osmetechannualreport 2004 xx
osmetech plc
annualreport andaccounts 2005 xx osmetechannualreport 2004
osmetech today
osmetech is a fast developing international diagnostics business with
operations inatlantabostonandpasadena in theus serving the high
growth near patient testing market targeting small to medium sized
hospitals
theopti range ofblood gas and electrolyte products provides a high
quality reliable revenuebase its established operational infrastructure
and strong international distributor network gives thegroupanexcellent
platform to support the further growth of its business
theacquisitions ofmolecular sensing plc inoctober 2004andclinical
microsensorsinc injuly 2005 have provideda strongcombination of
products suitable for the rapidly growing genetic diagnostics market
theoptigeneand esensor products areboth scheduled for launch in
early 2006
contents
1 highlights
2 chairman’s statement
3 chiefexecutiveofficer’s review
9 board of directors
10 report of the directors
15 independent auditors’ report
16 consolidated profit and loss account
16 consolidated statement of total recognised gains and losses
17 consolidatedbalance sheet
18 company balance sheet
19 consolidatedcash flow statement
19 reconciliation of net cash flow to movement in net funds
20 notes to theconsolidatedcash flow statement
23 notes forming part of the financial statements
37 notice ofannual general meeting
39 form of proxy
ibcdirectors andadvisers osmetechannualreport 2005 1
highlights
•sales of £583m 2004 – £618m – increase of 4 onaconstantcurrency basis
•sales of 1061m 2004 – 1045m for optibusiness – underlying increase of over 10
excluding one offsars relatedbenefit of over 1m in prior year
•operating losses of £215m 2004 – £142mbefore exceptional operatingcosts of £083m
2004 – £nil – in line with projections
•loss for the year after tax of £272m 2004 – £117m
•acquisition ofmolecular sensing plc for £273mbeforeacquisitioncosts givingan entry
point into the fast growingdnabased diagnostics sector
•strong product pipelineand excellent growth prospects in the small to medium sized
hospital market
•vetstat successfully launchedby our vetinerary distribution partneridexxlaboratories
inc – initial orders exceed expectations
current period
•successful fund raising of £110mbeforecosts
•acquisition ofclinicalmicrosensorsinc frommotorolainc strengthening thegroup’s
dna diagnostics strategy
•appointment of senior dna diagnostics specialists to management team
•launch of two new opti instruments 2 osmetechannualreport 2005
chairman’s statement
osmetech has continued to make significant progress with its strategy to developa diagnostics
business in the fast growing near patient testing market serving small to medium sized hospitals
the two recent acquisitions ofofexlistedmolecular sensing plcandclinicalmicrosensorsinc
“cms” frommotorolainc havecreateda strongand unrivalled product combination opti
gene will target simple test applications suchas sexually transmitted diseases where thereis
oftena demand for fast results thecms esensor™ product is suitable for morecomplex tests
suchas cysticfibrosis where theanalysis of multiple gene targets is required as thehuman
genomeproject continues to provide the genetic information necessary for new tests these
products createa strategically strong position for osmetech in the fast growing market segment of
genetic diagnostics
theoptibusiness has again performed well in the year it provides us withan excellent platform
from which wecan develop new product opportunities within thegroup this proven operational
infrastructure willbe very valuable in the process ofbringing theoptigeneand esensor™
products through to market weanticipatebeingable to successfully leverage our skills in
instrument manufacturingas wellas benefiting from our strong international distribution network
that currently sell toa similar customer base of small to medium sized hospitals
iam delighted to welcomebrucehuebner andgeoffmckinley to the management teamboth of
whom haveconsiderable experience in the field of genetic diagnostics bruce joins thegroupas
president ofcms he was previously chiefoperatingofficer ofgenprobeandpresident and
chiefoperatingofficer ofnanogen two major internationalcompanies in the genetics and
infectious diseases markets bruce has a strongsales andmarketingbackgroundand oversaw
genprobe througha period of growthandcommercial success in the diagnostics industry geoff
mckinley is responsible for our optigenebusiness he was previously sr director business
development biomérieux na with responsibility for new technologies for this globalmolecular
biology business successfully inlicensing technology fromgenprobeandaffymetrix 
injuly 2005osmetech raised £102 million net of expenses by way ofa placing of new shares in
order to provide workingcapital for thegroup througha very exciting stage in our development
we recognise the support andcommitment of many of our long term shareholders and had
originally proposed to provideall existing shareholders with the opportunity to participate in the
fundraising throughan offer of shares ona preemptivebasis however particularly in view of the
new europeanprospectus directive that became effective injulyand the increased timeandcost
that would havebeen involved in preparing suchan offer we reluctantly concluded that to
proceed on this basis would not be in thebest interests of thecompany 
at the forthcomingannualgeneralmeeting tobe held on 30 september 2005a resolution willbe
proposed toconsolidate every 10 ordinary shares of 001p each into 1 ordinary share of 010p each
weexpect to launchboth theoptigeneand esensor™ products in thecoming months and with
osmetech underpinnedby the strength of theoptibusinessibelieve that weare very well
placed tobuilda successfuland fast growing international diagnostics business
gordonhall
chairman
1september 2005 osmetechannualreport 2005 3
chief executive officer’s review
introduction
wearenow building upon the highly reliable revenue platform that opti has provided the
completion of twoacquisitionsmolecular sensing plc “ms”andclinicalmicrosensorsinc
“cms” in the fastest growth sector of the global diagnostics market genetic diagnostics should
providea powerful product combination this shouldallow us toperformboth simple tests
throughoptigeneand morecomplex tests with thecms esensor™ instrument yielding
exciting international opportunities for the further growth of thegroup 
as with theacquisition ofopti fromroche in 2003 theseacquisitions werecompleted on
favourable terms for osmetech shareholders and we expect tobeable to extract considerable
value from these investments in duecourse
opti
the recent investment in new opti products is starting to pay off with the updatedcca with
touchscreen havingbeen successfully launched the reusableoptir instrument targeting higher
usagecustomers and theoptilion electrolyte only analyser exhibitedat the recent american
association ofclinicalchemists conference aacc meeting in theus were very well receivedby
bothcustomers and international distributors both of these products are scheduled for worldwide
launch later this calendar year
theopti product line of near point ofcarearterialblood gas analysis instruments and
consumables continues to show good underlying sales growthas the market continues to migrate
from traditionalcentral hospital laboratory settings sales revenues for the year increased
marginally inconstant currency terms and there was underlying growth in excess of 10after
accounting for the oneoffbenefit ofsarsrelated sales tochinaand initial distributor pipeline
filling during the prior year
the vetstat productanopticcaanalyser adapted for the veterinary market has now been
launchedby our distribution partneridexxlaboratoriesinc “idexx” producing most
encouraging early results with orders exceeding expectations idexx is a worldwide leader in the
development andcommercialisation ofanimal health diagnostic products and weareconfident of
future growth resulting from their extensive sales and marketingcampaigns
good progress has alsobeen made with the development contract withidexx tocreatea new
platform for measuringcriticalcare parameters based onosmetech’s proprietary optical
fluorescence technology weexpect product sales tocommence on schedule in the short to
medium term
weopeneda sales office ingermany inapril with exclusive distribution rights toopti products in
this important market where we havean existingcustomer base regularly orderingconsumables
we shouldbeable to successfully leverage this operation further as we introduce new opti
products andcomplementary third party products we willalso havean established operation
through which to launch thegroup’s genetic diagnostics products allowing us to service the
customer base directly
opti is well placed to grow steadily andas the installedbaseexpands producea high quality
and reliable income stream for thegroup
genetic diagnostics market
genetic diagnostics is the fastest growing segment of the global diagnostics market and in theus
is forecast to grow at approximately 20 per year during the next 5 years the growth of this 4 osmetechannualreport 2005
chief executive officer’s review continued
sector and the prospect of high profit margins is becoming of increasing interest across the wider
diagnostics industry roche have recently madea strategic investment inaffymetrix which has a
biochip for dna detection
the genetic diagnostics market has not been dominatedby the major companies most testing is
currently performedby large hospitals and reference laboratories operating expensive instruments
and running specialised tests which rely on high volume testing in order to managecosts
the growth in these highly accurate diagnostic tests is expected tobe drivenby technological
advances providing simpler and morecost effectiveassays to enable small to medium sized
hospitals to perform testing themselves inaddition to the expansion of thehumangenome
project resulting in new tests to reduce healthcare systemcosts and to improve patient care this
fits well withosmetech’s existing distributor networkandcustomer base
the following three subsegments account for over 75 of theus genetic diagnostics market the
genetics and pharmacogenomics market in theusalone is expected to increase from 120m to
950m over the period 20032010 over the same period theus infectious diseases market is
expected to grow from 675m to 18bn
1humangenetics
human genetics focuses on enabling the physician to test individuals for diseases for which they
havea genetic predisposition for examplecystic fibrosis thrombosisalzheimer’s or certain
cancers this is achieved through the detection of “mistakes” inan individual’s dna which may
cause mutations associated witha particular disease
2pharmacogenomics
pharmacogenomics is the process of developing drug therapies tailored toan individual patient’s
needs through genetic testing this enables physicians to ensure that treatments areboth safeand
effective reducing drug wastageand reducing the possibility of patients experiencingadverse
drug reactions this is anarea in which weanticipate rapid growthand perhaps for the first time in
the healthcare diagnostics industry we will see pharmaceutical marginsbut without theassociated
development costs and timescales
thefda has recently approveda new product fromrocheaffymetrix for thecyp450 family of
enzymes which will provide relevant genetic information for drug metabolismand has now been
launchedat more than 500 per test cmsalso has a product currently under development for
cyp450 which is planned tobe launched later in 2006
the portable opti cca analyser
over 800 new opticca instruments sold in 20045
increasing theactive installedbase of units of over
4000 from which repeat consumable sales
continue tobe generated osmetechannualreport 2005 5
chief executive officer’s review continued
3infectious diseases
healthcare physicians rely on tests whichareable to identify thedna of thebacteria responsible
for sexually transmitted diseases eghivchlamydia gonorrhoeaand other infectious diseases
suchas mrsa this is the largest sector of the genetic diagnostics market today and is
concentrated incentral laboratories whichbatchand test high volumes of samples osmetech’s
aim through its optigene instrument is to improve the turnaround time of testing in this area
sufficiently to justify a shift in testingaway from thecentral laboratory to near point ofcare an
easy to perform test whichcan providea result within 45 minutes whilst the patient is stillat the
hospital or clinic presents a significant opportunity tocontrol the spread of diseaseboth in the
hospitaland in the general population theseattributes arealso expected tobe useful for the
effective diagnosis for emergingcontagious diseases suchas birdflu 
osmetech’s genetic diagnostics strategy
strategically the progression into genetic diagnostics was a logical move for osmetech with strong
growthanticipated from the small to medium sized hospital market  our corecustomer base we
hadbeen evaluatinga number of potential tests and technologies tocombine with our ownfda
approvedbacterial vaginosis test withina devicecapable of diagnosingand differentiatingbetween
the most prevalent andclinically important vaginal infectionsduring this process we reviewedand
assessed thecollaborative work that lgclimited “lgc”andms hadbeen performing includinga
