osmetech plc
annual report and accounts 2008 xx osmetech annual report 2004
osmetech’s molecular diagnostics business
transforming molecular diagnostics into practical costeffective
testing solutions
as the demand for and acceptance of molecular diagnostic tests
multiplies so does the rate of testing decentralisation the movement
of molecular diagnostic testing into the clinical laboratories of mid
size hospitals requires greater simplicity flexible testing capabilities
and costeffectiveness
osmetech molecular diagnostics is focused on providing cutting
edge costeffective molecular diagnostic technologies and tools that
enable a broader range of hospitals and laboratories to offer
molecular diagnostic services for improved patient care
contents
1 highlights
2 chairman’s statement
3 chief executive officer’s review
10 board of directors
11 report of the directors
17 independent auditors’ report
19 consolidated income statement
19 consolidated statement of total recognised income and expense
20 consolidated balance sheet
21 company balance sheet
22 cash flow statements
23 notes to the cash flow statements
25 notes forming part of the financial statements
59 notice of annual general meeting
63 form of proxy
ibc directors and advisers
directors
jon faiz kayyem nonexecutive chairman
james n g white chief executive officer
david a sandilands chief financial officer
daryl j faulkner nonexecutive
mark p lappe nonexecutive
secretary
sally a craig
corporate governance standing committees
audit committee
jon faiz kayyem chairman
daryl j faulkner
remuneration committee
daryl j faulkner chairman
mark p lappe
correspondence address
1 liverpool street
london
ec2m 7qd
tel 020 7849 6027
fax 020 7956 2001
registered office not for correspondence
co ashurst llp
broadwalk house
5 appold street
london ec2a 2ha
website httpwwwosmetechcom
registered number
2849544
stockbroker and financial adviser
canaccord adams limited
cardinal place
80 victoria street 7th floor
london
sw1e 5jl
auditors
deloitte llp
po box 500
2 hardman street
manchester
m3 3hf
solicitors
ashurst llp
broadwalk house
5 appold street
london
ec2a 2ha
registrars and transfer office
capita registrars
northern house
woodsome park
fenay bridge
huddersfield
hd8 0la
tel 0871 664 0391
principal banker
national westminster bank plc
41 greengate street
stafford
st1 2jd
directors and advisers
printed by park communications on fsc certified paper highlights
• loss for the year of £155 million 2007 – loss of £120 million from continuing operations
• revenue increases by 108 to £352000 2007 – £169000
• fda clearance and launch of second generation instrument platform esensor xt8 with
warfarin sensitivity test
• cyp4f2 biomarker provides unique position in rapidly developing warfarin testing market
• installed base of instruments growing and excellent customer feedback received on
operational performance
• us distribution agreement with fisher healthcare will accelerate revenue growth
• strong pipeline of tests to expand product menu in 2009
• development and supply agreement with qiagen for qiaplexbased respiratory viral
molecular test
• december 2008 share placing raises £69 million before expenses rationalization program
implemented to reduce cost base
• sufficient funding to support the business until july 2009
esensor
®
xt8 microarray consumable esensor
®
xt8 instrument  single tower esensor
®
xt8 instrument  3 tower chairman’s statement
at the start of 2009 mark lappe and i were appointed to the osmetech board and this represents my
first opportunity to formally address shareholders we represent osmetech’s largest shareholder efficacy
capital and have decided to increase our interests in the business as we believe that osmetech has the
strong potential to become a very successful player in the rapidly growing molecular diagnostics market
the company is well placed to take advantage of what we believe will be one of the next major shifts in
healthcare personalized medicine using genetic information to tailor treatment to the individual we
believe that the rewards of success for osmetech significantly outweigh the risks involved
we are particularly excited about the prospects for the development of the warfarin sensitivity testing
market and the clear alignment of benefits for the patient the practicing physician the hospital and the
insurance company there is considerable evidence in support of routine warfarin testing and we believe
that this market is approaching an inflection point where testing could begin to accelerate to the point
of becoming widespread and standard of care osmetech is in an excellent position to capitalize on this
with an fdacleared warfarin sensitivity test and a new extended version of the test which includes the
important new biomarker 4f2 unique to the company
following fda clearance and launch in july 2008 our esensor xt8 has performed extremely well in the
field providing our customers with an excellent user experience our easytouse and cost effective
system now enables our customers to perform molecular testing inhouse as a consequence patient
care is improved by producing faster test results and the hospital benefits financially by claiming
profitable reimbursement for running the test
many of the risks that an organization such as osmetech faces at this stage in its development have
been largely overcome our electrochemical detection technology is proven and robust and is protected
by a very strong patent portfolio we have developed a reliable and repeatable regulated
manufacturing process and have created a commercial infrastructure capable of supporting the growth
of our business we have an established method for creating new tests and have a product development
team with the skills to deliver these
we firmly believe that we have a superior instrument platform and have a strong pipeline of tests to
satisfy the requirements of the market our key operational challenge is now executing on our business
plan to expand the use of our esensor platform by increasing the installed base of instruments and
providing a growing menu of tests we have accelerated this strategy by signing agreements with
industry leaders qiagen and fisher healthcare for a respiratory pathogen test and us distribution
rights respectively
we believe that osmetech is an intrinsically strong company but remains undercapitalized in order to
fully execute our strategy we require further funding the board continues to consider all strategic
options to maximize shareholder value including attracting further funding into the business either
through investors or commercial partners a merger of the business with a complementary third party
business or the sale of the company i look forward to updating you in due course
jon faiz kayyem
chairman
2 april 2009
2 osmetech annual report and accounts 2008 chief executive officer’s review
introduction
the fda clearance and launch of our second generation instrument platform the esensor xt8 in 2008
marked a significant step towards our aim of commercialising our proprietary electrochemical detection
technology to provide a low cost easy to use technology for molecular diagnostics testing
at the same time as the fda clearance for the esensor xt8 we also received clearance for our esensor
warfarin sensitivity test which represents a significant market opportunity for osmetech
warfarin market opportunity
warfarin decreases the blood’s clotting ability and is the most widely prescribed oral anticoagulant in
north america and europe individuals metabolize warfarin differently and if its administration is not
managed carefully life threatening side effects may occur in the us alone there are an estimated
2 million new warfarin patients each year and it is the second most likely drug after insulin to send
americans to the emergency room resulting in an estimated 43000 visits a year and many
hospitalizations
current clinical practice involves a ‘trial and error’ process for the physician to determine the appropriate
dosing level for the drug on a patientbypatient basis there is now rapidly growing awareness of the
influence of genetic factors in establishing correct dosing levels supported by scientific and medical
research furthermore there is now an increasing weight of compelling economic data to support such
testing demonstrating that not only can patient care be improved but testing can save costs
we believe that the market is now at a tipping point where warfarin sensitivity testing will become a
standard of care resulting in widespread genetic testing for the substantial number of new warfarin
patients
in august 2007 the fda updated the label for warfarin to note that people with variations of the genes
cyp2c9 and vkorc1 may respond differently to the drug this has now been followed up by the
american medical association ama sending literature to us physicians promoting the use of genetic
testing as best practice when establishing warfarin dosing for patients the joint commission strong
influencers and monitors of hospital laboratory practice have identified anticoagulation therapy
including warfarin dosing under their main guidelines for improving patient safety in 2008 and 2009
in january 2009 results of the largest prospective study yet performed supported the use of genetic
testing for warfarin patients the study conducted by the department of medical sciences clinical
pharmacology uppsala university hospital uppsala sweden commenced in 2001 and monitored 1496
new warfarin patients assessing the impact of the three main genetic markers that are known to play a
critical role in metabolism of and sensitivity to warfarin it concluded “we have shown that in a large
prospective study vkorc1 and cyp2c9 predict warfarin dose and individuals predisposed to unstable
anticoagulation during initiation of therapy we anticipate that adequately sized clinical trials of patients
randomized to pharmacogenetic versus conventional dosing will demonstrate that warfarin dose
prediction improves the safety and cost effectiveness of oral anticoagulant treatment”
in february 2009 a paper published in the new england journal of medicine by the international
warfarin pharmacogenetics consortium described how clinical and genetic data from 4043 patients
were used to create a dosing algorithm that was based on clinical variables only and an algorithm in
which genetic information was added to the clinical variables the algorithms were validated on a group
of 1009 patients and the study which is by far the largest and most inclusive of its kind to date
concluded that the use of a pharmacogenetic algorithm for estimating the appropriate initial dose of
warfarin produces recommendations that are significantly closer to the required stable therapeutic dose
than those derived from a clinical algorithm or a fixeddose approach in an accompanying editorial two
osmetech annual report and accounts 2008 3 chief executive officer’s review
continued
senior fda representatives supported the findings noting that a high proportion of the population
46 were outliers and required higher or lower doses than the ‘average’ patient
the national heart lung and blood institute nhlbi is now in the process of launching the largest
prospective multicenter randomized clinical trial in the united states to test whether a genebased
strategy for prescribing the initial warfarin dose will improve patient outcomes the clinical trial will use
a dosing strategy similar to that developed in the international study and will enroll 1200 participants of
diverse backgrounds and ethnicities at twelve clinical sites
in addition to the improved standard of care for patients there are a number of key organizations who
are also driving this change from an economic perspective excited by the costs that can be saved in
healthcare budgets the organizations include medco a leading us pharmacy benefit manager pbm
with the nation’s largest mail order pharmacy operations and 60000 retail pharmacies
warfarin – osmetech’s unique position
osmetech’s fdacleared warfarin sensitivity test provides genetic information relating to the three
principal biomarkers for the metabolism of the drug in addition our extended warfarin sensitivity test
incorporates additional markers including the exclusivelylicensed cyp4504f2 biomarker unique to
osmetech the results of recent independent clinical studies support the significance of cyp4f2 a 2008
publication in blood journal of the american society of hematology concluded that the cyp4f2
marker significantly improves genetic data for warfarin dosing other studies including recent 2009
publications from researchers in spain and another group from italy have confirmed and strengthened
the importance of the 4f2 variant they concluded that cyp4f2 increases the reliability of the warfarin
pharmacogenetic test when cyp4f2 is included with cyp2c9 and vkorc1 genetic variants age and
weight an additional 7 of the interpatient variability in warfarin dose response is explained further
independent studies are in progress
additionally the significance of our unique cyp4f2 biomarker has been recognized by
warfarindosingorg this is a free web site dedicated to helping doctors and clinicians estimate the
most appropriate therapeutic dose for patients already prescribed warfarin initiating warfarin therapy by
integrating genetic phenotypic and therapeutic information the adddtion of cyp4f2 to the
warfarindosingorg dosing algorithm uniquely positions this algorithm as the leading comprehensive
clinical utility tool
we believe that the combination of ‘best platform’ and ‘best test’ should position osmetech as a leader
in this market which we believe is poised for significant growth
molecular diagnostics market
according to frost  sullivan a market research firm the 2007 worldwide invitro diagnostics or ivd
market was estimated to be 35 billion and is anticipated to reach 43 billion by 2010 its fastest
growing segment the molecular diagnostics market was 25 billion in 2007 and is anticipated to reach
37 billion in 2010 this new and expanding part of the ivd market emerged in response to a need for
more rapid sensitive and specific diagnostic tests than were available using only traditional techniques
such as growthbased tests biochemical tests or immunoassays
we believe several factors contribute to the growth of this market including
• decentralization of genetic testing
• conversion from “homebrew” tests to fdacleared molecular testing methods
• expansion of genetic testing for disease predisposition
4 osmetech annual report and accounts 2008 chief executive officer’s review
continued
• advances in pharmacogenomics and personalised medicine and
• growth of the infectious disease diagnostic market
osmetech’s solution
traditionally the market for molecular diagnostics testing has been dominated by testing methods that
rely on optical or fluorescence technologies and complex research based instruments adapted to meet
the very different demands of the clinical environment these technologies are expensive to operate and
require specialised facilities and highlytrained personnel in addition the devices that utilise these
technologies are sensitive to dust debris and movement and require specialised care and maintenance
by contrast our esensor platform is a simple ‘clinical lab ready’ system designed specifically for the
molecular diagnostics market and fits perfectly into routine workflows the platform is based on
electrochemical technology that uses chemical reactions to detect the presence of molecules which in
turn produce characteristic electrical currents this technology which is unique in the molecular
diagnostics field has been proven in other clinical applications such as blood glucose home testing for
diabetics to deliver accurate and reproducible results in small robust and affordable formats osmetech
has strong intellectual property supporting the use of this technology for the detection of dna rna
and proteins
our unique esensor platform permits multiplexing or simultaneously running multiple tests on
individual samples and random access testing or the ability to initiate tests while other tests are in
progress it is a compact benchtop workstation with an integrated touch screen computer and
disposable test cartridges that can process up to 3000 tests a week it provides a definitive result within
30 minutes with limited operator involvement and requires little or no maintenance
our business model
we are principally targeting those reference laboratories and hospitals that already possess molecular
testing skills but currently do not have a solution for our particular tests our target customers will
typically be sending their testing out to larger institutions but would prefer to retain testing inhouse in
order to provide faster results for the patient and to improve the profitability of their laboratories
osmetech is one of a small number of companies with the capability of meeting the needs of this
decentralizing and growing market
our business model is currently to provide customers with an instrument under a reagent rental
agreement earning osmetech revenues from the sale of tests the customer incurs no upfront capital
expenditure and has minimal labour costs and dedicates only a small amount of laboratory space for
running the test with attractive reimbursement levels in place molecular diagnostic testing instantly
becomes profitable for our customers
the combination of growing the installed base of instruments and broadening our test menu by
launching new assays has a multiplier effect which should allow osmetech to build a fast growing high
quality revenue stream
commercial progress
at the end of december 2008 we had grown our installed base of instruments with customers to 34
comprising 13 evaluation and 21 contract units we have increased this total to 49 during the first three
months of 2009 and have seen a continuation of the excellent conversion rate from evaluation to
contract we have yet to lose an evaluation to a competitor and the xt8 has been rated ahead of
competitor products by two recent independent studies this success has been driven by an excellent
user experience with a reported 100 system performance which compares very favourably to
competing products that often report high ‘nocall’ rates requiring the reprocessing of a sample
osmetech annual report and accounts 2008 5 chief executive officer’s review
continued
distribution partner
we have a relatively small inhouse sales force and in order to capitalize on the significant market
interest for our products and the growing number of customer leads we have entered into a fiveyear
us distribution agreement with fisher healthcare a division of thermo fisher scientific inc fisher
fisher has a significant presence in the us diagnostics market with 6 molecular sales specialists and
over 150 generalist healthcare sales representatives
test menu and pipeline
we intend to develop and market a broad range of dna tests in the fields of genetic testing
pharmacogenomics infectious diseases and cancer having the ‘best platform’ has enabled us to secure
exclusive rights to the important new genetic marker for warfarin the cyp450 4f2 biomarker and to
enter into an agreement with qiagen to adapt their qiaplexbased respiratory viral test which is
already a commercially successful product for use on our esensor xt8 system
the current menu of tests commercially available for use on our esensor xt8 system comprises
• warfarin sensitivity test for the three most relevant cyp2c9 vkor biomarkers associated with
warfarin metabolism fda 510k clearance obtained in july 2007
• 2c9 drug metabolism test for cyp2c9 biomarkers associated with metabolism of phenytoin and most
nonsteroidal antiinflammatory drugs launched as a research use only product in november 2008
• cystic fibrosis test for preconception screening of cystic fibrosis gene carriers for use with the
esensor xt8 system launched as a research use only product and an application for 510k
clearance submitted to the fda in march 2009
we are currently developing additional tests to expand our test menu for the esensor xt8 system in
each case focussing on validated content where external research has already identified the relevant
biomarkers these tests include the following
• extended warfarin sensitivity test based on the esensor warfarin sensitivity test this test
incorporates a number of additional markers including the exclusivelylicensed cyp4504f2
biomarker an application for fda 510k clearance was filed in december 2008
• respiratory pathogen test panel to detect major respiratory viruses and aid in the identification of
bacterial and viral infections this test will adapt qiagen’s qiaplexbased respiratory viral test for
use on the esensor xt8 system and is currently in development we expect to launch as a research
use only product in 2009 and will also consider an application for fda 510k clearance
• factor ii factor v and mthfr test venous thrombosis test for the most common mutations
associated with increased risk of blood clots which can lead to stroke and pulmonary embolism this
test is currently in development and we expect to launch as a research use only product in 2009 and
will also consider an application for fda 510k clearance
• 2d6 drug metabolism test for cyp2d6 biomarkers associated with metabolism of a variety of
prescription drugs including antipsychotics antidepressants and antithrombolytics this test is
currently in development and we expect to submit an application for fda 510k clearance if and
when development is completed
• tamoxifen sensitivity test for metabolism of the breast cancer drug tamoxifen this test is currently
in development and we expect to submit an application for fda 510k clearance if and when
development is completed
6 osmetech annual report and accounts 2008 chief executive officer’s review
continued
• 2c19 plavix test for metabolism of the antiplatelet drug plavix clopidogrel this test is currently in
development and we expect to submit an application for fda 510k clearance if and when
development is completed
we anticipate adding further tests to our development pipeline during the course of the coming year
particularly in the fields of personalised medicine and cancer where the market opportunities are highly
attractive
fund raising
the global molecular diagnostics market and the knowledge and understanding of healthcare
technology companies are heavily centred on the us a significant number of emerging healthcare
technology companies trade on nasdaq in september 2008 we announced proposals to undertake an
issue of american depositary shares ads and obtain a listing of such shares on the nasdaq global
market with market conditions proving very difficult and deteriorating further we concluded that there
was insufficient interest to proceed with the ads issue and the nasdaq listing at that time given the
company’s further funding requirements in december 2008 we raised £6662609 net of expenses
through the placing of new shares to institutional shareholders which should provide sufficient funds to
support the business until july 2009 we are currently evaluating options to provide further funding for
the group
financial review
loss
the loss from continuing operations increased by 28 from £12030624 in 2007 to £15451979 in 2008
and the net loss per share from continuing operations increased by 17 from 593 pence in 2007 to
693 pence in 2008 the operating loss for the period increased 20 primarily resulting from £1195536
costs incurred in connection with the withdrawal of a proposed issue and ads listing on nasdaq in the
us and currency exchange rate differences between the two periods amounting to 8
revenue
revenue increased from £169273 in 2007 to £352069 in 2008 the increase of £182796 or 108 was
principally a result of the growth in sales of our esensor cystic fibrosis carrier detection test although
