Adaptimmune Therapeutics plc
Company Number 09338148
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended
31 December 2017
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Adaptimmune Therapeutics plc
Company Number 09338148
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended
31 December 2017
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ADAPTIMMUNE THERAPEUTICS PLC
Contents
Page
Directors’ Report ……………………………………………………………………………………………………….……7
Strategic Report ……………………………………………………………………………………………………………. 10
Directors’ Remuneration Report …………………………………………………………………………….………………30
Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements ….……….……...49
Independent Auditor’s Report to the Members of the Adaptimmune Therapeutics plc …………………………………….50
Consolidated Income Statement…………………………………………………………………………….……………….55
Consolidated Statement of Financial Position……………………………………………………………….………………56
Company Statement of Financial Position……………………………………………………………….….………….……57
Consolidated Statement of Changes in Equity………………………………………………………………………….……58
Company Statement of Changes in Equity…………………………………………………………………………….…….59
Consolidated Statement of Cash Flows…………………………..…………………………………………………….……60
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ADAPTIMMUNE THERAPEUTICS PLC
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ADAPTIMMUNE THERAPEUTICS PLC
COMPANY INFORMATION
DIRECTORS
Mr L M Alleva
Dr A Behbahani
Ms B Duncan
Mr G Kerr
Mr D M Mott
Mr J J Noble
Dr C E Sigal
Dr P A Thompson
Dr T Zaks
SECRETARY
Ms M Henry
COMPANY NUMBER
09338148
REGISTERED OFFICE
AUDITOR
60 Jubilee Avenue
Milton Park
Abingdon
Oxfordshire
OX14 4RX
KPMG LLP
Arlington Business Park
Theale
Reading
RG7 4SD
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ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REPORT
For the year ended 31 December 2017
Adaptimmune Therapeutics plc was incorporated on 3 December 2014. The Directors submit this report and the
Consolidated Financial Statements of Adaptimmune Therapeutics plc and its subsidiaries, Adaptimmune Limited and
Adaptimmune LLC (which may be referred to as “the Group”, “we”, “us” or “our”) as of and for the years ended 31
December 2017 and 2016, as well as the financial statements for Adaptimmune Therapeutics plc (“the Company” or “the
parent company”) as of and for the years ended 31 December 2017 and 2016.
Adaptimmune Therapeutics plc is a public company limited by shares and incorporated and domiciled in England and Wales.
Adaptimmune Limited is registered in England and Wales. Adaptimmune LLC is registered in the United States of America.
BASIS OF PRESENTATION
Our Directors have elected to prepare the group financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the EU and in compliance with IFRSs issued by the IASB. The parent company financial
statements are drawn up in accordance with the Companies Act 2006 and Financial Reporting Standard 101 (“FRS 101”).
PRINCIPAL ACTIVITIES
The principal activity of Adaptimmune Therapeutics plc is the development and commercialisation of T cell therapy to treat
cancer.
We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to patients, particularly in
solid tumours. Our comprehensive and proprietary SPEAR (Specific Peptide Enhanced Affinity Receptor) T-cell platform
enables us to identify cancer targets, find and genetically engineer T-cell receptors (“TCRs”), and produce therapeutic
candidates for administration to patients. Using our affinity engineered TCRs, we aim to become a fully integrated cell
therapy company and to be the first company to have a TCR T-cell approved for a solid tumor indication.
RESULTS AND DIVIDENDS
The result for the year is set out in the Consolidated Income Statement on page 55.
The Directors do not propose a dividend (2016: $nil).
CHARITABLE AND POLITICAL CONTRIBUTIONS
No charitable contributions were paid during the year (2016: $nil).
No donations were made during the year to political organisations (2016: $nil).
FINANCIAL INSTRUMENTS
Please refer to the Financial Risk Management section included in our Strategic Report, beginning on page 10 of this
document.
STRUCTURE OF THE GROUP’S CAPITAL
Please refer to note 18 to the financial statements.
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ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2017
DIRECTORS
The following Directors have held office since the dates indicated below.
Mr L M Alleva
Dr A Behbahani
Ms B Duncan
Mr G Kerr
Mr D M Mott
Mr J J Noble
Dr C E Sigal
Dr P A Thompson
Dr T Zaks
(Appointed 5 March 2015)
(Appointed 12 February 2015 and re-elected 21 June 2017)
(Appointed 23 June 2016 and re-elected 21 June 2017)
(Appointed 1 November 2016 and re-elected 21 June 2017)
(Appointed 12 February 2015)
(Appointed 3 December 2014 and re-elected 16 June 2016)
(Appointed 12 February 2015 and re-elected 16 June 2016)
(Appointed 12 February 2015 and re-elected 21 June 2017)
(Appointed 14 November 2016 and re-elected 21 June 2017)
During the year ended 31 December 2017, there were eight full meetings of the Board of Directors. All of our Directors
attended each of the eight meetings except that Mr Alleva, Dr Sigal and Dr Thompson each attended seven meetings and Mr
Kerr attended five meetings.
One-third of the Directors are subject to retirement by rotation at each Annual General Meeting of shareholders.
THIRD PARTY INDEMNITY PROVISION FOR DIRECTORS
At the time the report is approved, there are no qualifying third party indemnity provisions in place for the benefit of one or
more of the Directors.
EMPLOYEE INVOLVEMENT
The Group is committed to the continued development of employee involvement by an effective communications and
consultative framework.
DISABLED PERSONS
Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and
abilities of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that
their employment with the Group continues and the appropriate training is arranged. It is the policy of the Group that the
training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person
who does not suffer from a disability.
ENVIRONMENTAL MATTERS
Please refer to the Environmental Matters section included in our Strategic Report, beginning on page 10 of this document.
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DIRECTORS’ REPORT (CONTINUED)
For the year ended 31 December 2017
GOING CONCERN
Our business activities, together with the factors likely to affect our future development, performance and position, are set
out in the Strategic Report on pages 10 to 29.
In determining whether our financial statements can be prepared on a going concern basis, our Directors considered the
Group’s business activities, together with the factors likely to affect our future development and performance. The review
also included our financial position and cash flows.
As of the date of this report, our Directors have a reasonable expectation that we have adequate resources to continue in
business for the foreseeable future. Accordingly, the financial statements have been prepared on the going concern basis.
AUDITOR
A resolution to reappoint KPMG LLP will be proposed at the forthcoming Annual General Meeting.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
All Directors in office at the time the report is approved confirm the following:
(i)
(ii)
so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware;
and
each Director has taken all the steps that he or she ought to have taken in his or her duty as a Director in order to
make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
The Directors’ Report was approved by the Board on 14 March 2018.
On behalf of the Board
James J Noble
Director
14 March 2018
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ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT
For the year ended 31 December 2017
INTRODUCTION
Adaptimmune Therapeutics plc (“the Company”) was incorporated on 3 December 2014. Adaptimmune Therapeutics plc
on behalf of itself and its subsidiaries, Adaptimmune Limited and Adaptimmune LLC (which may be referred to as “the
Group”, “we”, “us” or “our”), is required to produce a strategic report complying with the requirements of the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (the “Regulations”).
OVERVIEW
We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to patients, particularly in
solid tumours. Our comprehensive and proprietary SPEAR T-cell platform enables us to identify cancer targets, find and
genetically engineer TCRs, and produce therapeutic candidates for administration to patients. Using our affinity engineered
TCRs, we aim to become a fully integrated cell therapy company and to be the first company to have a TCR T-cell approved
for a solid tumour indication.
We have four SPEAR T-cells in clinical trials, MAGE-A10, MAGE-A4, AFP and NY-ESO. Phase 1/2 clinical trials are
ongoing in patients with various cancer tumour types including urothelial, melanoma, head and neck, ovarian, oesophageal,
gastric, multiple myeloma, hepatocellular cancers and in synovial sarcoma, myxoid round cell liposarcoma (“MRCLS”) and
non small cell lung cancer (“NSCLC”).
Our MAGE-A10 SPEAR T-cells have shown promising tolerability profiles with no evidence of off-target toxicities
observed. In particular as of 27 January 2018, there have been no reports of any severe neurotoxic events similar to CAR-T
cell related encephalopathy syndrome (“CRES”). The MAGE-A10 triple tumour study dose escalation to 1 billion transduced
cells, which is the dose previously observed to provide responses with our NY-ESO SPEAR T-cell, has been recommended
by the Safety Review Committee (“SRC”). In the MAGE-A10 NSCLC study, the SRC has recommended modification of
the protocol to permit escalation of the patient dose to 1 billion transduced cells with fludarabine and cyclophosphamide
preconditioning in the next treatment cohort. In the MAGE-A4 trial patient enrolment has started in bladder, melanoma,
head and neck, ovarian, NSCLC, oesophageal and gastric cancers.
Our NY-ESO SPEAR T-cell has shown promising initial results in clinical trials with a 50% response rate and a median
projected overall survival of 120 weeks (~28 months) in Cohort 1 of synovial sarcoma (a solid tumour) and 76% overall
response rate at day 100 in multiple myeloma. We have also now seen three partial responses (two confirmed and one to be
confirmed) and one stable disease in the first four patients dosed in a second solid tumour indication, MRCLS, with our NY-
ESO SPEAR T-cell. Our NY-ESO SPEAR T-cell therapy has breakthrough therapy designation in the United States and has
also received orphan drug designation from the U.S. Food and Drug Administration (“FDA”), and European Commission
for the treatment of soft tissue sarcoma. The European Medicines Agency (“EMA”) has also granted PRIME regulatory
access for our NY-ESO SPEAR T-cell therapy for the synovial sarcoma indication.
In September 2017, GlaxoSmithKline (“GSK”) exercised its option to obtain an exclusive global license to the NY-ESO
SPEAR T-cell program. Upon transition of the NY-ESO program to GSK which is anticipated to occur during 2018, GSK
will assume full responsibility for all development, manufacturing and commercialization activities for the NY-ESO SPEAR
T-cell including progression of the SPEAR T-cell into further clinical trials.
In January 2018, we announced that we had successfully manufactured the first SPEAR T-cells for a patient at our Navy
Yard facility in Philadelphia. We intend to use the facility to manufacture SPEAR T-cells for all three of our wholly owned
programs. In addition, in January 2018, we also announced an agreement with Cell and Gene Therapy Catapult for vector
production in the UK, which is intended to ensure vector supply for our ongoing and future clinical studies.
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Our SPEAR T-cell platform is being utilized with the aim of maximizing both patient and disease indication coverage in a
number of different ways.
• We are using our platform to identify and validate cancer targets for development of SPEAR T-cells in multiple
indications. Within a given indication, the frequency of expression of these identified targets may be low, and may
not be uniformly expressed in every cell within a tumour. As a result, we are developing multiple SPEAR T-cells
to different target antigens within selected disease indications to increase treatment potential for any given disease.
For example the NY-ESO-1, MAGE-A4 and MAGE-A10 SPEAR T-cells address targets expressed in NSCLC,
melanoma, urothelial (bladder) cancers and head and neck cancers, with each of these indications being addressed
by at least two of the SPEAR T-cells.
• We are also developing SPEAR T-cells directed to targets which are closely related to a specific disease indication.
The first of these SPEAR T-cells is our AFP SPEAR T-cell which is directed to hepatocellular cancer. Further
targets closely associated with other cancers are also being validated.
•
Finally, we are identifying peptides to different Human Leukocyte Antigen (“HLA”) types ensuring that for any
given target, for example NY-ESO, MAGE-A10, MAGE-A4 or AFP, we can address patient populations with
different HLA types.
We also recognize that further development of our SPEAR T-cells may be assisted by an enhancement in efficacy and
durability of response. We therefore have a number of next generation and combination SPEAR T-cell strategies designed
to further develop and engineer our SPEAR T-cells in addition to the initiation of combination therapy approaches, the first
of which is with Merck & Co., Inc’s (“Merck”) KEYTRUDA®. In addition to our internal next generation programs, to
enable continued innovation and development, we also have collaborations with third parties intended to promote further
next generation solutions. These include our collaboration with Universal Cells, Inc. (“Universal Cells”) and our
collaboration with Bellicum Pharmaceutical Inc. (“Bellicum”). With Universal Cells, we are looking to develop affinity
engineered donor T cells that are universally applicable to all patients. While these “universal cells” would be specific for a
given HLA type and target antigen, they would overcome the current limitation of autologous therapies that need to be
manufactured specifically for each patient. The enhanced T-cell technology being developed involves selective engineering
of cell surface proteins, without the use of nucleases, to develop universal T-cell products. If successful, this will enable us
to treat patient populations with an off-the-shelf product. Our Bellicum collaboration was announced in December 2016 and
under the collaboration, we will evaluate Bellicum’s GoTCR technology (inducible MyD88/CD40 co-stimulation, or iMC)
with our SPEAR T-cells for the potential to create enhanced T-cell therapeutics.
OUR SPEAR T-CELL THERAPIES
The Immune System and T-cells
The immune system plays an important role in targeting and destroying cancer cells. Specifically, T-cells, which are a type
of white blood cell, and their receptors create a natural system that is designed to scan the body for diseased cells. In general,
cells process proteins internally and then convert these proteins into peptide fragments which are then presented on the cell
surface by a protein complex called the Human Leukocyte Antigen, or HLA. T-cells naturally scan all other cells in the body
for the presence of abnormal peptide fragments, such as those generated from infectious agents. Recognition of this peptide-
HLA complex takes place through the TCR expressed on the T-cells. Binding of naturally occurring TCRs to cancer targets,
however, tends to be very poor because cancer proteins appear very similar to naturally occurring proteins on healthy cells
and TCRs that recognize what the body sees as “self-proteins” are eliminated during early human development. Even when
TCRs recognize cancer cells expressing novel proteins caused by mutations, elements of the immune system, or the cancer
itself often suppress the T-cell response.
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Target Identification and Validation
Before developing any engineered T-cell or TCR it is important to identify and validate a suitable target cancer peptide. The
target must be expressed primarily only on the cancer cells of interest and with expression in normal non-cancerous tissue
only where a risk to the patient would be deemed acceptable. Careful validation and identification of targets is important to
ensuring that any engineered TCR is specific to the targeted cancer and does not bind to the same target on non-cancer cells,
or that the TCR does not recognize a similar peptide derived from a protein in normal cells. Our target identification platform
is focused on three approaches. First, we are using our platform to validate cancer testis antigens, for example the NY-ESO,
MAGE-A4 and MAGE-A10 antigens. Second, we are using our platform to identify non-cancer testis antigens which are
closely related to a specific disease indication, for example the AFP antigen which is closely related to hepatocellular cancer.
Finally, we are identifying targets to different HLA types ensuring that for any given target, we can address patient
populations with different HLA types.
Affinity Engineering
Following identification of a suitable target peptide, we identify TCRs that are capable of binding to that target peptide. We
then engineer those identified TCRs to enhance and optimize their ability to target and bind to the cancer peptides, thereby
enabling a highly targeted immunotherapy. The optimized TCR then undergoes extensive preclinical safety testing prior to
administration to patients. Our SPEAR T-cell platform technology enables us to develop a pipeline of targets and TCR
therapeutic candidates that we believe may be effective in a variety of cancer types that are unresponsive to currently
available and experimental therapies. We have four SPEAR T-cells already in clinical trials (NY-ESO, MAGE-A10, MAGE-
A4 and AFP) and a pipeline of SPEAR T-cells in development.
Administration to Patients
The process for treating a patient with an engineered TCR therapeutic candidate involves extracting the patient’s T-cells and
then combining the extracted cells with our delivery system containing the gene for our affinity-enhanced TCR, through a
process known as transduction. Our delivery system uses a type of self-inactivating (SIN) virus, known as SIN-lentivirus, to
transduce the patient’s T-cells and is referred to as a lentiviral vector. The transduced T-cells are then expanded and infused
into the patient. When these T-cells encounter a recognized HLA-peptide complex, they multiply and initiate the destruction
of the targeted cancer cells.
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PRODUCT PIPELINE
We have Phase 1 clinical trials ongoing with our wholly-owned MAGE-A10, MAGE-A4 and AFP SPEAR T-cells in a total
of eight tumour types including NSCLC, head and neck cancer, ovarian, urothelial, melanoma, oesophageal, gastric and liver
cancers and as shown in the table above.
Our MAGE-A10 SPEAR T-cell Therapy
Phase 1 clinical trials are ongoing with our MAGE-A10 SPEAR T-cell are ongoing in NSCLC, urothelial, melanoma and
head and neck cancers in the United States, Canada, the United Kingdom and most recently Spain. Initial safety data from
the phase 1 studies has shown no evidence of off-target toxicity and as of 27 January 2018 there have been no reports of
severe neurotoxic events similar to CAR-T cell-related encephalopathy syndrome (CRES) to date. Further data from our
MAGE-A10 SPEAR T-cell trials is expected to be presented at the American Society of Cancer Oncology (“ASCO”)
conference in June 2018.
•
NSCLC: Approximately 80 to 85 percent of all lung cancers are NSCLC, and smoking is by far the leading risk
factor. About 40 percent of all NSCLCs are adenocarcinomas. Squamous cell carcinoma is the second most
common in the United States and Europe being 25 to 30 percent of NSCLC. Lung cancer is by far the leading cause
of cancer death among both men and women, and it is estimated that one out of four cancer deaths are from lung
cancer. Lung cancer mainly occurs in older people, and approximately two out of three people diagnosed with lung
cancer are 65 or older, while less than two percent are younger than 45.
The initial clinical program in NSCLC is an open label Phase 1 modified 3+3 dose escalating study in patients with
advanced stage NSCLC expressing the MAGE-A10 antigen. Patients receive preconditioning with fludarabine and
cyclophosphamide. The primary objectives of the study are to assess safety and tolerability of our MAGE-A10
TCR therapeutic candidate in patients. Secondary objectives include the assessment of anti-tumour activity and
durability of persistence. Enrolment of patients into this program is challenging, however the Safety Review
Committee has now recommended a protocol modification to allow dose escalation to treatment of patients with 1
billion T-cells with fludarabine and cyclophosphamide preconditioning in the next treatment cohort, following the
initial 100 million T-cell dose level.
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•
•
3-tumor trial: This is a Phase 1 open-label, modified 3+3 dose escalation study of the MAGE-A10 SPEAR T-cell
in HLAA*0201 and HLA-A*0206 positive patients with inoperable or metastatic urothelial cancer (transitional cell
cancer of the bladder, ureter or renal pelvis), melanoma, or squamous cell carcinoma of the head and neck
expressing the MAGE-A10 antigen. Patients will receive preconditioning with modified fludarabine and
cyclophosphamide.
Urothelial: Urothelial carcinoma is the most common type of bladder cancer. These cancers mainly start in the
urothelial cells that line the inside of the bladder or other parts of the urinary tract. Bladder cancer accounts for
approximately five percent of all new cancers in the United States, and is the fourth most common cancer in men.
Men are about three to four times more likely to get bladder cancer than women. It is was estimated that 79,030
new cases of bladder cancer will be diagnosed (about 60,490 in men and 18,540 in women), and about 16,870
deaths from bladder cancer will occur (about 12,240 in men and 4,630 in women) in the United States in 2017.
Bladder cancer occurs mainly in older people, and approximately 9 out of 10 people with this cancer are over the
age of 55.
• Melanoma: Melanoma is a cancer that begins in specific skin cells called melanocytes, and exposure to ultraviolet
rays is a major risk factor for most melanomas. It is estimated that approximately 87,110 new melanomas will be
diagnosed (about 52,170 in men and 34,940 in women), and about 9,730 people are were expected to die of
melanoma (about 6,380 men and 3,350 women) in the United States in 2017. The risk of melanoma increases as
people age, and the average age at diagnosis is 63 years. However, melanoma is not uncommon among those
younger than 30, and it is one of the most common cancers in young adults (especially young women).
•
Head and Neck: Cancers of the head and neck, which include cancers of the oral cavity, larynx, pharynx, salivary
glands, and nose/nasal passages, account for approximately three percent of all malignancies in the United States.
At least 75 percent of head and neck cancers are caused by tobacco and alcohol use. Infection with cancer-causing
types of human papillomavirus (“HPV”) is also a risk factor for some types of head and neck cancers. In recent
years, there has been a drop in the incidence of head and neck cancers caused by tobacco and alcohol, and a rise in
the incidence of head and neck cancers caused by HPV.
Initial patients in this trial have been treated with 100 million T-cells. The Safety Review Committee has now recommended
dose escalation to treatment of patients with the 1 billion cell dose.
Our MAGE-A4 SPEAR T-cell Therapy
Enrolment in the MAGE-A4 SPEAR T-cell trial in urothelial, melanoma, head and neck, ovarian, NSCLC, oesophageal and
gastric cancers is ongoing. Patients are initially being treated with an initial target dose of 100 million T-cells (safety dose).
Multiple sites in the United States are now active and recruiting and will enrol up to 32 patients. Initial data is anticipated
during 2018.
The Phase 1, open-label, modified 3+3 dose escalation study is in HLA*02 positive patients with inoperable locally advanced
or metastatic melanoma, and urothelial, head and neck, ovarian, non-small cell lung, oesophageal, and gastric cancers
expressing the MAGE-A4 target peptides. Patients will receive preconditioning with fludarabine and cyclophosphamide.
Our AFP SPEAR T-cell Therapy
We have a Phase 1, open label, dose escalation study designed to evaluate the safety and anti-tumour activity of our alpha
fetoprotein (“AFP”) therapeutic candidate in hepatocellular carcinoma (“HCC”) ongoing in the United States. The trial is
also open in the United Kingdom and Spain. The Phase 1 clinical trial will include a dose escalation and expansion of a
tolerable dose to explore initial evidence of anti-tumour activity.
AFP is a target peptide associated with hepatocellular carcinoma. Hepatocellular carcinoma is the most common type of
liver cancer in adults. Many patients who develop liver cancer have long-standing cirrhosis (scar tissue formation from liver
cell damage), and early detection can be difficult because signs and symptoms often do not appear until later stages. It was
estimated that approximately 40,710 new cases of liver cancer will be diagnosed (about 29,200 in men and 11,510 in women)
and about 28,920 people will die from this disease (about 19,610 men and 9,310 women) in the United States in 2017.
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Our NY-ESO SPEAR T-cell Therapy (partnered with GSK)
*Adaptimmune’s accrual complete
**Ongoing
MRCLS = myxoid/round cell liposarcoma
The NY-ESO SPEAR T-cell is currently in clinical trials in the United States and continues to show a promising tolerability
profile in all clinical trials as of 5 September 2017 with no severe neurotoxic events similar to CAR-T cell related
encephalopathy syndrome (“CRES”) reported as at 27 January 2018.
On 7 September 2017, we announced that GSK had exercised its option under the GSK Collaboration and License
Agreement to exclusively license the right to research, develop and commercialize the NY-ESO SPEAR T-cell. Further
details on exercise of the option can be found in the Core Alliances and Collaborations section below.
Following exercise of this option by GSK, we are transitioning the NY-ESO SPEAR T-cell program to GSK, with full
transition anticipated during 2018.
•
Synovial Sarcoma: Soft tissue sarcomas can develop from tissues like fat, muscle, nerves, fibrous tissues, blood
vessels, or deep skin tissues. There are approximately 50 types of soft tissue sarcomas, including synovial sarcoma,
which is a malignant tumour of the soft tissues arising often around joints. Synovial sarcoma is associated with a
characteristic chromosomal translocation, and represents about nine percent of all soft tissue sarcomas. This disease
is more common in children and young adults, and typically presents at an age ranging from 15 to 40 years. The
majority of patients who develop metastatic soft tissue sarcomas are currently incurable, with 75% to 80% of
patients not surviving past two to three years. First line therapy typically involves radiotherapy and chemotherapy,
as well as surgical resection where possible. There are limited additional treatment options for unresectable,
recurrent and metastatic synovial sarcoma, which is nearly always fatal, and systemic therapy is mainly used to
provide palliation and slow disease progression.