successful study ofclinical samples at theroyalfreehospitalinlondon to evaluate thelgc
hybeaconchlamydia detectionassay run on the prototypeoptigene instrument we now intend
to developand market theoptigene deviceas a priority toaddress the most critical
requirements of the vaginal infectionand sexually transmitted diseases market
webelieve that theopttigeneand esensor™ products have theattributes necessary to meet
the requirements of the hospital market for new genetic tests that emerge from the expansion of
thehumangenomeproject that only require theanalysis ofa limitedamount of genetic
information the rapidoptigene product is well suited the esensor™ device is designed for
morecomplex tests 
both of these products facilitateaccurate testing inacost effective easy to use format andare
well protectedby strongip positions unlike much of thecompetitionboth products combine
bothan instrument platformand proprietary assayspecificconsumables
acquisition of molecular sensing plc
theall share offer for molecular sensing plc was completed on 12 october 2004 the offer of 47
osmetech shares for every 2 ms shares resulted ina total of 83992581 new osmetech shares
being issued withanaverage midmarket price of 3245 pence per share this valuedmsat
approximately £27m at the date ofacquisition the fair valueof the net assets ofms was £18m
includingcash of £19m
opti’s self contained optical sensor cassette for
blood gas electrolyte and metabolite analysis
over 13 millionconsumable tests sold in 20045
representing 63 of totalopti sales anda highly
reliable source of revenue 6 osmetechannualreport 2005
chief executive officer’s review
continued
opti gene
optigene is a rapidand easy to use device for dnaandrnaanalysis for relatively simple tests
that require limited genetic information suchas thrombophiliaand infectious diseases including
sexually transmitted diseases
we have signedan exclusiveagreement withlgc to license its hybeacons dna probe
technology for genetic testingapplications inall world markets excludingindia assays utilising
this technology arebeing developedat our facility inbostonus 
the development programme for thecompletion of theoptigene instrument has been fully
integrated intoosmetech’s operations we plan to exhibit the product at themedica europeand
amp us trade shows innovember this year with product sales likely tocommence in the first half
of 2006
optigenealso has significant potential in other markets suchas veterinary forensics and
research we would seek to exploit these opportunities through strategic partnerships as we have
achieved through the existingidexx relationship
we havealso signeda license withrochediagnostics for our proprietary plastic tube technology
the worldwide nonexclusive license will enableroche to manufactureand sell plasticconsumable
vials for use on its large installedbase oflightcycler instruments as a morecosteffective
alternative to existing glass vials whilst maintaining performance levels the same technology has
been incorporated intoconsumables tobe supplied for use withosmetech’s optigene
instrument
acquisition of clinical micro sensors inc
cms was acquiredcashand debt free on 26 july 2005 for aconsideration satisfiedby an issue of
warrants that entitlemotorola to subscribe for 78114287 ordinary shares at 175 pence per share
under the terms of theacquisitionmotorola havealso subscribed for 212470862 ordinary shares
inosmetech equating toan investment of £37m
cms
cms was founded in 1994as a spin off fromthecaliforniainstitute of technology “caltech”and
was acquiredby motorola injune 2000 for aconsideration of 280m thebusiness is based in
pasadenacaliforniausand employs approximately 60 people
motorola has disposed of its noncore medicalbusinesses includingcms osmetech identified
this business as having excellent core technology with strong intellectual property protectedby
international patents which hadbenefited from significant investment by motorola during its
period of ownership
thecore technology ofcms is electrochemical detection for dnaanalysis cms has been
developinga low cost instrument andconsumable for moderately complex genetic testing where
the detection of multiple gene targets is required thecms esensor™ instrument is a platform
that allows a number of tests tobe performed through the use ofacommonconsumable
configured for a specific test webelieve that both the instrument andconsumable have
significant cost advantages over competitor products
cms has developeda test for cystic fibrosis carrier screening where the presence of 25 genes is
analysed froma single sample clinical trials havebeenconductedat two hospitals and one
reference laboratory in theus to support a 510k submission to thefda oneclinical laboratory osmetechannualreport 2005 7
chief executive officer’s review
continued
oregonhealthandscienceuniversity recently presenteda research poster ‘biochipbasedcystic
fibrosis carrier screening’ that discusses theclinical methodsand results using thecms
esensor™ dna detection system the paper notes that thecms system producedaccurateand
timely results was easy to use with straightforward sample preparation it concluded that this
biochip system wouldbe useful for moderate volume testing the paper is available on our
website wwwosmetechcom 
we plan to exhibit thecms esensor™ cystic fibrosis product at themedica europeandamp us
trade shows innovember this year with product sales anticipated tocommence in the first half of
2006
cms’s second product launch is likely tobe for cyp450anarea that we expect to grow rapidly
intoa significant market this product is anticipated for launch towards the end of 2006
fund raising
at the same timeas theacquisition ofcms injuly 2005a placing of 6286m ordinary shares raised
£110m gross £102m net of expensesat a price of 175 pence per share following the
completion of the placing thereare 1318049730 ordinary shares in issue the placing was largely
with new investors includingmotorola who subscribed for £37m this will provide funds for the
enlargedgroup’s workingcapital requirements particularly that which relates to the new cms
business 
webelieve that net proceeds of the funding willbe sufficient for thecompletion of development
and the launch ofboth theoptigeneandcmscystic fibrosis products however it is likely that
osmetech will require further funding in the futurebut we expect tobeable toachieve this froma
position of strengthas webuild value within thegroup
financial review
sales revenues totalled 10863000 £5833000 which representeda 4 increase over the
previous year onaconstant currency basis 10453000 £6180000 the 6 reduction in sales
reported in sterling reflects the relative weakness of theus dollar during the period 
opti sales accounted for 98 of total revenues andas has already explained this business
experienced underlying growth in excess of 10 in product terms the highly reliable repeat
reagent sales accounted for 63 of total revenues
as expected gross profit margins reduced to 415 from theabnormally high levels achieved in
the previous year following the successful utilisation of slow moving inventory acquiredas part of
the purchase of theoptibusiness a high proportion ofopti’s cost of sales represents fixed
manufacturingcosts the recovery of which will improve throughadditional production volumes
fromidexxand new product introductions with minimal sales and marketingcosts through the
use of distributors for internationaland veterinary market sales we expect tobeable to improve
the profitability of thebusiness as revenues continue to grow
operating losses before exceptional items of £827000 2004 – £nil increased to £2152000 2004 –
£1418000 largely as a result of the reduction in gross margins explainedabove other non
exceptional overheads of £4574000 2004 – £4864000 representeda reduction of 6compared
to the prior year although much of this reduction was explainedby currency movements this year
includes overheads relating to themsoptigenebusiness since its acquisition on 12 october
2004 together withcosts associated with the due diligence process for thecmsacquisition 8 osmetechannualreport 2005
chief executive officer’s review
continued
we have recognised exceptionalcosts this year of £827000although only £67000 represents
‘cash items’ and relates to the integration of themsacquisition noncash items comprise the
write down of thecarrying value ofcertain tangibleand intangibleassets including £681658
relating to electronic gas odour sensor technology following thegroup’s change in strategy to
focus its development resources primarily on genetic diagnostics
cash outflows before financingamounted to £1227000 2004 – £2104000although this included
£1691000 net cashacquired from theacquisition ofms adjusting for this the gross outflow of
£2918000 was broadly similar to the reported loss for the year the £760000 noncash elements of
the exceptionalcosts were offset by a largely temporary increase of £553000 in trade debtors due
to the strong sales performance towards the end of the trading period
in order tobring our reporting periodand naturalbusiness cycle in line with that of our
commercial partners we intend tochange our accounting period toadecember year end we will
therefore report for an 8 month period ending 31december 2005
outlook
lookingahead for opti we expect continued strong growth through theidexx trading
relationshipandan increasedcontribution from the launch later this year of theoptilionand
optir instruments
we havea high quality operational infrastructurecapable of supporting thecontinued growth of
thebusiness and have the skills experienceand knowledge of the market to exploit the significant
opportunities that lieahead particularly in the field of genetic diagnostics within the genetic
diagnostics sector the small to medium sized hospitalbusiness is expected to grow most rapidly
this is osmetech’s existingcore internationalcustomer base
webelieve that the recent acquisitions ofmsandcms will provideosmetech witha strong
commercial presence in the fastest growing sector of the globaldiagnostics market theoptigene
and thecms esensor™ products areboth near to marketcomplementary andcompriseboth
instrument andconsumable as an installedbase of instruments is established we havean excellent
opportunity to expand sales revenues by increasing the testingcapability through offering new tests
andbenefiting from the relatively high margins that this sector is anticipated to yield
osmetech is well placed tocontinue to make significant progress with its strategy to developa
medical devices and diagnostics business in the fast growing near patient testing market
principally serving small to medium sized hospitals our product portfoliocontinues to strengthen
combining the reliable high quality revenues fromopti with exciting growth opportunities in the
field of genetic testing we havea provencommercial infrastructure with existing distributionand
customer base together withcommercial partnerships with three leading worldcompaniesroche
sysmex andidexx we look forward to the future withconfidenceand the prospects ofbuilding
significant value for shareholders
james white
chiefexecutiveofficer 
1september 2005 osmetechannualreport 2005 9
board of directors
for the year ended 30 april 2005
gordon james hall
nonexecutivechairman
gordonhallaged 62 was managingdirector ofshielddiagnosticgroup plc now axisshield plc untiloctober 1997 and prior to
this held senior positions at abbott laboratories he was appointed to theboardas executivechairman on 24september 1998
becoming nonexecutivechairman on 1february 2001
james nicholas gerald white
chiefexecutiveofficer
james whiteaged 34 was previously a senior consultant inarthur dlittlelimited’s corporate finance practice where he
specialised inadvising venturecapitalists on investments in smalland medium sizedcompanies he was operations manager of
osmetech fromseptember 1998 untilappointed to theboardas chiefoperatingofficer on 1october 1999 he was appointed
chiefexecutiveofficer on 22 december 2000
david anthony sandilands
chieffinancialofficer
davidsandilandsaged 44 was groupfinancialdirector at bluebird toys plc until its takeover by mattelinc of theusa mr
sandilands qualifiedas acharteredaccountant withprice waterhouseand was appointed to theboardas chieffinancialofficer
on 1july 1999
gordon bruce kuenster
nonexecutive
gordonkuensteraged 71 has foundedand developed major medical diagnosticcompanies he was appointedgroupvice
president anda director ofsquibbcorporation following its acquisition ofadvance technology laboratories inc he is chairman
ofumd technology incan integratedcircuit testingcompany he was appointed to theboard on 3 february 1998as director of
development and was appointedchief technology officer on 1october 1999becominga nonexecutive director on
3 september 2002
alfred marek
executive
alfredmarekaged 60 is president ofosmetech’s criticalcaredivisionbased inatlanta having joined thecompany at the time
of theoptiacquisition inapril 2003 he was previously with avland was instrumental in developing their entireblood gas
business prior to its sale toroche in 2000 mr marek was appointed to theboard on 21april 2004 10 osmetechannualreport 2005
report of the directors
for the year ended 30 april 2005
the directors submit their report together with theaudited financial statements for the year ended 30 april 2005
results and dividends