currency exchange rate differences accounted for 19 of the increase product sales were £116288 and
£305163 an increase of 162 and license revenues were £52985 and £46906 a decrease of 11 in
2007 and 2008 respectively
changes in inventories of finished goods and work in progress
changes in inventories of finished goods and work in progress increased from £92818 in 2007 to
£312106 in 2008 the increase of £219288 or 236 was principally as a result of manufacturing
additional esensor cystic fibrosis carrier detection tests in 2008 following the growth in our installed
base of esensor 4800 instruments gross profit for product sales defined as product sales less changes
in inventories of finished goods and work in progress and royalties on product sales decreased from a
profit of £23470 in 2007 to a loss of £6943 in 2008 representing 20 and 2 of product sales in 2007
and 2008 respectively
we expect the gross profit on product sales to improve significantly in 2009 as we increase our sales of
esensor xt8 test cartridges these have a much lower cost of goods than our first generation test
cartridges for the esensor 4800 system furthermore we have identified further cost reductions and
manufacturing efficiencies for xt8 cartridges which we expect to progressively achieve in the coming
year
osmetech annual report and accounts 2008 7 chief executive officer’s review
continued
employee benefits
employee benefits costs increased from £6413616 in 2007 to £6882569 in 2008 the increase of
£468953 or 7 includes a reduction in the level of share compensation charges from £450317 for 2007
to a credit of £314881 for 2008 primarily due to a revision of expectations for achieving performance
targets for management longterm incentive plans the base level of payroll costs was higher in 2008
reflecting the higher average number of employees in the year for continuing operations which
increased by 17 from 94 in 2007 to 110 in 2008 although this cost increase was partially offset by a
substantial reduction in bonus payments in december 2008 we undertook a rationalisation program and
have reduced staffing levels to approximately 60 employees which will significantly reduce employee
benefits costs in 2009 the cost of this program in respect of oneoff employee benefits costs in 2008
was £421785
research and development costs
research and development costs increased from £2595179 in 2007 to £2667855 in 2008 an increase of
£72676 or 3 excluding currency exchange rate differences between the two periods amounting to
approximately 8 costs decreased by 5 in 2008 reflecting lower systems development costs as the
development of the esensor xt8 system was completed during the year this reduction was partially
offset by an increase in costs related to the development of new tests during the period
depreciation and amortization
depreciation and amortization expense increased from £589611 in 2007 to £714637 in 2008 the
increase of £125026 or 21 resulted from both an increase in the amortization of license costs and
increased depreciation in respect of plant machinery and laboratory instruments
other expenses
in total other expenses increased from £3526449 in 2007 to £5383198 in 2008 this increase of
£1856749 or 53 principally reflects £1195536 2007 – £nil costs incurred in connection with the
withdrawal of a proposed ads issue and listing on the nasdaq global market in the us
interest on bank balances and term deposits
interest on bank balances and term deposits decreased from £864143 in 2007 to £213259 in 2008 the
decrease of £650884 or 75 resulted primarily from a reduction in average cash balances during the
year due to the ongoing operating expenses of the business
taxation
there have been no uk activities during 2008 that would qualify for research and development tax
credits as compared to 2007 during which we qualified for net tax credits of £153633 the tax charge in
2008 of £122572 primarily reflects a reduction in the estimated credits available in respect of 2007
liquidity and capital resources
cash and cash equivalents decreased from £13910710 at 31 december 2007 to £6034926 at
31 december 2008 a decrease of £7875784 or 57 the decrease of cash and cash equivalents was
principally due to the use of £14305945 in operating activities offset by the net proceeds from the issue
of shares in 2008 amounting to £6662609 cash and cash equivalents at 28 february 2009 were
£3842861
net cash used in operating activities increased from £14121176 in 2007 to £14305945 in 2008 an
increase of £184769 or 1 and a decrease of approximately 7 excluding the impact of currency
exchange rate differences between the two periods the movement was primarily due to two factors an
increase in operating cash outflows before movements in working capital of £2739237 mainly resulting
from an increase in the loss from continuing operations offset by a reduction in net working capital of
8 osmetech annual report and accounts 2008 chief executive officer’s review
continued
£615836 in 2008 compared to an increase of £1542334 in 2007 the decrease in net working capital in
2008 is principally due to an increase in creditors in 2008 reflecting the agreed payment deferral of
certain professional costs associated with the cancellation of the proposed ads issue and listing of such
shares on nasdaq in 2008
net cash used in investing activities from continuing operations increased from £156830 for 2007 to
£760989 in 2008 representing an increase of £604159 the increase is primarily explained by the
reduction of interest received on bank balances and term deposits
net cash generated fromused in financing activities increased from £559228 in 2007 to £6662609 in
2008 an increase of £7221837 the increase primarily reflects the net proceeds from the issue of shares
in 2008 amounting to £6662609 and the payment of £480845 made to redeem share warrants in 2007
outlook
the past year has been one of significant development for the company with the successful launch of
our second generation instrument platform the esensor xt8 together with our warfarin sensitivity test
following fda clearance however with difficult conditions in the financial markets we have rationalised
the business and reduced our workforce we have accomplished this without negatively effecting
operational activity and cost savings have been realised the excellent operational performance of the
esensor xt8 in the field is a testament to the skill and dedication of our employees past and present
who have worked tirelessly to bring the product to market and help create the basis of the strong
business we have today however financial markets remain challenging and consequently we continue to
examine all strategic options for osmetech to ensure that we have adequate funds for our future
requirements
we will continue to execute on our strategy of commercialising our pipeline of tests and increasing our
installed base of instruments in the field we are focussing on tests with validated biomarkers where
there is an established market need the attraction of our instrument platform is illustrated by the
agreement with industry leader qiagen to adapt their existing and widely used respiratory test for use
on our esensor xt8
we already have a growing number of strong customer leads and expect to accelerate our commercial
expansion further through the distribution agreement recently signed with fisher healthcare in the us
we will benefit from fisher’s considerable sales and marketing strength and established relationship with
key customer accounts this agreement further validates our products and technology
the roll out of the esensor xt8 system has been successful and continues to gather pace we are
establishing the esensor xt8 as strong product platform with an expanding test menu in a fast growing
market which allows our customers to improve both patient care and the profitability of their
laboratories
james white
chief executive officer
2 april 2009
osmetech annual report and accounts 2008 9 board of directors
for the year ended 31 december 2008
the board of directors at the date of the approval of the financial statements is as follows
jon faiz kayyem
nonexecutive chairman
jon faiz kayyem aged 45 was appointed to the board on 1 january 2009 dr kayyem has a phd in molecular biology from the
california institute of technology “caltech” he subsequently founded clinical micro sensors “clinco” to commercialize
technical innovations he developed while at caltech in 2000 clinco was sold to motorola inc and was subsequently bought from
motorola inc in 2004 by osmetech dr kayyem cofounded efficacy capital limited which runs a family of biotechnology funds
james nicholas gerald white
chief executive officer
james white aged 38 was previously a senior consultant in arthur d little limited’s corporate finance practice where he
specialised in advising venture capitalists on investments in small and medium sized companies he was operations manager of
osmetech from september 1998 until appointed to the board as chief operating officer on 1 october 1999 he was appointed
chief executive officer on 22 december 2000
david anthony sandilands
chief financial officer
david sandilands aged 47 was group financial director at bluebird toys plc until its takeover by mattel inc of the usa
mr sandilands qualified as a chartered accountant with price waterhouse and was appointed to the board as chief financial
officer on 1 july 1999
daryl jay faulkner
nonexecutive
daryl faulkner aged 61 was formerly president and chief executive officer of molecular diagnostics company digene
corporation and a member of its board of directors prior to its sale to qiagen nv in 2007 prior to joining digene mr faulkner
spent eight years at invitrogen corp a life sciences company serving in several senior level capacities and served for 15 years in a
variety of roles at abbott laboratories inc a diversified healthcare company mr faulkner was appointed nonexecutive chairman
on 12 august 2008 stepping down as chairman on 1 january 2009
mark paul lappe
nonexecutive
mark lappe aged 42 was appointed to the board on 1 january 2009 mr lappe cofounded efficacy capital limited along with
dr kayyem in 2004 prior to his involvement with efficacy capital limited mr lappe founded lappe  associates inc a leading
executive search firm servicing startup and early stage life science based companies mr lappe is currently the chairman of the
board of repros therapuetics inc a nasdaq listed biotechnology company
10 osmetech annual report and accounts 2008 report of the directors
for the year ended 31 december 2008
the directors submit their report together with the audited financial statements for the year ended 31 december 2008
results and dividends
the results of the group for the year are set out on page 19
the directors do not recommend the payment of a dividend 31 december 2007 £nil
principal activities trading review and future developments
the principal activity of the group is the design development manufacture and sale of molecular diagnostics instruments and
consumables enabling simple rapid and cost effective dna rna and protein testing
the principal activities of the subsidiaries osmetech inc and clinical micro sensors inc are the same as osmetech plc osmetech
gmbh was established as a sales operation having exclusive rights to distribute osmetech’s critical care division products in
germany prior to the disposal of the division on 31 january 2007 osmetech technology inc is a holding company molecular
sensing limited molecular sensors limited and osmetech gmbh are dormant companies the principal activity of osmetech
aesop trustee limited is to act as a trustee to an employee share ownership trust
enhanced business review
operations
osmetech is a fast developing international healthcare diagnostics business with operations in boston and pasadena in the us
serving the high growth molecular diagnostics market targeting hospitals and reference laboratories osmetech molecular
diagnostics has since 2005 primarily been built through the acquisition and subsequent development of the businesses of clinical
micro sensors inc ‘cms’
the financial position and performance of the group is set out on pages 19 to 22 a review of the business its markets and future
developments is included in the chairman’s statement and chief executive officer’s review set out on pages 2 to 9
business risks
the board considers that the principal risks and uncertainties facing the group may be summarised as follows
• recruitment and retention of employees the group operates in a knowledge based industry employing many highly skilled
specialist staff the group aims to provide a challenging and rewarding working environment for its employees and has share
options incentives for key staff
• regulatory compliance osmetech operates in a regulated industry with its us based operations and market governed by the
requirements of the us food and drug administration “fda” we have received fda 510k premarketing approval for our
cystic fibrosis carrier detection test and esensor™4800 dna detection instrument platform and also for our warfarin sensitivity
test for use on our second generation esensor xt 8 instrument platform in december 2008 we submitted our extended warfarin
sensitivity test to the fda for 510k clearance it is our intention to produce other fda cleared tests in the future both of our us
sites operate under current good manufacturing practice cgmp securing and maintaining the necessary regulatory approvals
accreditations and quality standards is of fundamental importance to the future success of the group
• product development although the directors believe that there is a strong and growing demand for the molecular diagnostics
products being developed by the group the ability of these products to meet the specifications demanded and therefore the
speed of market penetration and the achievability of target prices is not certain prior to acquisition or license by osmetech
the group’s core electrochemical detection technology has received considerable investment and we believe that the
principal technological and scientific risks have now largely been overcome
• market acceptance of osmetech’s products commercial success will be dependent upon on the market acceptance of the
group’s products including the ability to convince customers that the group’s technology is an attractive alternative to other
technologies manufacture products in sufficient quantities with acceptable quality and at an acceptable cost and sell place and
service sufficient quantities of the products early stage commercial success has been achieved with the placement of the first
generation esensor™4800 dna detection and cystic fibrosis carrier detection test and the launch of our second generation
esensor xt 8 instrument platform with warfarin sensitivity test the group believes that the market opportunities for genetic
osmetech annual report and accounts 2008 11 report of the directors
continued
testing in particular are considerable driven by improved patient care and healthcare cost management these benefits have
been recognised by the fda who is actively encouraging further approved tests to promote the wider use of such testing
• intellectual property rights “ip” the group’s success relies in part on maintaining meaningful patent protection on its
inventions technologies and discoveries to compete effectively the group will depend on its ability to develop and maintain
proprietary aspects of its technology and to operate without infringing the proprietary rights of others or if necessary to
obtain rights to thirdparty proprietary rights whilst this is a complex area the directors believe that osmetech has a strong ip
position particularly in the field of electrochemical detection the molecular diagnostics market is at a relatively early stage of
development and we believe that osmetech’s ip will create barriers to entry
• economic risk and financing the group’s future is dependent upon generating cash flows from successful commercialisation of
the esensor xt8 system and any future instrument platforms incorporating our proprietary electrochemical detection
technology the directors are confident that the business is developing a sound base for commercial success for further
information please refer to the chief executive officer’s review on pages 3 to 9 until such time as the xt8 testing menu has
expanded and the number of instruments in use by customers has grown sufficiently the sales revenues generated will be
insufficient to cover the costs of the business and as such the group will be dependent upon additional funding through
completion of one or more licensing deals commercial collaboration or through injection of further capital
key performance indicators
the principal key performance indicators “kpis” are detailed below
• research and development as described in the “outlook” section of the chief executive officer’s review on page 9 a key
focus of the business is the execution of the fda clearance of new molecular diagnostic tests it should be highlighted that
delays can be experienced in progress through regulatory approval due to factors beyond the control of the group
consequently it is not appropriate to set precise targets for the timings of future stages of product approval however the
group has now received fda clearance for the esensor xt8 system a process that should not have to be repeated for the
regulatory clearance of additional tests for the same platform
• external research and development costs in the year amounted to £2667855 2007 – £2748272 the 2007 figure included
£2595179 relating to continuing operations successful progress with product development activities is critical to the future
success of the business and kpis in this area are difficult to quantify product development programmes are described in detail
in the chief executive’s report
• net cash outflow from operating activities during the year was £14305945 2007 – £14121176 the 2007 figure included
£12611140 relating to continuing operations
• the group had a total of £6034926 of cash and cash equivalents at 31 december 2008 2007 – £13910710
• the group increased its average headcount for full time equivalent staff in the year by 9 to 110 employees 2007 – 101 of
these totals average headcount relating to continuing operations increased in the year by 17 to 110 employees 2007 – 94
staff turnover in the year for continuing operations was 14 2007 – 19 which is considered to be broadly comparable with
our industry peers
charitable and political contributions
the group did not make any charitable or political contributions during the year 31 december 2007 £nil
directors
the directors of the company at 31 december 2008 and their interests all held beneficially in the ordinary share capital of the
company at the balance sheet date were as follows
12 osmetech annual report and accounts 2008 report of the directors
continued
ordinary shares of 010p each ordinary shares of 010p each
31 december 2008 31 december 2007
shareholder shares options shares options
j n g white 208903 9154350 208093 9154350
d a sandilands 61597 4831138 61597 4831138
d j faulkner –– ––
mr d j faulkner was appointed as a director on 12 august 2008
mr g j hall and mr g b kuenster resigned as directors on 31 december 2008
dr j f kayyem and mr m p lappe were appointed as directors on 1 january 2009
save as mentioned above there have been no changes in the directors or movements in the directors’ interests in the company’s
share capital between 31 december 2008 and 2 april 2009
in accordance with the articles of association and having been appointed since the date of the last annual general meeting
mr d j faulkner dr j f kayyem and mr m p lappe retire and being eligible offer themselves for election as directors at the
annual general meeting to be held on 5 may 2009 mr faulkner dr kayyem and mr lappe do not have service contracts with the
company mr faulkner’s appointment is terminable by up to one month’s notice dr kayyem’s appointment is terminable by up to
one month’s notice and mr lappe’s appointment is terminable by up to one month’s notice in accordance with the articles of
association mr j n g white will retire by rotation and being eligible offers himself for reelection mr white has a service
agreement with the company which is terminable by at least 12 months’ notice
directors’ interests in contracts
no director was or is materially interested in any contract subsisting during or at the end of the financial year which was
significant in relation to the business of the group
substantial shareholdings
in addition to the directors’ shareholdings shown above the directors have been notified or are aware of the following interests in
3 per cent or more of the issued ordinary share capital of the company as at 26 march 2009
shareholder number of shares per cent
jefferies international nominees limited safec account 291457742 3269
vidacos nominees limited 2303 account 80267756 900
goldman sachs securities nominees limited coseg account 68327136 766
nortrust nominees limited gsya account 66951936 751
chase nominees limited 47318668 530
hsbc global custody nominee uk limited account 934567 46000000 516
goldman sachs securities nominees limited ilseg account 39634573 445
chase nominees limited usslend account 33635581 377
nortrust nominees limited slend account 33559086 376
british coal staff superannuation scheme chase gis nominees limited bcsssx account 32608934 366
mineworkers pension scheme chase gis nominees limited mpsx account 32580191 365
compliance
the company is mindful of the provisions of the combined code however as an aim listed company the combined code is not
mandatory and the company has therefore not produced a separate corporate governance or directors’ remuneration report
going concern
osmetech had cash and cash equivalents of £60m as at 31 december 2008 and incurred a loss of £155m for the twelve months
ended 31 december 2008 the group’s directors have prepared a detailed cash flow forecast for the period ending 31 december
osmetech annual report and accounts 2008 13 report of the directors
continued
2010 “the forecast” which includes a number of assumptions regarding income expenditure cash flows and the availability of
future finance for the group
in preparing the forecast the directors have taken into account the recent trading activity of the group notably the increased
trading that will result from the fda approval of the xt8 instrument in july 2008 the directors have also reviewed the number and
value of instruments currently out in the field under an evaluation contract taking into account the historical conversion rate of
evaluation into revenue generating consumable contracts the cost base and capital required to deliver on the income forecast
the availability and timing of finance required in july 2009 and the assumptions relating to the timing of the group’s cash flows
however given the nature of the group’s business typified by the fact that the group’s products are at an early stage in their
market development and the time required to negotiate instrument placements and finalisation of contracts in conjunction with
the current global economic climate it is inherently difficult to accurately forecast the timing of contract signatures and the
associated subsequent cash flows in this regard the directors have made reasonable assumptions regarding the placement of
instruments under contract and ultimately conversion to cash inflows
in addition the group’s forecasts indicate the need for additional financing within the next 12 months based on current information
available to them and the historical availability of financing options the directors believe that they will be successful in raising further
funding this assumption is based on the recent successful issue of share capital and the directors’ confidence in the potential of the