There are four cohorts in the Phase 1/2 pilot study:
- Cohort 1 (patients with high NY-ESO-1 antigen expression and lymphodepletion with cyclophosphamide
and fludarabine) — enrolment in this first cohort is now complete.
- Cohort 2 (patients with low NY-ESO-1 antigen expression and lymphodepletion with cyclophosphamide
and fludarabine) — enrolment continues in this cohort.
- Cohort 3 (patients with high NY-ESO-1 antigen expression and lymphodepletion with cyclophosphamide
alone) — only one confirmed response was observed in evaluable patients treated in cohort 3 and as a
result, this cohort has now closed. The data from this cohort 3 suggest that fludarabine may be required as
part of the pre-conditioning regimen.
- Cohort 4 (patients with high NY-ESO-1 antigen expression and lymphodepletion with a modified (lower)
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dose of cyclophosphamide and fludarabine) — given the lack of response seen in cohort 3, cohort 4 was
opened and has now fully enrolled. We expect to present data comparing cohorts 1 and 4 during the
American Society of Clinical Oncology (“ASCO”) conference in June 2018.
As of 5 September 2017, initial anti-tumour activity was observed in all ongoing cohorts, including low expressors
of NY-ESO. NY-ESO SPEAR T-cells continued to be well-tolerated with all reported events of cytokine release
syndrome resolved. There have been no reports of severe neurotoxicity safety events similar to CAR T cell-related
encephalopathy syndrome (CRES) from investigators as of 27 January 2018. One patient experienced a fatal bone
marrow failure which was considered related to study treatment by the investigator in the trial. Internal
investigations have not identified a mechanism by which the NY-ESO SPEAR T-cells may have caused this bone
marrow failure. Survival data was promising with a median predicted overall survival of 120 weeks (~28 months)
among the 12 treated patients in Cohort 1; or, 159 weeks (~37 months) for the ten patients in this cohort who
received the target dose of greater than one billion cells.
The following diagram illustrates follows the response seen in one patient with synovial sarcoma in cohort 4 of our
synovial sarcoma trial. The red circle indicates one of the two target lesions which was in the patient’s lung prior
to treatment, at week 4 after T-cell infusion and up to week 8 after T-cell infusion.
Baseline (cohort 4)
- 34 yr old female; synovial sarcoma lung
- Prior therapies doxorubicin, ifosfamide,
pazopanib, gemcitabine, 7 surgical resections
- Showing target lesion 1 of 2, 54mm per
RECIST(v1.1)
Week 4
- Had received 2.8 x 109 transduced T-cells
- Partial response at 4 weeks
- 90.7% decrease in target lesion 1, 77% decrease
in both target lesions 1 and 2 per RECIST (v1.1)
Week 8
- Partial response maintained
- Target lesion 1 not measurable at week 12
due to reduction in size
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• MRCLS: Enrolment in this program is continuing in the United States and the program is anticipated to transition
to GSK during 2018. This is an open-label pilot study in patients to assess preliminary safety and efficacy in this
indication. Initially, ten patients will be enrolled. If further characterization of the treatment is required, up to five
additional patients may be enrolled. Eligible patients will be HLA-A*02:01, HLA-A*02:05 and/or HLA-A*02:06
with advanced (metastatic or inoperable) MRCLS whose tumour express NY-ESO-1 (defined as >30% of tumour
cells that are 2+ or 3+ by immunohistochemistry). Patients receive preconditioning with fludarabine and
cyclophosphamide at the same dose that is being used in cohort 4 of our ongoing synovial sarcoma Phase 1/2 study.
Soft tissue sarcomas can develop from tissues like fat, muscle, nerves, fibrous tissues, blood vessels, or deep skin
tissues. There are more than 50 types of soft tissue sarcomas, including MRCLS, which is mostly located in the
limbs (most frequently in the thighs). MRCLS is a solid tumour associated with a characteristic chromosomal
translocation, and represents about 30 to 35 percent of liposarcomas and 5 to 10 percent of all adult soft tissue
sarcomas. MRCLS commonly presents at an age ranging from 35 to 55 years.
The NY-ESO SPEAR T-cell appears to have a promising tolerability profile in MRCLS patients and three partial
responses (two confirmed and one to be confirmed) and one stable disease have been observed in the first four
patients dosed.
•
Ovarian program: Enrolment in the ovarian program has ceased. GSK will assume responsibility for any further
development for this indication and any long term follow up for patients previously enrolled and treated in the
program. To date no objective clinical responses have been reported in patients.
• Melanoma program: Enrolment in the melanoma program has ceased. To date no objective clinical responses
have been reported in patients.
• Myeloma program: Multiple myeloma is a cancer formed by malignancies of plasma cells, which are found in the
bone marrow and are an important part of the immune system. It is estimated that approximately 30,280 new cases
of multiple myeloma will be diagnosed in the United States in 2017 (17,490 in men and 12,790 in women). Multiple
myeloma is characterized by several features, including low blood counts, bone and calcium problems, infections,
kidney problems, monoclonal gammopathy, and by the proliferation of malignant plasma cells within bone marrow.
The risk of multiple myeloma goes up as people age, and less than one percent of cases are diagnosed in people
younger than 35. Most people diagnosed with this cancer are at least 65 years of age.
Interim results from a Phase 1/2 clinical trial in multiple myeloma patients were reported in Nature Medicine,
published on July 20, 2015. This trial has now closed. 25 patients were treated in the study. As at July 2017, the
overall response rate at day 100 was 76% (1sCR, 1 CR, 8 VGPR and 1PR). Three patients remain disease
progression free at 39, 56 and 61 months post T-cell infusion. These results were reported in Blood, 130
(Supplement 1), 845.
Enrolment of patients has now started into a multiple myeloma combination study with Merck’s anti-programmed
death-1 (“PD-1”) inhibitor, KEYTRUDA® (pembrolizumab). This trial is anticipated to transition to GSK during
2018. The study is evaluating the safety, pharmacodynamics, and preliminary efficacy of the combination.
•
NSCLC program: Enrolment in the NSCLC study has completed and GSK will assume responsibility for any
further development for this indication. Any patients already enrolled in the NSCLC study will continue to be
treated and followed for safety, efficacy and long term follow up.
The conduct and timing of any pivotal trial or other trials using the NY-ESO SPEAR T-cell will be the responsibility
of GSK following exercise of its option over the NY-ESO SPEAR T-cell program and full transition of the program
to GSK.
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17
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
Next Generation Technology and Manufacturing Platform Development
Next Generation Therapeutics
We believe that there is potential to enhance the potency and durability of our SPEAR T-cells, for instance by adding further
active proteins into the lentiviral delivery system. These enhancements are designed to result in next generation SPEAR T-
cells for future clinical programs. We have multiple development programs ongoing which are researching different
modifications to our SPEAR T-cells. For example, we have an active development program for a ‘dnTGFBRII’ SPEAR T-
cell. This next generation SPEAR T-cell is designed to block immune suppression by TGFB in certain tumour
microenvironments, thereby enhancing the activity and duration of response seen with our SPEAR T-cells within those
environments. We are also considering CD8 constructs where the aim is to promote the antigen spread, anti-tumour memory
and tumour inflammation seen with our SPEAR T-cells.
Manufacturing Improvements
We now have our own SPEAR T-cell manufacturing capability at the Navy Yard in Philadelphia, Pennsylvania. Patient
SPEAR T-cell manufacture for our wholly owned assets has started. Control of our own manufacturing process enables us
to improve and further develop our processes for manufacture of our lentiviral vector and SPEAR T-cells. Our goal is to
achieve a more consistent and efficient manufacturing process and ultimately to reduce the cost of supply.
We have made a number of changes to our current SPEAR T-cell manufacturing process. In particular, we are now
streamlining some of the manual steps in the process by simplifying the initial T-cell selection through increased use of the
antibody-bound magnetic Dynabeads® CD3/CD28. We have also introduced cryopreservation steps which make the
logistics of administering our SPEAR T-cells more flexible for patients and which also facilitate treatment of patients outside
the United States. Expansion and harvest of the SPEAR T-cells is now serum-free after initial culture preparation and is
being further optimized. Finally, we are also working towards automation of parts of the manufacturing process.
For the vector supply, we are developing and evaluating alternative approaches to increase volume and continuity of supply
while at the same time decreasing the cost of the vector supply. We are also collaborating with the Cell and Gene Therapy
Catapult for the provision of a module within its manufacturing facility at Stevenage, UK to enable our own manufacturing
of vector and further enhance our ability to optimize the vector manufacturing process.
COLLABORATIONS AND STRATEGIC ALLIANCES
We have entered into core alliance or collaboration agreements with GSK (collaboration and license agreement), MD
Anderson (collaboration designed to expedite the development of T-cell therapies for multiple types of cancer); Merck
(clinical trial collaboration agreement for the assessment of our NY-ESO SPEAR T-cell therapy in combination with
Merck’s PD-1 inhibitor, KEYTRUDA® (pembrolizumab), in patients with multiple myeloma); Universal Cells
(collaboration relating to gene editing and HLA-engineering technology); and Bellicum Pharmaceuticals Inc. (Co-
Development and Co-Commercialization Agreement).
GSK Collaboration and License Agreement
We entered into a strategic collaboration and license agreement with GSK in May 2014 (the “GSK Collaboration and
License Agreement”) regarding the development, manufacture and commercialization of TCR therapeutic candidates.
The collaboration is for up to five programs, the first being the NY-ESO SPEAR T-cell program and the second the
PRAME SPEAR T-cell program.
On 7 September 2017 we announced that GSK had exercised its exclusive option for the NY-ESO SPEAR T-cell
program. As part of the option exercise a transition plan was agreed between us and GSK for the transition of the NY-
ESO SPEAR T-cell clinical trials and program to GSK. Transition is expected to occur during 2018. Following transition
of the program to GSK, GSK will assume full responsibility for the NY-ESO SPEAR T-cell program including any
ongoing clinical trials. As a result of the option exercise, we will receive up to £48 million (~$61 million) from GSK
over the course of the transition period. This includes development milestones of up to £18 million (~$23 million) and
an option payment of £30 million (~$38 million), which also allows GSK to nominate two additional targets following
completion of the transition. Successful continuation of development and subsequent commercialization of NY-ESO
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18
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
would trigger additional payments for development milestones, tiered sales milestones, and mid-single to low double-
digit royalties on worldwide net sales.
In relation to the second target nominated, Adaptimmune will be responsible for taking the PRAME SPEAR T-cell
program through preclinical testing and up to Investigational New Drug (“IND”) application filing. GSK is responsible
for the IND filing itself. GSK has an exclusive option over the program. Under the terms of the GSK Collaboration and
License Agreement, the potential development milestones eligible related to the PRAME program could amount to
approximately $300 million, if GSK exercises its option and successfully develops this target in more than one indication
and more than one HLA type. Adaptimmune would also receive tiered sales milestones and mid-single to low double-
digit royalties on worldwide net sales.
Three other targets may be nominated by GSK at specified times under the GSK Collaboration and License Agreement,
excluding any research programs already in progress by Adaptimmune. Upon nomination by GSK of any of these three
additional targets, we will grant to GSK an exclusive option on each target, which can be exercised up to four months
after approval of an IND application in relation to a TCR therapeutic candidate directed against the nominated target.
Nomination also triggers the start of a collaboration program to develop the relevant TCR therapeutic candidate directed
to the nominated target peptide.
Following exercise of any option (including the options for the NY-ESO SPEAR T-cell and PRAME SPEAR T-cell
programs), we will grant to GSK an exclusive worldwide license under intellectual property rights specific to the SPEAR
T-cell developed under the relevant collaboration programs. GSK will, at its own expense, be fully responsible for all
further development and commercialization of the relevant T-cell candidates. The licenses do not include a right for GSK
to develop alternative affinity-enhanced TCRs using our intellectual property rights or to develop other TCR therapeutic
candidates directed to different target peptides. Under the agreement, we are also prohibited from independently
developing or commercializing T-cell therapeutics directed at the targets subject to outstanding options granted to GSK.
Under the GSK Collaboration and License Agreement, we received an upfront payment of $42.1 million in June 2014
and are entitled to various milestone payments based on the achievement of specified development and commercialization
milestones. As of 31 December 2017, we had achieved development milestones of $49.3 million.
In addition to the development milestones, we are entitled to royalties from GSK on all GSK sales of SPEAR T-cells
licensed under the agreement, varying between a mid-single-digit percentage and a low-double-digit percentage of net
sales, subject to certain agreed reductions, dependent on the cumulative annual net sales for each calendar year. Royalties
are payable while there is a jointly owned or solely owned valid patent claim covering the SPEAR T-cell in the country
in which the relevant SPEAR T-cell is being sold and, in each case, for a minimum of 10 years from first commercial
sale of the relevant TCR therapeutic. Sales milestones also apply once any TCR therapeutic covered by the GSK
Collaboration and License Agreement is on the market.
The GSK Collaboration and License Agreement is effective until all payment obligations expire, including any ongoing
royalty payments due in relation to GSK’s sale of any covered TCR therapeutic candidates. The GSK Collaboration and
License Agreement can also be terminated on a collaboration program-by-collaboration program basis by GSK for lack
of feasibility or inability to meet certain agreed requirements. Both parties have rights to terminate the agreement for
material breach upon 60 days’ written notice or immediately upon insolvency of the other party. GSK has additional
rights to terminate either the agreement or any specific license or collaboration program upon 60 days’ written notice to
us. Additional payments may be due to us as a result of such termination, and where we continue any development of
any TCR therapeutic candidate resulting from a terminated collaboration program, depending on the stage of
development, royalties may be payable to GSK at a mid-single-digit percentage rate of net sales. We also have rights to
terminate any license where GSK ceases development or withdraws any licensed SPEAR T-cells in specified
circumstances.
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19
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
BUSINESS STRATEGY
Our strategic objective is to be a world leader in discovering, developing and commercializing TCR-based T-cell therapies
that transform the clinical outcomes of patients with cancer. We have an ambition to be a fully integrated cell therapy
company and to have the first TCR T-cell approved for a solid tumour indication. In order to achieve our objectives, we are
focused on the following strategies:
Advance our clinical studies for our MAGE-A10, MAGE-A4 and AFP SPEAR T-cells. We have four SPEAR T-cells with
open INDs covering multiple indications, three of these being wholly owned. We plan to advance these wholly owned
SPEAR T-cells further during 2018 with the aim of providing initial tolerability and response data for at least one wholly
owned SPEAR T-cell during 2018. We are working with leading cancer centres including through our strategic alliance
agreement with MD Anderson to advance our SPEAR T-cells.
Continue to use our SPEAR T-cell platform to generate SPEAR T-cells for cancers where existing therapeutic
approaches are limited. We intend to continue to generate new SPEAR T-cells from our fully integrated technology
platform, which enables the systematic identification and validation of suitable target peptides, T-cell cloning, engineering
of TCRs and preclinical testing processes.
Continue to understand, further enhance and improve the effectiveness and persistence of our SPEAR T-cell therapies.
We continue to evaluate and work to understand the mechanism of action of our SPEAR T-cells, in particular the best
approaches for further enhancing the effectiveness and persistence of our SPEAR T-cells. We continue to further develop
our SPEAR T-cells by exploring the addition of other components in our lentiviral vector, which would be expressed in the
SPEAR T-cells alongside the engineered TCR. In addition, we are evaluating the combination of our NY-ESO SPEAR T-
cell with Merck’s KEYTRUDA® (pembrolizumab) in patients with multiple myeloma. This combination trial is anticipated
to transition to GSK during 2018.
Optimize and expand our process development and manufacturing capabilities to maintain our leadership position in the
TCR space. We have now opened our own SPEAR T-cell manufacturing facility at the Navy Yard in Philadelphia, U.S. and
have secured vector manufacturing capability within a manufacturing facility operated by the Cell and Gene Therapy
Catapult in the U.K. We will continue to expand our SPEAR T-cell and vector manufacturing capability during 2018. In
addition we continue to optimize the manufacture, supply, associated analytical expertise and quality systems for our SPEAR
T-cell therapies to ensure that our manufacturing capability is sufficient for later-stage clinical trials and, potentially, initial
commercial supply.
Expand our intellectual property portfolio. We intend to continue building on our technology platform, comprising
intellectual property, proprietary methods and know-how in the field of TCRs and T-cells. These assets form the foundation
for our ability not only to strengthen our product pipeline, but also to defend and expand our position as a leader in the field
of T-cell therapies.
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20
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
REVIEW OF THE BUSINESS
Overview
We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to patients, particularly in
solid tumours. Our comprehensive and proprietary SPEAR (Specific Peptide Enhanced Affinity Receptor) T-cell platform
enables us to identify cancer targets, find and genetically engineer T-cell receptors (“TCRs”), and produce therapeutic
candidates for administration to patients. Using our affinity engineered TCRs, we aim to become a fully integrated cell
therapy company and to be the first company to have a TCR T-cell approved for a solid tumour indication.
DEVELOPMENT AND PERFORMANCE DURING THE PERIOD
Revenue
Revenue increased by 166% to $37.8 million for the year ended 31 December 2017 from $14.2 million for the year ended 31
December 2016. On 7 September 2017, GSK exercised its option to the NY-ESO SPEAR T-cell program and further amended
the GSK Collaboration and License Agreement. Upon the exercise of the NY-ESO option, the estimate of the period over
which we will be delivering services to GSK in relation to the NY-ESO SPEAR T-cell development program has significantly
reduced, resulting in an increase in cumulative revenue amortization of $17.5 million in 2017. The increase in revenue in the
year ended 31 December 2017 compared to the year ended 31 December 2016 is primarily due to cumulative revenue
amortization recognized on exercise of the NY-ESO option and additional revenue amortization on milestone payments
achieved in the year.
Research and Development Expenses
Research and development expenses increased by 41% to $96.4 million for the year ended 31 December 2017 from $68.5
million for the year ended 31 December 2016.
The increase in our research and development expenses of $27.9 million for the year ended 31 December 2017 compared to
the year ended 31 December 2016 was primarily due to the following:
•
•
•
•
an increase of $6.7 million in salaries, materials, equipment, depreciation of property, plant and equipment and other
employee-related costs, primarily due to the increase in the average number of employees engaged in research and
development from 210 to 260;
an increase of $18.0 million in subcontracted expenditures, including clinical trial expenses, contract research
organization (CRO) costs and manufacturing expenses driven by increased recruitment in our clinical trials, initiation of
clinical trials for MAGE-A4, MAGE-A10 and AFP, and an increase in manufacturing process development activities;
operating expenditure of $2.8 million on developing our manufacturing capabilities in Philadelphia; and
an increase of $0.4 million in share-based compensation expense for employee and nonemployee share options;
Our subcontracted costs for the year ended 31 December 2017 were $41.5 million, compared to $23.6 million in the same
period of 2016, of which $13.4 million related to our NY-ESO SPEAR T-cells, $7.8 million related to process development
for our SPEAR T-cell platform and the remaining $20.3 million related to our wholly owned pipeline, including our MAGE-
A10, MAGE-A4 and AFP SPEAR T-cells.
Administrative Expenses
General and administrative expenses increased by 27% to $30.2 million for the year ended 31 December 2017 from $23.8
million in the same period in 2016.
The net increase of $6.4 million was primarily due to an increase in personnel costs and share-based compensation expense,
due to the addition of key management and other professionals to support our growth, an increase in costs associated with
supporting and maintaining our IT infrastructure and an increase in depreciation and amortisation.
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21
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
Other Income
Other income primarily relates to reimbursements of expenses, primarily through the U.K. Research and Development
Expenditure Credit. Other income decreased by 18% to $1.6 million for the year ended 31 December 2017 from $1.9 million
in the year ended 31 December 2016.
Finance Income
Finance income increased by $4.8 million to $7.3 million in the year ended 31 December 2017 from $2.4 million in the year
ended 31 December 2016. Finance income comprises interest received and unrealized foreign exchange gains/losses. The
increase in finance income is due to a significant increase in unrealized foreign exchange driven by an increase in the exposure
to foreign currency assets and liabilities and an increase in interest income due to cash generated from our two equity offerings
completed in March and April 2017, which has been invested in available-for-sale financial assets.
Taxation credit
The taxation credit primarily relates to tax credits received under the U.K. Research and Development Scheme for small and
medium sized entities offset by income taxes arising in the U.S. tax jurisdiction. Taxation credit increased by $4.2 million to
$9.1 million for the year ended 31 December 2016 from $5.0 million for the year ended 31 December 2016 due to an increase
in expenses eligible for the tax credit.
POSITION OF GROUP AT YEAR END
Liquidity and Capital Resources
Since our inception, we have incurred significant net losses and negative cash flows from operations. We financed our
operations primarily through sales of equity securities, cash receipts under our GSK Collaboration and License Agreement,
government grants and research and development tax and expenditure credits. From inception through to 31 December 2017,
we have raised:
•
•
•
•
$410.8 million, net of issue costs, through the issuance of shares, including $176.0 million raised through
our initial public offering in May 2015, $61.4 million raised through a follow-on public offering in March
2017 and $41.8 million raised through a registered direct offering in April 2017;
$118.1 million upfront fees, milestones and exercise fees under our GSK Collaboration and License
Agreement;
$2.8 million of income in the form of government grants; and
$13.7 million in the form of U.K. research and development tax credits and receipts from the U.K. RDEC
Scheme.
We use a non-GAAP measure, Total Liquidity, which is defined as the total of cash and cash equivalents, short-term deposits
and marketable securities, to evaluate the funds available to us in the near-term. A description of Total Liquidity and
reconciliation to cash and cash equivalents, the most directly comparable IFRS measure, are provided below under “Non-
GAAP measures”.
As of 31 December 2017, we had cash and cash equivalents of $84.0 million and Total Liquidity of $208.3 million. We believe
that our Total Liquidity and income from GSK upon transition of the NY-ESO program will be sufficient to fund our
operations, based upon our currently anticipated research and development activities and planned capital spending, through
to early 2020.
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22
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
SUMMARY OF CASH FLOWS
Operating Activities
Net cash used in operating activities increased by $8.2 million to $53.4 million for the year ended 31 December 2017 from
$45.2 million for the year ended 31 December 2016. Net cash used in operating activities is significantly impacted by the
timing of milestone payments received from GSK under the GSK Collaboration and License Agreement. In the year ended
31 December 2017, we received $38.2 million of milestone payments from GSK compared to $19.8 million in the year ended
31 December 2016. After taking into account the GSK milestone payments, the increase in cash used in operations was
primarily the result of a full year of operating activity and an increase in research and development costs due to the ongoing
advancement of our preclinical programmes and clinical trials and an increase in general and administrative expenses.
Net cash used in operating activities of $53.4 million for the year ended 31 December 2017 comprised a loss before tax of
$80.5 million offset by noncash items of $9.2 million, a net cash inflow of $11.2 million from changes in operating assets and
liabilities, net taxes received of $4.9 million and bank interest received of $1.8 million. The noncash items consisted primarily
depreciation expense on plant and equipment of $5.0 million and equity-settled share-based compensation expense of
$9.4 million, partially offset by unrealized foreign exchange gains of $5.0 million and bank interest income of $1.0 million.