the results of thegroup for the year are set out on page 16
the directors do not recommend the payment ofa dividend 2004 – £nil
principal activities trading review and future developments
the principalactivity of thegroup is the design developmentmanufactureand sale of healthcare diagnostics and medical
devices incorporating sensing technology
the principalactivities of the subsidiariesmolecular sensing plcmolecular sensors limitedandosmetechincare the sameas
osmetech plc osmetech technology inc is a holdingcompany osmetechgmbh is a sales operationand has exclusive rights to
distributeosmetech products ingermany the principalactivity of the sixth subsidiaryosmetechaesop trusteelimited is toact
as a trustee toan employee share ownership trust
a review of the tradingand future developments are dealt with fully in theaccompanyingchairman’s statement
charitable and political contributions
thegroup did not makeany charitable or politicalcontributions during the year 2004 – £nil
directors
the directors of thecompany at 30 april 2005and their interests which wereall heldbeneficially in the ordinary sharecapital of
thecompany at thebalance sheet date were
ordinary shares of 1p each ordinary shares of 1p each
30 april 2005 30 april 2004
shares options shares options
gjhall 763946 1000000 763946 1000000
jngwhite 1509500 25120000 1509500 25120000
dasandilands 330263 12500000 330263 12500000
amarek 261900 10000000 261900 10000000
gbkuenster 3305403350000 3305403350000
on 26 july 2005 the following directors acquired the following ordinary shares of 001p pursuant to the placing of new ordinary
shares by evolutions securities limitedat 175p per share
ordinary shares of ordinary shares of
001p each 001p each heldafter
acquired theplacing
gjhall 285714 1049660
jngwhite571428 2080928
dasandilands285714 615977
notetheabove table does not include the deferred shares whichare effectively useless
inaccordance with thearticles ofassociationmr dasandilands will retireby rotationandbeing eligible offers himself for
reelection mr sandilands does not havea serviceagreement with thecompany mr sandilands’ appointment is terminableby at
least 12 month’s notice mr gbkuenster havingattained theage of 71 years offers himself for reelection mr kuenster does not
havea serviceagreement with thecompany and his appointment is terminableby at least 12 month’s notice osmetechannualreport 2005 11
report of the directors
continued
directors’ interests in contracts
no director was or is materially interested inany contract subsisting during or at the end of the financial year which was
significant in relation to thebusiness of thegroup
substantial shareholdings
inaddition to the directors’ shareholdings shownabove the directors havebeen notified or areaware of the following interests in
3 per cent or more of the issued ordinary sharecapital of thecompany as at 22 august 2005
shareholder number ofshares per cent
motorolainc 212470862 1612
gartmoreinvestment management plc 167827798 1273
schroder investment management limited 161242856 1223
pershingkeennominees limitedpsl981account 59662866 453
barclaysharenominees limited 54293231412
td waterhousenominees europelimitedsmktnomsaccount 53807266 408
compliance
as anaim listedcompany thecombinedcode is not mandatory and thecompany has therefore not produceda separate
corporategovernance or directors’ remunerationreport
going concern
having reviewed thegroup’s budgets and financial projections andafter making dueandcareful enquiries thedirectors havea
reasonable expectation that thegroup has adequate resources tocontinue in operational existence for the foreseeable future
theaccounts thereforeare prepared ona goingconcernbasis
directors’ responsibilities
unitedkingdomcompany law requires the directors to prepare financial statements for each financial year which givea trueand
fair view of the state ofaffairs of thecompany and thegroupas at the end of the financial year and of the profit or loss of the
group for that period in preparing those financial statements the directors are required to
• select suitableaccounting policies and thenapply themconsistently
• make judgements and estimates that are reasonableand prudent and
• state whether applicableaccounting standards havebeen followed
the directors are responsible for keeping proper accounting records which disclose with reasonableaccuracy at any time the
financial position of thecompany andgroupand to enable them to ensure that the financial statements comply with the
companies act 1985 they arealso responsible for the system of internalcontrol for safeguarding theassets of thecompany and
hence for taking reasonable steps for the preventionand detection of fraudand other irregularities
the maintenanceand integrity of the web site is the responsibility of the directors the workcarried out by theauditors does not
involveconsideration of these matters andaccordingly theauditors accept no responsibility for any changes that have occurred
to the informationcontained in the financial statements since they were initially presented on the web site
legislation in theunitedkingdom governing the preparationand dissemination of the financial statements and other information
included in theannual reports may differ from legislation in other jurisdictions 12 osmetechannualreport 2005
report of the directors
continued
supplier payment policy
thecompany has due regard to the payment terms of suppliers and settles all undisputedaccounts inaccordance with the
payment terms agreed with the supplier for eachbusiness transaction thecompany had 10 days 2004 – 48 days of purchases
outstandingat the end of the financial year
post balance sheet event
on 26 july 2005 thecompany acquired 100 of the sharecapitalofclinicalmicrosensors inca 100 subsidiary
ofmotorolainc refer to note 26 for further information
crest
thecompany’s ordinary shares are eligible for settlement throughcrest the system for securities tobe heldand transferred in
electronic form rather than in paper shareholders are not obliged to usecrestandcancontinue to holdand transfer shares in
paper without loss of rights
independent auditors
a resolution to reappoint deloitte touchellpas thecompany’s auditor willbe proposedat theannualgeneralmeeting
electronic communications
thecompany may deliver shareholder information includingannualandinterimreportsforms ofproxy andnotices ofgeneral
meetings inan electronic format to shareholders
if you would like to receive shareholder information in electronic format please register your request on thecompany’s registrar’s
electronic databaseat wwwcapitaregistrarscom you will initially need your unique “investor code” which you will findat the top
of your sharecertificate there is nocharge for this serviceif you wish to subsequently change your mind you may do soby
contacting thecompany’s registrars by post or through their web site
if you elect to receive shareholder information electronicallyplease note that it is the shareholder’s responsibility to notify the
company ofany change to their nameaddress emailaddress or other contact details shareholders shouldalso note that with
electroniccommunication thecompany’s obligations willbe satisfied when it transmits the notification ofavailability of
information or such other document as may be involved to the electronicaddress it has on file thecompany cannot be held
responsible for any failure in transmissionbeyond its controlany more than it can for postal failure in the event of thecompany
becomingaware that an electronic notification is not successfully transmitteda further twoattempts willbe made in the event
that the transmission is still unsuccessfula hardcopy of the notification willbe mailed to the shareholder in the event that specific
software is required toaccess information placed on thecompany’s website it willbeavailable via the website without charge
before electing for electroniccommunications shareholders should ensure that they have theappropriate equipment and
computer capabilities sufficient for the purpose thecompany takes all reasonable precautions to ensure no viruses are present in
any communication it sends out but cannot accept responsibility for loss or damagearising from the opening or use ofany email
or attachments from thecompany and recommends that shareholders subject all messages to virus checking procedures prior to
use any electroniccommunication receivedby thecompany that is found tocontainany virus will not beaccepted
shareholders wishing to receive shareholder information in theconventional printed form willcontinue to do soand need take no
further action
should you haveany further questions on this pleasecontact thecompany’s registrarscapitaregistrars on 0870 162 3131 osmetechannualreport 2005 13
report of the directors
continued
annual general meeting – explanation of special business
share consolidation renewal of authority to allot shares disapplication of preemption rights and amendment to articles
of association resolutions 5 6 7 and 8
resolution 5
at theannualgeneralmeetinga resolution willbe proposed toconsolidate every 10 ordinary shares of 001p each into
1 ordinary share of 010p each the “consolidation” following theconsolidation eachshareholder will holdapproximately the
same proportion of the issued ordinary sharecapital of thecompany as it did prior to theconsolidation each ordinary share of
010p each “new ordinary shares” willcarry the same rights including voting dividend rights and rights ona return ofcapitalas
each existing ordinary share of 001p each “existingshares”
shareholders will not receive fractions arising on theconsolidation of their existingshares accordinglyshareholders witha total
holding ofexistingshares in excess of 10but which is not exactly divisibleby 10 will have their entitlements rounded down to the
nearest whole number ofnew ordinary shares andshareholders with less than 10 existingshares will not be entitled toany new
ordinary shares fractional entitlements tonew ordinary shareswillbeaggregatedand sold in the market with the proceeds of
salebeing retainedby thecompany
subject toresolution 5being passedat theannualgeneralmeeting theconsolidation willbe effectedby reference to
shareholders and their holdings ofexistingshares on the register as at theclose ofbusiness on 30 september 2005
•dealings inexisting shares willcease on 30 september 2005and dealings innew ordinary shares willcommence on
3 october 2005
• settlements effected on or after 30 september 2005 ofbargains madebefore that date willbe innew ordinary shares
• for shareholders holding their existingshares incertificated form new sharecertificates willbe despatched at the risk of
theaddressee in respect ofnew ordinary shares by no later than 10 october 2005
• for shareholders holding their existingshares in uncertificated form the relevant crestaccounts willbecredited with the
new ordinary shares on 3 october 2005 in place of their existingshares
thedirectors believe that the increased share price will give thegroup greater credibility in its core markets wherea higher share
price may be perceived to signify a more substantialcompany
under the terms of theshareoptionschemes in the event ofa variation in the sharecapital of thecompany theboard may
adjust the exercise priceandor the number of shares subject toan option outstanding options under theshareoptionschemes
willbeadjusted inaccordance with their terms and participants willbe notified separately of theadjustments
resolution 6
thedirectors may only allot shares or grant rights over shares ifauthorised to do soby shareholders the generalauthority
grantedat theannual general meeting held on 23 september 2004is due to expireat theannual general meeting in 2005
accordinglyresolution 6 willbe proposedas an ordinary resolution to grant a new authority toallot unissued sharecapital up to
anaggregate nominal value of £43935 representingapproximately one third of the total issued ordinary sharecapitalas at
1september 2005 if given this authority will expireat the earlier of a 31 0ctober 2006 and b theconclusion of the next annual
general meeting of thecompany tobe held in 2006 other than in respect of thecompany’s obligations under its employee share
schemes thedirectors have no present intention of utilising theauthority set out in this resolution to issueany of theauthorised
but unissued sharecapital of thecompany this authority if granted willbe inaddition toany other likeauthority to the extent
not utilisedat the timeand date it is granted 14 osmetechannualreport 2005
report of the directors
continued
resolution 7
thedirectors also requireadditionalauthority from shareholders toallot shares or grant rights over shares where they propose to
do so for cashand otherwise than to existing shareholders pro rata to their holdings the generalauthority grantedat theannual
general meeting held on 23 september 2004 is due to expireat theannual general meeting in 2005 accordinglyresolution 7 will
be proposedas a special resolution to grant suchauthority ifgiven this authority will expireat the earlier of a 31 0ctober 2006
and b theconclusion of the next annual general meeting of thecompany tobe held in 2006 apart from rights issues open
offers and other preemptive issues theauthority willbe limited to the issue of shares up toanaggregate nominal value of
£13180 being 10 per cent of the issued ordinary sharecapitalat 1september 2005 this authority does not accord withipc