business the directors therefore consider it reasonable to assume they will be successful in raising sufficient funds in the time period
required in their assessment of the going concern basis of preparation of the financial statements
the factors set out above highlight there are material uncertainties in providing an accurate forecast for the group being the
difficulty in accurately forecasting the timings of contract signatures and the subsequent cash receipts and the requirement to raise
additional finance this therefore may cast doubt about the group’s and company’s ability to continue as a going concern for the
foreseeable future and as a result it may be unable to realise its assets and discharge its liabilities in the normal course of business
notwithstanding the directors believe that they have a reasonable expectation that the group will be able to raise sufficient funds to
enable the group and company to continue as a going concern for the foreseeable future
statement of directors’ responsibilities
the directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and
regulations
company law requires the directors to prepare financial statements for each financial year the directors are required by the ias
regulation to prepare the consolidated financial statements under international financial reporting standards ifrss as adopted
by the european union and have also elected to prepare the parent company financial statements in accordance with ifrss as
adopted by the european union the financial statements are also required by law to be properly prepared in accordance with the
companies act 1985 and article 4 of the ias regulation
international accounting standard 1 requires that financial statements present fairly for each financial year the company’s financial
position financial performance and cash flows this requires the faithful representation of the effects of transactions other events
and conditions in accordance with the definitions and recognition criteria for assets liabilities income and expenses set out in the
international accounting standards board’s ‘framework for the preparation and presentation of financial statements’ in virtually all
circumstances a fair presentation will be achieved by compliance with all applicable ifrss however directors are also required to
• properly select and apply accounting policies
• present information including accounting policies in a manner that provides relevant reliable comparable and
understandable information and
• provide additional disclosures when compliance with the specific requirements in ifrss are insufficient to enable users to
understand the impact of particular transactions other events and conditions on the entity’s financial position and financial
performance
the directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that the financial statements comply with the companies act
14 osmetech annual report and accounts 2008 report of the directors
continued
1985 they are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website legislation in the united kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions
supplier payment policy
the company has due regard to the payment terms of suppliers and settles all undisputed accounts in accordance with the
payment terms agreed with the supplier for each business transaction the group had 60 days 31 december 2007 – 18 days of
purchases outstanding at the end of the financial year excluding purchases for which deferred payment has been agreed with the
supplier the group had 37 days of purchases outstanding at the end of 2008
crest
the company’s ordinary shares are eligible for settlement through crest the system for securities to be held and transferred in
electronic form rather than in paper shareholders are not obliged to use crest and can continue to hold and transfer shares in
paper without loss of rights
capital structure
details of the authorised and issued share capital together with details of the movements in the company’s issued share capital
during the year are shown in note 21 the company has in issue both ordinary shares and deferred shares neither of which carries
rights to fixed income each ordinary share carries the right to one vote at general meetings of the company the deferred shares
carry no voting rights the percentage of the issued nominal value of the ordinary shares is 116 of the total issued nominal value
of all the share capital
there are no specific restrictions on the size of a holding nor on the transfer of shares which are both governed by the general
provisions of the articles of association and prevailing legislation the directors are not aware of any agreements between holders
of the company’s shares that may result in restrictions on the transfer of securities or on voting rights
details of employee share option schemes are set out in note 23
no person has any special rights of control over the company’s share capital
with regard to the appointment and replacement of directors the company is governed by its articles of association the
companies act and related legislation
independent auditors
a resolution to reappoint deloitte llp formerly deloitte  touche llp as the company’s auditor will be proposed at the annual
general meeting
each person who is a director at the date of the approval of this report confirms that
1 so far as the director is aware there is no relevant audit information of which the company’s auditors are unaware and
2 the director has taken all steps that he or she ought to have taken as a director in order to make himself aware of any
information and to establish that the company’s auditors are aware of that information
this conformation is given and should be interpreted in accordance with the provisions of s234za of the companies act 1985
electronic communications
the company may deliver shareholder information including annual and interim reports forms of proxy and notices of general
meetings in an electronic format to shareholders
shareholders wishing to receive shareholder information in the conventional printed form will continue to do so and need take no
further action if you would like to receive shareholder information in electronic format please register your request on the
osmetech annual report and accounts 2008 15 report of the directors
continued
company’s registrar’s electronic database at wwwcapitaregistrarscom you will initially need your unique “investor code” which
you will find at the top of your share certificate there is no charge for this service if you wish to subsequently change your mind
you may do so by contacting the company’s registrar by post or through their web site
if you elect to receive shareholder information electronically please note that it is the shareholder’s responsibility to notify the
company of any change to their name address email address or other contact details shareholders should also note that with
electronic communication the company’s obligations will be satisfied when it transmits the notification of availability of
information or such other document as may be involved to the electronic address it has on file the company cannot be held
responsible for any failure in transmission beyond its control any more than it can for postal failure in the event of the company
becoming aware that an electronic notification is not successfully transmitted a further two attempts will be made in the event
that the transmission is still unsuccessful a hard copy of the notification will be mailed to the shareholder in the event that specific
software is required to access information placed on the company’s website it will be available via the website without charge
before electing for electronic communications shareholders should ensure that they have the appropriate equipment and
computer capabilities sufficient for the purpose the company takes all reasonable precautions to ensure no viruses are present in
any communication it sends out but cannot accept responsibility for loss or damage arising from the opening or use of any email
or attachments from the company and recommends that shareholders subject all messages to virus checking procedures prior to
use any electronic communication received by the company that is found to contain any virus will not be accepted
should you have any further questions on this please contact the company’s registrars capita registrars on 0871 664 0391
annual general meeting – explanation of special business
resolution 7
the directors may only allot shares or grant rights over shares if authorised to do so by shareholders the general authority
granted at the extraordinary general meeting held on 22 december 2008 is due to expire at the annual general meeting in 2009
accordingly resolution 7 will be proposed as an ordinary resolution to grant a new authority to allot unissued share capital up to
an aggregate nominal value of £594404 representing 594404000 ordinary shares of 010p each being approximately two thirds of
the total issued ordinary share capital as at 2 april 2009 if given this authority will expire at the earlier of a 30 june 2010 and b
the conclusion of the next annual general meeting of the company to be held in 2010 the directors have no present intention of
utilising the authority set out in this resolution following abi guidelines published on 31 december 2008 if the authority under
resolution 7ii to allot share capital up to an aggregate nominal value of £594404 is given where allotments exceed £297202 or
one third of the issued share capital of the company that is it exceeds the authority under resolution 7i if given all of the
directors of the company will stand for reelection at the annual general meeting of the company in 2010
resolution 8
the directors also require additional authority from shareholders to allot shares or grant rights over shares where they propose to do so
for cash and otherwise than to existing shareholders pro rata to their holdings the general authority granted at the extraordinary
general meeting held on 22 december 2008 is due to expire at the annual general meeting in 2009 accordingly resolution 8 will be
proposed as a special resolution to grant such authority if given this authority will expire at the earlier of a 30 june 2010 and b the
conclusion of the next annual general meeting of the company to be held in 2010 apart from rights issues open offers and other pre
emptive issues the authority will be limited to the issue of shares up to an aggregate nominal value of £445803 being 445803000
ordinary shares of 010p each representing approximately 50 of the issued ordinary share capital at 2 april 2009 this authority does
not accord with ipc guidelines but the directors regard the authority as desirable having regard to the costs associated with
implementing a preemptive offer to shareholders to maximise the options open to the company in the coming year
by order of the board
s a craig
secretary
2 april 2009
16 osmetech annual report and accounts 2008 independent auditors’ report
we have audited the group and parent company financial statements the “financial statements’’ of osmetech plc for the year
ended 31 december 2008 which comprise the consolidated income statement the consolidated and parent company statements
of total recognised income and expense the consolidated and parent company balance sheets the consolidated and parent
company statements of cash flow statements the notes to the consolidated and parent company cash flow statements and the
related notes 1 to 29 these financial statements have been prepared under the accounting policies set out therein
this report is made solely to the company’s members as a body in accordance with section 235 of the companies act 1985 our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose to the fullest extent permitted by law we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body for our audit work for this report or for the opinions
we have formed
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable law and
international financial reporting standards ifrss as adopted by the european union are set out in the statement of directors’
responsibilities
our responsibility is to audit the financial statements we report to you our opinion as to whether the financial statements give a
true and fair view and whether the financial statements are prepared in accordance with article 4 of the ias regulation we also
report to you whether in our opinion the information given in the directors’ report is consistent with the financial statements
in addition we report to you if in our opinion the company has not kept proper accounting records if we have not received all the
information and explanations we require for our audit or if information specified by law regarding directors’ remuneration and
other transactions is not disclosed
we read the other information contained in the annual report as described in the contents section and consider whether it is
consistent with the audited financial statements we consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements our responsibilities do not extend to any further
information outside the annual report
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices
board an audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the financial
statements it also includes an assessment of the significant estimates and judgments made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate to the group’s and company’s circumstances
consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatement whether caused by fraud or other irregularity or error in forming our opinion we also evaluated the overall adequacy
of the presentation of information in the financial statements
opinion
in our opinion
• the group financial statements give a true and fair view in accordance with ifrss as adopted by the european union of the
state of the group’s affairs as at 31 december 2008 and of its loss for the year then ended
• the parent company financial statements give a true and fair view in accordance with ifrss as adopted by the european union
as applied in accordance with the provisions of the companies act 1985 of the state of the parent company’s affairs as at
31 december 2008
osmetech annual report and accounts 2008 17 independent auditors’ report
continued
• the financial statements have properly prepared in accordance with the companies act 1985 and as regards the group
financial statements article 4 of the ias regulation and
• the information given in the directors’ report is consistent with the financial statements
emphasis of matter – going concern
in forming our opinion on the financial statements which is not qualified in this respect we draw attention to the disclosures made
in note 1 of the financial statements concerning the group’s and company’s ability to continue as a going concern the group
incurred a net loss of £155 million during the year ended 31 december 2008 and at that date had cash and cash equivalents of
£60 million the ability of the company to continue as a going concern is dependent upon on the accuracy of the forecasting in
relation to the timing of contract and the resultant receipt of cash pertaining to those contracts and the raising of finance from
external sources during the year
the directors have prepared a cash flow forecast which makes assumptions about the placement of revenue generating
instruments and the subsequent receipt of cash relating to those forecasted placements this is inherently difficult to forecast
accurately but the directors consider that their assumptions are prudent
in addition the group’s forecasts indicate the need for additional financing in july 2009 based on current information available to
them and the historical availability of financing options the directors believe that they will be successful in raising further funding
this assumption is based on the recent successful issue of share capital and the directors’ understanding of future potential of the
business the directors therefore consider it reasonable to include the availability of this financing in their assessment of the going
concern basis of preparation of the financial statements
these conditions along with other matters as set forth in note 1 indicate the existence of certain material uncertainties which may
cast significant doubt about the group’s and company’s ability to continue as a going concern the financial statements do not
include the adjustments that would result if the group and company was unable to continue as a going concern as it is not
practicable to determine or quantify them
deloitte llp
chartered accountants and registered auditors
manchester
united kingdom
2 april 2009
18 osmetech annual report and accounts 2008 consolidated income statement
for the year ended 31 december 2008
osmetech annual report and accounts 2008 19
year ended year ended
31 december 31 december
2008 2007
restated
note £ £
continuing operations
revenue 2 352069 169273
changes in inventories of finished goods and work in progress 312106 92818
employee benefits 4 6882569 6413616
research and development costs 2667855 2595179
depreciation and amortisation 714637 589611
other expenses 5383198 3526449
15960365 13217673
operating loss 3 15608296 13048400
interest on bank balances and term deposits 213259 864143
gains on financial instruments 5 65630 –
loss before taxation 15329407 12184257
taxation 7 122572 153633
loss for the year from continuing operations 15451979 12030624
discontinued operations
profit for the year from discontinued operations net of tax 9 – 16014425
lossprofit for the year 15451979 3983801
lossearnings per share
from continuing and discontinued operations
basic and diluted 10 693p 196p
from continuing operations
basic and diluted 10 693p 593p
the results for the year ended 31 december 2007 have been restated the effects of these restatements are disclosed in note 29
consolidated statement of total recognised income and expense
for the year ended 31 december 2008
year ended year ended
31 december 31 december
2008 2007
£ £
exchange gainloss on translation of foreign operations 1039827 383633
realisation of merger reserve on discontinued operations – 1885533
transfers
cumulative translation adjustment on disposal of discontinued operations – 713901
1039827 787999
lossprofit for the year 15451979 3983801
total recognised expenseincome for the year 14412152 4771800 consolidated balance sheet
at 31 december 2008
20 osmetech annual report and accounts 2008
2008 2007
note ££ ££
assets
noncurrent assets
other intangible assets 12 1379009 1162747
property plant and equipment 13 1603602 976220
2982611 2138967
current assets
inventories 15 1109008 445806
trade and other receivables 16 812261 367328
current tax assets 17 153793 465220
cash and cash equivalents 18 6034926 13910710
8109988 15189064
total assets 11092599 17328031
liabilities
current liabilities
trade and other payables 19 3047844 1273428
current tax liabilities 8937 8478
3056781 1281906
noncurrent liabilities
provisions 20 225212 171095
total liabilities 3281993 1453001
net assets 7810606 15875030
equity
called up share capital 21 7717443 7028892
share premium account 22 57730310 51756252
other reserves 22 1823925 2138806
cumulative exchange reserve 22 466910 572917
accumulated deficit 22 59927982 44476003
total equity 22 7810606 15875030 company balance sheet
at 31 december 2008
osmetech annual report and accounts 2008 21
2008 2007
restated
note ££ ££
assets
noncurrent assets
other intangible assets 12 268 483
property plant and equipment 13 130 210
investments 14 28408226 20819607
28408624 20820300
current assets
trade and other receivables 16 89585 69658
current tax assets 17 99186 279779
cash and cash equivalents 18 5674318 7425994
5863089 7775431
total assets 34271713 28595731
liabilities
current liabilities
trade and other payables 19 935530 249704
current tax liabilities 8937 8478
944467 258182
noncurrent liabilities
provisions 20 20000 20000
total liabilities 964467 278182
net assets 33307246 28317549
equity
called up share capital 21 7717443 7028892
share premium account 22 57730310 51756252
other reserves 22 1823925 2138806
accumulated deficit 22 33964432 32606401
total equity 22 33307246 28317549
the company balance sheet has been restated to reflect the allocation of share compensation charges to subsidiary companies
with respect to ifric 11 the effects of these restatements are disclosed in note 29
these financial statements were approved by the board of directors on 2 april 2009
signed on behalf of the board of directors
d a sandilands director cash flow statements
for the year ended 31 december 2008
22 osmetech annual report and accounts 2008
consolidated consolidated company company
2008 2007 2008 2007
note £ £ £ £
net cash used in operating activities a 14305945 14121176 1040873 2089216
net cash used ingenerated from investing activities c 760989 21864855 7373412 4019776
net cash generated fromused in financing activities c 6662609 559228 6662609 559228
net decreaseincrease in cash and cash equivalents 8404325 7184451 1751676 1371332
cash and cash equivalents at beginning of year 13910710 7089106 7425994 6054662
effect of foreign exchange rate changes 528543 362847 – –
cash and cash equivalents at end of year 18 6034928 13910710 5674318 7425994 notes to the cash flow statements
osmetech annual report and accounts 2008 23
a reconciliation of lossprofit for the year to net cash outflow from operating activities
consolidated consolidated company company
2008 2007 2008 2007
£ £ £ £
lossprofit for the year 15451979 3983801 1358031 1199726
adjustments for
depreciation of property plant and equipment 584795 479611 81 31151
amortisation of other intangible assets 129842 110000 215 4576
loss on disposal of property plant and equipment 20591 18779 – –
impairment losses – 1057832 – 1240942
share compensation creditcharge 314881 614772 360913 297503
interest on bank balances and term deposits 213259 864143 163929 2282369
income tax 122572 153633 117725 153633
gain on disposal of discontinued operations net of tax – 17648646 – –
increase in provisions 54117 2185 – –
movement in fair value of financial instruments 65630 – 65630 –
operating cash outflow before movements in working capital 15133832 12399442 1830482 2061556
increasedecrease in inventories 503530 64032 – –
increasedecrease in receivables 235783 134927 46238 79137
increasedecrease in payables 1355149 1741293 686283 106797
cash used in operations 14517996 13941776 1097961 2089216
income taxes receivedpaid 212051 179400 57088 –
net cash used in operating activities 14305945 14121176 1040873 2089216
net cash used in continuing operations 14305945 12611140 1040873 2089216
net cash used in discontinued operations – 1510036 – –
b major noncash transactions
there were no major noncash transactions in the years ended 31 december 2008 or 31 december 2007 notes to the cash flow statements
continued
24 osmetech annual report and accounts 2008
c analysis of cash flows – gross cash flows
consolidated consolidated company company
2008 2007 2008 2007
£ £ £ £
investing activities
interest received 218505 890497 169175 210186
purchases of property plant and equipment 1089784 658577 – –
purchases of other intangible assets – 388750 – –
receipts from the sale of intangible fixed assets 102606 – – –
receipts from the sale of tangible fixed assets 7684 – – –
loans to subsidiaries – – 7633729 1329697
loans repaid by subsidiaries – – 91142 5143931
net cash used ingenerated from investing activities
continuing operations 760989 156830 7373412 4024420
net cash generated fromused in investing activities
discontinued operations – 22021685 – 4644
760989 21864855 7373412 4019776
financing activities
proceeds on issues of shares 6662609 52759 6662609 52759
cash payments to redeem share warrants note 22 – 480844 – 480844