Investing Activities
Net cash used in investing activities was $127.0 million for the year ended 31 December 2017 and net cash generated by in
investing activities was $14.8 million for the year ended 31 December 2016. These amounts included purchases of property
and equipment of $24.6 million and $11.5 million for the years ended 31 December 2017 and 2016, respectively, acquisition
of intangibles of $1.3 million and $4.3 million for the years ended 31 December 2017 and 2016, respectively. The purchases
of property, plant and equipment for the years ended 31 December 2017 and 2016 related predominantly to the expansion of
our laboratory facilities in the United Kingdom and the United States. Net cash used in investing activities in the years ended
31 December 2017 and 2016 also included the investment in short-term cash deposits with maturities greater than three months
but less than 12 months of $18.0 million and $42.8 million, offset by cash inflows from maturity of short-term deposits of
$40.6 million and $73.4 million in the years ended 31 December 2017 and 2016, respectively and cash outflows from
investment in available-for-sale financial assets of 153.3 million, offset by cash inflows from maturity or redemption of
available-for-sale financial assets on $29.0 million in the year ended 31 December 2017.
Financing Activities
Net cash from financing activities was $104.4 million and $17,000 for year ended 31 December 2017 and 2016, respectively.
Net cash provided by financing activities for the year ended 31 December 2017 consisted of $61.4 million net of issuance
costs of $4.5 million raised through a follow-on public offering in March 2017, $41.8 million net of issuance costs of $0.2
million raised through a registered direct offering in April 2017 and proceeds from exercise of share options of $401,000.
KEY PERFORMANCE INDICATORS
Total Liquidity (a non-GAAP financial measure) is the total of cash and cash equivalents, short-term deposits and marketable
securities. Each of these components appears in the consolidated balance sheet. The IFRS financial measure most directly
comparable to Total Liquidity is cash and cash equivalents as reported in the consolidated financial statements, which
reconciles to Total Liquidity as follows (in thousands):
We believe that the presentation of Total Liquidity provides useful information to investors because management reviews
Total Liquidity as part of its management of overall liquidity, financial flexibility, capital structure and leverage. During the
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23
December 31, 2017December 31, 2016Cash and cash equivalents$ 84,043 $ 158,779 Short-term deposits - 22,694 Marketable securities 124,218 - Total Liquidity$ 208,261 $ 181,473
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
year ended 31 December 2017, we began investing in marketable securities. The definition of Total Liquidity has been
amended to include marketable securities, which are highly-liquid and available to use in our current operations.
PRINCIPAL RISKS AND UNCERTAINTIES
Financial
We are a clinical-stage biopharmaceutical company with no products approved for commercial sale. We have not generated
any revenue from any product sales or royalties. We have a history of losses and anticipate that we will incur continued losses
for at least the next few years. We cannot be certain that we will achieve or sustain profitability and it is very difficult to
predict any future financial performance. Our resources will continue to be devoted substantially to research and development
for the foreseeable future and our ability to generate any revenue from any of our current therapeutic candidates cannot be
guaranteed. We cannot be certain that additional funding will be available on acceptable terms, or at all.There is a risk that
should we fail to obtain additional funding on the terms or timescales we require, we will be unable to complete the further
development of our therapeutic candidates necessary to take those candidates to market.
Our current cash projections include reliance on our ability to obtain certain tax credits and our ability to obtain or continue
to obtain such tax credits cannot be guaranteed.
Dependence on Clinical Candidates
Our business is dependent on a small number of clinical candidates. There is no certainty that the results obtained in clinical
trials of our existing clinical candidates will be sufficient to enable progression of those candidates through our clinical
programmes or the obtaining of regulatory approval or marketing authorisation. There can also be no guarantee that clinical
candidates will progress through clinical programmes within anticipated timescales or that we will be able to recruit sufficient
clinical trial subjects at all or within anticipated timescales. There is significant competition from third party trials in relation
to the recruitment of patients. The outcome of clinical trials is inherently uncertain. Negative results seen in clinical
programmes with one clinical candidate may impact on our other clinical programmes or prevent other clinical programmes
from starting. T-cell therapy is a novel approach for cancer treatment which is not completely understood and the impact of
such therapy cannot be predicted. Our clinical candidates may cause adverse events or fatalities which result in the suspension
or halting of clinical programmes.
Research Programmes
We have a number of pre-clinical and other candidates under development. Development of further candidates and pre-clinical
assessment of those candidates takes a substantial amount of time, effort and money and we may encounter significant delays
in taking further candidates into clinical programmes or in finding suitable further candidates to further develop.
Manufacturing
Manufacturing and administration of our SPEAR T-cells is complex and highly regulated. As a result we may encounter
difficulties or delays in manufacture of SPEAR T-cells, scaling up or further development of any part of our manufacturing
process or any associated development activities. Given the complexity of the manufacturing processes, there is a risk that we
will not be able to manufacture our SPEAR T-cells reliably or at acceptable costs or on required timescales. Any delays in our
manufacture of SPEAR T-cells (whether at our own manufacturing facility or at our third party contract manufacturer’s
facility) can adversely affect a patient’s outcomes and result in delays to our clinical trials. Delays or failures in our
manufacturing process can result for a number of different reasons including failure in the process itself, lack of reliability in
the process, product loss caused by logistical issues, inability to obtain manufacturing slots from our third party contract
manufacturers, inability to procure starting materials, close-down of manufacturing facility (whether our own or a third party
facility), contamination of starting materials, a requirement to modify or further develop the manufacturing process and supply
chain failures or delays. There are additional risks associated with developing a commercially viable process including scaling
of our manufacturing process to the levels required and sourcing of materials. Any delay or failure to develop a commercially
viable process may delay the progression of our SPEAR T-cells into pivotal trials and our ability to commercialise those
SPEAR T-cells.
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24
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
The manufacture of our existing SPEAR T-cells is heavily reliant on third parties who are outside of our control. A delay or
problem with any of our third party contract manufacturers or third party suppliers can result in delays to the overall
manufacturing process, an inability to supply our therapeutics to clinical trial sites when required, and increased cost being
incurred in the manufacture and supply of our SPEAR T-cells.
Our manufacturing process needs to comply with regulatory requirements in the United States, Canada and certain countries
in the European Union. Any failure to comply with the relevant regulatory requirements could result in delays in or termination
of our clinical programmes or suspension or withdrawal of regulatory approvals for our SPEAR T-cells or manufacturing
process (whether at our own facility or at the facility of any of our third party contract manufacturers).
Commercialisation
Our ability to commercialise any SPEAR T-cell is dependent on the progression of clinical candidates through regulatory
approval processes and on the results seen in clinical trials. Clinical trials are expensive, time-consuming and difficult to
implement and there is no guarantee that the results seen in any clinical trials will be sufficient to progress to the next stage
of any clinical approval or ultimately to the obtaining of a marketing approval for any of our SPEAR T-cells.
The market opportunities for our SPEAR T-cells may be limited in terms of geographic scope or type of patients which can
be treated. Our estimates of the potential patient population which can be treated may be inaccurate affecting the amount of
revenue obtainable for any product. Likewise the amount of revenue that can be obtained in relation to any SPEAR T-cell
may be impacted by the nature of pricing reimbursement coverage or schemes available or in place in any specific country
and the continuation of such coverage and schemes. We currently have no marketing or sales force and we will have to
establish a marketing capability prior to bringing any SPEAR T-cell to market. Even if we are successful in obtaining
regulatory approval, our candidates may not gain market acceptance or utility.
In addition, we will face increasing competition from third parties as we proceed through clinical programmes, and such third
parties may have more funding and resources than us, impacting on our end ability to bring our therapeutic candidates to
market.
Regulation
Our clinical candidates are highly regulated and the regulatory process is lengthy and time-consuming. We may experience
significant delays in obtaining regulatory approval or be required to make changes to our clinical programmes or therapeutic
candidates by regulatory authorities. Our ability to obtain or maintain accelerated approval or orphan drug designation for any
clinical candidate is difficult to predict and may require the development of additional processes or assays. Even if we are
successful in obtaining regulatory approvals in one country, this does not mean that we will be successful in other countries
and further clinical programmes may be required to obtain required regulatory approvals in such other countries. Should we
obtain regulatory approval for any of our SPEAR T-cells we will be subject to ongoing regulatory obligations and
requirements which may result in significant additional expense or delays to commercialisation of our products. Any failure
to comply with regulatory requirements at any stage in the development of our SPEAR T-cells may harm our reputation and
significantly affect our operating results.
We are also subject to regulation as a company both in the United Kingdom and the United States including in relation to
financial controls, anti-bribery and other internal policies and controls. If we fail to establish and maintain proper internal
controls our ability to comply with applicable regulations could be impaired.
Litigation
We face an inherent risk of product liability given the nature of our business and will face an even greater risk upon
commercialisation of any candidates. We cannot guarantee that any insurance coverage we obtain will be sufficient to cover
any product liability that arises. We may also face claims brought by third parties in relation to the way in which we run or
manage our business, report the results of our business, or the impact our operations have on such third parties.
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25
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
Third Parties
Commercialization of the NY-ESO SPEAR T-cell therapy and our own ability to commercialize other SPEAR T-cells
depends heavily on the ongoing collaboration with GSK and payments made by GSK to us upon achievement of specified
milestones. GSK has the right to nominate three further target programs in addition to the NY-ESO SPEAR T-cell and
PRAME SPEAR T-cell programs under the collaboration arrangements. We have no control over whether GSK will elect
to progress additional targets under the collaboration arrangements and therefore trigger additional investment from GSK in
our SPEAR T-cells.
GSK has exercised its option under the GSK Collaboration and License Agreement signed in 2014 to exclusively license the
right to research, develop, and commercialize our NY-ESO SPEAR T-cell program. As a result of the option exercise the
NY-ESO SPEAR T-cell program is now being transitioned to GSK. The amount of time and level of resources required to
fully transition the program to GSK may impact on our ability to progress other wholly owned programs and divert resources
required to further develop our SPEAR T-cells or the manufacturing process for our SPEAR T-cells. The timescales for
transition of the NY-ESO SPEAR T-cell program to GSK rely heavily on GSK’s ability to put in place the required resources
and third party agreements to take over responsibility of the NY-ESO SPEAR T-cell program.
We also rely heavily on and are dependent on ThermoFisher Scientific Inc. (“ThermoFisher”) and the technology we obtain
from them for the activation and expansion of T-cells. Inability to obtain the relevant technology from ThermoFisher would
cause delays to our clinical programmes and our ability to manufacture, supply and administer our TCR therapeutic candidates.
We also rely heavily on third parties to conduct our clinical trials including universities, medical institutions, Contract
Research Organisations (“CROs”) and other clinical supply organisations.
Intellectual Property
We may be forced to litigate to enforce or defend our intellectual property rights and to protect our trade secrets. We may also
not be able to obtain suitable protection for our technology or products, or the cost of doing so may be prohibitive or excessive.
We cannot provide any assurance that the intellectual property rights that we own or license provide protection from
competitive threats or that we would prevail in any challenge mounted to our intellectual property rights. Third parties may
claim that our activities or products infringe upon their intellectual property which will adversely affect our operations and
prove costly and time-consuming to defend against. We have licensed, and expect to continue to license, certain intellectual
property rights from third parties. We cannot provide any assurances that we will be successful in obtaining and retaining
licences or proprietary or patented technologies in the future. Further, our products may infringe the intellectual property
rights of others and we may be unable to secure necessary licences to enable us to continue to manufacture or sell our products.
Suppliers
We depend upon a limited number of suppliers, and certain components or raw materials for our SPEAR T-cells may only
be available from a sole source or limited number of suppliers. Even if the key components that we source are available from
other parties, the time and effort involved in obtaining any necessary regulatory approvals for substitutes could impede our
ability to replace such components timely or at all. The loss of a sole or key supplier would impair our ability to deliver
products to our customers or clinical sites in a timely manner, adversely affect our sales and operating results and negatively
impact our reputation.
Employees
We rely on the ongoing involvement of certain key employees. Our ability to further progress our clinical candidates and
develop further clinical candidates is dependent on our ability to grow the size and capabilities of our organisation and we
may experience difficulties in managing this growth or achieving this growth within anticipated timescales.
Facilities
If any of our existing facilities or any future facilities, infrastructure or our equipment, including our information technology
systems, were damaged or destroyed, or if we experience a significant disruption in our operations for any reason, our ability
to continue to operate our business could be materially harmed. For example, if our US facility or infrastructure was damaged
or destroyed we may be unable to make certain SPEAR T-cells until an alternative manufacturer has been found. We
_____________________________________________________________________________________________________
26
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
maintain insurance coverage against damage to our property and equipment and business interruption and research and
development.
FINANCIAL RISK MANAGEMENT
The Group is exposed to market risks in the ordinary course of our business, which are principally limited to interest rate
fluctuations, foreign currency exchange rate fluctuations, particularly between pound sterling and U.S. dollar, and credit
risk. These risks are managed by maintaining an appropriate mix of cash deposits and securities in various currencies,
placed with a variety of financial institutions for varying periods according to expected liquidity requirements.
As of 31 December 2017, we held $124.2 million in marketable securities, with the aim of diversifying our investments
and reducing credit risks. We have not entered into investments for trading or speculative purposes.
Interest Rate Risk
The Group’s surplus cash and cash equivalents are invested in interest-bearing savings, money market funds, corporate
debt securities and commercial paper from time to time. The Group’s investments in corporate debt securities are subject
to fixed interest rates. The Group’s exposure to interest rate sensitivity is impacted by changes in the underlying U.K. and
U.S. bank interest rates and the fair market value of our corporate debt securities will fall in value if market interest rates
increase. Management does not believe an immediate one percentage point change in interest rates would have a material
effect on the fair market value of our portfolio, and therefore does not expect the operating results or cash flows to be
significantly affected by changes in market interest rates.
Currency Risk
The Group is exposed to foreign exchange rate risk because we currently operate in the United Kingdom and the United
States. The Group’s revenue from the GSK Collaboration and License Agreement is denominated in pounds sterling and
is generated by the U.K.-based subsidiary, which has a pounds sterling functional currency. As a result, these sales are
subject to translation into U.S. Dollars when the Group consolidates its financial statements. The Group’s expenses are
generally denominated in the currency in which the operations are located, which are the United Kingdom and the United
States. However, the U.K.-based subsidiary incurs significant research and development costs in U.S. dollars and, to a
lesser extent, Euros.
The results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates,
which could harm our business in the future. The Group seeks to minimize this exposure by maintaining currency cash
balances at levels appropriate to meet foreseeable expenses in U.S. dollars and pounds sterling. To date, the Group has not
used forward exchange contracts or other currency hedging products to manage exchange rate exposure, although it may
do so in the future. The exchange rate as of 31 December 2017, the last business day of the reporting period, was £1.00 to
$1.35.
Credit Risk
The Group’s cash and cash equivalents are held with multiple banks and the Group monitors the credit rating of those
banks. The investments in corporate debt securities and commercial paper are subject to credit risk. The Group’s
investment policy limits investments to certain types of instruments, such as money market instruments, corporate debt
securities and commercial paper, places restrictions on maturities and concentration by type and issuer and specifies the
minimum credit ratings for all investments and the average credit quality of the portfolio.
Trade receivables were $0.2 million and $1.5 million as of 31 December 2017 and 2016, respectively. Trade receivables
arise in relation to the GSK Collaboration and License Agreement. The Group has been transacting with GSK since 2014,
during which time no impairment losses have been recognized. There are no amounts which are past due as of 31
December 2017.
Going Concern
The Group’s financial position, including its cash flows and liquidity position, are fully described in the consolidated
financial statements. Having reviewed cash flow forecasts for the 12 month period following the date of signing the financial
_____________________________________________________________________________________________________
27
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
statements, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing these financial
statements despite the current uncertain economic climate.
ENVIRONMENTAL MATTERS
Our operations require the use of hazardous materials, which, among other matters, subjects us to a variety of federal, state,
local and foreign environmental, health and safety laws, regulations and permitting requirements, including those relating to
the handling, storage, transportation and disposal of biological and hazardous materials and wastes. The primary hazardous
materials we handle or use include human blood samples and solvents. Some of the regulations under the current regulatory
structure provide for strict liability, holding a party liable for contamination at currently and formerly owned, leased and
operated sites and at third-party sites without regard to fault or negligence. We could be held liable for damages and fines as
a result of our, or others’, operations or activities should contamination of the environment or individual exposure to hazardous
substances occur. We could also be subject to significant fines for failure to comply with applicable environmental, health
and safety requirements. We cannot predict how changes in laws or development of new regulations will affect our business
operations or the cost of compliance.
GREENHOUSE GAS REPORT
Our greenhouse gas emissions estimates for 2017 and 2016 have been prepared in accordance with the U.K. Government’s
Department for Environment, Food and Rural Affairs (Defra) guidance document “Environmental Reporting Guidelines:
Including Mandatory GHG emissions reporting guidance, from June 2013”.
Greenhouse Gas Emissions for the Group
Period
Source
Estimated greenhouse gas emissions from our own activities, including the
combustion of fuel and the operation of our facilities
Estimated greenhouse gas emissions from purchased electricity, heat, steam
or cooling for own use
Total estimated greenhouse gas emissions
Intensity ratio: Total greenhouse gas emissions per employee on the basis
of the average number of 330 full-time equivalent employees during the year
ended 31 December 2017 (2016: 266).
Year ended
31 December 2017
Year ended
31 December 2016
Tonnes carbon
dioxide equivalent
(tCO2-e)
Tonnes carbon
dioxide equivalent
(tCO2-e)
0.00
916.26
916.26
2.777
0.00
565.77
565.77
2.127
We have used the most recent evidence or estimates provided by our energy supply partners to generate our disclosure of
emissions for the period. These include the purchase of electricity, heat, steam or cooling. Standard emissions factors from
Defra’s GHG Conversion Factor Repository were applied to estimate emissions. The Group considers that the intensity ratio
of tonnes of carbon dioxide per full-time equivalent employee is a suitable metric for its operations.
Electricity usage at our leased facilities in the United States and the United Kingdom drive the majority of our greenhouse gas
emissions. Our estimates reflect the use of coolant gasses for refrigeration purposes at our laboratories in Oxfordshire.
Some activity data relating to emissions from our reportable activities were unavailable for the year ended 31 December 2016.
This includes electricity usage at our previous U.S. office facility where it was impractical for us to obtain these data.
Therefore, we estimated this amount at 8% of the above total estimated greenhouse gas emissions for the Group, based on
applying the greenhouse gas emissions for our U.K. operations to our U.S. office facility.
The Group actively looks to minimise indirect areas of emissions by promoting online conferencing facilities to reduce
business travel.
_____________________________________________________________________________________________________
28
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2017
EMPLOYEES
As at 31 December 2017, we had 371 full-time equivalent employees, compared to 298 as at 31 December 2016. Of these
employees, 288 were in R&D (including in manufacturing and operations, and quality control and quality assurance) and 83
were in management and administrative functions (including business development, finance, intellectual property, and
information technology and general administration). The average number of full-time equivalent employees during the year
ended 31 December 2017 was 330 (year ended 31 December 2016: 266).
We have never had a work stoppage and none of our employees are covered by collective bargaining agreements or
represented by a labour union. We believe our employee relations are good.
Diversity
Appointments within the Group are made on merit according to the balance of skills and experience offered by prospective
candidates. Whilst acknowledging the benefits of diversity, individual appointments are made irrespective of personal
characteristics such as race, disability, gender, sexual orientation, religion or age.
A breakdown of the employment statistics on the basis of full-time equivalent employees as at 31 December 2017 is as follows:
Position
Company Director (1)
Senior Manager
Other Employees
Total Employees (2)
(1) Includes our Chief Executive Officer
(2) Excludes our Chief Executive Officer
Male
Female
Total
8 1 9
3 2 5
156 209 365
159 211 370
EMPLOYEE CONSULTATION AND HUMAN RIGHTS
The Group places considerable value on the involvement of its employees. Meetings are held with employees to discuss the
operations and progress of the business and employees are encouraged to become involved in the success of the Group through
share option schemes (see note 23 to the financial statements).
The Group endeavours to impact positively on the communities in which it operates. The Group does not, at present, have a
specific policy on human rights. However, we have several policies that promote the principles of human rights. We will
respect the human rights of all our employees, including: provision of a safe, clean working environment; ensuring employees
are free from discrimination and coercion; not using child or forced labour and respecting the rights of privacy and protecting
access and use of employee personal information. We also have an equal opportunities policy which promotes the right of
every employee to be treated with dignity and respect and not to be harassed or bullied on any grounds.
The Strategic Report was approved by the Board on 14 March 2018.
On behalf of the Board
James J Noble
Director
14 March 2018
_____________________________________________________________________________________________________
29
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2017
Remuneration Committee Chairman’s Statement
On behalf of the Board of Directors of Adaptimmune Therapeutics plc, I am pleased to present the Directors’ Remuneration
Report for the year ended 31 December 2017. Shareholders will be invited to approve the Report on Remuneration (which
will be a non-binding advisory vote) and the Remuneration Policy (which will be a binding vote) at the Annual General
Meeting of shareholders to be held on 20 June 2018. Together, these items comprise the Directors’ Remuneration Report.
Period Covered by the Directors’ Remuneration Report
The Directors’ Remuneration Report that follows is for the full year period from 1 January 2017 to 31 December 2017 except
where otherwise stated.
The Remuneration Committee
The Committee is responsible for reviewing and establishing our executive remuneration policy and philosophy, including
making recommendations regarding the remuneration of our Chief Executive Officer (“CEO”) to the Board for its approval,
and determining and approving the remuneration of other senior executive officers. While the Board sets the remuneration of
our CEO, who is our sole Executive Director, the Committee makes recommendations on such matters to the Board.
Philosophy
We seek to attract and retain outstanding employees who have the potential to support the growth of the Group and to attract
and retain Non-Executive Directors who can substantially contribute to our success as an innovative, clinical-stage
biopharmaceutical company. As the Group has operations in the United Kingdom and the United States, our senior executives
and our Non-Executive Directors live and work in the U.K. and the U.S., and we are listed on a U.S. stock exchange, we
assess the competitiveness of our policies against both U.K. and U.S. benchmarks and practices, with an increasing focus on
U.S. benchmarks and practices.
Business Strategy during 2017
Our primary goal in 2017 was to progress the development of the Group including:
continuing to advance our clinical trials for our AFP, MAGE-A10 and MAGE-A4 SPEAR T-cells, as well as of our
clinical studies with our NY-ESO SPEAR T-cell beyond the setting of synovial sarcoma where preliminary evidence
of efficacy and safety is established;
continuing to use our SPEAR T-cell platform to generate SPEAR T-cells for cancers where existing therapeutic
approaches are limited;
continuing to understand, further enhance and improve the effectiveness and persistence of our SPEAR T-cell
therapies; and
the continued optimisation and expansion of our process development and manufacturing capabilities to maintain our
leadership position in the TCR space and the continued expansion of our intellectual property portfolio.
Activities and major decisions
The Committee’s activities during the year included a benchmarking review of executive compensation, which was
undertaken to ensure that remuneration for the senior executive team remains competitive for the purposes of retention and
engagement. The Committee engaged Willis Towers Watson as independent advisors to benchmark executive compensation
against a selected peer group consisting largely of comparable U.S.-listed biopharmaceutical companies, with some U.K.-
listed biopharmaceutical companies, and to provide recommendations for base salaries, equity based awards and the structure
of bonus incentive awards for 2018.
As a result of this benchmarking exercise, our CEO and senior executive officers received increased base salaries at levels
that remain compliant with the last approved Directors’ Remuneration Policy and are aligned with the 50th percentile of peer
group comparator data. For our CEO, this resulted in a base salary of £420,065 effective from 1 January 2018.
_____________________________________________________________________________________________________
30
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2017
In December 2017 the Committee also considered the extent of achievement of 2017 calendar year objectives by the executive
team and determined the level of bonus incentive awards payable in respect of the 2017 calendar year. The awards made to
our CEO and senior executive officers recognised that most of our corporate objectives for 2017 were achieved, with our CEO
receiving a bonus award at 90% of the target amount.