guidelinesbut the directors regard theauthority as desirable to maximise the options open to thecompany in thecoming year
resolution 8
thecompanies act 1985 “act” requires any director ofa publiccompany to retire from office uponattaining theage of 70
unless thearticles ofassociation of thecompany dissaply the relevant section of theact gordonkuenster who is 71 would
thereforebe required to stand down from theboard unless thecompany’s articles permit him to stay in office theboard wishes
gordonkuenster tocontinue in officeand since thearticles do not currently dissaply section 293 of theact it is proposed to put
a resolution to theannualgeneralmeeting tochange thecompany’s articles ofassociation so that directors may stay in office
beyond theage of 70
by order of theboard
s a craig
secretary
1september 2005 independent auditors’ report
osmetechannualreport 2005 15
independent auditors report to the members of osmetech plc
wehaveaudited the financial statements ofosmetech plc for the year ended 30 april 2005 whichcomprise theconsolidated
profit and loss account theconsolidated statement of total recognised gains and losses thebalance sheets theconsolidated
cash flow statement the reconciliation of net cash flow to movement in net funds notes to theconsolidatedcash flow statement
and the related notes 1 to 26 the financial statements havebeen prepared under theaccounting policies set out therein
this report is made solely to thecompany’s membersas abodyinaccordance with section 235 of thecompanies act 1985 our
audit work has been undertaken so that we might state to thecompany’s members those matters weare required to state to them
inanauditors’ report and for no other purpose to the fullest extent permittedby law we do not accept or assume responsibility
toanyone other than thecompany and thecompany’s members as abody for our audit work for this report or for the opinions
we have formed
respective responsibilities of directors and auditors
as described in the statement of directors’ responsibilities thecompany’s directors are responsible for the preparation of the
financial statements inaccordance withapplicableunitedkingdom law andaccounting standards our responsibility is toauditthe
financial statements inaccordance with relevant unitedkingdom legaland regulatory requirements andauditing standards
we report to you our opinionas to whether the financial statements givea trueand fair view andare properly prepared in
accordance with thecompanies act 1985 wealso report if in our opinion thedirectors’ report is not consistent with the financial
statements if thecompany has not kept proper accounting records if we have not receivedall the informationand explanations
we require for our audit or if information specifiedby law regarding directors’ remunerationand transactions with thecompany
and other members of thegroup is not disclosed
we read thedirectors’ report and the other informationcontained in theannualreport for theabove year as set out in the
contents sectionandconsider the implications for our report if webecomeaware ofany apparent misstatements or material
inconsistencies with the financial statements
basis of audit opinion
weconducted our audit inaccordance withunitedkingdomauditing standards issuedby theauditingpractices board anaudit
includes examination ona test basis of evidence relevant to theamounts and disclosures in the financial statements it also
includes anassessment of the significant estimates and judgements madeby the directors in the preparation of the financial
statementsand of whether theaccounting policies areappropriate to thecircumstances of thecompany andgroupconsistently
appliedandadequately disclosed
weplannedand performed our audit soas to obtainall the informationand explanations which weconsidered necessary in order
to provide us with sufficient evidence to give reasonableassurance that the financial statements are free from material
misstatement whether causedby fraud or other irregularity or error in forming our opinion wealso evaluated the overall
presentation of information in the financial statements
opinion
in our opinion the financial statements givea trueand fair view of the state ofaffairs of thecompany and thegroupas at 30 april 2005
and of the loss of thegroup for the year then endedand havebeen properly prepared inaccordance with thecompanies act 1985 
deloitte  touche llp
charteredaccountants andregisteredauditors
manchester
1september 2005 16 osmetechannualreport 2005
consolidated profit and loss account
for the year ended 30 april 2005
year ended year ended
300405 300404
note £ £
turnover 2 5832870 6180028
cost of sales 3410903 2733651
gross profit2421967 3446377
exceptionaladministrative expenses 5 827184 –
other administrative expenses 4574179 4864443
total administrative expenses 5401363 4864443
operating loss 4 2979396 1418066
net finance income 8 113631 102148
loss on ordinary activities before taxation 2865765 1315918
taxation 9 146672 147804
loss for the year transferred from reserves 20 2719093 1168114
basicanddilutedloss per share11 042p 021p
allactivities arose fromcontinuing operations
consolidated statement of total recognised gains and losses
for the year ended 30 april 2005
year ended year ended
300405 300404
£ £
loss for the financial year 2719093 1168114
currency translation difference on foreigncurrency net investments 198750 241703
total recognised losses relating to the year 2917843 1409817 osmetechannualreport 2005 17
consolidated balance sheet 
at 30 april 2005
at 300405 at 300404
note ££ ££
fixed assets
intangibleassets 12 1396113 1021933
tangibleassets 13 673825 476513
2069938 1498446
current assets
stocks 15 1143977 967278
debtors 16 2193160 1464345
investments 17 1000000 2700000
cashat bankand in hand 883712 472317
5220849 5603940
creditors amounts falling due within one year 18 1379412 940483
net current assets 3841437 4663457
net assets 5911375 6161903
capital and reserves
called up sharecapital19 6894783 6044304
share premiumaccount 19 29425051 29493748
merger reserve19 1885533 –
profit and loss account20 32293992 29376149
equity shareholders’ funds 21 5911375 6161903
these financial statements wereapprovedby theboard ofdirectors on 1september 2005
signed onbehalf of theboard ofdirectors
d a sandilands director 18 osmetechannualreport 2005
company balance sheet
at 30 april 2005
at 300405 at 300404
note ££ ££
fixed assets
intangibleassets 12 15706 680419
tangibleassets 13 9862 3093
investments 14 6229150 3006672
6254718 3690184
current assets
debtors 16 623865 471547
investments 17 1000000 2700000
cashat bankand in hand 697456 429886
2321321 3601433
creditors amounts falling due within one year 18 354404 324995
net current assets 1966917 3276438
net assets 8221635 6966622
capital and reserves
called up sharecapital19 6894783 6044304
share premiumaccount 19 29425051 29493748
merger reserve19 1885533 –
profit and loss account20 29983732 28571430
equity shareholders’ funds 21 8221635 6966622
these financial statements wereapprovedby theboard ofdirectors on 1september 2005
signed onbehalf of theboard ofdirectors
d a sandilands director osmetechannualreport 2005 19
consolidated cash flow statement
for the year ended 30 april 2005
year ended year ended
300405 300404
note £ £
net cash outflow from operating activities a 2748191 1772616
returns on investments and servicing of finance c 107410 101049
taxation c 158080 227529
capital expenditure and financial investment c 435841 238303
acquisitions and disposals b 1691296 421762
cash outflow before management of liquid resources and financing 1227246 2104103
management of liquid resources c 1700000 20000
financing c 58144 2047577
increasedecrease in cash414610 36526
reconciliation of net cash flow to movement in net funds
year ended year ended
300405 300404
£ £
increasedecrease incash in the year 414610 36526
decrease in liquid resources 1700000 20000
exchange differences 3215 9990
change in net funds 1288605 66516
net funds at beginning of year3172317 3238833
net funds at end of year 1883712 3172317 20 osmetechannualreport 2005
notes to the consolidated cash flow statement
a reconciliation of operating loss to operating cash flows
year ended year ended
300405 300404
£ £
operating loss 2979396 1418066
depreciationandamortisation 278996 157831
loss on disposal of fixedassets 17025 –
impairment of tangible fixedassets 29045 –
impairment of intangible fixedassets 731007 –
increase in stocks 276933 62297
increase in debtors 808799 274442
increasedecrease increditors 260864 175642
net cash outflow from operatingactivities 2748191 1772616
b acquisitions and disposals
on 12 october 2004 thegroupacquired the entire issued sharecapital ofmolecular sensing plcand its subsidiaries for a total
consideration of £2725459 satisfied entirely by the issue of ordinary shares andcosts of £204523
theacquisition has beenaccounted for using theacquisition method ofaccounting after adjustments to the valuation ofassets
and liabilities to reflect their fair value the fair value of theassets acquired is £1779044 goodwill of £1150938 has therefore
arisenand inaccordance with thegroup’s accounting policy hasbeencapitalised within thebalance sheet 
fair valueadjustments and net assets acquired
fair value
book value adjustments total
£££
intangibleassets 274272 21821756055
tangibleassets 462655328 40937
debtors 28074– 28074
cashand deposits 1895819 –1895819
creditors andaccruals 2364505391 241841
net assets acquired 2007980 2289361779044
goodwill 1150938
2929982
satisfiedby
issue ofshares2725459
acquisitioncosts 204523
2929982
theadjustments made in respect of intangibleassets comprise the write off of goodwillacquired of £154000 and the write off of
patents of £64217 which wereconsidered to have no value to thebusiness at the date ofacquisition osmetechannualreport 2005 21
notes to the consolidated cash flow statement
continued
b acquisitions and disposals continued
net cash inflow in respect of theacquisitioncomprised
£
cashat bankand in handacquired 1895819
acquisitioncosts 204523
net cash inflow 1691296
molecular sensing plc earneda loss after taxation of £608985 in the period from 1january 2004 to 12 october 2004 the
summarised profit and loss account for the period from 1january 2004 to 12 october 2004 shown on thebasis of theaccounting
policies ofmolecular sensing plc prior to theacquisition wasas follows
£
turnover and gross profit –
other operating expenses 685854
operating loss 685854
finance income net 66051
loss on ordinary activities before taxation 619803
tax on loss on ordinary activities 10818
loss for the financial period 608985
post acquisition the operations ofmolecular sensing plc were integrated with the existingoptibusiness and therefore it has not
been possible to determine the impact on the profit and loss account post acquisition notes to the consolidated cash flow statement
continued
22 osmetechannualreport 2005
c analysis of cash flows 
year ended year ended
300405 300404
£ £
i gross cash flows
returns on investments and servicing of finance
interest received 107587 101146
interest paid 177 97
107410 101049
taxation
researchanddevelopment tax credit 158080 227529
capital expenditure and financial investment
payments toacquire intangible fixedassets 16535 14754
payments toacquire tangible fixedassets 419306 223549
435841 238303
management of liquid resources
transfer from termdeposits 1700000 20000
financing
shares issued 23620 2147577
share issue expenses 81764 100000
58144 2047577
ii analysis of changes in net funds
at cash exchange at
300404flows differences 300405
£££ £
cashat bankand in hand 472317 414610 3215 883712
current asset investments 2700000 1700000– 1000000
net funds3172317 12853903215 1883712
d major noncash transactions
theconsideration for theacquisition ofmolecular sensing plccomprised entirely of the issue of shares the fair value of shares
issued was £2725459 osmetechannualreport 2005 23
notes forming part of the financial statements
for the year ended 30 april 2005
1 accounting policies
the financial statements havebeen prepared under the historicalcost conventionandare inaccordance withapplicableunited
kingdomaccounting standards thecompany has takenadvantage of the exemptionconferredby section 230 of thecompanies
act 1985 from presenting its own profit and loss account the followingaccounting policies which have not changed in the year
havebeenapplied
basis ofconsolidation
theconsolidatedaccounts incorporate the financial statements ofosmetech plcandall of its subsidiary undertakings made up to
30 april 2005 thecompany uses theacquisition method ofaccounting toconsolidate the results of its subsidiary undertakings
the results of subsidiary undertakings are included from the date ofacquisition
investments
investments heldas fixedassets are statedat cost less provision for impairment
acquisitions and disposals
onacquisition ofabusiness includingan interest inanassociated undertaking fair values areattributed to thegroup’s share of
net separableassets under theacquisition method infrs6 acquisitions andmergers’ where thecost of theacquisition exceeds
the fair values attributable to suchassets the difference is treatedas purchased goodwillandcapitalised in thebalance sheet in
the year ofacquisition the results andcash flow relating toabusiness are included in theconsolidated profit and loss account
and theconsolidatedcash flow statement from the date ofacquisition