cash settlements of repurchased share options – 131143 – 131143
net cash generated fromused in financing activities
continuing operations 6662609 559228 6662609 559228 notes forming part of the financial statements
for the year ended 31 december 2008
osmetech annual report and accounts 2008 25
1 accounting policies
osmetech plc the “company” is a company incorporated in the united kingdom under the companies act 1985 the company
and its subsidiaries are referred to as the “group” the address of the registered office is co ashurst llp  broadwalk house
5 appold street london ec2a 2ha
the group operates as an international healthcare diagnostics business the results and position of which is presented
geographically in note 2
significant accounting policies
the financial statements have been prepared under the historical cost convention and are in accordance with applicable united
kingdom law and accounting standards the company has taken advantage of the exemption conferred by section 230 of the
companies act 1985 from presenting its own profit and loss account the following accounting policies have all been applied
consistently throughout the year and in the comparative year
going concern
in determining the appropriate basis of preparation of the financial statements the directors are required to consider whether the
group can continue in operational existence for the foreseeable future being a period of not less than twelve months from the
date of the approval of the financial statements
osmetech had cash and cash equivalents of £6 million as at 31 december 2008 and incurred a loss of £155 million for the twelve
months ended 31 december 2008 the group’s directors have prepared a detailed cash flow forecast for the period ending
31 december 2010 “the forecast” which includes a number of assumptions regarding income expenditure cash flows and the
availability of future finance for the group
in preparing the forecast the directors have taken into account the recent trading activity of the group notably the increased
trading that will result from the fda approval of the xt8 instrument in july 2008 the directors have also reviewed the number and
value of instruments currently under evaluation contract taking into account the historical conversion rate of evaluation into
revenue generating consumable contracts the cost base and capital required to deliver on the income forecast the availability
and timing of finance required in july 2009 and the assumptions relating to the timing of the group’s cash flows
however given the nature of the group’s business typified by both the timely process of instrument placements and finalisation of
contracts in conjunction with the current global economic climate it is inherently difficult to accurately forecast the timing of
contract signatures and the associated subsequent cash flows in this regard the directors have made reasonable assumptions
regarding the placement of instruments under contract and ultimately cash
in addition the group’s forecasts indicate the need for additional financing within the next 12 months based on current
information available to them and the historical availability of financing options the directors believe that they will be successful in
raising further funding this assumption is based on the recent successful issue of share capital and the directors’ understanding of
future potential of the business the directors therefore consider it reasonable to include the availability of the facility in their
assessment of the going concern basis of preparation of the financial statements
the factors set out above highlight there are material uncertainties in providing an accurate forecast for the group being the
difficulty in accurately forecasting the timings of contract signatures and the subsequent cash receipts and the impending raising
of external finance this therefore may cast doubt about the group’s and company’s ability to continue as a going concern for the
foreseeable future and as a result it may be unable to realise its assets and discharge its liabilities in the normal course of business
notwithstanding the directors believe that they have a reasonable expectation that the group will be able to raise sufficient funds
to enable the group and company to continue as a going concern for the foreseeable future notes forming part of the financial statements
continued
26 osmetech annual report and accounts 2008
1 accounting policies continued
basis of accounting
the financial statements have been prepared in accordance with international financial reporting standards ifrss the financial
statements have also been prepared in accordance with ifrss adopted for use in the european union and therefore comply with
article 4 of the eu ias regulation
basis of consolidation
the consolidated accounts incorporate the financial statements of osmetech plc and all of its subsidiary undertakings made up to
31 december each year the company uses the purchase method of accounting to consolidate the results of its subsidiary
undertakings the results of subsidiary undertakings are included from the date of acquisition until the date of disposal all
intragroup transactions balances income and expense are eliminated upon consolidation
revenue
revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable from sales of
goods as well as income received from licence and development agreements in the normal course of business revenue is stated
exclusive of value added tax and other sales related taxes revenue from the sale of goods typically consumables is recognised
when substantially all the risks and rewards are transferred to the customer which is considered to be the point of delivery
revenue from licences is recognised evenly over the contractual period to which the licence relates
operating loss
operating loss is stated after charging administrative expenses including research and development costs and share
compensation charges but before interest income
pension costs
contributions to defined contribution pension schemes are charged to profit and loss in the year in which they become payable
the differences between amounts payable and amounts actually paid are recognised as either a prepayment or an accrual in the
balance sheet
share based compensation arrangements
the group operates equitysettled share based compensation plans in accordance with transitional provisions the group has
applied financial reporting standard 20 ‘frs 20’ sharebased payment to all grants of equity instruments after 7 november 2002
that were unvested as at 1 may 2005 frs 20 is consistent with ifrs 2 sharebased payment which was adopted by the company
on 1 january 2006
the group issues equitysettled share based payments to certain employees equitysettled share based payments are measured
at fair value at the date of grant the fair value determined at the grant date is expensed on a straight line basis over the vesting
period based on estimates of the number of options that are expected to vest fair value is based on both blackscholes and
binomial models according to the relevant measures of performance
at each balance sheet date the group revises its estimate of the number of options that are expected to become exercisable with
the impact of any revision being recognised in the profit and loss account and a corresponding adjustment to reserves over the
remaining vesting period the proceeds received net of any transaction costs are credited to share capital nominal value and
share premium when the options are exercised
operating leases
rentals under operating leases are charged on a straight line basis over the lease term even if the payments are not made on
such a basis notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 27
1 accounting policies continued
foreign currency
the individual financial statements of each group company are measured in the currency of the primary economic environment in
which it operates the functional currency for the purpose of the consolidated financial statements the results and financial
position of each group company are expressed in pounds sterling which is the functional currency of the company and the
reporting currency for the consolidated financial statements
in preparing the financial statements of the individual companies transactions in currencies other than the entity’s functional
currency are recorded at the rates ruling of the dates of the transactions at each balance sheet date monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date
non monetary items in foreign currencies are translated at the rates prevailing at the dates when fair values were determined
nonmonetary items that are measured in terms of historical cost in a foreign currency are not translated
exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in
profit or loss for the period exchange differences arising on the retranslation of nonmonetary items carried at fair value are
included in profit or loss for the period except for differences arising on the retranslation of non–monetary items any exchange
component of that gain or loss is also recognised directly in equity
for the purpose of presenting consolidated financial statements the assets and liabilities of the group’s foreign operations are
translated at exchange rates prevailing on the balance sheet date income and expense items are translated at the average
exchange rates for the period
taxation
current tax including uk corporation tax research and development tax credits and foreign tax is provided at amounts expected
to be paid or recovered using the tax rates enacted or substantively enacted by the balance sheet date
deferred taxation
deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial information and the corresponding tax bases used in the computation of taxable profit and is accounted for using
the balance sheet liability method deferred tax liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised such assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition other than in a business combination of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit
deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the
group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future
deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised deferred tax is charged or credited in the income statement except when it relates to items charged or credited directly
to equity in which case the deferred tax is also dealt with in equity notes forming part of the financial statements
continued
28 osmetech annual report and accounts 2008
1 accounting policies continued
internallygenerated intangible assets – research and development expenditure
expenditure on research activities is recognised as an expense in the period in which it is incurred
any internallygenerated intangible asset arising from the group’s development of healthcare diagnostics and medical devices is
recognised only if all of the following conditions are met
• an asset is created that can be identified and sold such as a new product for sale
• the group intends to complete the intangible asset and use or sell it
• the technical feasibility of completing the intangible asset so that it will be available for use or sale
• the availability of adequate technical financial and other resources to complete the development and to use or sell the
intangible asset
• it is probable that the asset created will generate future economic benefits and
• the development cost of the asset can be measured reliably
internallygenerated intangible assets are amortised on a straightline basis over their useful lives where no internallygenerated
intangible asset can be recognised development expenditure is recognised as an expense in the period in which it is incurred an
asset is not normally recognised until fda approval has been obtained or a decision has been made to launch as a ‘research use
only’ product and a commercially viable market has been identified
licences
licences are depreciated on a straight line basis over the shorter of the life of the product to which it relates after the first sale of
the product and the contractual length of the licence the product life may be shorter than the remaining contractual length of the
licence in circumstances when such products become obsolete as a result of technical developments in the market
patents and trademarks
patents and trademarks are measured initially at purchase cost and are amortised on a straightline basis over their estimated
useful lives which is the shorter of the life of the product to which it relates after the first sale of the product and the contractual
length of the patent or trademark the product life may be shorter than the remaining contractual length of the licence in
circumstances when such products become obsolete as a result of technical developments in the market
software
software is measured initially at purchase cost and is amortised on a straightline basis over its estimated useful life of 3 years
property plant and equipment
property plant and equipment assets are stated at cost net of accumulated depreciation and any provision for impairment
depreciation
depreciation is charged so as to write off the cost less estimated residual values of all tangible fixed assets except for assets
under construction over their expected useful lives residual values are reevaluated at each balance sheet date and the group’s
property plant and equipment currently have estimated residual values of £nil it is calculated at the following rates
short leasehold improvements – over the shorter of the life of lease or the useful economic life of the asset
plant machinery and laboratory equipment – 10–35 per annum on cost
office equipment – 25–50 per annum on cost
no depreciation is charged in respect of assets under construction until the assets are available for use at which point they are
transferred into plant machinery and laboratory equipment notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 29
1 accounting policies continued
inventories
inventories are valued at the lower of cost or net realisable value cost comprises direct materials and where applicable direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition cost
is calculated using the fifo method net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing selling and distribution
trade receivables
trade receivables are stated at amortised cost less allowances for estimated irrecoverable amounts
cash and cash equivalents
cash and cash equivalents include cash at bank and in hand deposits and other shortterm highly liquid investments which are
readily convertible into known amounts of cash have a short maturity of three months or less from the date of acquisition and
which are subject to an insignificant risk of change in value
noncurrent assets held for sale
noncurrent assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value
less costs to sell
noncurrent assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use this condition is regarded as met only when the sale is highly probable and the
asset or disposal group is available for immediate sale in its present condition management must be committed to the sale
which should be expected to qualify for recognition as a completed sale within one year from the date of classification
trade payables
trade payables are stated at amortised cost
derivative financial instruments
the group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates
the group uses foreign exchange forward contracts to hedge certain foreign currency exposures but does not designate these as
hedges for accounting purposesthe group does not use derivative financial instruments for speculative purposes
derivatives are initially recorded at fair value on the date a derivative contract is entered into and are subsequently remeasured at
their fair value at each balance sheet date
the group’s foreign exchange forward contracts are classified as at fair value through profit or loss and any changes in their fair
value are recognised immediately in the income statement
investments
investments are initially recognised at cost including transaction costs in subsequent periods investments are recognised at
amortised cost less any impairment loss recognised to reflect irrecoverable amounts an impairment loss is recognised in profit or
loss when there is objective evidence that the asset is impaired and is measured as the difference between the investment’s
carrying value and the present value of estimated future cash flows discounted at the effective interest rate
provisions
provisions are recognised when the group has a present legal or constructive obligation as a result of past events it is probable
that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated notes forming part of the financial statements
continued
30 osmetech annual report and accounts 2008
1 accounting policies continued
critical accounting judgements and key sources of estimation uncertainty
in the process of applying the group’s accounting policies the group is required to make certain estimates judgements and
assumptions that it believes are reasonable based upon the information available these estimates and assumptions affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the period presented
on an ongoing basis the group evaluates its estimates using historical experience and other methods considered reasonable in
the particular circumstances actual results may differ from the estimates the effect of which is recognised in the period in which
the facts that give rise to the revision become known the following paragraphs detail the estimates and judgements the group
believes to have the most significant impact on the annual results under ifrs
a revenue recognition
the group recognises revenue as described in the revenue recognition accounting policy when the collection of the resulting
receivable is reasonably assured should management consider at the point of sale that collectability is not reasonably assured
due to the assessment of the credit worthiness of the customer or other such available evidence the revenue would not be
recognised until such a time when the collectability is determined to be probable
b fair value of share options
the group operates three share based compensation plans as required by ifrs 2 the group’s share options are measured at fair
value using a suitable valuation model and this fair value is recognised as an expense over the performance period the
determination of the fair values involves a significant amount of estimation and application of judgement
the assumptions are based on the directors’ best estimates of the expected share price volatility dividend yield and the expected
life of the options as well as including factors such as the risk free rate the vesting period the effects of exercise restrictions and
behavioural considerations and where applicable the expected probability of achieving market based and nonmarket based
performance criteria these assumptions may differ from actual results due to changing market and economic conditions as well as
differences in actual behaviour to that assumed by the directors this may have a positive or negative impact on operating profit
volatility is determined at the date of grant over a length of time that corresponds to the average expected life of the option the
expected life of the option is determined by reference to historical trends in the length of time an employee will hold an option
before it is exercised the probability of achieving market based criteria is assessed using the latest available market information at
each grant date and the probability of achieving nonmarket based performance criteria is assessed on the individual
circumstances at each grant date including the probability and timing of the milestones to be achieved
c intangible assets
the group invests significant resources into the research and development of healthcare diagnostics and medical devices the
point at which a project moves from the research stage to the development phase is considered to be a critical accounting
judgement the factors which are taken into consideration include whether the product has received fda approval and whether
the product has a commercially viable market
the valuation of internallygenerated intangible assets arising from the capitalisation of development costs requires management
to make subjective judgements concerning the generation of future economic benefits in order to estimate its recoverable value
for impairment testing purposes
d intercompany receivables and investment carrying values
the company records loan balances representing intercompany receivables that will be recovered over the foreseeable future in
assessing the carrying value of the investments the directors have considered their recoverable value which has been determined
by reference to estimated discounted future cash flows the forecasts of future cash flows anticipate significant growth in future
revenues as the group’s products gain market acceptance and there is no guarantee that such growth will be achieved notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 31
1 accounting policies continued
recently issued accounting standards but not yet adopted
at the date of authorisation of these financial statements the following standards and interpretations were in issue but not yet
effective the directors anticipate that the group will adopt these standards and interpretations on their effective dates
ifrs 8 operating segments
ifrs 3 revised business combinations
amendments to ias 27 consolidated and separate financial statements
amendments to ias 1 presentation of financial statement – a revised presentation
amendments to ias 23 borrowing costs
ifric 11 ifrs 2 group and treasury share transactions
ifric 12 service concession arrangements
ifric 13 customer loyalty programmes
ifric 14 ias 19 the limit on a defined benefit asset minimum funding requirements and their
interaction
amendments to ias 32 and ias 1 puttable instruments and obligations arising on liquidation
amendments to ifrs 2 sharedbased payments vesting conditions and cancellations
the directors anticipate that the adoption of these standards and interpretations will have no material impact on the group’s
financial statements notes forming part of the financial statements
continued
32 osmetech annual report and accounts 2008
2 segment reporting
since the previously issued financial statements the directors have reviewed the segments in respect of the allocation of income
tax assets these assets are now wholly allocated to corporate assets and the 2007 segments have been restated for the impact of
this change
group revenue is wholly attributable to the group’s principal activity which is the design development manufacture and sale of
healthcare diagnostics and medical devices incorporating sensing technology the geographical analysis of segment revenue and
segment result is based on the location of its markets and is as follows
rest rest of
uk of europe usa far east world group
£ £££ ££
year ended 31 december 2008
continuing operations
segment revenue –– 339144 – 12925 352069
segment result 1404225 3264 13617933 – 517244 15542666
interest on bank balances and
term deposits 213259
loss before tax 15329407
tax 122572
loss for the year from continuing
operations 15451979
year ended 31 december 2007
restated
continuing operations
segment revenue – 2253 153014 9629 4377 169273
segment result 1061306 155307 10866174 663850 301763 13048400
interest on bank balances and term deposits 864143
loss before tax 12184157
tax 153633
loss for the year from continuing operations 12030624
the uk segment result includes £814781 2007 – £1090309 of corporate costs
the segment result includes a credit of £314881 2007 – charge of £614773 in respect of share compensation expenses of these