At the same time, the Committee approved the objectives to be achieved by the executive team during 2018. These are
considered to be commercially sensitive and will not be disclosed in detail, but are designed to support achievement of our
strategic objective to be a world leader in discovering, developing and commercializing TCR-based T-cell therapies that
transform the clinical outcomes of patients with cancer and our ambition to be a fully integrated cell therapy company and
to have the first TCR T-cell approved for a solid tumour indication.
The 2018 objectives are linked to our business goals, which include the continuation of some 2017 goals, with the addition
of a key objective for 2018:
the advancement of our clinical trials for our MAGE-A10, MAGE-A4 and AFP SPEAR T-cells. A key objective is
to advance these wholly owned SPEAR T-cells further during 2018 with the aim of providing initial tolerability
and response data for at least one wholly owned SPEAR T-cell during 2018;
continuing to use our SPEAR T-cell platform to generate SPEAR T-cells for cancers where existing therapeutic
approaches are limited;
continuing to understand, further enhance and improve the effectiveness and persistence of our SPEAR T-cell
therapies;
the optimisation and expansion of our process development and manufacturing capabilities to maintain our
leadership position in the TCR space; and
the continued expansion of our intellectual property portfolio.
Generally, the remuneration arrangements adopted in 2018 recognise the greater demands placed on our CEO and senior
executive team to deliver on our strategy and create value for our shareholders.
Finally, under the last approved Directors’ Remuneration Policy, the Board has discretion to pay Non-Executive Directors
in the form of a mixture of cash and equity. The remuneration arrangements for Non-Executive Directors during 2017
comprised an award of a fixed number of share options, plus an additional number of share options or cash payment at the
Director’s election. The option awards and cash payments were made at competitive levels aligned with the 50th percentile
of peer group data from comparable companies provided in a benchmarking survey undertaken by Radford consultants in
2016.
Directors’ Remuneration Policy
The current Directors’ Remuneration Policy was approved by shareholders at the 2015 Annual General Meeting. The new
Directors’ Remuneration Policy, in Part II of the Directors’ Remuneration Report, will (subject to shareholder approval) be
adopted from the date of the 2018 Annual General Meeting.
David M Mott
Director and Chairman of the Remuneration Committee
14 March 2018
_____________________________________________________________________________________________________
31
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
PART I - REPORT ON REMUNERATION
The information provided in this part of the Directors’ Remuneration Report is subject to audit.
The Remuneration Committee presents the Report on Remuneration for the year ended 31 December 2017, which will be
put to shareholders for a non-binding vote at the Annual General Meeting to be held on 20 June 2018.
Single Total Figure of Remuneration for each Director
The following table shows the remuneration received by the Directors for the year ended 31 December 2017. For reference
only, the table also shows the remuneration received by the Directors for the year ended 31 December 2016, which
information was included in the Company’s annual report and financial statements for the year ended 31 December 2016
and approved by shareholders at the Annual General Meeting held on 21 June 2017.
In respect of Dr Jonathan Knowles and Mr Ian Laing, the table shows the remuneration received for the year ended 31
December 2016 only, as Dr Knowles and Mr Laing retired from the Board on 31 December 2016.
For the year ended 31 December 2017:
For the year ended 31 December 2016:
Fixed Pay (1)
Variable Pay (1)
Fixed Pay (1)
Variable Pay (1)
Salary
and fees
£
Taxable
benefits
£
Annual
bonus
£
Pension
allowance
£
Equity-
Based
Awards
(6) £
£
Salary
and fees
£
Taxable
benefits
£
Annual
bonus
£
Total
£
Pension
allowance
£
Equity-
Based
Awards
(6) £
Total
£
407,830(2)
844(3) 183,524(4)
20,392(5)
-
612,590 315,000(2)
848(3) 78,750(4)
15,750(5)
- 410,348
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,648
5,812
-
-
-
-
-
13,957
-
-
33,493
4,231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,812
-
- 13,957
-
-
-
-
-
4,231
Notes to table of Single Total Figure of Remuneration for each Director
(1) The majority of the remuneration was set and paid in pounds sterling (£). For the purpose of this table, the fees paid in U.S. dollars
to Dr Tal Zaks for the year ended 31 December 2017 have been translated into pounds sterling based on the U.S. dollar/pound sterling
exchange rate at 31 December 2017 ($1.35005 to £1). For the year ended 31 December 2016, the fees have been translated into
pounds sterling based on the U.S. dollar/pound sterling exchange rate at 31 December 2016 ($1.233 to £1).
(2) The base salary levels of our CEO and all other employees of the Group are reviewed and, to the extent deemed necessary, adjusted to
be effective from 1 January in each year.
(3) Taxable benefits comprise medical and life insurance. Generally, Mr Noble participates in the same benefits as we offer to all our
employees in the United Kingdom where Mr Noble resides.
(4) The annual bonus amount for each of the year ended 31 December 2017 and the year ended 31 December 2016 represents the total
bonus payment that related to performance in each of 2017 and 2016.
(5) The pension allowance for each of the year ended 31 December 2017 and the year ended 31 December 2016 represents an amount
equating to 5% of the base salary for each of 2017 and 2016.
_____________________________________________________________________________________________________
32
Name of Director
Executive
James Noble
(CEO)
Non-executives
David Mott
(Chairman)
Lawrence Alleva
Ali Behbahani
Barbara Duncan
-
-
-
-
Giles Kerr
37,648
Jonathan Knowles
Ian Laing
Elliott Sigal
Peter Thompson
-
-
-
-
Tal Zaks
33,493
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
(6) There were no performance obligations linked to the equity-based awards. In each of the year ended 31 December 2017 and the year
ended 31 December 2016, the value of equity-based awards included in the table is based on the market value of underlying shares at
the date of grant, less the applicable exercise price, which is nil because the exercise price was based on the market value of the
underlying shares at the date of grant.
Annual Bonus
The annual bonus for the year ended 31 December 2017 shown in the table above for Mr Noble, our CEO, was based on the
achievement of objectives primarily linked to our business strategies and which included: the continued advancement of our
clinical trials for our AFP, MAGE-A10 and MAGE-A4 SPEAR T-cells, and as well as of our clinical studies with our NY-
ESO SPEAR T-cell beyond the setting of synovial sarcoma where preliminary evidence of efficacy and safety is established;
continuing to use our SPEAR T-cell platform to generate SPEAR T-cells for cancers where existing therapeutic approaches
are limited; continuing to understand, further enhance and improve the effectiveness and persistence of our SPEAR T-cell
therapies; and the continued optimization and expansion of our process development and manufacturing capabilities to
maintain our leadership position in the TCR space and the continued expansion of our intellectual property portfolio.
The Board has considered whether it would be in the best interests of the Company and its shareholders to disclose the
precise targets agreed for the performance measures in 2017. An additional consideration is that most of our competitors are
based in the U.S. where market practice is not to disclose precise annual bonus targets for biotechnology companies at the
pre-commercialization stage. As the specific objectives for a single year are based on the Group’s long-term strategies, the
Board has concluded that disclosing such targets would necessarily involve divulging competitively sensitive information
that we believe would be detrimental to our commercial performance going forward and, therefore, we are providing the
categories of objectives, rather than the precise targets.
Statement of Directors’ Shareholdings and Share Interests
The table below shows, for each Director, the total number of shares owned, the total number of share options held and the
number of share options vested as at 31 December 2017. No Director exercised any share options during the year ended 31
December 2017. The table only reflects shares held individually by each Director, or a family investment vehicle, and does
not include shares held by any investment fund with which the Director is affiliated.
Name of Director
Shares owned
Total share
options
Vested share
options (1)
Options exercised during year
ended 31 December 2017
Executive Director
James Noble (CEO)
Non-Executive Directors
David Mott (Chairman)
Lawrence Alleva
Ali Behbahani
Barbara Duncan
Giles Kerr
Elliott Sigal
Peter Thompson
Tal Zaks
11,172,600 (2)
9,314,092
5,091,104
-
70,584 (3)
-
-
-
367,038 (4)
-
-
657,200
990,628
561,032
561,541
432,000
949,427
565,603
432,000
354,639
584,555
340,244
145,588
81,000
566,290
341,824
81,000
-
-
-
-
-
-
-
-
-
(1) All share options that were outstanding as at 31 December 2017 use time-based vesting and are not subject to performance targets
other than continued service until the date of vesting.
(2) Includes 1,200,000 Ordinary shares represented by 200,000 ADSs that Mr Noble purchased in October 2015.
(3) Consists of 70,584 Ordinary shares represented by 11,764 ADSs that Mr Alleva purchased during the IPO.
(4) Includes 254,100 Ordinary shares held by Sigal Family Investments LLC, as well as 52,938 Ordinary shares represented by 8,823
ADSs that Dr Sigal purchased during the IPO and 60,000 Ordinary shares represented by 10,000 ADSs purchased by Sigal Family
Investments LLC in May 2016.
Policy on Shareholding Requirements
We do not currently have a policy requiring our Directors to hold a certain number or value of our shares. However, we
encourage our Executive Director and senior executive officers to have a shareholding in the Company.
_____________________________________________________________________________________________________
33
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Directors’ Equity-based Awards Held at 31 December 2017
The table below presents the interests of the Directors in options to acquire our Ordinary shares with a nominal value of
£0.001 per share as at 31 December 2017. 3,801,381 options were granted to Directors during the year ended 31 December
2017. None of our Directors exercised any options during the year ended 31 December 2017.
Name of Director
Executive Director
James Noble (CEO) (2)
Total
Non-Executive Directors
David Mott (Chairman)
Total
Lawrence Alleva (3)
Total
Ali Behbahani
Total
Barbara Duncan (4)
Total
Giles Kerr (4)
Total
Elliott Sigal (3)
Total
Peter Thompson
Total
Tal Zaks (4)
Total
Options
Held
Grant
date
Start date
for vesting
Exercise
price
First date of exercise of
some or all options (1)
Date of
expiry
1,335,000
438,100
3,500,000
1,968,016
2,072,976
9,314,092
20/03/15
20/03/15
20/03/15
18/01/16
13/01/17
31/03/14
31/03/14
19/12/14
18/01/16
13/01/17
£0.1120
£0.1120
£0.3557
£0.89
£0.59
163,229
191,410
302,561
657,200
519,481
30,745
196,678
243,724
990,628
155,682
184,562
220,788
561,032
332,776
228,765
561,541
288,000
144,000
432,000
519,481
24,596
184,562
220,788
949,427
155,682
186,142
223,779
565,603
288,000
144,000
432,000
11/05/15
11/08/16
03/07/17
11/05/15
11/08/16
03/07/17
16/03/15
11/05/15
11/08/16
03/07/17
16/03/16
11/05/15
11/08/16
03/07/17
11/05/15
11/08/16
03/07/17
11/05/15
11/08/16
03/07/17
£1.82
£0.97
£0.58
£0.50
£1.82
£0.97
£0.58
£1.82
£0.97
£0.58
23/06/16
03/07/17
23/06/16
03/07/17
£1.01
£0.58
29/11/16
03/07/17
29/11/16
03/07/17
£0.65
£0.58
16/03/15
11/05/15
11/08/16
03/07/17
16/03/16
11/05/15
11/08/16
03/07/17
11/05/15
11/08/16
03/07/17
11/05/15
11/08/16
03/07/17
£0.50
£1.82
£0.97
£0.58
£1.82
£0.97
£0.58
29/11/16
03/07/17
29/11/16
03/07/17
£0.65
£0.58
31/03/14
31/03/15
19/12/15
18/01/17
13/01/18
11/05/15
11/08/17
03/07/18
16/03/16
11/05/15
11/08/17
03/07/18
11/05/15
11/08/17
03/07/18
23/06/17
03/07/18
29/11/17
03/07/18
16/03/16
11/05/15
11/08/17
03/07/18
11/05/15
11/08/17
03/07/18
29/11/17
03/07/18
30/03/24
30/03/24
19/12/24
18/01/26
13/01/27
11/05/25
11/08/26
03/07/27
16/03/25
11/05/25
11/08/26
03/07/27
11/05/25
11/08/26
03/07/27
23/06/26
03/07/27
29/11/26
03/07/27
16/03/25
11/05/25
11/08/26
03/07/27
11/05/25
11/08/26
03/07/27
29/11/26
03/07/27
_____________________________________________________________________________________________________
34
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Notes to table of Directors’ Equity-based Awards Held at 31 December 2017
(1) All share options awarded to Directors that were outstanding as at 31 December 2017 use time-based vesting and are not subject to
performance targets other than continued service until the date of vesting.
(2) All options granted to James Noble on 20 March 2015 were granted as replacement options in exchange for options formerly held
over Ordinary shares of Adaptimmune Limited. Generally, these replacement options vest and become exercisable as follows: 25%
on the first anniversary of the grant date of the original options and 75% in monthly instalments over the following three years.
(3) 519,481 options granted to Lawrence Alleva and 519,481 options granted to Dr Elliott Sigal vest and become exercisable as follows:
25% on the first anniversary of the grant date and 75% in monthly instalments over the following three years. All options granted
to Non-Executive Directors on 11 May 2015 vested and became exercisable on 11 May 2015. All options granted to Non-Executive
Directors on 11 August 2016 vested and became exercisable on 11 August 2017. All options granted to Non-Executive Directors on
3 July 2017 vest and become exercisable on 3 July 2018.
(4) 332,776 options granted to Barbara Duncan, 288,000 options granted to Giles Kerr and 288,000 options granted to Tal Zaks were
awarded on appointment as new Directors, and vest and become exercisable as follows: 25% on the first anniversary of the grant
date and 75% in monthly instalments over the following two years.
The closing market price of our ADSs on 29 December 2017 was $6.68. One ADS represents six Ordinary shares.
Payments Made to Past Directors
During the year ended 31 December 2017, we made no payments to former Directors of the Company.
Payments for Loss of Office
During the year ended 31 December 2017, we made no payments with respect to a Director’s loss of office.
_____________________________________________________________________________________________________
35
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Illustration of Total Shareholder Return
The information provided in this part of the Directors’ Remuneration Report is not subject to audit.
The following graph compares the cumulative total shareholder return on our ADSs, each representing six Ordinary shares,
with that of the Nasdaq Biotech Index and the Nasdaq Composite Index for the period that our shares were publicly traded.
We selected the Nasdaq Biotech Index because our ADSs trade on The NASDAQ Global Select Market and we believe this
indicates our relative performance against a group consisting of more similarly situated companies.
Performance of Adaptimmune ADS price ($) as a multiplier of IPO pricing,
compared to the relative performance of the NASDAQ Composite index and the
NASDAQ Biotech index over the same period
g
n
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p
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ADAP
Nasdaq Biotech index
Nasdaq Composite
Chief Executive Officer Total Remuneration History
The table below sets out total remuneration details for the Chief Executive Officer.
Period
Single total figure of
remuneration £ (1)
Year ended 31 December 2017:
Year ended 31 December 2016:
612,590
410,348
Annual bonus payout
against maximum
opportunity (2)
45%
25%
Long term incentive
vesting rates against
maximum opportunity (3)
100%
100%
(1) The Single total figure of remuneration for the year ended 31 December 2017 includes the annual bonus payment for performance in
the year ended 31 December 2017. The Single total figure of remuneration for the year ended 31 December 2016 includes the annual
bonus payment for performance in the year ended 31 December 2016.
(2) The bonus payout percentage amount for the year ended 31 December 2017 relates to the total annual bonus payment for performance
in the year ended 31 December 2017. The bonus payout percentage amount for the year ended 31 December 2016 relates to the total
annual bonus payment for performance in the year ended 31 December 2016. In both years, the maximum opportunity was an annual
bonus payment of up to 100% of salary, which was in line with the last approved Directors’ Remuneration Policy.
(3) The amount shown represents the percentage of the options that actually vested during the period expressed as a percentage of the
maximum number of options that could have vested during the period. There were no performance obligations linked to these equity-
based awards, other than service obligations, and therefore, all options that could have vested during the period have actually vested.
_____________________________________________________________________________________________________
36
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Chief Executive Officer’s Remuneration Compared to Other Employees
The Chief Executive Officer’s average fixed salary of £407,830 for the year ended 31 December 2017 was 6.0 times the
value of the average fixed salary of the Group’s employees for such period. His average fixed salary of £315,000 for the
year ended 31 December 2016 was 4.9 times the value of the average fixed salary of the Group’s employees for that period.
The following table shows the percentage change in remuneration of the Chief Executive Officer and the average increase
per employee between the year ended 31 December 2017 and the year ended 31 December 2016.
Percentage change in remuneration in the year ended 31 December 2017
compared with remuneration in the year ended 31 December 2016
Base salary
Annual bonus
Taxable benefits
CEO
29%
133%
0%
Average change per employee
3.8% (1)
19%
1% (2)
(1) The average change in base salary per employee is calculated in relation to an average number of 330 FTE employees for the year
ended 31 December 2017 (compared to an average of 266 FTE employees for the year ended 31 December 2016).
(2) Taxable benefits for the CEO and for employees comprise small amounts and, therefore, any change generates a significant percentage
decrease or increase. For the year ended 31 December 2017, the CEO’s taxable benefits totalled £844 (2016: £848) – for more details,
please refer to the table for ‘Single Total Figure of Remuneration for each Director’ earlier in this report.
Relative Importance of Spend on Pay
The following table sets forth the total amounts spent by the Company and its direct and indirect subsidiaries on remuneration
for the year ended 31 December 2017 and the year ended 31 December 2016. Given that the Group remains in the early
phases of its business life cycle, the comparator chosen to reflect the relative importance of the Group’s spend on pay is the
Group’s research and development expenses as shown in its consolidated income statement on page 55 of its Annual Report
and Financial Statements for the year ended 31 December 2017.
Period:
Year ended
Year ended
Total spend on remuneration (1):
Research and development expenses:
31 December 2017
$47,358,000
$96,381,000
31 December 2016
$38,513,000
$68,514,000
(1) The total spend on remuneration includes the value of equity-based awards as recognised in the financial statements in accordance
with International Financial Reporting Standard 2 “Share-Based Payments”.
Executive Director Remuneration for the year ending 31 December 2018
Salary
In 2017, the Committee engaged Willis Towers Watson as independent advisors to benchmark executive compensation, to
ensure that it remains competitive for the purposes of retention and engagement. Willis Towers Watson benchmarked
executive compensation against a selected peer group consisting largely of comparable U.S.-listed biopharmaceutical
companies, with some U.K.-listed biopharmaceutical companies, and to provide recommendations for base salaries, equity
based awards and the structure of bonus incentive awards for 2018.
As a result of this benchmarking exercise, our CEO and senior executive officers received increased base salaries at levels
that remain compliant with the last approved Directors’ Remuneration Policy and are aligned with the 50th percentile of peer
group comparator data. For our CEO, this resulted in a base salary of £420,065 effective from 1 January 2018.
Annual bonus
For the year ending 31 December 2018, the CEO is eligible for a target bonus award of 55% of his base salary of £420,065
(that is, £231,036), subject to the achievement of objectives. These are linked to our business strategies, which include: the
advancement of our clinical trials for our MAGE-A10, MAGE-A4 and AFP SPEAR T-cells. A key objective is to advance
these wholly owned SPEAR T-cells further during 2018 with the aim of providing initial tolerability and response data for
_____________________________________________________________________________________________________
37
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
at least one wholly owned SPEAR T-cell during 2018; continuing to use our SPEAR T-cell platform to generate SPEAR T-
cells for cancers where existing therapeutic approaches are limited; continuing to understand, further enhance and improve
the effectiveness and persistence of our SPEAR T-cell therapies; the optimisation and expansion of our process development
and manufacturing capabilities to maintain our leadership position in the TCR space; and the continued expansion of our
intellectual property portfolio.
It is anticipated that the Board will meet in the first quarter of 2019 to assess the performance of the CEO for the year ended
31 December 2018 against the objectives.
The Board has considered whether it would be in the best interests of the Company and its shareholders to disclose the
precise targets agreed for the performance measures in 2018. An additional consideration is that most of our competitors are
based in the U.S. where market practice is not to disclose precise annual bonus targets for biotechnology companies at the
pre-commercialization stage. As the specific objectives for a single year are based on the Group’s long-term strategies, the
Board has concluded that disclosing such targets would necessarily involve divulging competitively sensitive information
that we believe would be detrimental to our commercial performance going forward and, therefore, we are providing the
categories of objectives, rather than the precise targets.
Long-term incentives
During January 2018, awards of share options were made to our CEO and other Senior Executive Officers. These awards
were within the guidelines provided by Willis Towers Watson, following their benchmarking assessment of equity awards
made to executive teams in a peer group of comparable U.S and U.K listed biopharmaceutical companies, with a priority
focus on U.S. companies, and were also within the principles of the last approved Directors’ Remuneration Policy. These
awards were disclosed on Form 4s submitted to the Securities and Exchange Commission on 17 January 2018.
The Remuneration Committee
The Remuneration Committee is comprised of Mr Mott (Chairman), Dr Thompson and Dr Zaks. All members have
continued to serve until the date of this Report on Remuneration. The charter of the Committee is set forth on our website at
http://www.adaptimmune.com
Advice Provided to the Remuneration Committee
The Committee retained Willis Towers Watson to provide independent advice and consultation with respect to remuneration
arrangements for the CEO (being our sole Executive Director) and senior management. Willis Towers Watson is a global
remuneration consultant with a well-established reputation for the design and implementation of remuneration programmes,
including the design and implementation of equity-based incentive programmes. The Committee also sourced certain market
research data reports from Radford remuneration consultants. In the year ended 31 December 2017, the amounts paid to
Willis Towers Watson totalled $109,605 and the amounts paid to Radford totalled $5,625.
In addition to Willis Towers Watson and Radford, the Committee solicited and received input from the CEO concerning the
remuneration of senior executives other than himself. The CEO provided recommendations with respect to annual cash
bonuses to be paid to these persons for service in the year ending 31 December 2017 and base salaries effective from 1
January 2018 and with respect to equity-based awards made to these persons in January 2018. Finally, the CEO also provided
input to the Committee regarding the implementation of equity-based remuneration as an element of all other employees’
remuneration.
Statement of Voting Results
Voting at our shareholder meetings has generally been conducted by show of hands by shareholders who are in attendance
at the meeting. At the Annual General Meeting held on 21 June 2017, all of the resolutions set out in the Notice of the Annual
General Meeting sent to shareholders were duly proposed and passed by unanimous approval, including the resolution
proposing the approval of the Directors’ Remuneration Report for the year ended 31 December 2016. No votes were
withheld.
_____________________________________________________________________________________________________
38
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Details of the proxy votes received in relation to the resolution proposing the approval of the Directors’ Remuneration Report
for the year ended 31 December 2016 were as follows:
Resolution
Votes For
% of Total
Votes
Against
% of Total
Votes
Withheld
% of Total
To approve the Directors’
Remuneration Report
458,824,642
99.96
162,498
0.04
23,070
0.01
Statement of Implementation of Remuneration Policy in the Year ended 31 December 2017
The Directors’ Remuneration Policy, as approved at the Annual General Meeting of shareholders held on 17 December
2015, was followed in relation to compensation paid to directors in 2017. That remuneration policy remains effective for a
maximum of three years, until 16 December 2018, or until a revised policy is approved by shareholders. The last approved
remuneration policy can be found in the Annual Report and Financial Statements of the Company for the year ended 30 June
2015, which is available in the Investors section of our website: http://www.adaptimmune.com
The new Directors’ Remuneration Policy will be put to shareholders as a binding vote at the Annual General Meeting to be
held on 20 June 2018.
_____________________________________________________________________________________________________
39
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
PART II - DIRECTORS’ REMUNERATION POLICY
The information provided in this part of the Directors’ Remuneration Report is not subject to audit.
The Remuneration Committee presents the Directors’ Remuneration Policy, which will be put to shareholders as a binding
vote at the Annual General Meeting to be held on 20 June 2018. This policy will then be effective from the date of the
Annual General Meeting for a maximum of three years, or until a revised policy is approved by shareholders.