turnover
turnover represents sales of goods and services to third parties as wellas income received from licenceand development
agreements income from theseagreements is typically in the form of fees on signature milestone payments on theachievement
of predetermined events and royalties on the sale of the product once marketed turnover is stated exclusive of valueadded tax
and other sales related taxes
turnover is recognised when licence rights are granted to the extent that thegroup has performed its contractual obligations
based on the fair value of the right toconsideration for eachcomponent of theagreement unearnedamounts arecarried forward
as deferred income
tangible fixedassets
tangible fixedassets are statedat cost net of depreciationandany provision for impairment
depreciation
depreciation is provided to write off thecost less estimated residual values ofall tangible fixedassets over expected useful
lives it is calculatedat the following rates
short leasehold improvements –over the life of lease
plant machinery and motor vehicles –1035 per annum oncost
office equipment – 2550 per annum oncost
taxation
current tax includingukcorporation tax researchand development tax credits and foreign tax is providedat amounts expected
tobe paid or recovered using the tax rates enacted or substantively enactedby thebalance sheet date 24 osmetechannualreport 2005
notes forming part of the financial statements
continued
1 accounting policies continued
deferred taxation
deferred tax is provided in full on timing differences which result inan obligationat thebalance sheet date to pay more tax or a
right to pay less tax at a future dateat rates expected toapply when they crystallisebased oncurrent tax rates and law timing
differences arise from the inclusion of items of incomeand expenditure in taxationcomputations 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 regardedas more
likely than not that they willbe recovered deferred tax assets and liabilities are not discounted
financecosts
financecosts associated with the issue of debt are deducted from the proceeds of the issueandcharged to profit over the
term of the debt so that theamount charged is at aconstant rate on thecarryingamount
financial instruments
in relation to the disclosures made in note 25
• short term debtors andcreditors are not treatedas financialassets or financial liabilities
• thegroup does not hold or issue derivative financial instruments for trading purposes
• forward exchangecontracts are used to fix the value of the relatedasset or liability in thecontract currency andat the
contract rateandany gains or losses on these instruments are offset where the instrument is used to hedgeacommitted or
probable future transaction gains and losses are deferred until the transaction occurs
foreigncurrency
profit and loss accounts of foreign subsidiary undertakings are translated into sterlingat theaverage rate assets and liabilities of
the foreign subsidiary undertakings are translated into sterlingat the rates of exchange ruling on thebalance sheet date
exchange differences whicharise from translation of the net investment in foreign subsidiary undertakings and the translation of
the profit and loss betweenclosing rateandaverage rateare taken to reserves
all other differences are taken to the profit and loss account with the exception of differences on foreigncurrency borrowings
which to the extent that they are used to finance or providea hedgeagainst foreign equity investmentsare taken directly to
reserves to the extent of the exchange differences arising on the net investment in those enterprises
intellectual property rights
patent costs arecapitalisedand written off ona straight linebasis over the shorter of the life of the patent or its useful
economic life thegroup’s other intellectual property rights are statedat cost andamortised over their useful economic
lives in relation to revenues generated
goodwill
purchased goodwill representing the excess of the fair value of theconsideration over the fair value of theassets acquired is
capitalisedandamortised ona straight linebasis over its useful economic life this is presumed tobebetween 10 and 15 years
depending on thebusiness acquired unless circumstances change significantly resulting inan impairment of thecarrying value 
researchand development
all researchand development expenditure is charged to the profit and loss account in the year in which it is incurred osmetechannualreport 2005 25
notes forming part of the financial statements
continued
1 accounting policies continued
stock
stocks are valuedat the lower ofcost or net realisable valuecost is calculatedas follows
raw materials – cost of purchase on first in first out basis
finished goods – cost of raw materials and labour andattributable overheads based on the normal level ofactivity
net realisable value is based on estimated selling price less further costs tocompletionand disposal
pensioncosts
contributions to definedcontribution pension schemes arecharged to the profit and loss account in the year in which they
become payable
operating leases
rentals under operating leases arecharged ona straight linebasis over the lease term even if the payments are not made on
suchabasis
2 turnover
the turnover is wholly attributable to thegroup’s principalactivity
turnover is analysedby destinationas follows
2005 2004
£ £
unitedkingdom 222712 123923
rest ofeurope 917753 1142784
usa 2696614 2331073
far east 1609478 2120280
rest of world 386313 461968
5832870 6180028
turnover originates as followsunitedstates – £5673092 2004 – £6180028 unitedkingdom – £133988 2004 – £niland
germany – £25790 2004 – £nil all turnover is to externalcustomers
3 analysis of loss before taxation and net assets
the directors have not disclosed segmentalanalysis on the grounds that it is considered seriously prejudicial to thegroup’s
commercial interests 26 osmetechannualreport 2005
notes forming part of the financial statements
continued
4 operating loss
2005 2004
£ £
this is arrivedat after charging
amortisation of intangible fixedassets 93163 30807
depreciation 185833 127024
impairment of intangibleassets 731007 –
impairment of tangibleassets 29045 –
auditors’ remuneration –audit servicesosmetech plc 30000 24500
–audit servicesother groupcompanies 18611 17791
– nonaudit services 17160 11000
operating lease rentals – plant and machinery 11512 –
– other 224762 263036
researchand development 2130533 1744862
loss on disposal of fixedassets 17025 –
5 exceptional administrative expenses
the exceptionalcosts incurred in 2005 relate to
• theclosure of themolecular sensing plc facility inmelkshamwiltshireukamounting to £67132 and related provisions for
the write off of tangibleand intangible fixedassets of £29045and £49349 respectively
• provisions for the impairment of intangible fixedassets of £681658 related to electronic gas odour sensor technology
following thegroup’s change in strategy to focus its development resources primarily on genetic diagnostics
the effect of this exceptionalcharge on preand post tax results in 2005 was £827184 2004 – £nil
6 employees
2005 2004
£ £
staffcosts for all employees including executive directorsconsist of
wages and salaries 2849276 2739148
social security costs 249534 227584
other pensioncosts 152314 107637
3251124 3074369
theaverage monthly number of employees of thegroup during the year including executive directors was as follows
number number
2005 2004
manufacturing 28 24
researchand development 22 21
sellingandadministration 24 19
74 64 osmetechannualreport 2005 27
notes forming part of the financial statements
continued
7 directors
2005 2004
£ £
emoluments 553009 403261
definedcontribution pension scheme payments 65396 40230
618405 443491
highest paid director
emoluments 209026 198311
definedcontribution pension scheme payments 23700 22500
232726 220811
thereare 3 2004 – 3 directors whoare members of definedcontribution schemes
directors’ interests
the interests of the directors in ordinary shares ofosmetech plc which saveas disclosedareall heldbeneficially as reported in
thereport of the directors on page 10
options
totaloptions
on ordinary share exercise
30 april 2004 date of price per exercisable
director and 30 april 2005grantshare from t o
gjhall 1000000 250908 2p 211001 210108
jngwhite120000 250998 2p 211001 210108
5000000 300902 2p 300905 300912
15815900 240203 239p 240204 240213
4184100 240203 239p 240204 240213
dasandilands2500000 300902 2p 300905 300912
5815900 240203 239p 240204 240213
4184100 240203 239p 240204 240213
gbkuenster 1350000 260400 26
1
 4p 260403 260410
1000000 20030111p 200304 200311
1000000 290102 12
3
 4p 290105 290112
amarek 10000000 10403 233p1040410413
the midmarket price of the shares at 30 april 2005 was 252p 2004 – 433pand the range during the period was between 235p
and 445p 2004 – 281pand 500p
8 net finance income
2005 2004
£ £
interest onbankbalances and term deposits 113808 102245
interest onbankborrowings 177 97
113631 102148 28 osmetechannualreport 2005
notes forming part of the financial statements
continued
9 tax on loss on ordinary activities
the tax credit comprises
2005 2004
£ £
current tax
ukcorporation tax receivable 136395 147804
adjustment in respect of prior years researchand development tax credit 10277 –
total tax on loss on ordinary activities 146672 147804
the differencebetween the totalcurrent tax shownaboveand theamount calculatedby applying the standard rate ofuk
corporation tax to the loss before tax is as follows
2005 2004
£ £
loss on ordinary activities before tax 2865765 1315918
tax credit at 30 859730 394775
effects of
– losses whichareavailable to set against future profits 568539 418074
–   researchand development tax credit 34095 147804
– expenses not deductible for tax purposes 139324 10959
– depreciation in excess ofcapitalallowances 15139 22826
– movement in short term timing differences 3484 11432
adjustment in respect of prior year 10277 –
total current tax credit 146672 147804
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 forwardas there is
insufficient evidence that theasset willbe recovered theamount of theasset not recognisedat a standard rate of 30 is
£83 million 2004 – £64 million inadditiona deferred taxasset in respect ofcapitalallowances of £289000 2004 – £317000 has
not been recognised theseassets willbe recoverable if thegroup generates profits in the future from the same trade in which
the losses were incurred
10 loss attributable to the company
the loss for the financial year dealt with in the financial statements of the parent company was £1412302 2004 – £1283961 as
permittedby section 230 of thecompanies act 1985 no separateprofit and loss account is presented in respect of the parent company
11 loss per share
the loss per share of 042p 2004 – loss per share 021p has beencalculated on the weightedaverage number of shares in issue
during the year namely 646690390 2004 – 561457432and losses of £2719093 2004 – £1168114
frs 14 requires presentation of dilutedeps whenacompany couldbecalled upon to issue shares that would decrease net profit
or increase net loss per share for a loss makingcompany with outstanding share options net loss per share would only be
increasedby the exercise of outofthemoney options since it is inappropriate toassume that option holders wouldact
irrationally noadjustment is made to dilutedeps for outofthemoney share options osmetechannualreport 2005 29
notes forming part of the financial statements
continued
12 intangible assets
group company
patents and intellectual patents and intellectual
trademarks property goodwill total trademarks property total
£££ £ ££ £
group
cost
at beginning of year 195686600000 367555 1163241 195686600000 795686
additions 16535–– 16535 16535– 16535
acquisitions 56055 –1150938 1206993 56055 – 56055
currency translationadjustment –– 27830 27830 –– –
at end of year268276 600000 1490663 2358939 268276 600000 868276
amortisation
at beginning of year 19007 96260 26041 141308 19007 96260 115267
charge for the year6296 –86867 93163 6296 – 6296
provision for impairment227267 503740 – 731007 227267 503740 731007
currency translationadjustment –– 2652 2652 –– –
at end of year252570 600000 110256 962826 252570 600000 852570
net book value
at 30 april 200515706 –1380407 1396113 15706 –15706
at 30 april 2004179679503740341514 1021933 176679503740680419
13 tangible assets
short plant machinery
leasehold and motor office
improvements vehicles equipment total
£££ £
group
cost
at beginning of year 1124456348 221158 678630
additions 101784 216377 101145 419306
acquisitions – 2333 38604 40937
disposals –17025 9638 26663
currency translationadjustment 85 3455315761 50399
at end of year 102823 623480335508 1061811
depreciation
at beginning of year38137504 64575 202117
provided in the year2553 10571377567 185833
disposals –– 9638 9638
provision for impairment – 270 28775 29045
currency translationadjustment 71 131966104 19371
at end of year2520 230291 155175 387986
net book value
at 30 april 2005100303 393189 180333 673825
at 30 april 20041086318844 156583 476513 30 osmetechannualreport 2005
notes forming part of the financial statements
continued
13 tangible assets continued
plant machinery
and motor office
vehicles equipment total
££ £
company
cost
at beginning of year –12940 12940
transfers from other groupcompanies2333 40198 42531
disposals –9638 9638
at end of year2333 43500 45833