amounts a credit of £360913 2007 – charge of £297504 is included within the uk segment and a charge of £46032
2007 – £317269 is included within the usa segment
the results for 2007 have been restated to reflect the allocation of share compensation charges to subsidiary companies with
respect to ifric 11 the effects of these restatements are disclosed in note 29 notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 33
2 segment reporting continued
rest rest of
uk of europe usa far east world group
£££ £££
year ended 31 december 2007
discontinued operations
segment revenue 38311 119466 429161 145651 28999 761588
segment result 1119618 172922 88883 210823 41975 1634221
interest on bank balances
and term deposits –
loss before tax 1634221
taxation –
loss for the year from discontinued
operations 1634221
profit on disposal of discontinued
operations 18529383
loss on realisation of cumulative
translation adjustment 713901
tax on profit on disposal of discontinued
operations 166836
total profit for the year from
discontinued operations 16014425
the segment result above includes £nil 2007 – £164456 in respect of share compensation charges all of which are included within
the uk segment
the geographical analysis of segment assets and liabilities is based on the location of the assets and liabilities is as follows
rest of
uk world usa group
£££ £
year ended 31 december 2008
continuing operations
other information
purchases of property plant and equipment and other intangible assets –– 1089784 1089784
depreciation and amortisation 295 – 714342 714637
balance sheet
segment assets 5764300 45102 5129403 10938805
segment liabilities 964467 2380 2306209 3273056
year ended 31 december 2007 restated
continuing operations
other information
purchases of property plant and equipment and other intangible assets 4644 – 1042683 1047327
depreciation and amortisation 35643 – 553968 589611
balance sheet
segment assets 7496345 37822 9328644 16862811
segment liabilities 278182 1837 1164504 1444523
the company balance sheet has been restated to reflect the allocation of share compensation charges to subsidiary companies
with respect to ifric 11 the effects of these restatements are disclosed in note 29 notes forming part of the financial statements
continued
34 osmetech annual report and accounts 2008
2 segment reporting continued
year ended 31 december 2008 and 31 december 2007
discontinued operations
there were no purchases of property plant and equipment or other intangible assets there was no depreciation or amortisation
charged during the year ended 31 december 2008 and none in the year ended 31 december 2007 other than the impairment of
£1057000 in respect of genesensor which was included in the uk segment result and there are no segment assets or liabilities
reconciliation of segment assets and liabilities to total assets and liabilities
2008 2007
£ £
segment assets 10938805 16862811
current tax assets 153794 465220
total assets 11092599 17328031
segment liabilities 3273056 1444523
current tax liabilities 8937 8478
total liabilities 3281993 1453001
3 operating loss
the following items are chargedcredited in arriving at the group’s operating loss from continuing operations and the operating
income from discontinued operations
2008 2007 2007 2007
continuing discontinued
group group operations operations
£ £££
amortisation of other intangible assets 129842 110000 110000 –
depreciation 584795 479611 479611 –
fees payable to the auditors for the
statutory audit of the annual accounts
– osmetech plc 40921 40921 40921 –
– other group companies 24575 24479 24479 –
fees payable to the auditors for other
services to the group
– tax services 58570 53695 53695 –
– other assurance 273000 47483 42322 5161
operating lease rentals – plant and machinery 13587 27152 25591 1561
impairment of goodwill property plant and
equipment and other intangible assets – 1057832 – 1057832
research and development 2667855 2748272 2595179 153093
loss on disposal of property plant and equipment 20591 18779 18779 –
staff costs see note 4 6882569 6413616 5607046 655353
net foreign exchange gainslosses 228023 67815 67815 –
cost of inventories recognised as expense 880206 668618 92818 575800
included within the other operating costs are costs of £2463155 in respect of professional fees 2007 – £1341363 this includes
£1195536 2007 – £nil incurred in connection with the withdrawal of a proposed issue and listing of american depositary shares
on the nasdaq global market in the usa notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 35
4 staff costs
staff costs for all employees including executive directors and nonexecutive directors consist of
group company
year ended year ended year ended year ended
31 december 31 december 31 december 31 december
2008 2007 2008 2007
£ £ £ £
wages and salaries 6197368 5730016 84217 933556
social security costs 470740 458693 26327 29123
other pension costs 214461 224907 52164 51825
6882569 6413616 5726 1014504
the average monthly number of employees of the group and company during the year including executive directors was as
follows
group company
year ended year ended year ended year ended
31 december 31 december 31 december 31 december
2008 2007 2008 2007
number number number number
manufacturing 34 33 – –
research and development 38 38 – –
selling and administration 38 30 5 5
110 101 5 5
5 gains on financial instruments
group company
year ended year ended year ended year ended
31 december 31 december 31 december 31 december
2008 2007 2008 2007
£ £ £ £
changes in the fair value of derivative assets outstanding
at year end and classified as held for trading 65630 – 65630 – notes forming part of the financial statements
continued
36 osmetech annual report and accounts 2008
6 executive and nonexecutive directors
year ended year ended
31 december 31 december
2008 2007
£ £
emoluments 549138 1369836
defined contribution pension scheme payments 55085 54641
compensation for loss of office 39648 –
643871 1424477
the executive and nonexecutive directors are considered to be the key management personnel of the group and company
year ended year ended
31 december 31 december
2008 2007
£ £
highest paid executive director
emoluments 234737 566226
defined contribution pension scheme payments 31299 29256
266036 595482
there are 2 2007 – 3 directors who are members of defined contribution schemes as at the year end
options
total options total options
on ordinary on ordinary
shares of lapsedwaived granted shares of exercise
010p during the during the 010p date of price per exercisable
director 311207 period period 311208 grant share from to
g j hall 100000 100000 – – ––– –
j n g white 6590248 –– 6590248 020905 01p 030905 020915
493822 493822 – – ––– –
2070280 –– 2070280 020905 01p 021005 020915
–– 493822 493822 051208 01p 021005 020915
d a sandilands 3295124 –– 3295124 020905 01p 030905 020915
493822 493822 – – ––– –
788229 –– 788229 020905 01p 021005 020915
253963 –– 253963 300107 01p 310107 300117
–– 493822 493822 051208 01p 021005 020915
g b kuenster 135000 135000 – – ––– –
100000 100000 – – ––– –
100000 100000 – – ––– –
b huebner 1318049 1318049 – – ––– –
2231038 2231038 – – ––– –
the midmarket price of the shares at 31 december 2008 was 188p 31 december 2007 – 2425p and the range during the year
was between 113p and 2475p 31 december 2007 – 1775p and 2725p notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 37
7 tax on loss on ordinary activities
continuing operations discontinued operations total
2008 2007 2008 2007 2008 2007
£ £ £ £ £ £
current tax
tax charge on continuing activities 4847 – – – 4847 –
adjustment in respect of prior years 117725 63532 – – 117725 63532
research and development tax credit – 217165 – – – 217165
tax charge from discontinued activities – – – 166836 – 166836
total current tax 122572 153633 – 166836 122572 13203
corporation tax is calculated at 285 2007 – 30 of the estimated assessable income for the year taxation for other jurisdictions
is calculated at the rates prevailing in the respective jurisdictions
the rate of uk corporation tax reduced from 30 to 28 on 1 april 2008
the adjustment in respect of prior years represents amendments made to the research and development tax credit claimed in
respect of the period ended 31 december 2007
the charge for the year can be reconciled to the loss before tax as follows
continuing operations
year ended year ended year ended year ended
31 december 31 december 31 december 31 december
2008 2008 2007 2007
£ £
loss before tax from continuing operations 15329407 100 12184257 100
tax credit at uk corporation tax rate of 285 2007 – 30 4368881 285 3655277 30
effects of
– unrecognised deferred tax assets 4013604 262 3431034 28
– research and development tax credit –– 7550 –
– expenses not deductible for tax purposes 350430 23 14628 –
– adjustment in respect of prior year 117725 08 63532 1
total tax chargecredit from continuing operations 122572 08 153633 1
discontinued operations
year ended year ended year ended year ended
31 december 31 december 31 december 31 december
2008 2008 2007 2007
£ £
profitloss before tax from discontinued operation – 100 16181261 100
tax charge at uk corporation tax rate of 285 2007 – 30 –– 4854368 30
effects of
– tax rate differences –– 166836 1
– unrecognised deferred tax assets –– 4854378 30
total tax charge from discontinued operations –– 166836 1
of the total tax charge in 2007 approximately £4330428 related to the profits arising in the critical care division “ccd” after
the utilisation of tax losses the total tax charge relating to discontinued operations in 2007 was £166836 which arose on the
disposal of the ccd during the year notes forming part of the financial statements
continued
38 osmetech annual report and accounts 2008
7 tax on loss on ordinary activities continued
there were no cumulative unremitted earnings of overseas subsidiaries and related undertakings at 31 december 2008 or
31 december 2007 therefore no deferred tax provision is required in respect of those earnings
factors that may affect the future tax credit
deferred tax assets have not been recognised principally in respect of tax losses carried forward as there is insufficient evidence
that the asset will be recovered the amount of the tax losses carried forward is £49365000 2007 – £28269000 in addition a
deferred tax asset in respect of capital allowances of £63000 2007 – £113000 has not been recognised these assets will be
recoverable if the group generates income in the future from the same trade in which the expenses were incurred
the uk full rate of corporation tax reduced from 30 to 28 with effect from 1 april 2008 the 30 rate applied to profits arising
before that date and the 28 rate applies to profits arising after that date
8 profit attributable to the company
the loss for the financial year dealt with in the financial statements of the parent company was £1358031 2007 – loss of
£1199726 as permitted by section 230 of the companies act 1985 no separate income statement is presented in respect of the
parent company
9 discontinued operations
critical care division
in december 2006 the group entered into a sale and purchase agreement to dispose of the critical care division the disposal
was effected in order to generate cash flow for the expansion of the group’s other businesses the disposal was completed on
31 january 2007 on which date control of the business passed to the acquirer the fair value of the consideration received was
£22021685 43294632 which comprised cash consideration of £23071211 45358000 less costs of £1049526 2063368
genesensor
during 2007 the development of the genesensor instrument platform was discontinued with the group’s resources fully focused
on the esensor technology and xt8 platform the genesensor technology was obtained as part of the acquisition of molecular
sensing plc in 2004 due to the decision to abandon the genesensor business the group revised its cash flow forecasts for this
cash generating unit “cgu” the noncurrent assets relating to genesensor cgu were therefore reduced to their recoverable
amount being their value in use of £nil with the related impairment charge being reported within discontinued operations the
impairment losses of £1057832 included the write down of goodwill arising on the acquisition of molecular sensing business
amounting to £977095 the impairment of the property plant and equipment amounting to £44534 and the impairment of other
intangible assets amounting to 2007 – £36203 the impairment losses recorded in the company amounted to £1240942 which
included the write down of the investment 2007 – £1159395 the impairment of the property plant and equipment £45344 and
other intangible assets 2007 – £36203 all of these impairments have been reported in the loss attributable to the genesensor
discontinued operation notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 39
9 discontinued operations continued
the results of the discontinued operations were as follows
critical care
division genesensor total
£££
year ended 31 december 2007
revenue 761588 – 761588
expenses 1150052 187925 1337977
impairment losses – 1057832 1057832
loss from operations 388464 1245757 1634221
profit on disposal of discontinued operations 18529383 – 18529383
attributable tax expense 166836 – 166836
realisation of cumulative translation adjustments 713901 – 713901
net profitloss attributable to discontinued operations net of tax 17260182 1245757 16014425
the effect of discontinued operations on reporting segments is disclosed in note 2 the genesensor operation included within
that total increased the operating loss and loss before tax of the uk segment by £1064164 and of the us segment by £181593
the genesensor discontinued operation did not impact segmental revenues or the tax credit in either 2008 or 2007
the net assets of the critical care division at 31 january 2007 when classified as held for sale were as follows
31 january
2007
goodwill 271362
property plant and equipment 862402
inventories 1751455
trade and other receivables 1365515
total assets classified as held for sale 4250734
trade and other payables 591596
total liabilities directly associated with assets classified as held for sale 591596
net assets of the disposal group 3659138
there was no tax income or expense in 2007 in respect of the trading loss attributable to the discontinued operations notes forming part of the financial statements
continued
40 osmetech annual report and accounts 2008
10 lossearnings per share
year ended year ended
31 december 31 december
2008 2007
£ £
lossprofit for the year attributable to equity holders of the company – continuing and
discontinuing operations 15451979 3983801
adjustment for profit from discontinued operations – 16014425
loss for the year attributable to equity holders of the company – continuing operations 15451979 12030624
2008 2007
pence pence
earnings per share from continuing and discontinued operations
basic and diluted 693 196
earnings per share from continuing operations
basic and diluted 693 593
earnings per share from discontinued operations
basic and diluted – 789
basic earnings per share is calculated by dividing profit or loss for the financial year attributable to equity holders by 222889207
2007 – 202934689 being the weighted average number of shares in issue during the year
as the group reported a loss for the year from continuing operations all potential shares relating to share options are viewed as
antidilutive the number of potential dilutive ordinary shares as at 31 december 2008 was 24975790 2007 – 30498838
11 goodwill
£
cost
at 1 january 2007 31 december 2007 and 31 december 2008 977095
accumulated impairment losses
at 1 january 2007 –
impairment losses 977095
at 31 december 2007 and 31 december 2008 977095
carrying amount
31 december 2007 and 31 december 2008 –
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired
due to the decision to abandon the genesensor molecular sensing business in 2007 as described in note 9 the group revised its
cash flow forecasts for this cash generating unit “cgu” the noncurrent assets relating to genesensor cgu including the
goodwill were therefore reduced to their recoverable amount of £nil in 2007 with the related impairment charge being reported
within discontinued operations in that year notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 41
12 other intangible assets
patents and intellectual licence
trademarks property costs total
£££ £
group
at 1 january 2007 294988 600000 905752 1800740
additions 4644 – 384106 388750
exchange differences –– 12910 12910
at 31 december 2007 299632 600000 1276948 2176580
assets reclassified from tangible assets –– 114545 114545
disposals –– 102606 102606
exchange differences –– 457357 457357
at 31 december 2008 299632 600000 1746244 2645876
amortisation
at 1 january 2007 258370 600000 8423 866793
charge for the year 4576 – 105424 110000
impairment losses 36203 –– 36203
exchange differences –– 837 837
at 31 december 2007 299149 600000 114684 1013833
charge for the year 215 – 129627 129842
on assets reclassified from tangible assets –– 50835 50835
exchange differences –– 72357 72357
at 31 december 2008 299364 600000 367503 1266867
carrying amount
at 31 december 2008 268 – 1378741 1379009
at 31 december 2007 483 – 1162264 1162747
licenses have an average remaining amortisation period of 15 years as at 31 december 2008 2007 – 16 years due to the decision
to abandon the genesensor molecular sensing business as described in note 9 the group revised its cash flow forecasts for this
cash generating unit “cgu” the noncurrent assets relating to genesensor cgu were therefore reduced to their recoverable
amount of £nil in 2007 with the related impairment charge being reported within discontinued operations for that year notes forming part of the financial statements
continued
42 osmetech annual report and accounts 2008
12 other intangible assets continued
patents and intellectual
trademarks property total
£££
company
cost
at 1 january 2007 294988 600000 894988
additions 4644 – 4644
at 31 december 2007 299632 600000 899632
at 31 december 2008 299632 600000 899632
amortisation
at 1 january 2007 258370 600000 858370
charge for the year 4576 – 4576
impairment losses 36203 – 36203
at 31 december 2007 299149 600000 899149
charge for the year 215 – 215
at 31 december 2008 299364 600000 899364
net book value
at 31 december 2008 268 – 268
at 31 december 2007 483 – 483
due to the decision to abandon the genesensor molecular sensing business in 2007 as described in note 9 the company revised
its cash flow forecasts for this cash generating unit “cgu” the noncurrent assets in 2007 relating to genesensor cgu were
therefore reduced to their recoverable amount of £nil in 2007 with the related impairment charge being reported within
discontinued operations for that year notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 43
13 property plant and equipment
short plant machinery
leasehold and laboratory office
improvements instruments equipment total
£££ £
group
cost
at 1 january 2007 149228 924836 400988 1475052
additions – 417239 241338 658577
disposals –– 18779 18779
exchange differences 2129 11884 5651 19664
at 31 december 2007 147099 1330191 617896 2095186
additions – 958631 131153 1089784
assets reclassified –– 114545 114545
disposals – 183450 – 183450
exchange differences 52686 443915 219554 716155
at 31 december 2008 199785 2549287 854058 3603130
accumulated depreciation
at 1 january 2007 55296 388791 152948 597035
charge for the year 35601 305345 138665 479611
impairment losses – 44534 – 44534
exchange differences 195 1216 803 2214
at 31 december 2007 90702 737454 290810 1118966
charge for the year 57841 312138 214816 584795
on assets reclassified –– 50835 50835
disposals – 155175 – 155175
exchange differences 43985 304915 152877 501777
at 31 december 2008 192528 1199332 607668 1999528
net book value
at 31 december 2008 7257 1349955 246390 1603602
at 31 december 2007 56397 592737 327086 976220
the group had not entered into contractual commitments for the acquisition of property plant and equipment at 31 december
2008 or 2007
due to the decision to abandon the genesensor molecular sensing business in 2007 as described in note 9 the group revised its
cash flow forecasts for this cash generating unit “cgu” the noncurrent assets relating to genesensor cgu were therefore
reduced to their recoverable amount of £nil in 2007 with the related impairment charge being reported within discontinued
operations for that year
during the year the useful economic lives of the esensor 4800 instruments were reviewed as a result of the transition to the
esensor xt8 platform this has resulted in an additional depreciation charge of £62000 in the year the instruments will be fully
written down during 2009 when the transition of customers to the esensor xt8 platform is expected to be completed notes forming part of the financial statements
continued
44 osmetech annual report and accounts 2008
13 property plant and equipment continued
plant
machinery and
laboratory office
instruments equipment total
£££
company
cost
at 1 january 2007 and 31 december 2007 90771 4897 95668
disposals 90771 – 90771
at 31 december 2008 – 4897 4897
accumulated depreciation
at 1 january 2007 15170 3793 18963
charge for the year 30257 894 31151
impairment losses 45344 – 45344
at 31 december 2007 90771 4687 95458
charge for the year – 80 80
disposals 90771 – 90771
at 31 december 2008 – 4767 4767
net book value
at 31 december 2008 – 130 130
at 31 december 2007 – 210 210
the company had not entered into contractual commitments for the acquisition of property plant and equipment at 31 december
2008 or 2007
due to the decision to abandon the genesensor molecular sensing business in 2007 as described in note 9 the company has
revised its cash flow forecasts for this cash generating unit “cgu” the noncurrent assets relating to genesensor cgu have
therefore been reduced to their recoverable amount of £nil with the related impairment charge being reported within
discontinued operations notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 45
14 investments
a subsidiary undertakings
investments loan total
£££
company
cost
at 1 january 2007 3871273 26351240 30222513
new loans issued – 3381764 3381764
recharge of share compensation charge – 317269 317269
repayments – 5143924 5143924
at 31 december 2007 restated 3871273 24906349 28777622
new loans issued – 7679761 7679761
repayments – 91142 91142
at 31 december 2008 3871273 32494968 36366241
provision for impairment
at 1 january 2007 645 6797975 6798620
provided in the year 1159395 – 1159395
at 31 december 2007 and 2008 1160040 6797975 7958015
net book value
at 31 december 2008 2711233 25696993 28408226
at 31 december 2007 2711233 18108374 20819607
the impairment charge in 2007 of £1159345 referred to the investment in molecular sensing plc which included the acquisition of
the genesensor technology as detailed in note 9 the development of this technology was discontinued during the year ended
31 december 2007
the loan balance included above relates to intercompany receivables that are anticipated to be recovered over the foreseeable
future in assessing the carrying value of the investments the directors have considered their recoverable value which has been
determined by reference to estimated discounted future cash flows the forecasts of future cash flows anticipate significant growth
in future revenues as the group’s products gain market acceptance and there is no guarantee that such growth will be achieved
despite this uncertainty the directors have concluded that the company’s investments are not impaired
investments have been restated to reflect the allocation of share compensation charges to subsidiary companies with respect to
ifric 11 the effects of these restatements are disclosed in note 29 notes forming part of the financial statements
continued