There will continue to be an advisory vote on the Directors’ Remuneration Report presented at the Annual General Meeting
on an annual basis.
For the avoidance of doubt, in approving the Directors’ remuneration policy, authority is given to the Company to honour
any commitments entered into with current or former Directors (such as the payment of a pension or the vesting and/or
exercise of past share option awards). Details of any payments to former Directors will be set out in the annual Directors’
Report on Remuneration as they arise.
Future Policy Tables
The policy tables set out below describe the Company’s proposed future remuneration policy for Directors and seek to
explain how each element of the Directors’ remuneration packages will operate.
Summary of remuneration policy – Executive Directors
As Adaptimmune Therapeutics plc is a U.K. incorporated company listed on NASDAQ, the Group has operations in the
U.K. and the U.S., our senior executives and our Non-Executive Directors live and work in the U.K. and the U.S., the
Committee considers it appropriate to examine and be informed by compensation practices in both the U.K. and U.S.,
particularly in the matter of equity-based incentives, with an increasing focus on U.S. benchmarks and practices. The
Committee considers that the current Directors’ Remuneration Policy continues to be appropriate and fit for purpose, but the
Committee is committed to reviewing the remuneration policy on an ongoing basis in order to ensure that it remains effective
and competitive. Minor amendments have been made to the text of our last approved Directors’ Remuneration Policy, in
order to add clarity for investors, but no material amendments have been made.
The Directors’ Remuneration Policy is used to determine the remuneration for our CEO, our sole Executive Director, as well
as for our other senior executives, and would also apply to other Executive Directors and senior executives that we appointed.
The table set out below presents the elements of remuneration for the Executive Director(s) and Senior Executives, which
comprise: base salary, pension or pension allowance payment, benefits (currently, access to death-in-service life insurance,
family private medical cover and ill-health income protection), annual bonus and long term equity incentives (currently,
share option awards).
The remuneration of our CEO is determined by the Board after having considered recommendations from the Committee.
The remuneration of other senior executives in the Company, excluding our CEO, (the “Senior Executives”) is determined
by the Committee. For ease of reference, the following table generally refers throughout to remuneration being determined
by the Committee.
_____________________________________________________________________________________________________
40
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Purpose and link to strategy Operation
Maximum
Performance
targets
Not applicable.
Element of
Remuneration
Base
salary
Rewards skills and
experience and
provides the basis for a
competitive
remuneration package.
Salaries will not
generally exceed the
75th percentile of
peer group
comparator data for
the relevant role
unless there is a
clear business
rationale to do so.
The Committee will
reference alternative
data for roles not
widely represented
in the core peer
group.
The Committee
retains discretion to
adjust t h e
Executive
Directors’ base
salaries to ensure
that we can attract
and retain the
necessary talent to
effectively compete
in the global
marketplace.
Salaries will be reviewed
annually by reference to: (i)
market practice and market
data on which the
Committee receives
independent advice; (ii) the
individuals’ experience and
scope of the role; (iii)
broader employee increases
and (iv) rates of inflation.
Salaries will be
benchmarked against
comparable roles in a
selected peer group of US-
and European-listed
biopharmaceutical
companies with similar
market capitalisations and/or
scale of operational
complexity.
We typically expect to align
salaries with the 50th
percentile of peer group
comparator data but may
vary from this general rule
where we consider that
special circumstances apply
or where recruitment or
retention of a particular role
is required.
The Committee may also
decide to approve future
increases following changes
to job responsibilities or to
reflect experience within the
role.
Company contribution to a
personal pension scheme or a
pension allowance payment,
at the election of the
Executive Director. Levels
will be reviewed annually
and the Committee may
decide to increase future
contribution levels should
the review indicate such a
change is appropriate.
Pension
Enables Executive
Directors to build
long-term retirement
savings.
5% of basic salary.
Not applicable.
_____________________________________________________________________________________________________
41
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Operation
Maximum
Not applicable.
Performance
targets
Not applicable.
Element of
Remuneration
Benefits
Purpose and link to
strategy
Protects against
risks and provides
other benefits in
line with market
practice.
Annual
Bonus
Rewards
achievement of the
near-term business
objectives set at the
start of each
calendar year and
reflects individual
and team
performance of the
Executive Director
and other Senior
Executives in
achieving those
objectives, and
progress towards
achieving our
strategic goals.
Benefits currently include
death-in-service life insurance,
family private medical cover
and ill-health income protection.
The Committee will review
benefits offered from time to
time and retains the discretion to
add or substitute benefits to
ensure they remain market
competitive.
In the event that the Group
requires an Executive Director
to relocate, we would offer
appropriate relocation
assistance.
Objectives are set at the start of
each calendar year.
The choice of annual
performance objectives
will reflect the Committee’s
assessment of the key
milestones/metrics required to
be achieved within the calendar
year in order to make progress
towards achieving our strategic
goals.
The target annual cash bonus
for our Executive Directors will
be established as a percentage
of base salary.
The annual bonus is payable in
cash after award.
Awards will
normally be limited
to a maximum of
100% of basic
salary.
In exceptional
periods, considered
to be those years in
which achievements
lead to a
transformational
effect on the future
prospects or the
valuation of the
business, the annual
maximum may
increase to up to
150% of basic
salary.
The Committee
retains the ability to
set performance
objectives annually.
These objectives can
be group-based and
/or individual,
financial and/ or non-
financial, and are
likely to include
milestones linked to:
successful
execution of key
elements of pipeline
development
programmes;
progress with
clinical trials
programmes;
key regulatory steps
When business opportunities or
challenges change substantially
during the course of the year,
the Committee may adjust
objectives to meet the changed
circumstances and
correspondingly realign
potential rewards.
Judgement as to
whether
achievements in a
calendar year are
considered to be
exceptional is at the
discretion of the
Committee.
(IND grants,
regulatory
approvals);
progress with
business
development
activities;
the Group’s
financial position
and equity liquidity
and valuation.
A number of these
objectives are
considered to be
commercially
sensitive and are
therefore not
disclosed here in
detail.
_____________________________________________________________________________________________________
42
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Element of
Remuneration
Long term
equity
incentives
Purpose and link to strategy Operation
Maximum
Motivates and rewards
multi-year
performance,
encouraging
achievement of
strategy over the
medium to long term.
Aligns the interests of
our Executive Directors
and Senior Executives
with those of our
shareholders.
Encourages retention as
entitlement to full
benefits arising from
equity-based awards
only accrues over a
period of years.
Enables us to compete
with equity-based
remuneration offered
by a set of comparable
companies with whom
we may compete for
executive talent.
Under our share option
schemes, the Committee
is able to grant awards of
CSOP options in the UK,
and unapproved share
options (non-qualifying
options) in the UK and
US, which includes the
ability to grant RSU-style
awards. All awards may
be subject to performance
targets.
The Committee generally
grants equity-based
remuneration to
Executive Directors and
Senior Executives at the
time they commence
employment and from
time to time thereafter
based on performance.
The Committee is able to
grant share options which
permit phased vesting
over the period.
Currently, awards vest
over a period of four
years, with the first 25%
vesting after 12 months.
There is no fixed annual
maximum limit to the
size or value of equity-
based compensation
awards made in a year to
Executive Directors and
Senior Executives, or in
the aggregate over a
period of years.
However, the Committee
will always work within
benchmarking guidelines
provided by our
compensation
consultants. Additionally,
our option scheme rules
set a maximum limit on
the grant of options to all
participants of 8% of our
initial issued share capital
on the date of our IPO
increased by 4% on each
30 June to be effective
from 1 July 2016.
Expected values are
calculated in accordance
with generally accepted
methodologies based on
Black-Scholes models.
We seek to establish
equity-based
r emuneration to be
reasonably competitive
to that offered by a set
of comparable
companies with whom
we may compete for
executive talent.
Performance
targets
Generally, we
grant equity-based
remuneration
awards that vest
over time without
specific
performance
targets other than
continued service.
When making
awards, the
Committee
considers: the
size and value of
past awards; the
performance of
the Executive
Director or
Senior
Executive; and
competitive data
on awards made
to executives at
comparable
companies.
Our Severance
Policy entitles the
Executive Director
and Senior
Executives to
accelerated vesting
of options on
termination
without cause on a
change of control.
Additionally, the
Board has
discretion to
accelerate vesting
of options
including in
connection with a
change of control
event or when an
Executive
Director’s service
is terminated on
account of
disability or death.
See Policy on
Payments for Loss
of Office.
_____________________________________________________________________________________________________
43
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Notes to policy tables
(1) In 2017, the Committee retained an independent remuneration consultant, Willis Towers Watson, to assist the Committee in ensuring
that our remuneration arrangements for the Executive Director and senior executives are competitive for the calendar year
commencing 1 January 2018. Willis Towers Watson provided data from comparable publicly traded biopharmaceutical companies
and otherwise assisted the Committee in its design of competitive remuneration for the Executive Director and senior executives. We
expect to continue to use remuneration consultants to assist the Committee in determining competitive levels of executive
remuneration and specific design elements of our remuneration programme.
(2) The use of time-based vesting for share option awards is consistent with U.S. practice, to which we look for guidance on our policies.
We examine, with assistance from Willis Towers Watson, our independent remuneration consultant, comparative data on both a (i)
fair market value basis and (ii) percentage of salary basis. The Committee uses a blend of the two methods to establish appropriate
levels of equity-based remuneration for the Executive Director and Senior Executives.
Application of the Remuneration Policy to Executive Director Remuneration for the year ending 31 December 2018
The following table provides an illustration of the potential remuneration for the year ending 31 December 2018 for the
CEO, as the sole Executive Director, computed in accordance with the Remuneration Policy outlined above and by applying
the following assumptions:
Minimum
In line with
expectations
Maximum
The base salary for the Executive Director is assumed to be the base salary of £420,065 per annum
effective from 1 January 2018.
The value of benefits receivable for the year ending 31 December 2018 is assumed to be 5% of base
salary for a pension allowance payment and the same rate of contribution for private health insurance
as for 2017.
No bonus is assumed for the Executive Director.
The same components for base salary and benefits as reflected for the minimum above.
The expected level of bonus is taken to be 55% of base salary, being the target level of bonus payment
for the year ending 31 December 2018.
The same components for base salary and benefits as reflected for the minimum above.
The maximum level of bonus is taken to be 100% of current base salary.
The bar chart below does not include any value for equity-based award remuneration in either the minimum illustration or
the illustration of remuneration in line with expectations. We do not believe it is possible to reasonably quantify the value
that might result from outstanding options and other equity-based awards.
Chief Executive Officer
s
0
0
0
£
'
1000
900
800
700
600
500
400
300
200
100
0
Minimum
In line with
expectations
Maximum
Fixed remuneration
Variable remuneration
_____________________________________________________________________________________________________
44
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Service Contracts
It is Group policy that Executive Directors should have contracts with an indefinite term providing for a maximum of up to
12 months’ notice. We currently employ our CEO, our sole Executive Director, on a service agreement providing for
termination, other than for cause, upon nine months’ advance notice by either the Company or the CEO. The CEO is required
to resign his position as a Director if the Board requires a resignation in conjunction with the end of the employment
relationship. We expect service contracts with future Executive Directors will have comparable provisions.
On termination of the service contract without cause, we have the right to require the Executive Director to take garden leave
for all or part of the notice period (the remaining term of the contract) and we have the right to pay salary and benefits in
lieu of notice. During the period of any garden leave, the Executive Director must continue to be available to the Company
and will continue to receive his full salary and other contractual entitlements. The Company may terminate the Executive
Director’s employment with immediate effect in certain circumstances including bankruptcy, criminal convictions, gross
misconduct or serious or repeated breaches of obligations of his service. In the event of termination of the Executive Director
for cause, we are not obligated to make any payment in lieu of notice. The service agreement contains non-solicitation and
non-competition provisions for a 12 month period as well as confidentiality provisions.
Policy on Payments for Loss of Office
Our approach to payments in the event of termination of an Executive Director is to take account of the individual
circumstances including the reason for termination, individual performance, contractual obligations and the terms of the
long-term incentive plans in which the Executive Director participates.
As previously reported in our last approved Directors’ Remuneration Report, during March 2017, the Company entered into
an amended service agreement with our Executive Director and adopted an executive severance policy that is applicable to
our Executive Director and senior executive officers on termination other than for cause. The amended service agreement
and executive severance policy are compliant with our last approved Directors’ Remuneration Policy. In particular, all
employment arrangements for any Executive Director(s) will continue to include a notice provision and continuing payment
obligations for not more than a maximum period of one year following our termination of an Executive Director other than
for cause. Payment obligations would include base salary, target bonus and benefits. In the event of termination without
cause following a change of control, the Executive Director is entitled to accelerated vesting of any unvested and outstanding
equity awards. In addition, the Board has discretion under our option scheme rules to allow some or all of the options held
by our Executive Director and senior executives to vest in the event of a change of control or otherwise.
In order to receive severance benefits under the employment agreement and executive severance policy, the Executive
Director is required to execute a release of claims in favour of the Company and comply with certain other post-employment
covenants set forth in his employment agreement.
We will comply with applicable disclosure and reporting requirements of the Securities and Exchange Commission with
respect to remuneration arrangements with a departing Executive Director.
Policy on Recruitment Arrangements
Our policy is to pay a fair remuneration package for the role being undertaken and the experience of the individual to be
appointed. We expect remuneration packages will include base salary, targeted level of annual cash incentive, initial and
ongoing equity-based awards, standard benefits and special provisions tailored to the recruiting situation, such as: sign-on
bonus, reasonable relocation support and make-whole awards for remuneration forfeited from a prior employer (whether on
account of cash bonuses, share awards, pension benefits or other forfeited items).
The Board retains the discretion to provide additional benefits where necessary or useful to recruit new Executive Directors
or to secure the ongoing service of existing Executive Directors.
If we appoint an existing employee as an Executive Director of the Company, we would expect to retain legacy obligations
to the employee with respect to remuneration, such as outstanding share awards. Should these differ materially from current
arrangements, these will be disclosed in the next Directors’ Remuneration Report following such appointment. We will also
disclose remuneration details for a new Executive Director in accordance with reporting requirements of the Securities and
Exchange Commission.
_____________________________________________________________________________________________________
45
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Summary of remuneration policy – Non-Executive Directors
Under the last approved Directors’ Remuneration policy, the Board has the discretion to pay fees to any or all Non-Executive
Directors and/or to pay Non-Executive Directors in the form of a mixture of cash and share options. Since 2016, our
remuneration arrangements for Non-Executive Directors comprise an award of a fixed number of share options, plus an
additional number of share options or cash payment at the Director’s election. The option awards and cash payments were
established at competitive levels taking into account peer data from comparable companies provided in a benchmarking
survey undertaken by Radford consultants in 2016 and are compliant with the last approved Directors’ Remuneration policy.
The Committee has retained Willis Towers Watson to assist the Committee in ensuring that our remuneration arrangements
for the Non-Executive Directors are competitive and appropriate by benchmarking them against comparable publicly traded
biopharmaceutical companies, with an increasing focus on U.S. benchmarks and practices. We expect to continue to use
remuneration consultants to assist the Committee in determining competitive levels of Non-Executive Director remuneration
and specific design elements of our Non-Executive Director remuneration programme.
Our Non-Executive Directors participate in the Group’s long-term incentive plans on terms similar to those used for
Executive Directors. In accordance with their Letters of Appointment, each Non-Executive Director is entitled to receive an
annual award of share options, and incoming Non-Executive Directors receive an initial award of share options, and which
may include RSU-style awards, with such number to be determined by the Board. In determining option awards, the Board
works within benchmarking guidelines provided by remuneration consultants.
Any share options that are awarded will not be subject to performance conditions.
Our Non-Executive Directors do not receive any pension from the Company nor do they participate in any performance-
related incentive plans.
The following table presents the elements of remuneration for Non-Executive Directors.
_____________________________________________________________________________________________________
46
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Element of
Remuneration
Non-
Executive
fees
Purpose and link to
strategy
Reflects time
commitments and
responsibilities of
each role.
Reflects fees paid
by similarly sized
companies.
Long term
equity
incentives
For public companies
listed in the United
States, equity-based
remuneration is a
standard component of
Director remuneration.
We extend equity-
based awards to our
Non-Executive
Directors in order to be
competitive with
comparable companies
seeking qualified
Directors and to align
the interests of our
Non- Executive
Directors with those of
our shareholders.
Operation
Maximum
The value of each
individual’s aggregate
fees will not exceed the
75th percentile of peer
group comparator data
for the relevant role.
Not applicable.
The option awards will be
determined by the Board as
a whole working within
benchmarking guidelines
provided by our
compensation consultants.
Additionally, our option
scheme rules set a
maximum limit on the
grant of options to all
participants of 8% of our
initial issued share capital
on the date of our IPO
increased by 4% on each
30 June effective from 1
July 2016.
The remuneration of the Non-Executive
Directors will be determined by the Board
as a whole by reference to market practice
and market data, on which the Committee
receives independent advice, and reflects
individual experience, scope of the role,
time commitment and changes to
responsibilities.
We typically expect to align fees with the 50th
percentile of peer group comparator data but
may vary from this general rule where we
consider that special circumstances apply or
where recruitment or retention of a particular
role is required.
Fees will typically consist of a basic fee for
Non-Executive Director responsibilities
plus incremental fees for additional
roles/responsibilities such as chairmanship
of Board committees and a senior
independent Non-Executive Director role.
The Non-Executive Directors may elect to
receive the fees in cash or in the form of an
award of additional share options.
The Non-Executive Directors do not receive
any pension from the Company, nor do they
participate in any performance-related
incentive plans.
Non-Executive Directors participate in the
Group’s long-term incentive plans on terms
similar to those used for Executive Directors.
Under their appointment letters, each Non-
Executive Director is entitled to receive an
annual award of options, provided that he or
she continues to serve as a Director. When a
new Non-Executive Director is appointed, he
or she may receive an initial award of options.
In either scenario, these may include RSU-style
awards.
The Board is able to grant share options which
permit phased vesting over the period.
Currently, options awarded to new Directors
become fully exercisable over three years while
options awarded annually are exercisable on
the first anniversary of the date of grant. Any
share options awarded will not be subject to
performance conditions. Expected values are
calculated in accordance with generally
accepted methodologies based on Black-
Scholes models.
_____________________________________________________________________________________________________
47
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2017
Letters of Appointment
The Chairman and all other Non-Executive Directors have letters of appointment which set out the terms under which they
provide their services to the Company and which are subject to a three month notice period either by the Company or the
Non-Executive Director. Their remuneration is reviewed by the Board annually. In accordance with the Company’s Articles
of Association, Non-Executive Directors are included in the requirement that one-third of Directors are subject to retirement
by rotation at each Annual General Meeting of shareholders. There is no remuneration payable on loss of office when, for
example, a Director is not re-elected at an Annual General Meeting.
Statement of Consideration of Employment Conditions and Differences to the Executive Director Policy
All our employees are paid a base salary and receive standard employee benefits, which vary according to whether they are
employed in the UK or in the US but all are entitled to a contribution from the Group towards a pension scheme or retirement
plan, as well as access to health insurance and income protection.
All employees are eligible to be considered for an annual increase in their base salaries, provided they have worked for a
sufficient portion of the prior fiscal year. In addition, all employees are eligible to be considered for target annual cash bonus
awards, subject to the achievement of objectives and to the overall performance of the Company, and for consideration for
regular option awards. Eligibility is dependent on the employee’s position and performance, with more senior employees
eligible for higher bonus and option award levels.
No specific consultation with employees has been undertaken in respect of the design of the Company’s senior executive
remuneration policy to date although the Committee will keep this under review.
Statement of Consideration of Shareholder Views
This policy for remuneration of both Executive Directors and Non-Executive Directors was devised by a Remuneration
Committee of which all members are Non-Executive Directors. The policy was also approved by the full Board.
Changes to Remuneration Policy
It is anticipated that this policy will apply until the Annual General Meeting in 2021, or until a revised policy is approved by
shareholders.
Approval
This report was approved by the Board of Directors on 14 March 2018 and signed on its behalf by:
David M Mott
Director
14 March 2018
_____________________________________________________________________________________________________
48
ADAPTIMMUNE THERAPEUTICS PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE DIRECTORS’
REPORT, THE STRATEGIC REPORT AND THE FINANCIAL STATEMENTS
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 group and parent company financial statements for each financial year. Under
that law they have elected to prepare the group financial statements in accordance with IFRSs as adopted by the EU and
applicable law, and have elected to prepare the parent company financial statements in accordance with U.K. Accounting
Standards and applicable law (U.K. Generally Accepted Accounting Practice) including FRS 101 Reduced Disclosure
Framework.
Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing
each of the group and parent company financial statements, the directors are required to:
•
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as adopted by the EU;
for the parent company financial statements, state whether applicable U.K. Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the
parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report
and Directors’ Remuneration Report that comply with that law and those regulations.
_____________________________________________________________________________________________________
49
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC
1 Our opinion is unmodified
We have audited the financial statements of Adaptimmune Therapeutics Plc (“the Company”) for the year ended 31
December 2017 which comprise:
the Consolidated and parent balance sheet as of 31 December 2017,
the Consolidated income statement for the year then ended,
the Consolidated statement of comprehensive loss for the year,
the Consolidated and parent statement of changes in equity;
and the related notes, including the accounting policies in note 1.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as
at 31 December 2017 and of the Group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards as adopted by the European Union;
the parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence
we have obtained is a sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
Risks of material misstatement
Revenue recognition
Valuation of Investments in the Parent Company
_____________________________________________________________________________________________________
50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
The risk
Our response
Revenue recognition
================
==
Revenue: $37.8m
(2016:$14.2m)
Refer to page 66
(accounting policy )
and pages 69 to 70
(financial disclosure)
Existence and Accuracy of revenue
recognised
========================
The group’s revenue is mainly derived
from the supply of research activities to
develop T-cell cancer therapies under the
terms of the signed GlaxoSmithKline,
“GSK”, and Adaptimmune Therapeutics
plc,
“the Company”, Collaboration
Agreement. The GSK Agreement relates
to up to five target programs, the first of
which was the NY-ESO SPEAR T-cell
program and the second, PRAME.
agreement
The
defines multiple
milestones which trigger a payment on the
achievement thereof and at any point GSK
can take up the option to take over the
research activities in return for royalty
payments to the Company. Milestones are
considered to be non-substantive in nature.
As a result revenue is recognised by
from
spreading
achieving milestones deliverables over the
estimated date the Company expects to
provide
the GSK
Collaboration Agreement.
payments
services
earned
under
and
commercialize
During the year, by way of an amendment
agreement, GSK exercised its option to
obtain an exclusive license to research,
the
develop,
Company’s NY-ESO SPEAR T-cell
therapy program for £20 million, plus
future additional payments, which has
been deferred until the transition date. This
Amendment also specified the activities
required for Adaptimmune to transition
the NY-ESO SPEAR T-cell program to
GSK. This Agreement results in revenue
being recognised over a significant shorter
period of time compared to prior years for
the NY-ESO deliverable.
After the
transition, GSK will assume responsibility
for all NY-ESO-related activities.
Our procedures included:
observation
==========================
Control design,
performance:
Testing the design, implementation and
operating effectiveness of the controls
over the revenue process
and
Test of details:
We obtained all invoices raised during the
accounting period for the achievement of
the milestones under the terms of the GSK
Collaboration Agreement, including the
related approval from GSK indicating the
achievement of the milestone in the
appropriate accounting period.
We independently verified management’s
revenue calculations.
We held discussions with management
regarding the period over which revenue is
estimated to be recognised and inspected
minutes of internal and external meetings.