depreciation
at beginning of year –9847 9847
provided in the year2063 4431 6494
transfers from other groupcompanies – 223 223
provision for impairment270 28775 29045
disposals –9638 9638
at end of year2333 33638 35971
net book value
at 30 april 2005– 9862 9862
at 30 april 2004– 30933093
14 fixed asset investments
investments loan total
££ £
company
cost
at beginning of year646 9804646 9805292
additions2947483274995 3222478
at end of year294812910079641 13027770
provision for impairment
at beginningand end of year645 6797975 6798620
net book value
at 30 april 2005 2947484 3281666 6229150
at 30 april 20041 3006671 3006672 osmetechannualreport 2005 31
notes forming part of the financial statements
continued
14 fixed asset investments continued
the following were subsidiary undertakings at the end of the year and haveallbeen included in theconsolidatedaccounts
proportion of
country of voting rights and
incorporation ordinary share
name or registration capital held nature ofbusiness
osmetech technology incusa 100 holdingcompany
osmetechincusa 100sameas ultimate parent company
molecular sensing plcuk 100 sameas parent company
molecular sensors limited uk 100 sameas parent company
osmetechgmbh germany 100 sales operation
osmetechaesop trusteelimited uk 100 dormant
thecountry of operation is the sameas its country of incorporation or registration
during the year the groupacquired the entire sharecapital ofmolecular sensing for consideration of £2929982 and the entire
sharecapital ofa new subsidiaryosmetechgmbh for £17501
shares heldby osmetech technology inc
15 stocks – group
2005 2004
£ £
raw materials and work in progress 861380 600574
finished goods 282597 366704
1143977 967278
there is no material differencebetween the replacement cost of stocks and theamount at which they are stated in the financial
statements
16 debtors
2005 2004
group company group company
££ ££
due within one year
trade debtors 1481814 – 928649 –
other debtors 165551 101894 47962 16426
called up sharecapital not paid 290000 290000 290000 290000
taxation recoverable 136395 136395 147804147804
prepayments andaccrued income 119400 95576 49930 17317
2193160 623865 1464345 471547 32 osmetechannualreport 2005
notes forming part of the financial statements
continued
17 investments – term deposits
2005 2004
£ £
group and company
cash deposits with terms in excess of 7 days 1000000 2700000
18 creditors amounts falling due within one year
2005 2004
group company group company
££ ££
tradecreditors 603192 115314 217984 30210
taxationand social security 31320 20940 51820 51820
accruals and deferred income 744900 218150 670679 242965
1379412354404 940483324995
19 share capital and other reserves group and company
2005 2004
£ £
authorised
ordinary sharecapital
1200000000 shares of 1p each 2004 – 810000000 shares of 1p each 1200000 1200000
allotted called up and fully paid
ordinary sharecapital
674978258 shares of 1p each 2004 – 589930397 shares of 1p each 6749783 5899304
allotted and called up
ordinary sharecapital
14500000 shares of 1p 14500000 shares of 1p 145000 145000
called up sharecapital – total 6894783 6044304
share
share premium merger
capital account reserve
£££
movement in the year
at 1may 2004 6044304 29493748 –
shares issued in the period 85047913066 1885533
share issuecosts –81763–
at 30 april 2005 689478329425051 1885533 osmetechannualreport 2005 33
notes forming part of the financial statements
continued
19 share capital and other reserves group and company continued
the following ordinary shares of 1p each were issued during the year
date number consideration per share
27 october 2004 76808133 3268432 shares of 10p each inmolecular sensing plc
28october 2004 311867 13271 shares of 10p each inmolecular sensing plc
4november 2004 301740 12840 shares of 10p each inmolecular sensing plc
11november 20041275955 54296 shares of 10p each inmolecularsensing plc
18november 2004136180 5795 shares of 10p each inmolecular sensing plc
25november 20041075758 45777 shares of 10p each inmolecularsensing plc
2 december 2004 79505233832 shares of 10p each inmolecular sensing plc
9december 2004 293444 12487 shares of 10p each inmolecular sensing plc
17 december 2004 730073 31067 shares of 10p each inmolecular sensing plc
16 december 2004 226437996357 shares of 10p each inmolecularsensing plc
24december 2004 250000 175p
24december 2004805280239p
share options
thecompany has granted options under theosmetech plcenterprisemanagement incentiveplan “emiplan”and the
osmetech plc 2003 usequity compensationplan “usplan”and has entered into individual optionagreements and unapproved
options as follows
1 emi plan
number of ordinary shares
under optionas at subscription
date 300405 300404 price exercisablebetween
17 september 2002 1187500 1437500 1
3

4
p17 december 2002 and 17 september 2012
24february 2003 10554238 11359518 239p 17 december 2003 and 24february 2013
13 october 2004 35250 –936p13 october 2004and 30july 2011
1november 2004 2750000 – 3075p 1november 2005and 1november 2014
14526988 12797018 34 osmetechannualreport 2005
notes forming part of the financial statements
continued
19 share capital and other reserves group and company continued
2 us plan
number of ordinary shares
under optionas at subscription
date 300405 300404 price exercisablebetween
1april 2003 25000000 25000000 233p1april 2004and 1april 2013
3 individual option agreements
number of ordinary shares
under optionas at subscription
date 300405 300404 price exercisablebetween
25september 1998 1237000 1237000 2p 21october 2001and 21october 2008
26 april 2000 1350000 3150000 26
1

4
p 26 april 2003 and 26 april 2010
20 march 2001 250000 250000 11p 1march 2004and 20 march 2011
20 march 2001 750000 750000 11p 20 march 2004and 20 march 2011
29january 2002 1000000 2000000 12
3

4
p 29january 2005and 29january 2012
30 september 2002 7500000 7500000 2p 30 september 2005and 30 september 2012
24february 2003 21631800 21631800 239p 24february 2004and 24february 2013
13 october 2004 2802281 – 34p 13 october 2004and 22 november 2008
36521081 37218800
4 unapproved options
number of ordinary shares
under optionas at subscription
date 300405 300404 price exercisablebetween
13 october 2004 35250 –532p 27 may 2005and 27 may 2012
36521081 37218800
warrants
thecompany has warrants outstandingas follows
number of ordinary shares
under warrant as at subscription
date 300405 300404 price exercisablebetween
14january 2002 – 300000 14055p 15january 2002 and 14january 2005
29january 2002 – 730000 1332p 30 january 2002 and 29january 2005
– 1030000 osmetechannualreport 2005 35
notes forming part of the financial statements
continued
20 profit and loss account group and company
group company
££
at 1may 200429376149 28571430
loss for the period 27190931412302
exchange loss onconsolidation 198750–
at 30 april 20053229399229983732
21 reconciliation of movements in shareholders’ funds
2005 2004
group company group company
££ ££
loss for the financial year 27190931412302 1168114 1283961
other recognised losses relating to the year 198750– 241703–
new sharecapital subscribed including premium 2667315 2667315 2337577 2337577
net reductionincrease in shareholders’ funds 250528 1255013 927760 1053616
opening shareholders’ funds 6161903 6966622 5234143 5913006
closing shareholders’ funds 59113758221635 6161903 6966622
22 commitments
at thebalance sheet date thegroup hadannualcommitments under noncancellable operating leases as set out below
land and landand
buildings other buildings other
2005 2005 2004 2004
££ ££
operating leases which expire
between twoand five years 488788478 ––
over five years 216052 – 168055 5067
264930 8478 168055 5067
23 related party transactions
thecompany has takenadvantage of the exemption not to disclose transactions with other group undertakings as voting rights
arecontrolled within thegroupandconsolidated financial statements are publicly available
no director was or is materially interested inany contract subsisting during or at the end of the financial year which was
significant in relation to thebusiness of thegroup
24 pension costs
thecompany makes contributions into money purchase pension schemes for thebenefit of its employees theassets of the
schemes are held separately from those of thecompany in independently administered funds the pensioncost charge represents
contributions payableand paidby thecompany to the fundsandamounted to £152314 for the year 2004 – £107637 notes forming part of the financial statements
continued
36 osmetechannualreport 2005
25 financial instruments
the numerical disclosures in this note deal with financialassets and financial liabilities as defined infinancialreportingstandard
13 –derivatives andother financialinstrumentsdisclosures frs13 certain financialassets suchas investments in subsidiaries
are excluded from the scope of these disclosures
as permittedby frs13 shortterm debtors andcreditors havebeen excluded from the disclosures other than thecurrency risk
disclosures
there is no material differencebetween the fair values andbook values of thegroup’s financial instruments either in thecurrent or
prior year
thegroup’s treasury activities are designed to provide suitable flexible fundingarrangements to satisfy its requirements the
group uses financial instruments comprisingcashand term deposits the main risks arising from thegroup financial instruments
are interest rateand liquidity risks theboard reviews policies for managing each of these risks and they are summarisedbelow
these policies have remained unchanged from previous years
thegroupaims toachieveabalancebetweencontinuity and flexibility of fundingby maintaininga range of maturities on its
liquid resources thegroupalso mixes the duration of its deposits to reduce the impact of interest rate fluctuations
thegroup has limited foreigncurrency risk since overseas subsidiaries derive revenues and incur expenses denominated
predominantly in thecurrencies of thecountries in which they operate all monetary assets and liabilities of thegroupare
materially denominated in the operating or functionalcurrency of the operating unit involved
there is no material differencebetween the fair values andbook values of thegroup’s financial instruments
interest bearing financialassets
functionalcurrency of operations
2005 2006
group sterling us dollar euro group sterling usdollar euro
£££ £££££
cash 883712718084 127961 37667 472317 429886 42431–
termdeposits 1000000 1000000 –– 2700000 2700000 ––
1883712 1718084 127961 37667 31723173129886 42431–
the sterlingandus dollar cashbalances attract interest at floating rates based on thebank ofenglandbase rateandusprimerate
respectively
the term deposits are of 1 month’s durationat a weightedaverage fixed rate of 460 2004 – 1 month’s duration 369
26 post balance sheet events
on 26 july 2005 thecompany acquired 100 of the sharecapitalofclinicalmicrosystems inca 100 subsidiary ofmotorolainc
theconsideration for the transactioncomprised the issue of warrants over 78114287 osmetech shares at 175p per share the net
assets ofclinicalmicrosystems incat acquisitionbeforeconsideration of fair valueadjustments were £1232000 osmetechannualreport 2005 37
notice of annual general meeting
notice is hereby given that theannualgeneralmeeting ofosmetech plc the “company” willbe heldat the offices ofashurst
broadwalkhouse 5appoldstreetlondonec2a 2ha on 30 september 2005at 1030 am for the purpose ofconsideringand if
thought fit passing the following resolutions
ordinary business
1 to receiveandconsider theaccounts for the year ended 30 april 2005 together with the reports of the directors andauditors
thereon
2 to reelect dasandilands as a director
3 to reelect gbkuenster as a director
4 to reappoint deloitte touchellpas auditors of thecompany until theconclusion of the next annual general meetingand
toauthorise the directors of thecompany to determine their remuneration 
special business
toconsiderand if thought fit to pass the following resolutions of which numbers 5and 6 willbe proposedas ordinary resolutions
and numbers 7 and 8 willbe proposedas special resolutions
5 that all of the issuedand unissued ordinary shares of 001p each in the sharecapital of thecompanybe with effect from
close ofbusiness on the date of the passing of this resolutionconsolidated into ordinary shares of 010p each “ordinary
shares” on thebasis of one ordinary share of 010p each for every 10 ordinary shares of 001p each eachordinary share
having the same rights andbeing subject to the same restrictions as the ordinary shares of 001p eachas set out in the
company’s articles ofassociationand that fractional entitlements to ordinary shares of 010p eachbeaggregatedand sold in
the market and the proceeds of salearising therefrombe retained for thebenefit of thecompany
6 that the directors beand they are hereby generally and unconditionally authorised for the purposes ofand pursuant to
section 80 of thecompanies act 1985 the “act” to exerciseall the powers of thecompany toallot relevant securities within
the meaning of section 802 of theact up toanaggregate nominalamount of £43935 provided that this authority shall
unless renewed varied or revoked expireat the earlier of a 31october 2006 and b theconclusion of the next annual
general meeting of thecompany tobe held in 2006 and provided further that thecompany may before the expiry of such
period makeany offeragreement or arrangement which would or might require relevant securities tobeallottedafter such