46 osmetech annual report and accounts 2008
14 investments continued
company
the following were subsidiary undertakings at the end of the year and have all been included in the consolidated accounts
proportion of
country of voting rights and
incorporation ordinary share
name or registration capital held nature of business
osmetech technology inc usa 100 holding company
osmetech inc usa 100 same as ultimate parent company
clinical micro sensors inc usa 100 same as ultimate parent company
osmetech gmbh germany 100 dormant
molecular sensing limited uk 100 dormant
molecular sensors limited uk 100 dormant
osmetech aesop trustee limited uk 100 dormant
the country of operation is the same as the country of incorporation or registration
shares held by osmetech technology inc
b other investments group
proportion of
country of voting rights and
incorporation ordinary share
name or registration capital held nature of business
atlas genetics limited uk 45 electrochemical dna detection
ohmx corporation usa 29 electrochemical detection
 shares held by clinical micro sensors inc
both of these investments are in unquoted private companies the investments were received in exchange for noncash
consideration the fair value of these investments at 31 december 2008 which is also the carrying value is considered to be £nil
2007 – £nil
15 inventories
31 december 31 december
2008 2007
£ £
raw materials and work in progress 748497 391771
finished goods 360511 54035
1109008 445806
there is no material difference between the replacement cost of inventories and the amount at which they are stated in the
financial statements at either 31 december 2008 or 31 december 2007
the company has no inventory notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 47
16 trade and other receivables
2008 2007
group company group company
££ ££
due within one year
trade receivables 81247 – 49216 23
other debtors 574118 83485 159951 7692
prepayments and accrued income 156896 6100 158161 61943
812261 89585 367328 69658
group trade receivables of £81247 2007 – £49216 do not carry interest and are stated net of allowances for doubtful receivables
of £nil 2007 – £nil
total trade receivables net of allowances held by the group amounted to £81247 2007 – £49216 the group has no significant
concentration of credit risk with exposure spread over a large number of customers the directors consider that the carrying
amount of trade and other receivables approximates to their fair value the average credit period taken on sales is 57 days
2007 – 30 days
included within the group’s trade receivables balance are debtors with a carrying value of £nil 2007 – £nil which are past due but
for which the group has not provided against as there had not been a significant change in credit quality the average age of
these balances are nil days 2007 – nil days
the group primarily sells to us hospitals and reference laboratories which have high credit ratings no formal independent third
party credit scoring system is employed although credit limits and payment history are regularly reviewed for each customer
movement in allowance for doubtful receivables
year ended year ended
31 december 31 december
2008 2007
£ £
balance at the start of the year – 95135
amounts recovered through sale of disposal group – 95135
balance at the end of the year – –
17 current tax assets
31 december 2008 31 december 2007
group company group company
££ ££
research and development tax credits receivable 99186 99186 279779 279779
income tax recoverable 54607 – 185441 –
153793 99186 465220 279779 notes forming part of the financial statements
continued
48 osmetech annual report and accounts 2008
18 cash and cash equivalents
31 december 2008 31 december 2007
group company group company
££ ££
cash at bank and in hand 834926 474318 4713622 104373
shortterm deposits 5200000 5200000 9197088 7321621
cash and cash equivalents 6034926 5674318 13910710 7425994
the effective interest rate on shortterm deposits during the year ended 31 december 2008 was 13 2007 – 408 these
deposits have a weighted average maturity of 13 days 2007 – 20 days in the year ended 31 december 2007 shortterm deposits
included a significant amount denominated in us dollar excluding the impact of the us dollar deposits the effective interest rate
on shortterm deposits which were denominated in sterling was 59
the carrying amount of these assets approximates to their fair value as these are highly liquid assets with an average maturity of
13 days 2007 – 20 days
19 trade and other payables
31 december 2008 31 december 2007
group company group company
££ ££
trade payables 1615851 588824 502081 54133
accrued employee benefits 480036 – 435942 –
accrued professional fees 185516 185516 130512 130512
other accrued expenses 766441 161190 204893 65059
3047844 935530 1273428 249704
trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs no interest was
payable in 2008 2007 – £nil as all trade and other payables were current the group has financial risk management policies in
place to ensure that all payables are paid within the appropriate time frame
the directors consider that the carrying amount of trade payables equates to fair value at both 31 december 2008 and
31 december 2007 on the basis of discounted cash flow analyses
the average credit period taken for trade purchases is 60 days for the group 2007 – 18 days and 126 days 2007 – 11 days for the
company
20 provisions
group company
££
at 1 january 2007 173280 20000
exchange difference 2185 –
at 31 december 2007 171095 20000
exchange difference 54117 –
at 31 december 2008 225212 20000
provisions which relate to dilapidations on leased properties represent estimates for asset retirement obligations to remove assets
at the end of the lease term for which there will be no alternative future use at the end of the lease term the actual amount
payable will depend on actual expenses arising at the end of the term which is considered to be payable in two to five years notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 49
21 share capital and other reserves group and company
31 december 31 december
2008 2007
£ £
authorised
ordinary share capital
1500000000 shares of 010p each 31 december 2007 – 1120000000 shares of 010p each 1500000 1120000
1200000000 deferred shares of 099p each 31 december 2007 – 1200000000 shares of 099p each 11880000 11880000
authorised share capital – total 13380000 13000000
allotted called up and fully paid
ordinary share capital
890157157 shares of 010p each 31 december 2007 – 201606639 shares of 010p each 890157 201607
674978300 deferred shares of 099p each 31 december 2007 – 674978300
deferred shares of 099p each 6682286 6682285
7572443 6883893
allotted and called up but unpaid ordinary share capital
ordinary share capital
1450000 shares of 010p 31 december 2007 – 1450000 shares of 010p 1450 1450
14500000 deferred shares of 099p each 31 december 2007 – 14500000 shares of 099p each 143550 143550
145000 145000
called up share capital – total 7717443 7028892
the deferred shares were created at the time of the 10 for 1 consolidation of ordinary shares on 30 september 2005 and the
directors consider these to be of minimal value the deferred shares do not entitle the holder thereof to payment of any dividend
or other distribution or to receive notice or attend or vote at any general meeting of the company the deferred shares are
nontransferable in the event of a return of assets on winding up of the company the deferred shareholders receive 1p in respect
of their shareholding it its entirety
the following ordinary shares of 010p each were issued during the year for cash consideration
date number consideration
14 january 2008 20000 1925p
17 january 2008 6667 1925p
6 february 2008 33333 1925p
5 december 2008 241686998 100p
23 december 2008 446803520 100p notes forming part of the financial statements
continued
50 osmetech annual report and accounts 2008
22 shareholders’ equity
share cumulative
share premium merger other exchange accumulated
capital account reserve reserve reserve deficit total
£££ ££££
group
at 1 january 2007 7028640 51703745 1885533 2136021 903185 50345337 11505417
profit for the year ––– –– 3983801 3983801
new share capital issued 252 52507 ––– – 52759
credit to equity for
equitysettled sharebased
payments ––– 614773 –– 614773
repurchased equity options ––– 131143 –– 131143
repurchased warrants ––– 480845 –– 480845
exchange adjustments ––– – 383633 – 383633
exchange adjustments taken
to income statement for
discontinued operations ––– – 713901 – 713901
transfer of merger reserve
to income statement –– 1885533 –– 1885533 –
at 31 december 2007 7028892 51756252 – 2138806 572917 44476003 15875030
loss for the year ––– –– 15451979 15451979
new share capital issued
net of costs 688551 5974058 ––– – 6662609
debit to equity for
equitysettled sharebased
payments ––– 314881 –– 314881
exchange adjustments ––– – 1039827 – 1039827
at 31 december 2008 7717443 57730310 – 1823925 466910 59927982 7810606 notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 51
22 shareholders’ equity continued
share cumulative
share premium merger other exchange accumulated
capital account reserve reserve reserve earnings total
£££ ££££
company
at 1 january 2007 7028640 51703745 1885533 2136021 – 33292208 29461731
loss for the year ––– –– 1199726 1199726
new share capital issued 252 52507 –– –– 52759
credit to equity for
equitysettled sharebased
payments ––– 614773 –– 614773
repurchased equity shares ––– 131143 –– 131143
repurchased warrants ––– 480845 –– 480845
transfer of merger reserve
to income statement –– 1885533 –– 1885533 –
at 31 december 2007 7028892 51756252 – 2138806 – 32606401 28317549
loss for the year ––– –– 1358031 1358031
new share capital issued
net of costs 688551 5974058 –– –– 6662609
debit to equity for
equitysettled sharebased
payments ––– 314881 –– 314881
at 31 december 2008 7717443 57730310 – 1823925 – 33964432 33307246
the other reserve relates to the equity settled share compensation schemes
the merger reserve related to the acquisition of genesensor the molecular sensing business when the shareholding was
acquired in 2004 the company elected to take the available merger relief on acquisition accounting under section 131 the shares
issued as consideration were recorded at market value rather than the nominal value and the corresponding increase inequity was
reported as a merger reserve in accordance with section 131 in 2007 genesensor was abandoned the goodwill impaired and
therefore the reserve was realised
warrants
during 2007 the company repurchased warrants which had been previously issued to motorola inc as consideration for the
acquisition of clinical micro sensors inc each warrant entitled the holder to subscribe for one ordinary share the warrants had a
fair value of £923144 as determined by the blackscholes model for pricing osmetech paid cash of £468686 plus costs of
£12159 in return for the cancellation of the warrants a corresponding deduction from equity was recorded in 2007 no gain or
loss was reported in line with ias 32 notes forming part of the financial statements
continued
52 osmetech annual report and accounts 2008
23 share based payments
the company has granted options under the osmetech plc 2003 us equity compensation plan “us plan” and long term
incentive awards “ltip’s” and has entered into individual option agreements and unapproved options as shown in the table
below an unapproved share option is an option as defined by hm revenue and customs which does not attract tax relief on
exercise
1 emi plan
number of ordinary shares
under option as at
31 december 31 december subscription
date 2008 2007 price exercisable between
17 september 2002 – 75000 175p 17 december 2002 to 17 september 2012
24 february 2003 – 142601 239p 17 december 2003 to 24 february 2013
2 september 2005 – 987644 010p 2 october 2005 to 2 september 2015
– 1205245
2 us plan
number of ordinary shares
under option as at
31 december 31 december subscription
date 2008 2007 price exercisable between
3 august 2005 1870000 2410000 1925p 3 august 2006 to 3 august 2015
24 october 2005 – 25000 1475p 24 october 2006 to 24 october 2015
1 november 2005 485000 485000 1425p 1 november 2006 to 1 november 2015
2 december 2005 100000 100000 2425p 2 december 2006 to 2 december 2015
8 december 2005 160000 160000 2275p 8 december 2006 to 8 december 2015
24 march 2006 183334 200000 2225p 24 march 2007 to 24 march 2016
27 march 2006 10000 10000 2250p 27 march 2007 to 27 march 2016
18 may 2006 – 50000 2225p 18 may 2007 to 18 may 2016
21 june 2006 496667 505000 1850p 21 june 2007 to 21 june 2016
5 july 2006 440000 470000 2125p 5 july 2007 to 5 july 2016
10 august 2006 – 60000 1875p 10 august 2007 to 10 august 2016
5 october 2006 – 250000 1650p 5 october 2007 to 5 october 2016
28 november 2006 150000 150000 2500p 28 november 2007 to 28 november 2016
11 january 2007 1076667 1440000 2400p 11 january 2008 to 11 january 2017
28 march 2007 106667 290000 2300p 28 march 2008 to 28 march 2017
8 may 2007 120000 140000 2500p 8 may 2008 to 8 may 2017
29 june 2007 575000 640000 2300p 29 june 2008 to 29 june 2017
31 july 2007 51667 85000 1875p 31 july 2008 to 31 july 2017
31 august 2007 110000 110000 1900p 31 august 2008 to 31 august 2017
9 october 2007 605000 755000 2225p 9 october 2008 to 9 october 2017
7 december 2007 110000 335000 2525p 7 december 2008 to 7 december 2017
2 april 2008 275000 – 1725p 2 april 2009 to 2 april 2018
3 june 2008 280000 – 1750p 3 june 2009 to 3 june 2018
30 july 2008 125000 – 1325p 30 july 2009 to 30 july 2018
7330002 8670000 notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 53
23 share based payments continued
3 individual option agreements
number of ordinary shares
under option as at
31 december 31 december subscription
date 2008 2007 price exercisable between
25 september 1998 – 111700 20p 21 october 2001 to 21 october 2008
26 april 2000 – 135000 2625p 26 april 2003 to 26 april 2010
20 march 2001 – 25000 110p 1 march 2004 to 20 march 2011
20 march 2001 – 75000 110p 20 march 2004 to 20 march 2011
29 january 2002 – 100000 1275p 29 january 2005 to 29 january 2012
24 february 2003 – 4500 239p 24 february 2004 to 24 february 2013
13 october 2004 – 76375 34p 13 october 2004 to 22 november 2008
– 527575
4 unapproved options
number of ordinary shares
under option as at
31 december 31 december subscription
date 2008 2007 price exercisable between
2 september 2005 2858509 2858509 010p 2 october 2005 to 2 september 2015
5 december 2008 50000 – 175p 17 december 2002 to 17 september
5 december 2008 61213 – 239p 17 december 2003 to 24 february 2013
5 december 2008 987644 – 010p 2 october 2005 to 2 september 2015
3957366 2858509
5 ltips
number of ordinary shares
under option as at
31 december 31 december subscription
date 2008 2007 price exercisable between
2 september 2005 11203421 12521470 010p 3 september 2005 to 2 september 2015
30 january 2007 2485001 4716039 010p 30 january 2007 to 30 january 2017
13688422 17237509
employee participation in these schemes is at the discretion of the remuneration committee or senior management of the
company share options granted under ltips emi plan and unapproved options dated 2 september 2005 are exercisable at a
price of 01 pence per share subject to the achievement of specific nonmarket based performance criteria for ltips dated
2 september 2005 exercise is also subject to the achievement of share price targets all other options are exercisable at a price
equal to equal to the average closing quoted market price of the company’s shares on the date of grant and generally vest
between 1 and 3 years
options are generally exercisable for a period up to 10 years after grant and are forfeited if the employee leaves the group before
the options vest at 31 december 2008 all options are equitysettled following the sale of the company’s critical care division
“ccd” on 31 january 2007 the us plan was amended to allow shares held by ccd employees leaving the group “ccd
options” to be repurchased for cash by the company for those holders of options totalling 3725000 options who elected to
exercise and immediately sell their shares the company repurchased the appreciation in value calculated on the difference
between the closing bid price of an osmetech plc share on the date of exercise and the related exercise price at 31 december
2007 the ccd options totalled 5055000 and expired on 31 december 2008 notes forming part of the financial statements
continued
54 osmetech annual report and accounts 2008
23 share based payments continued
equity settled sharebased payments are measured at fair value at the date of grant the fair value determined at the date of grant
of equity settled sharebased payments is expensed on a straightline basis over the vesting period based on the group’s
estimate of shares that will eventually vest
the fair value of the ltips is measured by use of a binomial model the black scholes model is used to determine the fair value of
other options the models include adjustments based on management’s best estimate for the effects of exercise restrictions and
behavioural considerations the option life is derived by the models based on these assumptions and other assumptions identified
below expected volatility is calculated using an analysis of volatility over an historical 3 year period
the expected volatility has been calculated with reference to the historical volatility across a period which equates to the expected
life as the directors consider this to be the best method to determine future volatility
the total credit included within the total operating loss for operations in respect of sharebased payments was £314000
2007 – expense of £615000
details of the share options outstanding are as follows
year ended 31 december 2008 ltips emi plan and unapproved other options exercise price other options exercise price
options priced at 010 pence at or below 25 pence per share above 25 pence per share
weighted weighted weighted
average average average
number exercise price number exercise price number exercise price
of options pence of options pence of options pence
outstanding at beginning of period 21083662 010 8668801 2086 746375 9411
granted during the period –– 1130000 1636 ––
forfeited during the period 3549087 010 2295886 1991 560000 11584
exercised during the period –– 60000 1925 ––
expired during the period –– 111700 2000 ––
outstanding at end of period 17534575 010 7331215 2049 110000 2525
range of prices 010 1325 – 2500 2525
weighted average fair value 1107 pence 878 pence 969 pence
contractual remaining life 687 years 764 years 894 years
exercisable at end of period 4964404 010 4461214 2004 36667 2525
year ended 31 december 2007 ltips emi plan and unapproved other options exercise price other options exercise price
options dated 2 september 2005 at or below 25 pence per share above 25 pence per share
weighted weighted weighted
average average average
number exercise price number exercise price number exercise price
of options pence of options pence of options pence
outstanding at beginning of period 18344697 010 11248801 2062 411375 15019
granted during the period 4716039 010 3610000 2311 335000 2525
forfeited during the period 1977074 010 2213334 2232 ––
exercised during the period –– 3976666 2141 ––
outstanding at end of period 21083662 010 8668801 2086 746375 9411
range of prices 010 1425 – 2500 2525 – 26250
weighted average fair value 1064 pence 890 pence 587 pence
contractual remaining life 799 years 835 years 595 years
exercisable at end of period 3846153 010 3018801 1930 411375 15019 notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 55
23 share based payments continued
for those share options granted in the period the assumptions including revisions thereto in relation to ltips used in the
calculation of the fair values were as follows
year ended year ended
31 december 2008 31 december 2007
ltips other options ltips other options
vesting period years –2 42
expected volatility  – 490 507 507
expected life years –3 43
risk free rate  – 459 532 534
expected dividend yield  – nil nil nil
probability of achieving nonmarket based performance
criteria where applicable – 100 75 100
60000 2007 – 3976666 of options were exercised during the year as noted in the table above the weighted average share price
at the exercise date was 1925 2007 – 2141p
24 commitments
at the balance sheet date the group had total future minimum lease payments under noncancellable operating leases for each of
the following periods
31 december 2008 31 december 2007
land and land and
buildings other buildings other
££ ££
commitments under noncancellable operating leases
within one year 473572 15575 359007 29246
between two and five years 406838 – 107296 –
880410 15575 466303 15969
the company does not have any lease commitments
in relation to the group’s significant leases there are no contingent rentals payable restrictions or further leasing requirements
imposed by these lease arrangements notes forming part of the financial statements
continued
56 osmetech annual report and accounts 2008
25 related party transactions
group
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are
not disclosed in this note
company
the parent company derives interest receivable from subsidiary undertakings and certain costs are recharged between the parent
company and subsidiary undertakings in the normal course of business
total income received during the year amounted to £nil 2007 – £2052074 and total recharges were £nil 2007 – £1048085
amounts outstanding at 31 december 2008 and 31 december 2007 between the parent company and subsidiary undertakings are
provided in note 14
related party receivables are not secured and no guarantees were issued in respect thereof balances will be settled in accordance
with normal credit terms no provisions have been made for doubtful debts in respect of the amounts owed by related parties
the executive directors and nonexecutive directors are considered to be key management personnel of the group information
on the remuneration of executive directors is shown in note 6 no director was or is materially interested in any contract
subsisting during or at the end of the financial year which was significant in relation to the business of the group
26 pension costs
the company makes contributions on behalf of the group into money purchase pension schemes for the benefit of its employees
the assets of the schemes are held separately from those of the company in independently administered funds the pension cost
charge represents contributions payable and paid by the company to the funds and amounted to £214461for the year ended
31 december 2008 2007 – £224907 at 31 december 2008 the company had £93998 of unpaid pension contributions
2007 – £62700
27 financial instruments
there is no material difference between the fair values and book values of the group’s financial instruments which comprise
financial assets and liabilities as disclosed in note 18 either in the current or prior year
the group’s treasury activities are designed to provide suitable flexible funding arrangements to satisfy its requirements the
group uses financial instruments comprising cash and shortterm deposits the main risks arising from the group’s financial
instruments are interest rate and liquidity risks the board reviews policies for managing each of these risks and they are
summarised below
the group aims to achieve a balance between continuity and flexibility of funding by maintaining a range of maturities on its
liquid resources the group also mixes the duration of its deposits to reduce the impact of interest rate fluctuations
the group has limited foreign currency risk since overseas subsidiaries derive revenues and incur expenses denominated
predominantly in the currencies of the countries in which they operate all monetary assets and liabilities of the group are
materially denominated in the operating or functional currency of the operating unit involved