We
challenged
management’s assumptions used in the
determination of the period over which
revenue should be recognised for NY-ESO
and PRAME.
assessed
and
Sensitivity analysis:
We performed a sensitivity analysis on
both NY-ESO and PRAME to determine
the maximum slippage in the timeline in
order for the impact to be material.
Assessing transparency
We assessed the adequacy of the Group’s
disclosures (see Note 3) in respect of
revenue and the change in estimated
considered whether the disclosures
reflected the risks inherent in the
estimating the period over which revenue
is recognised and the impact it has on the
Group’s financial results.
The exercise of the NY-ESO option and
the Amendment has been accounted for as
a modification of an existing multiple-
element arrangement.
The difference between the cumulative
revenue recognized based on the previous
estimate and the revenue recognized based
on the revised estimate is recognized as an
_____________________________________________________________________________________________________
51
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
adjustment to revenue in the period in
which the change in estimate occurs.
Judgement is involved in the assessment
towards completion of
of progress
Adaptimmune’s deliverables. Revision to
such estimates of progress may result in
increases or decreases
in estimated
revenues and the split between non-current
and current deferred income.
Furthermore,
the
judgement
allocation of the deliverables and hence
the portion of revenue recognised.
drives
Given the judgements involved in the
recognition of revenue, and that revenue is
financial
a material
statements, we consider a significant risk
exists in relation to the timing and value of
revenue to be recognised
figure
the
in
Valuation of
Investments in the
Parent Company
$104.8m;
(2016: $97.6m)
Refer
to page 64
(accounting policy) and
(financial
page
disclosures).
76
Low risk, High Value
The carrying amount of the parent
company’s investments in the subsidiary
companies represents 27.6% (2016:
36.8%) of the company’s total assets. Its
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to
its materiality in the context of the parent
company financial statements, this is
considered to be the area that had the
greatest effect on our overall parent
company audit.
Our procedures included:
Comparing valuations comparing the
carrying amount of the investment to the
market capitalisation of the Group, as
Adaptimmune Limited contains a
significant portion of the group’s trading
operations.
Our results
We found no indicators of impairment
3 Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at $4 million, determined with reference to a benchmark of
group loss before tax (2016: $3 million).
Materiality for the parent company financial statements as a whole was set at $2 million which was calculated on Loss Total
assets in the current year. (2016: $120,000), determined with reference to a benchmark of company total assets, of which it
represents 0.53% (2016: 8.6%).
During the year the group team reassessed the appropriate benchmark metric for the group company from loss before tax to
total assets as the parent company is not the main trading company and is regarded as the holding company responsible for
the financing of the group.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $200,000, in
addition to other identified misstatements that warranted reporting on qualitative grounds
Of the group's 3 (2016: 3) reporting components; Adaptimmune LLC, Adaptimmune Limited and Adaptimmune
Therapeutics plc, we subjected 3, (2016: 3) to full scope audits for group purposes and nil (2016: nil) to specified risk-
focused audit procedures.
_____________________________________________________________________________________________________
52
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
The group team performed procedures on the GlaxoSmithKline’s option exercise, in terms of the Collaboration Agreement
which was excluded from normalised group loss before tax.
The components within the scope of our work accounted for the following percentages of the group’s results:
Number of
components
2017
2016
Audits for group
reporting
purposes
Total
3
3
3
3
Group revenue
Group profit and
loss before tax
Group total assets
2017
100%
2016
100%
2017
100%
2016
100%
2017
100%
2016
100%
100%
100%
100%
100%
100%
100%
The Group team approved the following component materialities, having regard to the mix of size and risk profile of the
Group across the components:
■ Adaptimmune Limited $3.1 million (2016: $2.8 million)
■ Adaptimmune LLC $2.7 million (2016: $0.18 million)
The Group team visited 2 (2016:2) component locations in the United Kingdom and United States of America (2016: United
Kingdom and United States of America) to assess the audit risk and strategy. All work on a component and group level was
performed by the Group team.
The work on all three components, including the audit of the parent company, was performed by the Group team.
4 We have nothing to report on going concern
We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate
or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
we have not identified material misstatements in the strategic report and the directors’ report;
in our opinion the information given in those reports for the financial year is consistent with the financial statements;
and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
_____________________________________________________________________________________________________
53
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 49, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;
assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the
parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Charles Le Strange Meakin (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Arlington Business Park
Theale
RG7 4SD
15 March 2018
_____________________________________________________________________________________________________
54
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December
Revenue
Research & development expenses
Administrative expenses
Other income
Operating loss
Finance income
Finance expense
Loss before tax
Taxation credit
Loss for the period
Note
2
3
4
7
7
8
2017
$’000
37,833
(96,381)
(30,229)
1,581
(87,196)
7,273
(529)
(80,452)
9,144
2016
$’000
14,198
(68,514)
(23,805)
1,921
(76,200)
2,424
-
(73,776)
4,977
(71,308)
(68,799)
Basic and diluted loss per share
(0.14)
(0.16)
Weighted average number of shares used to calculate basic and diluted
527,637,086
424,713,997
loss per share
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
For the year ended 31 December
Loss for the period
Other comprehensive loss for the period, net of income
tax
Items that are or may be reclassified subsequently to profit
or loss:
Foreign exchange translation differences
Net change in fair value of available-for-sale financial
assets
2017
$’000
2016
$’000
(71,308)
(68,799)
(3,115)
(218)
(6,943)
-
Total comprehensive loss for the period
(74,641)
(75,742)
All of the above figures relate to continuing operations.
The notes on pages 61 to 91 form part of these financial statements
_____________________________________________________________________________________________________
55
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company Number 09338148
As of
Assets
Non-current assets
Property, plant & equipment
Intangibles
Clinical materials
Restricted cash
Total non-current assets
Current assets
Other current assets
Trade and other receivables
Tax receivable
Available-for-sale financial assets
Short-term deposits
Cash and cash equivalents
Total current assets
Note
31 December
2017
$’000
31 December
2016
$’000
9
10
13
14
15
21
16
17
40,679
7,404
4,695
4,253
57,031
9,889
579
11,454
124,218
-
84,043
230,183
27,899
5,893
2,580
4,017
40,389
8,803
2,228
6,247
-
22,694
158,779
198,751
Total assets
287,214
239,140
Equity & liabilities
Equity
Share capital
Share premium
Other reserve
Accumulated Other comprehensive income
Retained losses
Total Equity
Non-Current liabilities
Trade and other payables
Total Non-Current liabilities
Current liabilities
Trade and other payables
Tax payable
Total current liabilities
Total equity & liabilities
18
2
19
20
854
279,298
131,013
(25,357)
(176,757)
209,051
3,849
3,849
74,314
-
74,314
683
175,901
131,013
(22,024)
(114,806)
170,767
28,103
28,103
39,539
731
40,270
287,214
239,140
The notes on pages 61 to 91 form part of these Financial Statements
The financial statements on pages 55 to 91 were approved by the Board of Directors on 14 March 2018 and are signed on its
behalf by:
James J Noble
Director
14 March 2018
_____________________________________________________________________________________________________
56
ADAPTIMMUNE THERAPEUTICS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
Company Number 09338148
As of
Assets
Non-current assets
Investments in subsidiaries
Other receivables
Total non-current assets
Current assets
Prepayments
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity & liabilities
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total Equity
Current liabilities
Trade and other payables
Total equity & liabilities
Note
11
12
15
18
31 December
2017
$’000
31 December
2016
$’000
104,827
269,619
374,446
196
4,382
799
5,377
97,660
166,635
264,295
197
400
634
1,231
379,823
265,526
854
279,298
79,990
19,115
379,257
683
175,901
79,990
8,345
264,919
20
566
607
379,823
265,526
The notes on pages 61 to 91 form part of these Financial Statements
The financial statements on pages 55 to 91 were approved by the Board of Directors on 14 March 2018 and are signed on its
behalf by:
James J Noble
Director
14 March 2018
_____________________________________________________________________________________________________
57
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Capital
$’000
Share
Premium
$’000
Other
reserve
$’000
Exchange
reserve
$’000
Fair value
reserves
$’000
Retained
Losses
$’000
Total
equity
$’000
Balance at 1 January 2016
682
175,885
131,013
(15,081)
-
(55,051)
237,448
Total comprehensive loss for the
year:
Loss for the year
Other comprehensive loss for the
year
Transactions with owners,
recorded directly in equity:
Shares issued upon exercise of
stock options
Equity-settled share based
payment expense
-
-
1
-
-
-
16
-
-
-
-
-
-
(6,943)
(68,799)
(68,799)
-
(6,943)
-
-
-
17
9,044
9,044
Balance at 31 December 2016
683
175,901
131,013
(22,024)
-
(114,806)
170,767
Balance at 1 January 2017
683
175,901
131,013
(22,024)
-
(114,806)
170,767
Total comprehensive loss for the
period:
Loss for the period
Other comprehensive loss for the
period
-
-
-
-
Issuance of common stock, net of
170
102,997
issuance costs
Issuance of common stock upon
exercise of options
Transactions with owners,
recorded directly in equity:
Equity-settled share based
payment expense
1
-
400
-
-
-
-
-
-
-
(71,308)
(71,308)
(3,115)
(218)
-
(3,333)
-
-
-
-
103,167
-
401
9,357
9,357
Balance at 31 December 2017
854
279,298
131,013
(25,139)
(218)
(176,757)
209,051
The notes on pages 55 to 91 form part of these Financial Statements
_____________________________________________________________________________________________________
58
ADAPTIMMUNE THERAPEUTICS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
Capital
$’000
Share
Premium
$’000
Other
Reserve
$’000
Retained
Earnings
$’000
Total
Equity
$’000
Balance at 1 January 2016
682
175,885
79,990
690
257,247
Total comprehensive loss for the year:
Loss for the year
Transactions with owners, recorded directly in
equity:
Shares issued upon exercise of stock options
Equity-settled share based payment expense
-
1
-
-
16
-
-
-
-
(1,389)
(1,389)
-
9,044
17
9,044
Balance at 31 December 2016
683
175,901
79,990
8,345
264,919
Balance at 1 January 2017
683
175,901
79,990
8,345
264,919
Total comprehensive loss for the year:
Profit for the year
-
-
Transactions with owners, recorded directly in
equity:
Issue of common stock
Shares issued upon exercise of stock options
Equity-settled share based payment expense
170
102,997
1
-
400
-
-
-
-
-
1,413
1,413
-
-
9,357
103,167
401
9,357
Balance at 31 December 2017
854
279,298
79,990
19,115
379,257
The notes on pages 55 to 91 form part of these Financial Statements
_____________________________________________________________________________________________________
59
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
Note
9
10
23
For the year ended 31 December
Cash flows from operating activities
Loss for the period before tax
Adjustments for:
Depreciation
Amortisation
Equity-settled share based payment expense
Realized losses on maturity or redemption of
available-for-sale financial assets
Unrealized foreign exchange gains
Bank interest income
Other
Changes in:
(Increase) decrease in other current and other non-
current assets
Decrease (increase) in trade and other receivables
Increase in trade and other payables
Cash used in operations
Net taxes received
Interest received
2017
$’000
2016
$’000
(80,452)
(73,776)
5,032
391
9,357
646
(5,043)
(2,230)
1,006
(3,314)
2,115
12,439
(60,053)
4,893
1,784
3,126
160
9,044
-
(1,314)
(1,110)
122
4,067
(6,533)
16,077
(50,137)
3,781
1,191
Net cash used in operating activities
(53,376)
(45,165)
Cash flows from investing activities
Acquisition of property, plant & equipment
Acquisition of intangibles
Proceeds from disposal of property, plant & equipment
Investment in short-term deposits
Maturity of short-term deposits
Investment in available-for-sale financial assets
Maturity of available-for-sale financial assets
Net cash (used in)/ generated by investing activities
Net cash from financing activities
Proceeds from issuance of common stock
Proceeds from exercise of share options
Net cash generated by financing activities
Net decrease in cash and cash equivalents
Effect of movements in exchange rates on cash held
Cash and cash equivalents at start of period
Cash and cash equivalents at period end
(24,643)
(1,308)
550
(18,000)
40,625
(153,334)
29,090
103,167
401
(11,506)
(4,274)
-
(42,837)
73,377
-
-
(127,020)
14,760
103,568
(76,827)
2,092
158,779
84,043
-
17
17
(30,388)
(5,096)
194,263
158,779
The notes on pages 55 to 91 form part of these Financial Statements
_____________________________________________________________________________________________________
60
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1. ACCOUNTING POLICIES
Domicile
Adaptimmune Therapeutics plc is registered in England and Wales. Its registered office is 60 Jubilee Avenue, Milton Park,
Abingdon, Oxfordshire OX14 4RX.
The Company and its subsidiaries (the “Group”) are a clinical-stage biopharmaceutical group focused on novel cancer
immunotherapy products based on its T-cell receptor platform. It has developed a comprehensive proprietary platform that
enables it to identify cancer targets, find and genetically engineer T-cells receptors, or TCRs, and produce TCR therapeutic
candidates for administration to patients. The Group engineers TCRs to increase their affinity to cancer specific peptides in
order to destroy cancer cells in patients.
The Group is subject to a number of risks similar to other biopharmaceutical companies in the early stage, including, but not
limited to, the need to obtain adequate additional funding, possible failure of preclinical programmes or clinical trials, the
need to obtain marketing approval for its TCR therapeutic candidates, competitors developing new technological
innovations, the need to successfully commercialize and gain market acceptance of the Group’s TCR therapeutic candidates,
and protection of proprietary technology. If the Group does not successfully commercialize any of its TCR therapeutic
candidates, it will be unable to generate product revenue or achieve profitability. As at 31 December 2017, the Group had
retained losses of approximately $176.8 million.
Statement of Compliance
The consolidated financial statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the EU and in compliance with IFRSs issued by the IASB.
The separate financial statements of the Company are drawn up in accordance with the Companies Act 2006 and Financial
Reporting Standard 101. On publishing the parent company financial statements here together with the group financial
statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual
income statement, cash flow statement and related notes that form a part of these approved financial statements.
Basis of Preparation
The financial statements have been prepared on the historical cost basis except as required by the accounting standards. The
consolidated financial statements of Adaptimmune Therapeutics plc and its subsidiaries, Adaptimmune Limited and
Adaptimmune LLC and the financial statements for Adaptimmune Therapeutics plc included herein are for the years ended
31 December 2017 and 2016.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
_____________________________________________________________________________________________________
61
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1 ACCOUNTING POLICIES (CONTINUED)
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the Strategic Report on pages 10 to 29. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the primary statements and notes of this set of financial statements. In addition, note 21
includes the Group’s objectives, policies and processes for managing its capital and its financial risk management objectives.
After making enquiries and considering the Group’s business activities, together with the factors likely to affect its future
development, performance and position, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
Management Estimates and Judgements
The preparation of the financial statements in conformity with IFRSs requires management to make judgements, estimates
and assumptions. These judgements, estimates and assumptions affect the reported amounts of assets and liabilities as well as
income and expenses in the financial statement provided.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. The actual outcome is not expected to differ significantly
from the estimates and assumptions made.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or the period of revision and future periods
if this revision affects both current and future periods.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into
consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is
transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control ceases.
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign
exchange rate in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are retranslated to the functional currency at the foreign exchange rate in effect at that date. Foreign
exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated
to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations are translated to the Group’s presentational currency, pounds sterling, at foreign
exchange rates in effect at the balance sheet date. The revenues and expenses of foreign operations are translated at an average
rate for the year where this rate approximates to the foreign exchange rates in effect at the dates of the transactions. Exchange
differences arising from this translation of foreign operations are reported as an item of other comprehensive income and
accumulated in the exchange reserve.
_____________________________________________________________________________________________________
62
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1
ACCOUNTING POLICIES (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated at their purchase cost, together with any incidental expenses of acquisition, less
accumulated depreciation.
Depreciation is calculated so as to write off the cost of the assets less their estimated residual values, on a straight line basis
over the expected useful economic lives of the assets concerned. Depreciation is not charged on construction in progress until
the asset is completed and ready for its intended use.
The following table shows the generally applicable expected useful economic life for each category of asset:
Computer equipment
Laboratory equipment
Office equipment
Leasehold improvements
3 to 5 years
5 years
5 years
the shorter of the estimated useful life and the expected duration of the lease
Intangibles
Research and development
Expenditure on research activities is recognized in the income statement as incurred. Development costs are capitalised only
after technical and commercial feasibility of the asset for sale or use have been established. When making this determination
the Group considers:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits can be demonstrated;
the availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortization and any
accumulated impairment losses.
If the development costs do not meet the criteria for capitalization, the costs are recognized in the income statement as
incurred.
The Group currently does not have any development projects which have met the above criteria.
Acquired in-process research and development
Acquired research and development intangible assets, which are still under development, such in-licensed or acquired
compounds, are recognized as In-Process Research & Development (IPR&D). IPR&D assets are stated at their purchase
cost, together with any incidental expenses of acquisition.
IPR&D assets are not amortized, but evaluated for potential impairment on an annual basis or when facts and circumstances
warrant. Impairment charges are recorded in the research & development within the consolidated income statement.
Software licenses
Acquired computer software licences are capitalised as intangibles assets and stated at costs incurred to acquire and bring to
use the specific software. These costs are amortised over their estimated useful lives.
_____________________________________________________________________________________________________
63
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1
ACCOUNTING POLICIES (CONTINUED)
Investment in Subsidiaries
Investments in subsidiary undertakings are stated at cost less any impairment. Where management identify uncertainty over
such investments, the investment is impaired to an estimate of its net realisable value.
Clinical Materials
Clinical materials with alternative use, which are not held for sale are capitalised as either other current assets or other non-
current assets, depending on the timing of their expected consumption.
Non-Derivative Financial Instruments:
The Group classifies non-derivative financial assets into the following categories: financial assets at FVTPL (fair value
through profit and loss), held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. Non-
derivative financial liabilities are classified into the following categories: financial liabilities at FVTPL and other financial
liabilities.
As of 31 December 2017, the Group has available-for-sale financial assets, receivables and other liabilities.
Available-For-Sale Financial Assets
Available-for-sale financial assets are initially measured at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, they are measured at fair value and changes other than impairment losses, interest income
and foreign currency differences on debt instruments are recognised in other comprehensive income and accumulated in the
fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit and
loss.
Available-for-sale financial assets with a maturity at acquisition of less than three months are categorized as cash
equivalents.
Our investment in available-for-sale financial assets are subject to credit risk. The Group’s investment policy limits
investments to certain types of instruments, such as money market instruments and corporate debt securities, places
restrictions on maturities and concentration by type and issuer and specifies the minimum credit ratings for all investments
and the average credit quality of the portfolio.
Trade and Other Receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method, less any impairment losses.
Other Financial liabilities
Other financial liabilities are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances, short-term deposits and available-for-sale financial assets with maturities
of three months.
_____________________________________________________________________________________________________
64
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1
ACCOUNTING POLICIES (CONTINUED)
The Group is required to disclose information on all assets and liabilities reported at fair value that enables an assessment
of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the
observable nature of those inputs. The hierarchy defines three levels of valuation inputs:
Level 1 — Quoted prices in active markets for identical assets or liabilities
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly
Level 3 — Unobservable inputs that reflect the Group’s own assumptions about the assumptions market participants
would use in pricing the asset or liability
The carrying amounts of the Group’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and
accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of
available-for-sale financial assets, which are measured at fair value on a recurring basis is detailed in Note 21.
Impairment Excluding Inventories and Deferred Tax Assets:
Financial Assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash
flows of that asset that can be estimated reliably. If any such evidence exists, the amount of the impairment is determined as
follows:
Available-For-Sale Financial Assets
When a decline in fair value of an available-for-sale financial asset has been recognized in other comprehensive
income and there is objective evidence that the asset is impaired, the cumulative loss that has been recognized in
other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. The
amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the
acquisition cost (net of any principal repayment and amortisation) and current value, less any impairment loss on
that financial asset previously recognized in the profit or loss. If in a subsequent period, the fair value of a debt
instrument classified as available-for-sale increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the
amount of the reversal recognised in the profit or loss.
Financial Assets Measured At Amortised Cost (Including Receivables)
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Interest on the impaired asset continues to be recognised through the unwinding of
the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Non-Financial Assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use,
the recoverable amount is estimated each period at the same time.
_____________________________________________________________________________________________________
65
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1 ACCOUNTING POLICIES (CONTINUED)
Revenue
Revenue is recognized to the extent that the Group obtains the right to consideration in exchange for its performance and is
measured at the fair value of the consideration received excluding Value-Added Tax (VAT). If a payment is for multiple
deliverables, then an allocation of the fair value of each deliverable is assessed based on available evidence, judgment is
required to attribute the fair value to the various elements.
Where a deliverable has only been partially completed at the balance sheet date, revenue is calculated by reference to the
value of services performed as a proportion of the total services to be performed for each deliverable or on a straight-line
basis if the pattern of performance cannot be estimated. The amount of revenue recognized is limited to non-refundable
amounts already received or reasonably certain to be received. We consider payments reasonably certain to be received at
the point that satisfactory criteria are agreed with GSK. Where payments are received from customers in advance of services
provided, the amounts are recorded as deferred income and included within current liabilities or non-current liabilities,
depending on when the services are expected to be delivered.
We regularly review and monitor the performance of the GSK Agreement in terms of the period of time over which the
revenue is deferred based on facts known at the time. If circumstances arise that may change the original estimates of progress
toward completion of a deliverable, then estimates are revised. These revisions may result in increases or decreases in
estimated revenues and are reflected in income in the period in which the circumstances that give rise to the revision become
known to management. This typically does not result in a significant impact on revenue recognized. However in September
2017, up on the exercise of the NY-ESO option, the estimate of the period of time over which the revenue is deferred has
significantly reduced, resulting in an increase in revenue amortization of $17.5 million. Management estimates that all
deferred revenue, totalling $38.7 million, will now be amortized within 12 months.
Operating Leases
Costs in respect of operating leases are charged to the income statement on a straight line basis over the lease term. There
are no assets currently held under finance leases.
Research and Development Expenditure
Research and development expenditure includes direct and indirect costs of these activities, including staff costs and
materials, as well as external contracts. All such expenditure is expensed as incurred unless the capitalisation criteria of
International Accounting Standard 38, ‘Intangible Assets’ have been satisfied.
Pension Costs
The Group operates a defined contribution pension scheme for its executive directors and employees. The contributions to
this scheme are expensed to the Income Statement as they fall due.
Government Grants
Government grants are recognised as other income over the period necessary to match them with the related costs when there
is reasonable assurance that the Group will comply with any conditions attached to the grant and the grant will be received.
Share-Based Payments
The Group operates equity-settled, share-based compensation plans. Certain employees of the Group are awarded options
over the shares in the parent company. The fair value of the employee services received in exchange for these grants of
options is recognised as an expense, using the Black-Scholes option-pricing model, with a corresponding increase in
reserves. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options
granted and assumptions about the number of options that are expected to vest. The Group has analysed historic forfeiture
rates for share options and determined approximately 3% of options granted are not expected to vest due to forfeitures.
_____________________________________________________________________________________________________
66
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
1 ACCOUNTING POLICIES (CONTINUED)
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the current or prior years, using tax
rates enacted or substantively enacted at the balance sheet date.
Current tax includes tax credits form the U.K and U.S. taxing authorities, including the U.K. research and development tax
credit regime applicable to small and medium sized companies, the U.K. (the “U.K. SME Tax Credit”), the U.S. Research
Tax Credit and the U.S. Orphan Drug Credit. The tax credits for each period are estimated based on calculations that conform
to the applicable tax regulations. Receipts under the U.K. R&D expenditure credit (“RDEC”) scheme, which may be
reimbursed and are similar in nature to grant income, are presented within other income.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
Dividends
Dividends received from subsidiary undertakings are accounted for when received. Dividends paid are accounted for in the
period when they are paid.