expiry and the directors of thecompany may allot relevant securities pursuant toany such offeragreement or arrangement as
if theauthority hereby conferred had not expired this authority shallbe inaddition toany likeauthority pursuant to the said
section 80 to the extent not utilisedat the timeand date on which this resolution 6 is passed
7 that subject to the passing ofresolution 6 above the directors of thecompany beand they are hereby empowered toallot
equity securities within the meaning of section 942 of theact for cash pursuant to theauthority conferredby resolution 6
aboveas if section 891 of theact did not apply toany suchallotment provided that this power shall unless renewed varied
or revoked expireat the earlier of a 31 0ctober 2006 and b theconclusion of the next annual general meeting of the
company tobe held in 2006 and provided further that this powershallbe limited to theallotment of equity securities
i inconnection witha rights issue open offer or other preemptive issue in favour of ordinary shareholders where the
equity securities respectively attributable to the interests ofall ordinary shareholders are proportionate as nearly as
practical to the respective numbers of ordinary shares heldbythembut subject to such exclusions or other arrangements
as the directors may deem necessary or desirable in relation tofractional entitlements or legal or practical problems
arising in or pursuant to the laws ofany territory or the requirements ofany regulatory body or stock exchange inany
territory and 38 osmetechannualreport 2005
notice of annual general meeting
continued
ii otherwise than pursuant to paragraph iabove up toanaggregate nominalamount of £13180 and provided further that
thecompany mayat any timebefore the expiry of such power makeany offer or enter intoany agreement which would
or might require equity securities tobeallottedafter the expiry of such power and the directors may allot equity
securities in pursuance ofany such offer or agreement as if such power conferred hereby had not expired this power
shallbe inaddition toany existing like power not utilisedatthe timeand date on which this resolution 7 is passed
8 that thearticles ofassociation of thecompany beamendedbytheaddition ofa new article 110 aas follows
“there shall not beanage limit for directors and subsections 2 to 6 of section 293 of theact shall not apply to the
company”
by order of theboard registered office
sacraig coashurst
secretary broadwalkhouse
5appoldstreet
londonec2a 2ha
1september 2005
notes
1 a member of thecompany may appoint one or more proxies toattendand ona poll to vote instead of the member a proxy
ofa member need not alsobea member
2 the instrument appointinga proxyand the power ofattorney or other authority ifany under which it is signed or a notarially
certifiedcopy of that power or authority must be deposited with thecompany’s registrarscapitaregistrarsproxy
departmenttheregistry 34beckenhamroadbeckenhamkentbr3 4tu not less than 48 hours before the time for holding
the meeting aform ofproxy accompanies this document for useby members
3 completion of theform ofproxy will not precludea member fromattendingand voting in person
4 as permittedby regulation 41 of theuncertificatedsecurities regulations 2001 only those holders of ordinary shares whoare
registered on thecompany’s share register as at 1030 am on 28september 2005 shallbe entitled toattend theannual
generalmeetingand to vote in respect of the number of shares registered in their names at that time changes to entries on
the share register after 1030 am on 28september 2005 shallbedisregarded in determining the rights ofany person toattend
andor voteat theannualgeneralmeeting
5 the register of directors’ interests in the sharecapital of thecompany is available for inspectionat thecompany’s registered
office during normalbusiness hours from the date of the noticeof this meeting until the date of theannualgeneralmeeting
and willbeavailable for inspectionat the place of theannualgeneralmeeting for at least 15 minutes prior toand during the
meeting  osmetechannualreport 2005 39
osmetech plc proxy for use at annual general meeting
please insert iwe
full name
please useblock letters
andaddress of
of
being members of theabove–namedcompany hereby appoint thechairman of theannualgeneralmeeting
or see note 1
as myour proxy to vote for meus and on myour behalfat theannualgeneralmeeting of thecompany tobe heldat the offices
ofashurstbroadwalkhouse 5appoldstreetlondonec2a 2ha on 30 september 2005at 1030 amandat any adjournment
thereof
iwe request such proxy to vote on the following resolutions as mentionedbelow see note 2
signaturesee note 3 dated this day of 2005
joint holders ifany see note 5
name name
name name
notes
1 if you wish toappoint some other personas your proxy please insert hisher nameandaddress initialand strike out the words “thechairman of themeeting” a
proxy need not bea member of thecompany appointinga proxy will not preclude you from personally attendingand votingat the meeting in substitution for your
proxy vote if you subsequently decide to do so
2 please indicate withan “x” in theappropriatebox how you wish your votes cast unless otherwise instructed the proxy will exercise hisher discretionas whetherand
if so how heshe will vote
3 this form ofproxy must in thecase ofan individualbe signedby theappointer or hisher attorney or in thecase ofacorporationbe given under its common seal
or signed on its behalfby anattorney or a duly authorised officer or if it is subject to thecompanies act 1985 as amended inaccordance withsection 36a thereof
4 tobe valid this form ofproxy andany power ofattorney or other authority under which it is executed or a duly notarisedcopy thereof must be lodged with the
registrars of thecompanycapitaregistrarsproxy departmenttheregistry 34beckenhamroadbeckenhamkentbr3 4tu not less than 48 hours before the
timeappointed for the meeting or adjourned meetingat which it is tobe used
5 in thecase of joint holders ofa share the vote of the senior who tenders a vote whether in person or by proxy shallbeaccepted to the exclusion of the votes of the
other joint holders and for this purpose seniority shallbe determinedby the order in which the names stand in the statutory register of members in respect of the
share
6 any alteration in this form ofproxy must be initialledby the person in whose hand it is signed or executed
ordinary business for against
1 to receiveandconsider theaccounts for the year ended 30 april 2005 together with the
reports of the directors andauditors thereon
2 to reelect dasandilands as a director
3 to reelect gbkuenster as a director
4 to reappoint deloitte touchellpas auditors of thecompany until theconclusion of the
next annual general meetingand toauthorise the directors of thecompany to determine
their remuneration
special business
5 toconsolidate thecompany’s ordinary shares into ordinary shares of 010p each
6 toauthorise the directors toallot shares of thecompany up toa maximumamount
of £43935
7 toempower the directors toallot shares for cash otherwise than ona preemptivebasis 
and otherwise up toa maximumamount of £13180
8 toamend thearticles ofassociation
q businessreplyservice
licencenomb122
capita registrars
proxy department
po box 25
beckenham
kent br3 4br
2 2
thirdfold
firstfold
secondfold directors 
gordon j hall nonexecutive chairman
james n g white chief executive officer
david a sandilands chief financial officer
gordon b kuenster nonexecutive
alfred marek 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
12 st james’s square
london
sw1y 4rb
tel 020 7849 6027
fax 020 7849 6300
registered office
co ashurst
broadwalk house
5 appold street
london ec2a 2ha
fax 020 7849 6300
website httpwwwosmetechcom
registered number
2849544
stockbroker and financial advisor 
evolution securities limited
100 wood street
london
ec2v 7an
auditors
deloitte  touche llp
pobox 500
201 deansgate
manchester
m60 2at
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
st1 2jd
directors and advisers xx osmetechannualreport 2004


Summary:
 osmetechannualreport 2005 3
chief executive officer’s review
introduction
wearenow building upon the highly reliable revenue platform that opti has provided the
completion of twoacquisitionsmolecular sensing plc “ms”andclinicalmicrosensorsinc
“cms” in the fastest growth sector of the global diagnostics market genetic diagnostics should
providea powerful product combination this shouldallow us toperformboth simple tests
throughoptigeneand morecomplex tests with thecms esensor™ instrument yielding
exciting international opportunities for the further growth of thegroup 
as with theacquisition ofopti fromroche in 2003 theseacquisitions werecompleted on
favourable terms for osmetech shareholders and we expect tobeable to extract considerable
value from these investments in duecourse
opti
the recent investment in new opti products is starting to pay off with the updatedcca with
touchscreen havingbeen successfully launched the reusableoptir instrument targeting higher
usagecustomers and theoptilion electrolyte only analyser exhibitedat the recent american
association ofclinicalchemists conference aacc meeting in theus were very well receivedby
bothcustomers and international distributors both of these products are scheduled for worldwide
launch later this calendar year
theopti product line of near point ofcarearterialblood gas analysis instruments and
consumables continues to show good underlying sales growthas the market continues to migrate
from traditionalcentral hospital laboratory settings sales revenues for the year increased
marginally inconstant currency terms and there was underlying growth in excess of 10after
accounting for the oneoffbenefit ofsarsrelated sales tochinaand initial distributor pipeline
filling during the prior year
the vetstat productanopticcaanalyser adapted for the veterinary market has now been
launchedby our distribution partneridexxlaboratoriesinc “idexx” producing most
encouraging early results with orders exceeding expectations idexx is a worldwide leader in the
development andcommercialisation ofanimal health diagnostic products and weareconfident of
future growth resulting from their extensive sales and marketingcampaigns
good progress has alsobeen made with the development contract withidexx tocreatea new
platform for measuringcriticalcare parameters based onosmetech’s proprietary optical
fluorescence technology weexpect product sales tocommence on schedule in the short to
medium term
weopeneda sales office ingermany inapril with exclusive distribution rights toopti products in
this important market where we havean existingcustomer base regularly orderingconsumables
we shouldbeable to successfully leverage this operation further as we introduce new opti
products andcomplementary third party products we willalso havean established operation
through which to launch thegroup’s genetic diagnostics products allowing us to service the
customer base directly
opti is well placed to grow steadily andas the installedbaseexpands producea high quality
and reliable income stream for thegroup
genetic diagnostics market
genetic diagnostics is the fastest growing segment of the global diagnostics market and in theus
is forecast to grow at approximately 20 per year during the next 5 years the growth of this 4 osmetechannualreport 2005
chief executive officer’s review continued
sector and the prospect of high profit margins is becoming of increasing interest across the wider
diagnostics industry roche have recently madea strategic investment inaffymetrix which has a
biochip for dna detection
the genetic diagnostics market has not been dominatedby the major companies most testing is
currently performedby large hospitals and reference laboratories operating expensive instruments
and running specialised tests which rely on high volume testing in order to managecosts
the growth in these highly accurate diagnostic tests is expected tobe drivenby technological
advances providing simpler and morecost effectiveassays to enable small to medium sized
hospitals to perform testing themselves inaddition to the expansion of thehumangenome
project resulting in new tests to reduce healthcare systemcosts and to improve patient care this
fits well withosmetech’s existing distributor networkandcustomer base
the following three subsegments account for over 75 of theus genetic diagnostics market the
genetics and pharmacogenomics market in theusalone is expected to increase from 120m to
950m over the period 20032010 over the same period theus infectious diseases market is
expected to grow from 675m to 18bn
1humangenetics
human genetics focuses on enabling the physician to test individuals for diseases for which they
havea genetic predisposition for examplecystic fibrosis thrombosisalzheimer’s or certain
cancers this is achieved through the detection of “mistakes” inan individual’s dna which may
cause mutations associated witha particular disease
2pharmacogenomics
pharmacogenomics is the process of developing drug therapies tailored toan individual patient’s
needs through genetic testing this enables physicians to ensure that treatments areboth safeand
effective reducing drug wastageand reducing the possibility of patients experiencingadverse
drug reactions this is anarea in which weanticipate rapid growthand perhaps for the first time in
