potential
• integrated cpu
• programmable esensor
®
cartridge
• increased chip density to enable wider analysis of gene mutations
• improved data management capabilities
a successful third party evaluation for a fully functional prototype xt8 instrument and our first cyp450
assay for warfarin testing took place in december 2006 we now plan to exhibit the platform at the
clinical virology symposium in the us next month moving to clinical trials in support of an fda
submission in the third quarter of 2007 following fda approval we anticipate a launch in the us by the
end of 2007 with an international launch scheduled for 2008
sensitube™
the sensitube™ product line previously known as opti tube™ consists of plastic tubes and
ergonomically designed sealing caps and carousel for use in the roche lightcycler a market leading
instrument used in pcr analysis sensitube™ is a cost effective robust alternative to roche glass
capillaries that eliminates the dangers of glass breakage and minimises the risk of laboratory personnel
being exposed to potentially dangerous samples and glass shards the same plastic technology has
been incorporated into consumables to be supplied for use with osmetech’s genesensor™ instrument
osmetech has also granted a worldwide nonexclusive license to roche for the manufacture and sale of
plastic consumable vials using this proprietary plastic tube technology in respect of which the company
has recently been granted its first patent
genesensor™
the genesensor™ instrument is primarily suited to undertaking relatively simple molecular tests whilst
our primary objective is to further develop the commercial potential for our esensor
®
system we plan to
fully launch the genesensor™ as a research instrument later this year followed by the introduction of an
fdacleared instrument and accompanying factor v and factor ii ivd tests for thrombophilia in early
2008 in time we expect that the instrument platform and proprietary consumable will be used for
testing a wide range of conditions
the combination of the esensor
®
and genesensor™ products should enable both complex and simple
molecular diagnostic tests to be performed accurately by hospitals in a cost effective and easy to use
format unlike many competing products the two products combine both an instrument platform and
proprietary test specific consumables new tests launched will use the same instrument platform and
consumable format thereby increasing sales revenues for each instrument in use
osmetech annual report and accounts 2006 5  chief executive officer’s review
continued
the increase in administrative expenses and operating loss for the continuing operations of the group
for 2006 reflects both the comparison with an 8 month period for 2005 and the inclusion of the results of
clinical micro sensors inc for a full 12month period following its acquisition on 26 july 2005 we
anticipate that administrative expenses for continuing operations will show a marginal increase in 2007
as more of our molecular division’s products reach commercialisation
the operating loss for the period of £124m compared to a net cash outflow from operating activities of
£112m with the difference of £12m largely explained by the share compensation charge of £08m a
noncash item accounted for in accordance with financial reporting standards no20 “share based
payment” frs 20 also in accordance with frs 20 we have restated the prior year charge for share
compensation charges
at 31 december 2006 cash and liquid resources were £71m following the receipt of the proceeds net
of expenses from the sale of the critical care division cash and liquid resources on 31 january 2007
were £275m the majority of our cash and liquid resources are denominated in us dollars and will be
retained as such to meet the anticipated funding requirements of our molecular diagnostics division
arising in the same currency
we have announced today that we have agreed to acquire the warrants issued to motorola as
consideration for the acquisition of clinical micro sensors in july 2005 the warrants are over 7811428
ordinary shares representing 385 of the issued share capital and will be cancelled by the company
thereby removing any dilution effects that would result from their exercise the cash cost to the
company is approximately £469000 representing 6 pence per warrant which were exercisable into
ordinary shares at 175 pence
outlook
the importance of the developing global molecular diagnostics market with high product margin
potential is becoming increasingly recognised by healthcare companies for example geneohm and tm
biosciences were recently acquired by larger players furthermore healthcare giant abbott laboratories
recently announced that it was to sell its core laboratory diagnostics business to ge healthcare but
would retain its molecular diagnostics and diabetes care glucose monitoring businesses it is also
likely that the growth of “companion” diagnostics in the pharmacogenomics market segment will lead
to closer alliances with pharmaceutical companies
the sale of our critical care blood gas and electrolyte analyser business has enabled osmetech to
become a ‘pure play’ well funded molecular diagnostics business operating in a high growth market
the company’s recent business development activities have given osmetech the financial flexibility to
execute its strategy of building a portfolio of commercialstage molecular diagnostic products we
expect to be able to add further content in order to develop a pipeline of new molecular diagnostic
tests to be run on the company’s instrument platforms in addition we anticipate that we will be able to
secure license agreements and partnerships to leverage the company’s assets in nonhealthcare
diagnostic markets where predicted growth rates are similarly attractive
we have a growing presence in this exciting market with our experienced management and a proven
product technology backed by a strong intellectual property portfolio osmetech has considerable
scope to build significant value in its molecular diagnostics division
james white
chief executive officer
20 march 2007
osmetech annual report and accounts 2006 7