Earnings per Share
Basic loss per share is determined by dividing net loss attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the period. Diluted loss per share is determined by dividing net loss attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, adjusted for the
dilutive effect of all potential ordinary shares that were outstanding during the period. Potentially dilutive shares are
excluded from the when the effect would be to increase diluted earnings per share or reduce diluted loss per share.
The effects of 70,374,832 potentially dilutive equity instruments have been excluded from the diluted loss per share
calculation because they would have an antidilutive effect on the loss per share for the period (2016: 45,882,791 shares)
Adopted IFRS Not Yet Applied
The following standards and interpretations have been issued but are not yet effective and therefore have not been applied
in these financial statements.
IFRS 15, Revenue from Contracts with Customers (mandatory for year commencing on or after 1 January 2018) (“IFRS
15”)
IFRS 9, Financial Instruments (mandatory for year commencing on or after 1 January 2018) (“IFRS 9”)
IFRS 16, Leases (mandatory for year commencing on or after 1 January 2019) (“IFRS 16”)
The Group is currently evaluating the impact of adopting IFRS 9 and IFRS 16.
_____________________________________________________________________________________________________
67
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
Impact of adopting IFRS 15
The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. To achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Group intends to adopt the guidance using the modified retrospective approach, with the cumulative effect of initially
applying the guidance recognized at the date of initial application, with effect from 1 January 2018. The Group’s assessment
of the impact of the guidance is complete and the adoption of IFRS 15 will have a material impact on the Group’s
consolidated financial statements due to the following:
Under the GSK Collaboration and License Agreement, the Group will receive milestone payments in the
future upon achievement of specified development milestones. These milestones are currently recognized as
revenue recognized over the period during which we are delivering services to GSK when they are received
or reasonably certain to be received. IFRS 15 requires an entity to estimate the amount of consideration to
which the entity will be entitled in exchange for transferring the promised goods or services to a customer.
This includes an estimate of variable consideration to the extent that it is probable that a significant reversal
in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the
variable consideration is subsequently resolved. This results in certain milestone payments being recognized
earlier under IFRS 15 than under existing guidance, if it is considered probable that the milestone will be
achieved.
Where a deliverable has only been partially completed at the balance sheet date, revenue is calculated by
reference to the value of services performed as a proportion of the total services to be performed for each
deliverable or on a straight-line basis if the pattern of performance cannot be estimated. IFRS 15 requires an
entity to recognize revenue using a measure of progress that depicts the transfer of control of the goods or
services to the customer. We consider that an input measure, such as costs incurred, relative to the total
expected inputs will be the appropriate measure to depict the transfer of control of the services under the GSK
Collaboration and License Agreement, which impacts the timing of our revenue from the GSK Collaboration
and License Agreement.
Due to these factors, the cumulative effect of adopting the guidance on our financial statements at 1 January 2018 is estimated
to be a credit to retained losses and corresponding decrease in deferred revenue of approximately $9 million.
IFRS 15 requires an entity to provide financial statement users with sufficient information to understand the nature, amount,
timing and uncertainty of revenue and cash flows arising from contracts with customers. To help achieve this objective,
IFRS 15 requires certain quantitative and qualitative disclosures, which will be more extensive than our current revenue
disclosures.
_____________________________________________________________________________________________________
68
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
2 REVENUE & SEGMENTAL REPORTING
Group
Revenue represents recognised income from collaboration agreements.
During the years ended 31 December 2017 and 2016 revenue was derived from one customer and the Directors believe that
there is only one operating segment.
For the year ended 31 December
Revenue
2017
$’000
37,833
2016
$’000
14,198
Revenue represents recognized income from the GSK Collaboration and License Agreement which requires the Group to
provide multiple deliverables to GSK. The GSK Collaboration and License Agreement related to up to five target programs,
the first of which was the NY-ESO SPEAR T-cell program. On 7 September 2017, and by way of an amendment agreement
(the “Amendment”), GSK exercised its option to obtain an exclusive license to research, develop, and commercialize the
Group’s NY-ESO SPEAR T-cell therapy program. The Amendment also specified the activities required to transition the
NY-ESO SPEAR T-cell program to GSK. Transition of the program is targeted for completion during 2018.
The exercise of the NY-ESO option and the Amendment has been accounted for as a modification of an existing arrangement.
As of 7 September 2017, we have accounted for the modified arrangement as a multiple-element arrangement consisting of
the following deliverables under the GSK Collaboration and License Agreement (i) an exclusive license to research, develop,
and commercialize the Group’s NY-ESO SPEAR T-cell therapy program, (ii) the transitional development program for the
NY-ESO Spear T-cell performed during the transition period, (iii) additional transitional services, when and if required by
GSK and reimbursed when performed and (iv) the development of, and option to obtain an exclusive license to a second
target, PRAME. As provided under the GSK Collaboration and License Agreement, GSK continues to have the right to
nominate three additional target peptides, excluding any targets on which work is already under way. No further targets can
be nominated until after full payment of the option exercise fee for the NY-ESO program. Management does not consider
this to be a deliverable at 7 September 2017, because it represents a substantive option not priced at a significant and
incremental discount. After the transition, GSK will assume responsibility for all NY-ESO-related activities.
Upon modification, the non-contingent arrangement consideration was allocated between the separate deliverables using the
Group’s best estimate of the relative fair value. In determining the best estimate, the Group considered internal pricing
objectives it used in negotiating the GSK Collaboration and License Agreement and the Amendment, together with internal
data regarding the cost and margin of providing services for each deliverable taking into account the different stage of
development of each development program.
Under the GSK Collaboration and License Agreement, the Group received an upfront payment of $42.1 million in June 2014
and has achieved non-substantive development milestones of $49.3 million, of which $10.3 million were achieved in the
year ended 31 December 2017. Upon exercise of the NY-ESO option, the Group is entitled to receive an option exercise
fee of £30 million (approximately $38 million), of which $26.6 million was received in September 2017 and the remainder
is payable upon transition of the program to GSK, which is expected to occur during 2018. The Group is entitled to further
non-substantive milestone payments based on the achievement of development milestones by the Group relating to the NY-
ESO SPEAR T-cell program. In addition to the development milestone payments due in relation to the NY-ESO SPEAR
T-cell program, the Group is also entitled to non-substantive milestone payments based on achievement of development
milestones under the PRAME SPEAR T-cell program, the second target program nominated by GSK under the GSK
Collaboration and License Agreement.
The Group will also be entitled to further development and commercialization milestone payments based on achievement of
specified milestones by GSK. The Group is entitled to royalties from GSK on all GSK sales of TCR therapeutic products
licensed under the GSK Collaboration and License Agreement, varying between a mid-single-digit percentage and a low-
double-digit percentage of net sales. Sales milestones also apply once any TCR therapeutic covered by the GSK
Collaboration and License Agreement is on the market.
_____________________________________________________________________________________________________
69
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
2 REVENUE & SEGMENTAL REPORTING (CONTINUED)
The revenue allocated to the exclusive license to research, develop, and commercialize the Group’s NY-ESO SPEAR T-cell
therapy program will be recognized as revenue upon commencement of the exclusive license, which occurs on completion
of defined transition activities and transition of sponsorship of clinical programs to GSK. The revenue allocated to the
transitional development program for the NY-ESO Spear T-cells and the development of, and option to obtain an exclusive
license to a second target, PRAME is recognized using the proportional performance model in revenue systematically over
the period in which the Group is delivering services under the GSK Collaboration and License Agreement, which is
determined to be the estimated duration of the development activities to be performed by Adaptimmune under the GSK
Collaboration and License Agreement.
Management regularly reviews and monitors the performance of the GSK Collaboration and License Agreement to
determine the period over which the Group will be delivering services to GSK: and when a change in facts or circumstances
occurs, the estimated is adjusted and the revenue is recognized based on the revised estimate. The difference between the
cumulative revenue recognized based on the previous estimate and the revenue recognized based on the revised estimate is
recognized as an adjustment to revenue in the period in which the change in estimate occurs. Upon the exercise of the NY-
ESO option, the estimate of the period over which the Group will be delivering services to GSK in relation to the NY-ESO
Spear T-Cell development program has significantly reduced, resulting in an increase in revenue amortization of $17.5
million in September 2017. Management estimates that all deferred revenue, totalling $38.7 million, will now be amortized
within 12 months.
The GSK Collaboration and License Agreement is effective until all payment obligations expire. The GSK Collaboration
and License Agreement can also be terminated on a collaboration program-by-collaboration program basis by GSK for lack
of feasibility or inability to meet certain agreed requirements. Both parties have rights to terminate the GSK Collaboration
and License Agreement for material breach upon 60 days’ written notice or immediately upon insolvency of the other party.
GSK has additional rights to terminate either the GSK Collaboration and License Agreement or any specific license or
collaboration program on provision of 60 days’ notice to us. The Group also has rights to terminate any license where GSK
ceases development or withdraws any licensed TCR therapeutic in specified circumstances.
Geographic information
Noncurrent assets (excluding intangibles, financial instruments, and deferred tax) based on geographic location:
As of 31 December
United Kingdom
United States
2017
$’000
22,786
17,893
40,679
2016
$’000
15,719
12,180
27,899
Clinical materials of $4,695,000 and 2,580,000, included within non-current assets as of 31 December 2017 and 2016,
respectively, are not included within the table above because they can easily be transferred between geographic location.
All revenues for the years ended 31 December 2017 and 2016 originated in the U.K.
3 OTHER INCOME
Group
For the year ended 31 December
Income from government grants
U.K. research and development expenditure credit
Reimbursement of certain equity issuance costs
2017
$’000
150
981
450
1,581
2016
$’000
414
1,022
485
1,921
_____________________________________________________________________________________________________
70
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
EXPENSES AND AUDITOR’S REMUNERATION
4
Group
For the year ended 31 December
Operating loss is stated after charging/(crediting):
Operating lease charges:
Other than Plant & Machinery
Realized foreign exchange losses
Depreciation of owned property, plant and equipment (note 9)
Amortisation of intangibles (note 10)
Loss on disposal of assets
Other expenses include amounts receivable by the Group’s auditor and its associates
in respect of:
Audit of the annual financial statements
Audited-related fees
Tax fees
All other fees
STAFF NUMBERS AND COSTS
5
Group
2017
$’000
2016
$’000
3,617
652
5,032
391
194
193
110
-
6
2,255
312
3,126
160
122
360
352
-
-
The average number of persons employed by the Group (including Directors) during the period, analysed by category, was
as follows:
For the year ended 31 December
2017
2016
Research & Development
Management & Administration
The aggregate staff costs of these persons were as follows:
For the year ended 31 December
Wages and salaries
Social security costs
Share based payment – fair value of employee services (note 23)
Pension costs – defined contribution (note 22)
260
70
330
2017
$’000
33,830
2,907
9,357
1,264
47,358
210
56
266
2016
$’000
26,265
2,228
9,044
976
38,513
_____________________________________________________________________________________________________
71
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
DIRECTORS’ REMUNERATION
6
Group
For the year ended 31 December
Directors’ emoluments
2017
$’000
2016
$’000
975
662
Directors' emoluments include employer social security contributions of $94,000 (2016: $79,000).
Total Directors’ pension contributions for the period were $nil (2016: $5,000).
No retirement benefits are accruing to Directors (2016: none) under the Group’s pension schemes. No Directors (2016:
none) exercised share options in the parent company during the period.
For the year ended 31 December
Highest paid Director
Aggregate emoluments and benefits
2017
$’000
2016
$’000
877
629
(Excluding gains on exercise of share options and value of shares received under long term incentive schemes)
The highest paid Director’s pension contributions for the year ended 31 December 2017 were $nil (2016: $5,000). The
highest paid Director exercised no share options in the period (2016: nil)
FINANCE INCOME AND EXPENSE
7
Group
Finance income recognised in the income statement:
For the year ended 31 December
Net unrealized foreign exchange gains
Interest income on available-for-sale financial assets
Interest income on cash, cash equivalents and short-term deposits
Finance expense recognised in the income statement:
For the year ended 31 December
Amortization and accretion of available-for-sale financial assets
Other
2017
$’000
5,043
2,230
7,273
2017
$’000
507
22
529
2016
$’000
1,314
1,110
2,424
2016
$’000
-
-
-
_____________________________________________________________________________________________________
72
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
TAXATION CREDIT
8
Group
Recognised in the income statement:
For the year ended 31 December
Current tax income:
U.K. R&D tax credit
U.S. corporation tax
Adjustments in respect of prior periods
Total tax credit recognized in income statement
Reconciliation of Effective Tax Rate
2017
$’000
9,566
(452)
30
9,144
2016
$’000
5,869
(892)
-
4,977
The total tax credit is lower (2016: lower) than the standard rate of corporation tax in the U.K. The differences are
explained below:
For the year ended 31 December
Loss before tax
Tax at the U.K. corporation tax rate of 19.25% (2016: 20%)
Non-deductible expenses
Deferred taxes not recognised
Difference in tax rates
Additional allowance in respect of enhanced R&D relief
Surrender of tax losses for R&D tax credit refund
Other
2017
$’000
2016
$’000
80,452
73,776
15,485
631
(9,966)
(1,071)
6,954
(3,011)
123
9,144
14,755
(144)
(10,439)
(1,870)
4,714
(2,410)
371
4,977
At 31 December 2017, there are accumulated tax losses for carry forward in the U.K. of $129,500,000 (31 December 2016:
$85,961,000) and U.S. tax credit carryforwards of $205,000. Unsurrendered U.K. tax losses can be carried forward
indefinitely to be offset against future taxable profits, however this is restricted to an annual £5 million allowance in each
standalone company or group and above this allowance, there will be a 50% restriction in the profits that can be covered by
losses brought forward. U.S. tax credit carryforwards can be carried forward for 20 years.
No deferred tax asset is recognised in respect of accumulated tax losses on the basis that suitable future trading profits are
not sufficiently certain.
The effective U.K. corporate tax rate for the years ended 31 December 2017 and 2016 was 19.25% and 20%, respectively.
Reductions to the U.K. corporation tax rate to 18% (effective from 1 April 2020) was substantively enacted on 26 October
2015, and an additional reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016.
The U.S. corporate tax rate for the years ended 31 December 2017 and 2016 was 34%. This rate has decreased to 21% for
the year ending 31 December 2018 due to U.S. tax reforms which were enacted in December 2017. We believe that other
aspects of U.S. tax reforms will not have a significant impact on our income taxes.
_____________________________________________________________________________________________________
73
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
PROPERTY, PLANT & EQUIPMENT
9
Group
Computer
Equipment
$’000
Office
Equipment
$’000
Laboratory
Equipment
$’000
$
Leasehold
Improvements
$’000
Cost
At 1 January 2016
Additions
Disposals
Effect of foreign currency translation
At 31 December 2016
Additions
Disposals
Effect of foreign currency translation
At 31 December 2017
Depreciation
At 1 January 2016
Charge for period
Disposals
Effect of foreign currency translation
At 31 December 2016
Charge for period
Disposals
Effect of foreign currency translation
At 31 December 2017
Carrying value
At 1 January 2016
At 30 At 31 December 2016
At 30 At 31 December 2017
1,182
876
-
(154 )
1,904
702
-
100
2,706
226
434
-
(55 )
605
643
-
54
1,302
956
1,299
1,404
258
48
-
(41 )
265
558
-
35
858
49
42
-
(10 )
81
78
-
8
167
209
184
691
11,016
2,448
-
(2,041 )
11,423
6,118
-
1,204
18,745
1,513
2,241
-
(436 )
3,318
2,752
-
430
6,500
9,503
8,105
12,245
Leasehold improvement includes $0.4 million (2016: $14.3 million) of assets under construction.
Total
$’000
15,234
20,216
(173 )
(2,855 )
32,422
16,643
(1,373 )
2,451
50,143
2,009
3,126
(51 )
(561 )
4,523
5,032
(629 )
538
9,464
2,778
16,844
(173 )
(619 )
18,830
9,265
(1,373 )
1,112
27,834
221
409
(51 )
(60 )
519
1,559
(629 )
46
1,495
2,557
18,311
26,339
13,225
27,899
40,679
_____________________________________________________________________________________________________
74
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
INTANGIBLES
10
Group
Cost
At 1 January 2016
Additions
Effect of foreign currency translation
At 31 December 2016
Additions
Effect of foreign currency translation
At 31 December 2017
Amortization
At 1 January 2016
Charge for period
Effect of foreign currency translation
At 31 December 2016
Charge for period
Effect of foreign currency translation
At 31 December 2017
Carrying value
At 1 January 2016
At 31 December 2016
At 31 December 2017
Licensed
technology
$’000
In-process
R&D
$’000
Computer
Software
$’000
-
195
(12)
183
-
17
200
-
11
-
11
23
2
36
-
172
164
2,464
2,995
(834)
4,625
939
503
6,067
-
-
-
-
-
-
-
2,464
4,625
6,067
399
1,084
(173)
1,310
369
110
1,789
94
149
(29)
214
368
34
616
305
1,096
1,173
Total
$’000
2,863
4,274
(1,019)
6,118
1,308
630
8,056
94
160
(29)
225
391
36
652
2,769
5,893
7,404
On 25 November 2015, the Group entered into a Research, Collaboration and License Agreement relating to gene editing
and Human Leukocyte Antigen (“HLA”) engineering technology with Universal Cells, Inc. (“Universal Cells”). The Group
paid an upfront license and start-up fee of $2.5 million to Universal Cells in November 2015, a milestone payment of $3.0
million in February 2016 and further milestone payments of $0.9 million in 2017. Further milestone payments of up to
$43.5 million are payable if certain development and product milestones are achieved.
_____________________________________________________________________________________________________
75
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
INVESTMENTS IN SUBSIDIARIES
11
Company
Cost and carrying value
At 1 January 2016
Capital contributions in respect of share-based payment transactions
At 31 December 2016
Capital contributions in respect of share-based payment transactions
At 31 December 2017
The Company has the following (direct or indirect) interest in subsidiary undertakings:
Proportion
Held
100%
Name of Company
Adaptimmune Limited
Country of
Incorporation
England and
Wales
Holding
Ordinary shares
of £0.001
$’000
90,352
7,308
97,660
7,167
104,827
Nature of Business
Biotechnology Research &
Development
Adaptimmune LLC
United States of
America
Ordinary Shares
of $1
100%
Biotechnology Research &
Development
OTHER NON-CURRENT RECEIVABLES
12
Company
As of 31 December
Amounts owed from group undertakings
2017
$’000
269,619
2016
$’000
166,635
Amounts owed from group undertakings arise due to a five year U.S. dollar denominated unsecured loan, which accrues
interest at a rate of 2.38% per annum.
RESTRICTED CASH
13
Group
As of 31 December 2017 and 2016, the Group had restricted cash of $4,253,000 and $4,017,000, respectively, relating to
security deposits for letters of credit relating to leased properties.
OTHER CURRENT ASSETS
14
Group
As of 31 December
Prepayments
Clinical materials
Other current assets
2017
$’000
6,120
3,760
9
9,889
2016
$’000
7,610
1,193
-
8,803
_____________________________________________________________________________________________________
76
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
TRADE & OTHER RECEIVABLES
15
Group
As of 31 December
Trade receivables
Other receivables
Company
As of 31 December
Amounts owed from group undertakings
Other debtors
2017
$’000
206
373
579
2017
$’000
4,382
-
4,382
2016
$’000
1,480
748
2,228
2016
$’000
378
22
400
Amounts owed from group undertakings are trading balances, which are unsecured and have no fixed date of repayment.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
16
Group
As of 31 December
Deposits held in pounds sterling
Deposits held in U.S. dollars
CASH AND CASH EQUIVALENTS
17
Group
As of 31 December
Cash and cash equivalents held in pounds sterling
Cash and cash equivalents held in U.S. dollars
2017
$’000
-
-
-
2017
$’000
42,166
41,877
84,043
2016
$’000
3,082
19,612
22,694
2016
$’000
35,020
123,759
158,779
The Group’s policy for determining cash and cash equivalents is to include all cash balances, short-term deposits and
investments with original maturities of three months or less.
When the Group assesses its liquidity position it includes cash and cash equivalents as well as short-term investments.
_____________________________________________________________________________________________________
77
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
CAPITAL AND RESERVES
18
Group and Company
Share capital
As of 31 December
Allotted, called up and fully paid
562,119,334 (As of 31 December 2016: 424,775,092) Ordinary shares of 0.1p
each
Ordinary shares
2017
$’000
2016
$’000
854
683
Each holder of ordinary shares is entitled to one vote, on a show of hands and one vote per share on a poll, at general meetings
of the Company. On the winding up of the Company, the assets of the Company available for distribution to holders
remaining after payment of all other debts and liabilities of the Company shall be paid to the shareholders in proportion to
the number of shares held by each of them. The payment of dividends by Adaptimmune Therapeutics plc is governed by
U.K. law.
Effective from 21 June 2017, the Directors have the authority to allot new ordinary shares or to grant rights to subscribe for
or to convert any security into ordinary shares in the Company up to a maximum aggregate nominal amount of £140,000.
This authority runs for five years and will expire on 20 June 2022. Effective from 21 June 2017, the Directors also have the
authority to allot ordinary shares for cash or to grant rights to subscribe for or to convert any security into ordinary shares in
the Company without first offering them to existing shareholders in proportion to their existing holdings up to an aggregate
maximum nominal amount of £140,000. This power will expire at the end of the Annual General Meeting of the Company
to be held in 2019.
Underwritten public offering
On 27 March 2017, the Company completed an underwritten public offering of the Company’s American Depositary Shares
(“ADSs”). The Company sold 15,700,223 ADSs (representing 94,201,338 ordinary shares) at a price to the public of $4.20
per ADS. The net proceeds were $61,397,000 after deducting offering expenses of $4,544,000.
Registered direct offering
On 10 April 2017, the Company completed a registered direct offering of the Company’s ADSs following its entry into a
definitive agreement with Matrix Capital Management Company, LP. The Company sold 7,000,000 ADSs (representing to
42,000,000 ordinary shares) at a price of $6.00 per ADS. The net proceeds were $41,770,000 after deducting offering
expenses of $230,000.
Dividends
No dividends were paid or declared in the years ended 31 December 2017 and 2016.
Capital Management Policy
The Group manages the operating cash outflow through its budgeting process, and looks to raise sufficient funds from revenue
and equity to cover these outflows.
_____________________________________________________________________________________________________
78
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
18
CAPITAL AND RESERVES (CONTINUED)
Nature and purpose of reserves
Exchange reserve
The exchange reserve comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations.
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the
assets are derecognized or impaired.
Other reserve
The other reserve has arisen as a result of the company reorganization described above.
NON-CURRENT TRADE AND OTHER PAYABLES
19
Group
As of 31 December
Deferred income
Accruals
CURRENT TRADE AND OTHER PAYABLES
20
Group
As of
Trade payables
Other taxation and social security
Deferred income
Accruals
31
December
2017
$’000
-
3,849
3,849
31
December
2016
$’000
24,962
3,141
28,103
31
December
2017
$’000
31
December
2016
$’000
8,378
6,204
38,735
20,997
74,314
11,698
2,380
11,392
14,069
39,539
_____________________________________________________________________________________________________
79
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
CURRENT TRADE AND OTHER PAYABLES (CONTINUED)
20
Company
As of 31 December
Trade payables
Accruals
2017
$’000
42
524
566
2016
$’000
219
388
607
Amounts owed to group undertakings are unsecured, have no fixed date of repayment, and are interest free.