the healthcare diagnostics industry we will see pharmaceutical marginsbut without theassociated
development costs and timescales
thefda has recently approveda new product fromrocheaffymetrix for thecyp450 family of
enzymes which will provide relevant genetic information for drug metabolismand has now been
launchedat more than 500 per test cmsalso has a product currently under development for
cyp450 which is planned tobe launched later in 2006
the portable opti cca analyser
over 800 new opticca instruments sold in 20045
increasing theactive installedbase of units of over
4000 from which repeat consumable sales
continue tobe generated osmetechannualreport 2005 5
chief executive officer’s review continued
3infectious diseases
healthcare physicians rely on tests whichareable to identify thedna of thebacteria responsible
for sexually transmitted diseases eghivchlamydia gonorrhoeaand other infectious diseases
suchas mrsa this is the largest sector of the genetic diagnostics market today and is
concentrated incentral laboratories whichbatchand test high volumes of samples osmetech’s
aim through its optigene instrument is to improve the turnaround time of testing in this area
sufficiently to justify a shift in testingaway from thecentral laboratory to near point ofcare an
easy to perform test whichcan providea result within 45 minutes whilst the patient is stillat the
hospital or clinic presents a significant opportunity tocontrol the spread of diseaseboth in the
hospitaland in the general population theseattributes arealso expected tobe useful for the
effective diagnosis for emergingcontagious diseases suchas birdflu 
osmetech’s genetic diagnostics strategy
strategically the progression into genetic diagnostics was a logical move for osmetech with strong
growthanticipated from the small to medium sized hospital market  our corecustomer base we
hadbeen evaluatinga number of potential tests and technologies tocombine with our ownfda
approvedbacterial vaginosis test withina devicecapable of diagnosingand differentiatingbetween
the most prevalent andclinically important vaginal infectionsduring this process we reviewedand
assessed thecollaborative work that lgclimited “lgc”andms hadbeen performing includinga
successful study ofclinical samples at theroyalfreehospitalinlondon to evaluate thelgc
hybeaconchlamydia detectionassay run on the prototypeoptigene instrument we now intend
to developand market theoptigene deviceas a priority toaddress the most critical
requirements of the vaginal infectionand sexually transmitted diseases market
webelieve that theopttigeneand esensor™ products have theattributes necessary to meet
the requirements of the hospital market for new genetic tests that emerge from the expansion of
thehumangenomeproject that only require theanalysis ofa limitedamount of genetic
information the rapidoptigene product is well suited the esensor™ device is designed for
morecomplex tests 
both of these products facilitateaccurate testing inacost effective easy to use format andare
well protectedby strongip positions unlike much of thecompetitionboth products combine
bothan instrument platformand proprietary assayspecificconsumables
acquisition of molecular sensing plc
theall share offer for molecular sensing plc was completed on 12 october 2004 the offer of 47
osmetech shares for every 2 ms shares resulted ina total of 83992581 new osmetech shares
being issued withanaverage midmarket price of 3245 pence per share this valuedmsat
approximately £27m at the date ofacquisition the fair valueof the net assets ofms was £18m
includingcash of £19m
opti’s self contained optical sensor cassette for
blood gas electrolyte and metabolite analysis
over 13 millionconsumable tests sold in 20045
representing 63 of totalopti sales anda highly
reliable source of revenue 6 osmetechannualreport 2005
chief executive officer’s review
continued
opti gene
optigene is a rapidand easy to use device for dnaandrnaanalysis for relatively simple tests
that require limited genetic information suchas thrombophiliaand infectious diseases including
sexually transmitted diseases
we have signedan exclusiveagreement withlgc to license its hybeacons dna probe
technology for genetic testingapplications inall world markets excludingindia assays utilising
this technology arebeing developedat our facility inbostonus 
the development programme for thecompletion of theoptigene instrument has been fully
integrated intoosmetech’s operations we plan to exhibit the product at themedica europeand
amp us trade shows innovember this year with product sales likely tocommence in the first half
of 2006
optigenealso has significant potential in other markets suchas veterinary forensics and
research we would seek to exploit these opportunities through strategic partnerships as we have
achieved through the existingidexx relationship
we havealso signeda license withrochediagnostics for our proprietary plastic tube technology
the worldwide nonexclusive license will enableroche to manufactureand sell plasticconsumable
vials for use on its large installedbase oflightcycler instruments as a morecosteffective
alternative to existing glass vials whilst maintaining performance levels the same technology has
been incorporated intoconsumables tobe supplied for use withosmetech’s optigene
instrument
acquisition of clinical micro sensors inc
cms was acquiredcashand debt free on 26 july 2005 for aconsideration satisfiedby an issue of
warrants that entitlemotorola to subscribe for 78114287 ordinary shares at 175 pence per share
under the terms of theacquisitionmotorola havealso subscribed for 212470862 ordinary shares
inosmetech equating toan investment of £37m
cms
cms was founded in 1994as a spin off fromthecaliforniainstitute of technology “caltech”and
was acquiredby motorola injune 2000 for aconsideration of 280m thebusiness is based in
pasadenacaliforniausand employs approximately 60 people
motorola has disposed of its noncore medicalbusinesses includingcms osmetech identified
this business as having excellent core technology with strong intellectual property protectedby
international patents which hadbenefited from significant investment by motorola during its
period of ownership
thecore technology ofcms is electrochemical detection for dnaanalysis cms has been
developinga low cost instrument andconsumable for moderately complex genetic testing where
the detection of multiple gene targets is required thecms esensor™ instrument is a platform
that allows a number of tests tobe performed through the use ofacommonconsumable
configured for a specific test webelieve that both the instrument andconsumable have
significant cost advantages over competitor products
cms has developeda test for cystic fibrosis carrier screening where the presence of 25 genes is
analysed froma single sample clinical trials havebeenconductedat two hospitals and one
reference laboratory in theus to support a 510k submission to thefda oneclinical laboratory osmetechannualreport 2005 7
chief executive officer’s review
continued
oregonhealthandscienceuniversity recently presenteda research poster ‘biochipbasedcystic
fibrosis carrier screening’ that discusses theclinical methodsand results using thecms
esensor™ dna detection system the paper notes that thecms system producedaccurateand
timely results was easy to use with straightforward sample preparation it concluded that this
biochip system wouldbe useful for moderate volume testing the paper is available on our
website wwwosmetechcom 
we plan to exhibit thecms esensor™ cystic fibrosis product at themedica europeandamp us
trade shows innovember this year with product sales anticipated tocommence in the first half of
2006
cms’s second product launch is likely tobe for cyp450anarea that we expect to grow rapidly
intoa significant market this product is anticipated for launch towards the end of 2006
fund raising
at the same timeas theacquisition ofcms injuly 2005a placing of 6286m ordinary shares raised
£110m gross £102m net of expensesat a price of 175 pence per share following the
completion of the placing thereare 1318049730 ordinary shares in issue the placing was largely
with new investors includingmotorola who subscribed for £37m this will provide funds for the
enlargedgroup’s workingcapital requirements particularly that which relates to the new cms
business 
webelieve that net proceeds of the funding willbe sufficient for thecompletion of development
and the launch ofboth theoptigeneandcmscystic fibrosis products however it is likely that
osmetech will require further funding in the futurebut we expect tobeable toachieve this froma
position of strengthas webuild value within thegroup
financial review
sales revenues totalled 10863000 £5833000 which representeda 4 increase over the
previous year onaconstant currency basis 10453000 £6180000 the 6 reduction in sales
reported in sterling reflects the relative weakness of theus dollar during the period 
opti sales accounted for 98 of total revenues andas has already explained this business
experienced underlying growth in excess of 10 in product terms the highly reliable repeat
reagent sales accounted for 63 of total revenues
as expected gross profit margins reduced to 415 from theabnormally high levels achieved in
the previous year following the successful utilisation of slow moving inventory acquiredas part of
the purchase of theoptibusiness a high proportion ofopti’s cost of sales represents fixed
manufacturingcosts the recovery of which will improve throughadditional production volumes
fromidexxand new product introductions with minimal sales and marketingcosts through the
use of distributors for internationaland veterinary market sales we expect tobeable to improve
the profitability of thebusiness as revenues continue to grow
operating losses before exceptional items of £827000 2004 – £nil increased to £2152000 2004 –
£1418000 largely as a result of the reduction in gross margins explainedabove other non
exceptional overheads of £4574000 2004 – £4864000 representeda reduction of 6compared
to the prior year although much of this reduction was explainedby currency movements this year
includes overheads relating to themsoptigenebusiness since its acquisition on 12 october
2004 together withcosts associated with the due diligence process for thecmsacquisition 8 osmetechannualreport 2005
chief executive officer’s review
continued
we have recognised exceptionalcosts this year of £827000although only £67000 represents
‘cash items’ and relates to the integration of themsacquisition noncash items comprise the
write down of thecarrying value ofcertain tangibleand intangibleassets including £681658
relating to electronic gas odour sensor technology following thegroup’s change in strategy to
focus its development resources primarily on genetic diagnostics
cash outflows before financingamounted to £1227000 2004 – £2104000although this included
£1691000 net cashacquired from theacquisition ofms adjusting for this the gross outflow of
£2918000 was broadly similar to the reported loss for the year the £760000 noncash elements of
the exceptionalcosts were offset by a largely temporary increase of £553000 in trade debtors due
to the strong sales performance towards the end of the trading period
in order tobring our reporting periodand naturalbusiness cycle in line with that of our
commercial partners we intend tochange our accounting period toadecember year end we will
therefore report for an 8 month period ending 31december 2005
outlook
lookingahead for opti we expect continued strong growth through theidexx trading
relationshipandan increasedcontribution from the launch later this year of theoptilionand
optir instruments
we havea high quality operational infrastructurecapable of supporting thecontinued growth of
thebusiness and have the skills experienceand knowledge of the market to exploit the significant
opportunities that lieahead particularly in the field of genetic diagnostics within the genetic
diagnostics sector the small to medium sized hospitalbusiness is expected to grow most rapidly
this is osmetech’s existingcore internationalcustomer base
webelieve that the recent acquisitions ofmsandcms will provideosmetech witha strong
commercial presence in the fastest growing sector of the globaldiagnostics market theoptigene
and thecms esensor™ products areboth near to marketcomplementary andcompriseboth
instrument andconsumable as an installedbase of instruments is established we havean excellent
opportunity to expand sales revenues by increasing the testingcapability through offering new tests
andbenefiting from the relatively high margins that this sector is anticipated to yield
osmetech is well placed tocontinue to make significant progress with its strategy to developa
medical devices and diagnostics business in the fast growing near patient testing market
principally serving small to medium sized hospitals our product portfoliocontinues to strengthen
combining the reliable high quality revenues fromopti with exciting growth opportunities in the
field of genetic testing we havea provencommercial infrastructure with existing distributionand
customer base together withcommercial partnerships with three leading worldcompaniesroche
sysmex andidexx we look forward to the future withconfidenceand the prospects ofbuilding
significant value for shareholders
james white
chiefexecutiveofficer 
1september 2005