the group holds no other financial liabilities with a contractual maturity date 2007 – £nil all trade and other payables are due
within one month 2007 – one month excluding purchases for which deferred payment has been agreed with the supplier the
credit risk is set out in note 16 and the directors consider that the risk is adequately managed by appropriate credit control
procedures as described in note 16 notes forming part of the financial statements
continued
osmetech annual report and accounts 2008 57
27 financial instruments continued
the sterling carrying amounts of the group’s foreign currency denominated monetary assets and monetary liabilities at the report
date are as follows
liabilities assets
2008 2007 2008 2007
£ £ £ £
euro 2380 1837 45102 37822
us dollar 2011802 1172984 5031105 7375811
the group’s exposure to foreign currency has remained the same in comparison to 2007 being that the group remains primarily a
us based business and therefore exposed to movements in the us dollar
in the directors’ opinion the sensitivity analysis is unrepresentative of the inherent foreign exchange risk in the group as the year
end exposure does not reflect exposure during the year
the following table details the group’s sensitivity to a 10 increase and 10 decrease in the sterling against the us dollar which is
the main risk area of foreign currency exposure
currency impact currency impact
us dollar us dollar us dollar us dollar
10 10 10 10
increase decrease increase decrease
2008 2008 2007 2007
profitloss 1274592 1557829 492322 601727
other equity 75521 92309 265959 325063
a positive number above indicates an increase in profit or other equity where the sterling strengthens 10 against the us dollar
for a 10 weakening of the sterling against the relevant currency there would be an equal and opposite impact on the profit and
other equity and the balances below would be negative
the impact on other equity relates to the cumulative exchange reserve the impact of this is limited because the group has taken
advantage of the first time adoption exemptions permitted under ifrs 1 for the period to 1 january 2006 which permits the group
to set the reserve to nil as at 1 january 2006 the effective date for the adoption of ifrs on 31 january 2007 the group disposed
of the ccd division and the cumulative exchange reserve relating to this division was recycled through profit and loss
interest bearing financial assets
functional currency of operations
31 december 2008 31 december 2007
group sterling us dollar euro group sterling us dollar euro
££££ £ £££
cash 834926 473994 316505 44427 4713622 104373 4571427 37822
term deposits 5200000 5200000 –– 9197088 1280000 7917089 –
6034926 5673994 316505 44427 13910710 1384373 12488516 37822
the sterling and us dollar cash balances attract interest at floating rates based on the bank of england base rate and us prime
rate respectively
the term deposits are of 13 days duration 2007 – 20 days at a weighted average fixed rate of 13 2007 – 408
foreign currency derivatives
the group has entered into foreign currency forward contracts not exceeding 6 months to manage the risk associated with
anticipated sales and purchase transactions over that period notes forming part of the financial statements
continued
58 osmetech annual report and accounts 2008
27 financial instruments continued
these contracts are not designated in a hedge accounting relationship and are classified as heldfortrading
the table below summarises the outstanding contracts at the year end there were no outstanding contracts in 2007
total
foreign currency value 6000000
forward rate per contracts 1482
contract value £4048611
fair value of instruments £65630
sensitivity to 10 weakening of sterling £410425
sensitivity to 10 strengthening of sterling £410425
the fair values of foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived
from quoted interest rates matching maturities of the contracts
28 contingent liabilities
the owners of patents covering technology allegedly used by the group have indicated claims for license payments and royalties
relating to the group’s use of that technology amounting to approximately £1 million however no legal correspondence has been
received to date the directors believe that a successful claim by the licensor is unlikely though possible and therefore no
provision for the potential license payments or royalties payable has been made in its accounts for the year ended 31 december
2008
29 restatements to previously reported financial statements
subsequent to the issuance of the group’s annual report for the year ended 31 december 2007 the group filed a registration
statement on form f1 with the us securities and exchange commission as a consequence of the registration process the
directors revised the presentation on the face of the consolidated income statement to show share compensation charges as a
component of employee benefits rather than separately disclosed and to reclassify health insurance costs from other expenses to
employee benefits expense
the impact of these restatements on the consolidated loss for the year ended 31 december 2007 is as follows
reclassification
as previously of employee
reported benefits as restated
£££
continuing operations
other expenses 3882702 356253 3526449
share compensation charges 450317 450317 –
employee benefits 5607046 806570 6413616
operating loss 13048400 – 13048400
in accordance with ifric 11 “group and treasury share transactions” share compensation payments relating to subsidiary
companies have been allocated to these companies
the impact of restatements on the company only balance sheet at 31 december 2007 is as follows
share
as previously compensation
reported charges as restated
£££
investments 20502338 317269 20819607
accumulated deficit 32923670 317269 32606401 osmetech annual report and accounts 2008 59
notice of annual general meeting
this document is important and requires your immediate attention if you are in any doubt as to what
action to take you should consult your stockbroker solicitor accountant or other appropriate independent professional
adviser authorised under the financial services and markets act 2000 if you have sold or otherwise transferred all your
shares in the company please forward this document and the accompanying form of proxy to the person through whom
the sale or transfer was effected for transmission to the purchaser or transferee
notice is hereby given that the annual general meeting of osmetech plc the “company” will be held at the offices of ashurst
llp  broadwalk house 5 appold street london ec2a 2ha on tuesday 5 may at 1100 am for the purpose of considering and if
thought fit passing the following resolutions
ordinary business
1 to receive and consider the accounts for the financial year ended 31 december 2008 together with the reports of the directors
and auditors thereon
2 to elect d j faulkner as a director
3 to elect j f kayyem as a director
4 to elect m p lappe as a director
5 to reelect j n g white as a director
6 to reappoint deloitte llp as auditors of the company until the conclusion of the next annual general meeting and to
authorise the directors of the company to determine their remuneration
special business
to consider and if thought fit to pass the following resolutions of which number 7 will be proposed as an ordinary resolution and
number 8 will be proposed as a special resolution
7 that subject to and in accordance with the articles of association of the company the directors be generally and
unconditionally authorised in accordance with section 80 of the companies act 1985 the ‘act’ in substitution for any existing
authority to allot relevant securities to exercise all the powers of the company to allot relevant securities within the meaning
of section 80 of the act
i up to a maximum nominal amount of £297202 being approximately one third of the current issued ordinary share capital
and representing 297202000 ordinary shares of 010p each and
ii comprising equity securities as defined in section 94 of the act up to an aggregate nominal amount when added to any
allotments made under i above of £594404 being approximately two thirds of the current issued ordinary share capital
and representing 594404000 ordinary shares of 010p each in connection with or pursuant to an offer or invitation by way
of a rights issue in favour of holders of ordinary shares in proportion as nearly as practicable to the respective number of
ordinary shares held by them on the record date for such allotment and holders of any other class of equity securities
entitled to participate therein or if the directors consider it necessary as permitted by the rights of those securities but
subject to such exclusions or other arrangements as the directors may consider necessary or appropriate to deal with
fractional entitlements treasury shares record dates or legal regulatory or practical difficulties which may arise under the
laws of or the requirements of any regulatory body or stock exchange in any territory or any other matter whatsoever
provided that such authorities shall expire at the conclusion of the annual general meeting of the company in 2010 or on 30
june 2010 whichever is the earlier save that the company may before such expiry make an offer or agreement which would or
might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of
such offer or agreement as if the authority conferred by this resolution had not expired 60 osmetech annual report and accounts 2008
notice of annual general meeting
continued
8 that subject to the passing of resolution 7 as set out in the notice of this annual general meeting and in accordance with
the articles of association of the company the directors be empowered pursuant to section 951 of the companies act 1985
the “act” to allot equity securities as defined in section 94 of the act for cash pursuant to the general authority conferred by
resolution 7 as set out in the notice of this annual general meeting as if section 891 of the act did not apply to such
allotment provided that this power shall be limited to the allotment of equity securities
i in connection with or pursuant to an offer by way of rights open offer or other preemptive issue or offer to the holders of
shares in the company but in the case of the authority granted under resolution 7 ii by way of a rights issue only and
other persons entitled to participate therein in proportion as nearly as practicable to their respective equity holdings on
the record date for such allotment but subject to such exclusions or other arrangements as the directors may consider
necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any territory or
the regulations or requirements of any regulatory authority or any stock exchange in any territory or any other matter
whatsoever and
ii otherwise than pursuant to subparagraph i above up to an aggregate nominal amount of £445803 being approximately
one half of the current issued ordinary share capital and representing 445803000 ordinary shares of 010p each
and such authority shall expire on the conclusion of the annual general meeting of the company in 2010 or on 30 june 2010
whichever is the earlier save that the company may before such expiry make an offer or agreement which would or might
require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer
or agreement as if the power conferred by this resolution had not expired
by order of the board registered office
s a craig co ashurst llp
secretary broadwalk house
5 appold street
london ec2a 2ha
2 april 2009
notes
1 a shareholder is entitled to appoint another person as his proxy to exercise all or any of his rights to attend and to speak and
vote at the annual general meeting a shareholder may appoint more than one proxy in relation to the meeting provided
that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder
2 a form of proxy is enclosed the appointment of a proxy will not prevent a shareholder from subsequently attending and
voting at the meeting in person
3 to be effective the instrument appointing a proxy and any power of attorney or other authority under which it is executed or
a duly certified copy of any such power or authority must either be a sent to the company’s registrars capita registrars
proxies department the registry 34 beckenham road beckenham kent br3 4tu so as to arrive no later than 48 hours
before the time for holding the meeting or any adjournment of it or in the case of a poll taken otherwise than at or on the
same day as the meeting or adjourned meeting for the taking of the poll at which it is to be used or b lodged using the
crest proxy voting service – see note 7 below
4 holders of ordinary shares are entitled to attend and vote at general meetings of the company the total number of issued
ordinary shares in the company on 2 april 2009 which is the latest practicable date before the publication of this document
was 891607157 on a vote by show of hands every shareholder who is present has one vote and every proxy present who
has been duly appointed by a shareholder entitled to vote has one vote on a poll every shareholder who is present in
person or by proxy has one vote for every ordinary share of which he is the holder osmetech annual report and accounts 2008 61
notice of annual general meeting
continued
5 pursuant to regulation 41 of the uncertificated securities regulations 2001 the company specifies that entitlement to attend
and vote at the meeting and the number of votes which may be cast at the meeting will be determined by reference to the
company’s register of members at 1100 am on 1 may 2009 or if the meeting is adjourned 48 hours before the time fixed
for the adjourned meeting as the case may be in each case changes to the register of members after such time will be
disregarded
6 shareholders should note that the doors to the meeting will be open at 1030 am
7 crest members who wish to appoint a proxy or proxies through the crest electronic proxy appointment service may do so
for the meeting and any adjournment of the meeting by following the procedures described in the crest manual subject to
the provisions of the company’s articles of association crest personal members or other crest sponsored members and
those crest members who have appointed a voting service providers should refer to their crest sponsor or voting service
providers who will be able to take the appropriate action on their behalf
8 in order for a proxy appointment or instruction made by means of crest to be valid the appropriate crest message a
“crest proxy instruction” must be properly authenticated in accordance with euroclear uk  ireland limited’s
specifications and must contain the information required for such instructions as described in the crest manual the
message regardless of whether it constitutes the appointment of a proxy the revocation of a proxy appointment or an
amendment to the instruction given to a previously appointed proxy must in order to be valid be transmitted so as to be
received by capita registrars id crest ra10 by the latest times for receipt of proxy appointments specified in note 3
above for this purpose the time of receipt will be taken to be the time as determined by timestamp applied to the
message by the crest applications host from which capita registrars is able to retrieve the message by enquiry to crest
in the manner prescribed by crest after this time any change of instructions to a proxy appointed through crest should
be communicated to him by other means
9 crest members and where applicable their crest sponsors or voting service providers should note that euroclear uk 
ireland limited does not make available special procedures in crest for any particular messages normal system timings and
limitations will therefore apply in relation to the input of crest proxy instructions it is the responsibility of the crest
member concerned to take or if the crest member is a crest personal member or sponsored member or has appointed a
voting service provider to procure that his crest sponsor or voting service providers takes such action as shall be
necessary to ensure that a message is transmitted by means of the crest system by any particular time in this connection
crest members and where applicable their crest sponsors or voting service providers are referred in particular to those
sections of the crest manual concerning practical limitations of the crest system and timings
10 the company may treat as invalid a crest proxy instruction in the circumstances set out in regulation 355a of the
uncertificated securities regulations 2001
11 in order to facilitate voting by corporate representatives at the meeting arrangements will be put in place at the meeting so
that i if a corporate shareholder has appointed the chairman of the meeting as its corporate representative with instructions
to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the
meeting then on a poll those corporate representatives will give voting directions to the chairman and the chairman will
vote or withhold a vote as corporate representative in accordance with those directions and ii if more than one corporate
representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the
chairman of the meeting as its corporate representative a designated corporate representative will be nominated from
those corporate representatives who attend who will vote on a poll and the other corporate representatives will give voting
directions to that designated corporate representative corporate shareholders are referred to the guidance issued by the
institute of chartered secretaries and administrators on proxies and corporate representatives – wwwicsaorguk for further
details of this procedure the guidance includes a sample form of representation letter if the chairman is being appointed as
described in i above 62 osmetech annual report and accounts 2008
notice of annual general meeting
continued
12 the register of directors’ interests in the share capital of the company copies of service agreements under which the
directors of the company are employed and copies of terms and conditions of appointment of nonexecutive directors are
available for inspection at the company’s registered office during normal business hours from the date of the notice of this
meeting until the date of the annual general meeting and will be available for inspection at the place of the annual general
meeting for at least 15 minutes prior to and during the meeting osmetech annual report and accounts 2008 63
osmetech plc proxy for use at annual general meeting
please insert iwe
full name
please use block letters
and address of
of
being a members of the company hereby appoint the chairman of the annual general meeting
or
as myour proxy to vote for meus and on myour behalf at the annual general meeting of the company to be held at the offices
of ashurst llp  broadwalk house 5 appold street london ec2a 2ha on 5 may 2009 at 1100 am and at any adjournment thereof
 delete if it is desired to appoint any other person and insert his or her name
please tick this box if you are appointing more than one proxy
enter the number of ordinary shares in relation to which your proxy is authorised to vote
or leave blank to authorise your proxy to act in relation to your full voting entitlement
ordinary business for against withheld
1 to receive and consider the accounts for the financial year ended 31 december 2008
together with the reports of the directors and auditors thereon
2 to reelect d j faulkner as a director
3 to elect j f kayyem as a director
4 to elect m p lappe as a director
5 to reelect j n g white as a director
6 to reappoint deloitte llp as auditors of the company until the conclusion of the
next annual general meeting and to authorise the directors of the company to
determine their remuneration
special business
7 to authorise the directors to allot shares of the company up to a maximum amount
of £594404
8 to empower the directors to allot shares for cash on a preemptive basis and otherwise
up to a maximum amount of £445803
signature dated this day of 2009
notes
1 a duly appointed proxy may attend the meeting speak vote on a show of hands and vote on a poll to appoint more than one proxy complete a photocopy of this proxy form
please also indicate by ticking the relevant box if the proxy appointment is one of multiple appointments being made multiple proxy appointments should be returned together in
the same envelope
2 to appoint as a proxy a person other than the chairman of the meeting insert the full name in the space provided please indicate the proxy holder’s name and the number of
shares in relation to which they are authorised to act as your proxy which in aggregate should not exceed the number of shares held by you if no indication is given as to the
number of shares your proxy will be deemed to be authorised in respect of your full voting entitlement or if this proxy form has been issued in respect of a designated account for
a member the full voting entitlement for that designated account all forms must be signed and should be returned together with the same envelope a proxy need not be a
member of the company
3 unless otherwise indicated the proxy will vote as he thinks fit or at his discretion abstain from voting
4 the form of proxy together with any power of attorney or other authority under which it is signed or a duly certified copy of such power or authority must arrive not later than
48 hours before the time set for the meeting at capita registrars the registry 34 beckenham road beckenham kent br3 4tu the completion and return of a form of proxy will
not however preclude members from attending and voting in person at the meeting or at any adjournment thereof should they wish to do so
5 a corporation must execute the form of proxy under either its common seal or the hand of a duly authorised officer or attorney
6 the form of proxy is for use in respect of the shareholder account specified above only and should not be amended or submitted in respect of a different account
7 the ‘vote withheld’ option is to enable you to abstain on any particular resolution such a vote is not a vote in law and will not be counted in the votes ‘for’ and ‘against’ a
resolution
8 shares held in uncertificated form ie in crest may be voted through the crest proxy voting service in accordance with the procedures set out in the crest manual
9 in the case of joint holders the vote of the senior who votes whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint holders and for this
purpose seniority shall be determined by the order in which names stand in the register of members in respect of the share


Summary:
 chief executive officer’s review
introduction
the fda clearance and launch of our second generation instrument platform the esensor xt8 in 2008
marked a significant step towards our aim of commercialising our proprietary electrochemical detection
technology to provide a low cost easy to use technology for molecular diagnostics testing
at the same time as the fda clearance for the esensor xt8 we also received clearance for our esensor
warfarin sensitivity test which represents a significant market opportunity for osmetech
warfarin market opportunity
warfarin decreases the blood’s clotting ability and is the most widely prescribed oral anticoagulant in
north america and europe individuals metabolize warfarin differently and if its administration is not
managed carefully life threatening side effects may occur in the us alone there are an estimated
2 million new warfarin patients each year and it is the second most likely drug after insulin to send
americans to the emergency room resulting in an estimated 43000 visits a year and many
hospitalizations
current clinical practice involves a ‘trial and error’ process for the physician to determine the appropriate
dosing level for the drug on a patientbypatient basis there is now rapidly growing awareness of the
influence of genetic factors in establishing correct dosing levels supported by scientific and medical
research furthermore there is now an increasing weight of compelling economic data to support such
testing demonstrating that not only can patient care be improved but testing can save costs
we believe that the market is now at a tipping point where warfarin sensitivity testing will become a
standard of care resulting in widespread genetic testing for the substantial number of new warfarin
patients
in august 2007 the fda updated the label for warfarin to note that people with variations of the genes
cyp2c9 and vkorc1 may respond differently to the drug this has now been followed up by the
american medical association ama sending literature to us physicians promoting the use of genetic
testing as best practice when establishing warfarin dosing for patients the joint commission strong
influencers and monitors of hospital laboratory practice have identified anticoagulation therapy
including warfarin dosing under their main guidelines for improving patient safety in 2008 and 2009
in january 2009 results of the largest prospective study yet performed supported the use of genetic
testing for warfarin patients the study conducted by the department of medical sciences clinical
pharmacology uppsala university hospital uppsala sweden commenced in 2001 and monitored 1496
new warfarin patients assessing the impact of the three main genetic markers that are known to play a
critical role in metabolism of and sensitivity to warfarin it concluded “we have shown that in a large
prospective study vkorc1 and cyp2c9 predict warfarin dose and individuals predisposed to unstable
anticoagulation during initiation of therapy we anticipate that adequately sized clinical trials of patients
randomized to pharmacogenetic versus conventional dosing will demonstrate that warfarin dose
prediction improves the safety and cost effectiveness of oral anticoagulant treatment”
in february 2009 a paper published in the new england journal of medicine by the international
warfarin pharmacogenetics consortium described how clinical and genetic data from 4043 patients
were used to create a dosing algorithm that was based on clinical variables only and an algorithm in
which genetic information was added to the clinical variables the algorithms were validated on a group
of 1009 patients and the study which is by far the largest and most inclusive of its kind to date
concluded that the use of a pharmacogenetic algorithm for estimating the appropriate initial dose of
warfarin produces recommendations that are significantly closer to the required stable therapeutic dose
than those derived from a clinical algorithm or a fixeddose approach in an accompanying editorial two
osmetech annual report and accounts 2008 3 chief executive officer’s review
continued
senior fda representatives supported the findings noting that a high proportion of the population
46 were outliers and required higher or lower doses than the ‘average’ patient
the national heart lung and blood institute nhlbi is now in the process of launching the largest
prospective multicenter randomized clinical trial in the united states to test whether a genebased
strategy for prescribing the initial warfarin dose will improve patient outcomes the clinical trial will use
a dosing strategy similar to that developed in the international study and will enroll 1200 participants of
diverse backgrounds and ethnicities at twelve clinical sites
in addition to the improved standard of care for patients there are a number of key organizations who
are also driving this change from an economic perspective excited by the costs that can be saved in
healthcare budgets the organizations include medco a leading us pharmacy benefit manager pbm
with the nation’s largest mail order pharmacy operations and 60000 retail pharmacies
warfarin – osmetech’s unique position
osmetech’s fdacleared warfarin sensitivity test provides genetic information relating to the three
principal biomarkers for the metabolism of the drug in addition our extended warfarin sensitivity test
incorporates additional markers including the exclusivelylicensed cyp4504f2 biomarker unique to
osmetech the results of recent independent clinical studies support the significance of cyp4f2 a 2008
publication in blood journal of the american society of hematology concluded that the cyp4f2
marker significantly improves genetic data for warfarin dosing other studies including recent 2009
publications from researchers in spain and another group from italy have confirmed and strengthened
the importance of the 4f2 variant they concluded that cyp4f2 increases the reliability of the warfarin
pharmacogenetic test when cyp4f2 is included with cyp2c9 and vkorc1 genetic variants age and
weight an additional 7 of the interpatient variability in warfarin dose response is explained further
independent studies are in progress
additionally the significance of our unique cyp4f2 biomarker has been recognized by
warfarindosingorg this is a free web site dedicated to helping doctors and clinicians estimate the
most appropriate therapeutic dose for patients already prescribed warfarin initiating warfarin therapy by
integrating genetic phenotypic and therapeutic information the adddtion of cyp4f2 to the
warfarindosingorg dosing algorithm uniquely positions this algorithm as the leading comprehensive
clinical utility tool
we believe that the combination of ‘best platform’ and ‘best test’ should position osmetech as a leader
in this market which we believe is poised for significant growth
molecular diagnostics market
according to frost  sullivan a market research firm the 2007 worldwide invitro diagnostics or ivd
market was estimated to be 35 billion and is anticipated to reach 43 billion by 2010 its fastest
growing segment the molecular diagnostics market was 25 billion in 2007 and is anticipated to reach
37 billion in 2010 this new and expanding part of the ivd market emerged in response to a need for
more rapid sensitive and specific diagnostic tests than were available using only traditional techniques
such as growthbased tests biochemical tests or immunoassays
we believe several factors contribute to the growth of this market including
• decentralization of genetic testing
• conversion from “homebrew” tests to fdacleared molecular testing methods
• expansion of genetic testing for disease predisposition
4 osmetech annual report and accounts 2008 chief executive officer’s review
continued
• advances in pharmacogenomics and personalised medicine and
• growth of the infectious disease diagnostic market
osmetech’s solution
traditionally the market for molecular diagnostics testing has been dominated by testing methods that
rely on optical or fluorescence technologies and complex research based instruments adapted to meet
the very different demands of the clinical environment these technologies are expensive to operate and
require specialised facilities and highlytrained personnel in addition the devices that utilise these
technologies are sensitive to dust debris and movement and require specialised care and maintenance
by contrast our esensor platform is a simple ‘clinical lab ready’ system designed specifically for the
molecular diagnostics market and fits perfectly into routine workflows the platform is based on
electrochemical technology that uses chemical reactions to detect the presence of molecules which in
turn produce characteristic electrical currents this technology which is unique in the molecular
diagnostics field has been proven in other clinical applications such as blood glucose home testing for
diabetics to deliver accurate and reproducible results in small robust and affordable formats osmetech
has strong intellectual property supporting the use of this technology for the detection of dna rna
and proteins
our unique esensor platform permits multiplexing or simultaneously running multiple tests on
individual samples and random access testing or the ability to initiate tests while other tests are in
progress it is a compact benchtop workstation with an integrated touch screen computer and
disposable test cartridges that can process up to 3000 tests a week it provides a definitive result within
30 minutes with limited operator involvement and requires little or no maintenance
our business model
we are principally targeting those reference laboratories and hospitals that already possess molecular
testing skills but currently do not have a solution for our particular tests our target customers will
typically be sending their testing out to larger institutions but would prefer to retain testing inhouse in
order to provide faster results for the patient and to improve the profitability of their laboratories
osmetech is one of a small number of companies with the capability of meeting the needs of this
decentralizing and growing market
our business model is currently to provide customers with an instrument under a reagent rental
agreement earning osmetech revenues from the sale of tests the customer incurs no upfront capital
expenditure and has minimal labour costs and dedicates only a small amount of laboratory space for
running the test with attractive reimbursement levels in place molecular diagnostic testing instantly
becomes profitable for our customers
the combination of growing the installed base of instruments and broadening our test menu by
launching new assays has a multiplier effect which should allow osmetech to build a fast growing high
quality revenue stream
commercial progress
at the end of december 2008 we had grown our installed base of instruments with customers to 34
comprising 13 evaluation and 21 contract units we have increased this total to 49 during the first three
months of 2009 and have seen a continuation of the excellent conversion rate from evaluation to
contract we have yet to lose an evaluation to a competitor and the xt8 has been rated ahead of
competitor products by two recent independent studies this success has been driven by an excellent
user experience with a reported 100 system performance which compares very favourably to
competing products that often report high ‘nocall’ rates requiring the reprocessing of a sample
osmetech annual report and accounts 2008 5 chief executive officer’s review
continued
distribution partner
we have a relatively small inhouse sales force and in order to capitalize on the significant market
interest for our products and the growing number of customer leads we have entered into a fiveyear
us distribution agreement with fisher healthcare a division of thermo fisher scientific inc fisher
fisher has a significant presence in the us diagnostics market with 6 molecular sales specialists and
over 150 generalist healthcare sales representatives
test menu and pipeline
we intend to develop and market a broad range of dna tests in the fields of genetic testing
pharmacogenomics infectious diseases and cancer having the ‘best platform’ has enabled us to secure
exclusive rights to the important new genetic marker for warfarin the cyp450 4f2 biomarker and to
enter into an agreement with qiagen to adapt their qiaplexbased respiratory viral test which is
already a commercially successful product for use on our esensor xt8 system
the current menu of tests commercially available for use on our esensor xt8 system comprises
• warfarin sensitivity test for the three most relevant cyp2c9 vkor biomarkers associated with
warfarin metabolism fda 510k clearance obtained in july 2007
• 2c9 drug metabolism test for cyp2c9 biomarkers associated with metabolism of phenytoin and most
nonsteroidal antiinflammatory drugs launched as a research use only product in november 2008
• cystic fibrosis test for preconception screening of cystic fibrosis gene carriers for use with the
esensor xt8 system launched as a research use only product and an application for 510k
clearance submitted to the fda in march 2009
we are currently developing additional tests to expand our test menu for the esensor xt8 system in
each case focussing on validated content where external research has already identified the relevant
biomarkers these tests include the following
• extended warfarin sensitivity test based on the esensor warfarin sensitivity test this test
incorporates a number of additional markers including the exclusivelylicensed cyp4504f2
biomarker an application for fda 510k clearance was filed in december 2008
• respiratory pathogen test panel to detect major respiratory viruses and aid in the identification of
bacterial and viral infections this test will adapt qiagen’s qiaplexbased respiratory viral test for
use on the esensor xt8 system and is currently in development we expect to launch as a research
use only product in 2009 and will also consider an application for fda 510k clearance
• factor ii factor v and mthfr test venous thrombosis test for the most common mutations
associated with increased risk of blood clots which can lead to stroke and pulmonary embolism this
test is currently in development and we expect to launch as a research use only product in 2009 and
will also consider an application for fda 510k clearance
• 2d6 drug metabolism test for cyp2d6 biomarkers associated with metabolism of a variety of
prescription drugs including antipsychotics antidepressants and antithrombolytics this test is
currently in development and we expect to submit an application for fda 510k clearance if and
when development is completed
• tamoxifen sensitivity test for metabolism of the breast cancer drug tamoxifen this test is currently
in development and we expect to submit an application for fda 510k clearance if and when
development is completed
6 osmetech annual report and accounts 2008 chief executive officer’s review
continued
• 2c19 plavix test for metabolism of the antiplatelet drug plavix clopidogrel this test is currently in
development and we expect to submit an application for fda 510k clearance if and when
development is completed
we anticipate adding further tests to our development pipeline during the course of the coming year
particularly in the fields of personalised medicine and cancer where the market opportunities are highly
attractive
fund raising
the global molecular diagnostics market and the knowledge and understanding of healthcare
technology companies are heavily centred on the us a significant number of emerging healthcare
technology companies trade on nasdaq in september 2008 we announced proposals to undertake an
issue of american depositary shares ads and obtain a listing of such shares on the nasdaq global
market with market conditions proving very difficult and deteriorating further we concluded that there
was insufficient interest to proceed with the ads issue and the nasdaq listing at that time given the
company’s further funding requirements in december 2008 we raised £6662609 net of expenses
through the placing of new shares to institutional shareholders which should provide sufficient funds to
support the business until july 2009 we are currently evaluating options to provide further funding for
the group
financial review
loss
the loss from continuing operations increased by 28 from £12030624 in 2007 to £15451979 in 2008
and the net loss per share from continuing operations increased by 17 from 593 pence in 2007 to
693 pence in 2008 the operating loss for the period increased 20 primarily resulting from £1195536
costs incurred in connection with the withdrawal of a proposed issue and ads listing on nasdaq in the
us and currency exchange rate differences between the two periods amounting to 8
revenue
revenue increased from £169273 in 2007 to £352069 in 2008 the increase of £182796 or 108 was
principally a result of the growth in sales of our esensor cystic fibrosis carrier detection test although
currency exchange rate differences accounted for 19 of the increase product sales were £116288 and
£305163 an increase of 162 and license revenues were £52985 and £46906 a decrease of 11 in
2007 and 2008 respectively
changes in inventories of finished goods and work in progress
changes in inventories of finished goods and work in progress increased from £92818 in 2007 to
£312106 in 2008 the increase of £219288 or 236 was principally as a result of manufacturing
additional esensor cystic fibrosis carrier detection tests in 2008 following the growth in our installed
base of esensor 4800 instruments gross profit for product sales defined as product sales less changes
in inventories of finished goods and work in progress and royalties on product sales decreased from a
profit of £23470 in 2007 to a loss of £6943 in 2008 representing 20 and 2 of product sales in 2007
and 2008 respectively
we expect the gross profit on product sales to improve significantly in 2009 as we increase our sales of
esensor xt8 test cartridges these have a much lower cost of goods than our first generation test
cartridges for the esensor 4800 system furthermore we have identified further cost reductions and
manufacturing efficiencies for xt8 cartridges which we expect to progressively achieve in the coming
year
osmetech annual report and accounts 2008 7 chief executive officer’s review
continued
employee benefits
employee benefits costs increased from £6413616 in 2007 to £6882569 in 2008 the increase of
£468953 or 7 includes a reduction in the level of share compensation charges from £450317 for 2007
to a credit of £314881 for 2008 primarily due to a revision of expectations for achieving performance
targets for management longterm incentive plans the base level of payroll costs was higher in 2008
reflecting the higher average number of employees in the year for continuing operations which
increased by 17 from 94 in 2007 to 110 in 2008 although this cost increase was partially offset by a
substantial reduction in bonus payments in december 2008 we undertook a rationalisation program and
have reduced staffing levels to approximately 60 employees which will significantly reduce employee
benefits costs in 2009 the cost of this program in respect of oneoff employee benefits costs in 2008
was £421785
research and development costs
research and development costs increased from £2595179 in 2007 to £2667855 in 2008 an increase of
£72676 or 3 excluding currency exchange rate differences between the two periods amounting to
approximately 8 costs decreased by 5 in 2008 reflecting lower systems development costs as the
development of the esensor xt8 system was completed during the year this reduction was partially
offset by an increase in costs related to the development of new tests during the period
depreciation and amortization
depreciation and amortization expense increased from £589611 in 2007 to £714637 in 2008 the
increase of £125026 or 21 resulted from both an increase in the amortization of license costs and
increased depreciation in respect of plant machinery and laboratory instruments
other expenses
in total other expenses increased from £3526449 in 2007 to £5383198 in 2008 this increase of
£1856749 or 53 principally reflects £1195536 2007 – £nil costs incurred in connection with the
withdrawal of a proposed ads issue and listing on the nasdaq global market in the us
interest on bank balances and term deposits
interest on bank balances and term deposits decreased from £864143 in 2007 to £213259 in 2008 the
decrease of £650884 or 75 resulted primarily from a reduction in average cash balances during the
year due to the ongoing operating expenses of the business
taxation
there have been no uk activities during 2008 that would qualify for research and development tax
credits as compared to 2007 during which we qualified for net tax credits of £153633 the tax charge in
2008 of £122572 primarily reflects a reduction in the estimated credits available in respect of 2007
liquidity and capital resources
cash and cash equivalents decreased from £13910710 at 31 december 2007 to £6034926 at
31 december 2008 a decrease of £7875784 or 57 the decrease of cash and cash equivalents was
principally due to the use of £14305945 in operating activities offset by the net proceeds from the issue
of shares in 2008 amounting to £6662609 cash and cash equivalents at 28 february 2009 were
£3842861
net cash used in operating activities increased from £14121176 in 2007 to £14305945 in 2008 an
increase of £184769 or 1 and a decrease of approximately 7 excluding the impact of currency
exchange rate differences between the two periods the movement was primarily due to two factors an
increase in operating cash outflows before movements in working capital of £2739237 mainly resulting
from an increase in the loss from continuing operations offset by a reduction in net working capital of
8 osmetech annual report and accounts 2008 chief executive officer’s review
continued
£615836 in 2008 compared to an increase of £1542334 in 2007 the decrease in net working capital in
2008 is principally due to an increase in creditors in 2008 reflecting the agreed payment deferral of
certain professional costs associated with the cancellation of the proposed ads issue and listing of such
shares on nasdaq in 2008
net cash used in investing activities from continuing operations increased from £156830 for 2007 to
£760989 in 2008 representing an increase of £604159 the increase is primarily explained by the
reduction of interest received on bank balances and term deposits
net cash generated fromused in financing activities increased from £559228 in 2007 to £6662609 in
2008 an increase of £7221837 the increase primarily reflects the net proceeds from the issue of shares
in 2008 amounting to £6662609 and the payment of £480845 made to redeem share warrants in 2007
outlook
the past year has been one of significant development for the company with the successful launch of
our second generation instrument platform the esensor xt8 together with our warfarin sensitivity test
following fda clearance however with difficult conditions in the financial markets we have rationalised
the business and reduced our workforce we have accomplished this without negatively effecting
operational activity and cost savings have been realised the excellent operational performance of the
esensor xt8 in the field is a testament to the skill and dedication of our employees past and present
who have worked tirelessly to bring the product to market and help create the basis of the strong
business we have today however financial markets remain challenging and consequently we continue to
examine all strategic options for osmetech to ensure that we have adequate funds for our future
requirements
we will continue to execute on our strategy of commercialising our pipeline of tests and increasing our
installed base of instruments in the field we are focussing on tests with validated biomarkers where
there is an established market need the attraction of our instrument platform is illustrated by the
agreement with industry leader qiagen to adapt their existing and widely used respiratory test for use
on our esensor xt8
we already have a growing number of strong customer leads and expect to accelerate our commercial
expansion further through the distribution agreement recently signed with fisher healthcare in the us
we will benefit from fisher’s considerable sales and marketing strength and established relationship with
key customer accounts this agreement further validates our products and technology
the roll out of the esensor xt8 system has been successful and continues to gather pace we are
establishing the esensor xt8 as strong product platform with an expanding test menu in a fast growing
market which allows our customers to improve both patient care and the profitability of their
laboratories
james white
chief executive officer
2 april 2009
osmetech annual report and accounts 2008 9