FINANCIAL INSTRUMENTS
21
Group
Disclosure of financial assets measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement
criteria as of 31 December 2017 are as follows:
Assets:
Available-for-sale financial assets
Corporate debt securities
31 December
2017
$’000
Fair Value Measurements Using
Level 1
$’000
Level 2
$’000
Level 3
$’000
124,218
124,218
-
-
The Group estimates the fair value of available-for-sale financial assets with the aid of a third party valuation service, which
uses actual trade and indicative prices sourced from third-party providers on a daily basis to estimate the fair value. If observed
market prices are not available (for example securities with short maturities and infrequent secondary market trades), the
securities are priced using a valuation model maximizing observable inputs, including market interest rates.
_____________________________________________________________________________________________________
80
Fair
value
$’000
1,480
7,610
748
9,838
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
21
FINANCIAL INSTRUMENTS (CONTINUED)
Disclosure of fair values of financial assets and liabilities :
As of
31 December 2017
31 December 2016
Financial assets not measured at fair value:
Carrying
amount
Fair value
Carrying
amount
$’000
$’000
$’000
Receivables
Trade receivables
Tax receivable
Other receivables
Short-term deposits
Cash and cash equivalents
As of
Financial liabilities not measured at fair
value:
Trade payables
Other taxation and social security
Accruals
Tax payable
=
206
11,454
373
12,033
-
84,043
206
11,454
373
12,033
-
84,043
1,480
7,610
748
9,838
22,694
158,779
22,694
158,779
31 December 2017
31 December 2016
Carrying
amount
$’000
Fair value
$’000
Carrying
amount
$’000
Fair value
$’000
8,378
6,204
24,846
-
39,428
8,378
6,204
24,846
-
39,428
11,698
2,380
14,069
731
28,878
11,698
2,380
14,069
731
28,878
For cash and cash equivalents, short-term investments, trade and other payables and trade and other receivables with a
remaining life of less than one year, the nominal amount is deemed to reflect fair value.
_____________________________________________________________________________________________________
81
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
21
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity Risk
The Group’s treasury policy gives guidance on how much investment should be held with differing counterparties. The cash
utilisation is monitored to provide a lead time for raising further funding.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
effect of netting agreements:
As of
Financial liabilities at amortised cost
Trade payables
Other taxation and social security
Accruals
As of
Financial liabilities at amortised cost
Trade payables
Other taxation and social security
Accruals
Tax payable
Foreign Exchange Risk
Carrying
amount
$’000
31 December 2017
Contractual
cash flows
$’000
8,378
6,204
24,846
39,428
8,378
6,204
24,846
39,428
Carrying
amount
$’000
31 December 2016
Contractual
cash flows
$’000
11,698
2,380
14,069
731
28,878
11,698
2,380
14,069
731
28,878
1 year or
less
$’000
8,378
6,204
20,997
35,579
1 year or
less
$’000
11,698
2,380
14,069
731
28,878
Our surplus cash and cash equivalents are invested in interest-bearing savings, money market funds, corporate debt securities
and commercial paper from time to time. Our investments in corporate debt securities are subject to fixed interest rates. Our
exposure to interest rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates and the fair
market value of our corporate debt securities will fall in value if market interest rates increase. We do not believe an immediate
one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and
therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.
_____________________________________________________________________________________________________
82
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
21
FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets and liabilities in foreign currencies are as follows:
As of 31 December
Financial assets:
Available-for-sale financial assets
Short-term deposits
Cash and cash equivalents
Financial liabilities:
Accruals
Trade payables
2017
Carrying
amount
$’000
124,218
-
36,888
2016
Carrying
amount
$’000
-
19,612
123,758
4,726
6,422
5,366
4,650
A 1% increase in exchange rates would reduce the carrying value of net financial assets and liabilities in foreign currencies at
31 December 2017 by $1,499,000 (At 31 December 2016: $1,388,000).
The results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates,
which could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at
levels appropriate to meet foreseeable expenses in U.S. dollars and pounds sterling. To date, we have not used forward
exchange contracts or other currency hedging products to manage our exchange rate exposure, although we may do so in the
future. The exchange rate as of 31 December 2017, the last business day of the reporting period, was £1.00 to $1.35.
Credit risk
Trade receivables were $0.2 million and $1.5 million as of 31 December 2017 and 2016, respectively. Trade receivables arise
in relation to the GSK Collaboration and License Agreement. We have been transacting with GSK since 2014, during which
time no impairment losses have been recognized. There are no amounts which are past due as of 31 December 2017.
Our cash and cash equivalents are held with multiple banks and we monitor the credit rating of those banks. Our investments
in corporate debt securities and commercial paper are subject to credit risk. Our investment policy limits investments to
certain types of instruments, such as money market instruments, corporate debt securities and commercial paper, places
restrictions on maturities and concentration by type and issuer and specifies the minimum credit ratings for all investments
and the average credit quality of the portfolio.
Market Risk
Market risk is the risk that changes in market prices, such as in interest rates, commodity prices and foreign exchange rates
will affect the Group’s income or the value of its holdings of financial instruments. The Group’s surplus cash and cash
equivalents are invested in interest-bearing savings, money market funds, corporate debt securities and commercial paper
from time to time. The Group’s investments in corporate debt securities are subject to fixed interest rates. The Group’s
exposure to interest rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates and the fair
market value of our corporate debt securities will fall in value if market interest rates increase. We do not believe an immediate
one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and
therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.
_____________________________________________________________________________________________________
83
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
21 FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets and liabilities subject to variable interest rates are as follows:
As of 31 December
2017
Carrying
amount
$’000
2016
Carrying
amount
$’000
Cash and cash equivalents
84,043
158,779
An increase in Bank of England base rates by 0.5 percentage points would increase the net annual interest income applicable
to the cash and cash equivalents as of 31 December 2017 by $420,000 (31 December 2016: $794,000).
The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Group’s operations,
the costs of managing exposure to commodity price risk exceed any potential benefits. The Directors will revisit the
appropriateness of this policy should the Group’s operations change in size or nature. The Group has no exposure to equity
securities price risk as it holds no listed or other equity investments.
EMPLOYEE BENEFITS
22
Group
The Group operates a defined contribution pension scheme for its executive directors and employees. The assets of the scheme
are held separately from those of the company in an independently administered fund. The unpaid contributions outstanding
as of 31 December 2017 were $280,000 (31 December 2016: $191,000). The pension cost charge for the year ended 31
December 2017 was $1,264,000 (2016: $976,000).
SHARE BASED PAYMENTS
23
Group
The Company grants options over ordinary shares in Adaptimmune Therapeutics plc under the following option plans: (i) the
Adaptimmune Therapeutics plc 2015 Share Option Scheme (adopted on 16 March 2015); (ii) the Adaptimmune Therapeutics
plc Company Share Option Plan (adopted on 16 March 2015) and (iii) the Adaptimmune Therapeutics plc Employee Share
Option Scheme (adopted on 14 January 2016).
The Adaptimmune Therapeutics plc Company Share Option Plan is a tax efficient option scheme intended to comply with
the requirements of Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 of the United Kingdom, which provides
for the grant of company share option plan (“CSOP”) options. Grants may not exceed the maximum value of £30,000 per
participant for the shares under the option, which is a CSOP compliance requirement.
_____________________________________________________________________________________________________
84
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
23
SHARE BASED PAYMENTS (CONTINUED)
Generally, the vesting dates for the options granted under these plans up to 31 December 2017 are 25% on the first
anniversary of the grant date and 75% in monthly instalments over the following three years. However, the options granted
to non-executive directors under the Adaptimmune Therapeutics plc 2015 Share Option Scheme vest and become exercisable
as follows:
Options granted to non-executive directors on 11 May
2015:
Immediately on grant date
Options granted to a non-executive director on 23 June
2016:
25% on the first anniversary of the grant date and 75% in
monthly instalments over the following two years
Options granted to non-executive directors on 11
August 2016:
100% on the first anniversary of the grant date
Options granted to non-executive directors on 28
November 2016:
25% on the first anniversary of the grant date and 75% in
monthly instalments over the following two years
Options granted to non-executive directors on 3 July
2017
100% on the first anniversary of the grant date
Options granted under these plans are not subject to performance conditions. The contractual term of options granted under
these plans is ten years.
The maximum aggregate number of options which may be granted under these plans and any incentive plans adopted by the
Company cannot exceed a scheme limit that equates to 8% of the initial fully diluted share capital of the Company
immediately following our IPO plus an automatic annual increase of an amount equivalent to 4% of the issued share capital
on each 30 June (or such lower number as the Board, or an appropriate committee of the Board, may determine). The
automatic increase is effective from 1 July 2016.
Prior to 31 December 2014, the Group granted options to purchase ordinary shares in Adaptimmune Limited under three
option schemes:
(i)
(ii)
The Adaptimmune Limited Share Option Scheme was adopted on 30 May 2008. Under this scheme Enterprise
Management Incentive (“EMI”) options (which are potentially tax-advantaged in the United Kingdom) have been
granted (subject to the relevant conditions being met) to our employees who are eligible to receive EMI options
under applicable U.K. tax law and unapproved options (which do not attract tax advantages) have been granted to
our employees who are not eligible to receive EMI options, and to our directors and consultants. In May 2014, the
Company no longer qualified for EMI status and since that date, no further EMI options were granted under this
scheme; however, unapproved options have been under granted under this scheme since that date.
The Adaptimmune Limited 2014 Share Option Scheme was adopted on 11 April 2014. EMI options were granted
(subject to the relevant conditions being met) under this scheme to our employees who are eligible to receive EMI
options under applicable U.K. tax law. Unapproved options were granted to our employees who are not eligible to
receive EMI options and to directors. In May 2014, the Company no longer qualified for EMI status and since that
date, no further EMI options were granted under this scheme; however, unapproved options have been under
granted under this scheme since that date.
(iii)
The Adaptimmune Limited Company Share Option Plan was adopted on 16 December 2014. This scheme allowed
the grant of options to our eligible employees prior to the corporate reorganization. This scheme is a tax efficient
option scheme and options were granted on 19 December 2014 and on 31 December 2014 to our part-time and
full-time employees.
_____________________________________________________________________________________________________
85
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
23
SHARE BASED PAYMENTS (CONTINUED)
As part of the corporate reorganization in connection with our IPO, the holders of options granted under these schemes over
ordinary shares of Adaptimmune Limited were granted equivalent options on substantially the same terms over ordinary
shares of Adaptimmune Therapeutics plc (“Replacement Options”) in exchange for the release of these options. The
Company does not intend to grant any further options under these schemes.
Generally, the vesting dates for the Replacement Options under the Adaptimmune Limited schemes are:
Options granted in 2009:
Options granted in 2011, 2012, 2013 and April 2014:
100% on the third anniversary of the grant date
25% on the first anniversary of the grant date and 75% in
Options granted in December 2014:
annual instalments over the following three years
25% on the first anniversary of the grant date and 75% in
monthly instalments over the following three years
The contractual life of options granted under these schemes is ten years.
The number and weighted average exercise prices of share options (including grant in the year) are as follows:
For the year ended
2017
2016
Outstanding at start of year
Changes during the period:
Granted
Forfeited
Exercised
Outstanding at the end of the period
Exercisable at the end of the period
Number
49,237,290
29,924,787
(1,142,904)
(3,075,506)
74,943,667
31,449,602
Weighted
average
exercise
price
0.58
0.62
0.19
1.04
0.58
0.51
Number
31,203,477
19,404,373
(1,307,368)
(63,192)
49,237,290
17,167,347
Weighted
average
exercise
price
£0.41
£0.89
£1.04
£0.22
£0.58
£0.41
There were 29,924,787 and 19,404,373 options granted in the year ended 31 December 2017 and 2016, respectively, with a
weighted average fair value of $0.35 and $0.74, respectively.
There were 3,075,506 and 63,192 share options exercised in the year ended 31 December 2017 and 2016. In the years ended
31 December 2017 and 2016 the total intrinsic value of share options exercised was $1,522,000 and $40,000 respectively
and the cash received from exercise of share options was $401,000 and $17,000, respectively. The Group satisfies the
exercise of share options through newly issued shares.
_____________________________________________________________________________________________________
86
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
23
SHARE BASED PAYMENTS (CONTINUED)
For options outstanding at 31 December 2017, the range of exercise prices and weighted average remaining contractual life
are as follows:
Exercise Price
Total Share
£0 – £0.25
£0.26 – £0.50
£0.51 – £0.75
£0.76 – £1.00
£1.01 – £1.50
£1.51 – £2.00
Total
Options
9,224,274
9,694,008
38,859,727
13,986,392
2,313,651
865,615
74,943,667
Outstanding
Weighted-Average
Remaining
Contractual Life
5.6
7.0
8.7
7.9
8.9
4.9
7.9
Exercisable
Weighted-Average
Total Share
Exercise Price
£0.12
£0.36
£0.58
£0.90
£1.05
£1.82
£0.58
Options
8,508,100
7,477,900
6,615,358
7,405,720
576,909
865,615
31,449,602
Weighted-Average
Exercise Price
£0.12
£0.36
£0.51
£0.91
£1.06
£1.82
0.51
The total charge for the year relating to share based payment plans was $9,357,000 (2016: $9,044,000), all of which related
to equity-settled share based payment transactions.
Options were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair
value calculations. The assumptions used in the fair value calculation for options granted in the year are as follows:
For the year ended
Expected volatility
Expected life (years)
Risk free rate
Expected dividend yield
2017
5 years
66-71%
2016
68-73%
5 years
0.40-0.76%
0.17-1.07%
0%
0%
The expected volatility is based upon a benchmarking study of similar companies with public securities. The expected life
of the option is based on management judgement. The risk free rate is based on the Bank of England’s estimates of gilt yield
curve as at the respective grant dates. Share-based payment expense is recognized for options, which are expected to vest.
The Group has analysed historic forfeiture rates for share options and determined approximately 2% of options granted are
expected to be forfeited.
CAPITAL COMMITMENTS AND CONTINGENCIES
24
Group
As of 31 December
Future capital expenditure contracted but not provided for
2017
$’000
945
2016
$’000
8,093
Future capital expenditure contracted but not provided for predominately relates to leasehold improvements arising on the
fit out of laboratory and office space in Oxfordshire, U.K. and Philadelphia, U.S.
Other commitments
Commitments for clinical materials, clinical trials and contract manufacturing
As of 31 December 2017, the Group had non-cancellable commitments for purchase of clinical materials, executing and
administering clinical trials, and for contract manufacturing of $76,725,000, of which the Group expects to pay
$33,028,000 within one year, $41,214,000 in one to three years, $1,475,000 in three to five years, and $1,008,000 after
five years. The amount and timing of these payments vary depending on the rate of progress of development and clinical
trial enrolment rates.
_____________________________________________________________________________________________________
87
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
24
CAPITAL COMMITMENTS AND CONTINGENCIES (CONTINUED)
Bellicum Pharmaceuticals Inc., Co-Development and Co-Commercialization Agreement
On 16 December 2016, the Group entered into a Co-Development and Co-Commercialization Agreement with Bellicum
Pharmaceuticals, Inc. (“Bellicum”) in order to facilitate a staged collaboration to evaluate, develop and commercialize next
generation T-cell therapies.
Under the agreement, the Group will evaluate Bellicum’s GoTCR technology (inducible MyD88/CD40 co-stimulation, or
iMC) with the Group’s SPEAR T-cells for the potential to create enhanced T-cell therapeutics. Depending on results of the
initial preclinical proof-of-concept phase, the agreement may progress to a two-target co-development and co-
commercialization phase. To the extent necessary, and in furtherance of the parties’ proof-of-concept and co-development
efforts, the parties granted each other a royalty-free, non-transferable, non-exclusive license covering their respective
technologies for purposes of facilitating such proof-of-concept and co-development efforts. In addition, as to covered
therapies developed under the agreement, the parties granted each other a reciprocal exclusive license for the
commercialization of such therapies. During the proof of concept phase, each party bears its own costs and there are no
payments made between the Group and Bellicum. Any research and development costs incurred by the Group with third
parties have been accounted for in accordance with the Group’s accounting policy for research and development expenses.
With respect to any joint commercialization of a covered therapy, the parties agreed to negotiate in good faith the
commercially reasonable terms of a co-commercialization agreement. The parties also agreed that any such agreement
shall provide for, among other things, equal sharing of the costs of any such joint commercialization and the calculation of
profit shares as set forth in the agreement.
The agreement will expire on a country-by-country basis once the parties cease commercialization of the T-cell therapies
covered by the agreement, unless earlier terminated by either party for material breach, non-performance or cessation of
development, bankruptcy/insolvency, or failure to progress to co-development phase.
Merck Combination Agreement
On 27 October 2016, the Group entered into a clinical trial collaboration agreement with Merck & Co., Inc. (“Merck”)
(known as MSD outside the United States and Canada), for the assessment of the NY-ESO SPEAR T-cell therapy in
combination with Merck’s PD-1 inhibitor, KEYTRUDA® (pembrolizumab), in patients with multiple myeloma. Under the
terms of the agreement, each of Merck and the Group will manufacture and supply its relevant compound for use in the
combination study. Each of the Group and Merck are responsible for their own costs incurred in the performance of
obligations under the agreement. Any research and development costs incurred by the Group with third parties have been
accounted for in accordance with the Group’s accounting policy for research and development expenses. The agreement
will last until the earlier of delivery of the final study report or study completion. Either party may terminate the agreement
for material breach, patient safety, regulatory action preventing supply of compound or withdrawal of regulatory approval
for one of the combination study compounds. Merck may also terminate the agreement where it believes its compound is
being used in an unsafe manner. As a result of GSK’s exercise of its option over the NY-ESO SPEAR T-cell program, the
clinical trial and performance obligations covered by the agreement with Merck will transition to GSK at the same time as
other clinical trials using the NY-ESO SPEAR T-cell.
MD Anderson Strategic Alliance
On 26 September 2016, the Group announced that it had entered into a multi-year strategic alliance with The University of
Texas MD Anderson Cancer Center (“MD Anderson”) designed to expedite the development of T-cell therapies for
multiple types of cancer. The Group and MD Anderson are collaborating on a number of studies including clinical and
preclinical development of the Group’s SPEAR T-cell therapies targeting NY-ESO, MAGE-A10 and MAGE-A4 and will
collaborate on future clinical stage first and second generation SPEAR T-cell therapies across a number of cancers.
_____________________________________________________________________________________________________
88
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
24
CAPITAL COMMITMENTS AND CONTINGENCIES (CONTINUED)
MD Anderson Strategic Alliance (continued)
Under the terms of the agreement, the Group has committed at least $19,644,000 to fund studies. Payment of this funding
is contingent on mutual agreement to study orders under the alliance agreement and the performance of set milestones by
MD Anderson. The Group made an upfront payment of $3,412,000 to MD Anderson in the year ended 31 December 2017
and is obligated to make further payments to MD Anderson as certain milestones are achieved. These costs will be
expensed to research and development as MD Anderson renders the services under the strategic alliance.
The agreement may be terminated by either party for material breach by the other party. Individual studies may be
terminated for, amongst other things, material breach, health and safety concerns or where the institutional review board,
the review board at the clinical site with oversight of the clinical study, requests termination of any study. Where any legal
or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.
Universal Cells Research, Collaboration and License Agreement
On 25 November 2015, the Group entered into a Research, Collaboration and License Agreement relating to gene editing
and Human Leukocyte Antigen (“HLA”) engineering technology with Universal Cells, Inc. (“Universal Cells”). The
Group paid an upfront license and start-up fee of $2.5 million to Universal Cells in November 2015, a milestone payment
of $3.0 million in February 2016 and further milestone payments of $0.9 million in 2017. Further milestone payments of
up to $43.5 million are payable if certain development and product milestones are achieved. Universal Cells would also
receive a profit-share payment for the first product, and royalties on sales of other products utilizing its technology. The
upfront and start-up fee and milestones payments are included within intangible assets.
ThermoFisher License Agreement
In 2012, the Group entered into a series of license and sub-license agreements with Life Technologies Corporation, part of
ThermoFisher Scientific, Inc. (“ThermoFisher”) that provide the Group with a field-based exclusive license under certain
intellectual property rights owned or controlled by ThermoFisher. The Group paid upfront license fees of $1.0 million
relating to the license and sublicense agreements and has an obligation to pay minimum annual royalties (in the tens of
thousands of U.S. dollars prior to licensed product approval and thereafter at a level of 50% of running royalties in the
previous year), milestone payments and a low single-digit running royalty payable on the net selling price of each licensed
product. The upfront payment made in 2012 was expensed to research and development when incurred. Subsequent
milestone payments have been recognized as an intangible asset due to the technology having alternative future use in
research and development projects at the time of the payment. The minimum annual royalties have been expensed as
incurred.
On 16 June 2016, the Group entered into a supply agreement with ThermoFisher for the supply of the Dynabeads®
CD3/CD28 technology. The Dynabeads® CD3/CD28 technology is designed to isolate, activate and expand human T-cells,
and is being used in the manufacturing of the Group’s affinity enhanced T-cell therapies. The supply agreement runs until
December 31, 2025. Under the supply agreement the Group is required to purchase its requirements for CD3/CD28 magnetic
bead product exclusively from ThermoFisher for a period of 5 years and there are also minimum purchasing obligations,
which are included within ‘Purchase commitments for clinical materials, clinical trials and contract manufacturing’ set forth
above. ThermoFisher has the right to terminate the supply agreement for material breach or insolvency.
_____________________________________________________________________________________________________
89
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
24 CAPITAL COMMITMENTS AND CONTINGENCIES (CONTINUED)
Commitments under non-cancellable operating leases
The total of future minimum lease payments payable under the entity’s non-cancellable operating leases for each of the
following periods is as follows:
As of 31 December
2017
2016
Within one year
Within two to five years
Over five years
Land and
buildings
$’000
2,886
15,326
15,215
33,427
Other
$’000
-
-
-
-
Land and
buildings
$’000
2,112
12,491
17,983
32,586
Other
$’000
-
-
-
-
The annual charge in the income statement for operating leases was $3,617,000 for the year ended 31 December 2017 (2016:
$2,255,000).
The leases refer to laboratory and office property in Oxfordshire, U.K. and Philadelphia, U.S.
RELATED PARTIES
25
Group
During the periods presented, the Group entered into transactions, in the ordinary course of business, with other related parties.
Transactions entered into and trading balances outstanding as of 31 December 2017 are as follows:
Related Party
$’000
$’000
Invoiced to
related
party*
Purchases
from
related party
Amounts
owed
from related
party
$’000
Amounts
owed
to related
party
$’000
Immunocore Limited
New Enterprise Associates
OrbiMed Advisors LLC
555
-
-
785
1
12
-
-
-
-
-
-
Transactions entered into and trading balances outstanding as of 31 December 2016 are as follows:
Related Party
Immunocore Limited
New Enterprise Associates
OrbiMed Advisors LLC
Invoiced to
related
party*
Purchases
from
related party
$’000
8
-
-
$’000
2,074
49
-
Amounts
owed
from related
party
$’000
-
-
-
Amounts
owed
to related
party
$’000
365
-
-
New Enterprise Associates and OrbiMed Advisors LLC are related parties because they are the beneficial owner of more
than 5% of any class of our voting securities. During the periods presented, New Enterprise Associates has invoiced the
Group for travel expenses of directors David Mott, Ali Behbahani and Elliot Sigal and OrbiMed Advisors, LLC has invoiced
the Group for travel expenses of director Peter Thompson.
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90
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
______________________________________________________________________
25 RELATED PARTIES (CONTINUED)
Immunocore Limited (“Immunocore”)
The Group has historically entered into several agreements with Immunocore Limited (“Immunocore”). During the year
ended 31 December 2017, Immunocore has invoiced the Group in respect of: (i) services provided under a target
collaboration agreement (which terminated on 1 March 2017); (ii) costs relating to prosecution of jointly owned patents; and
(iii) property rents (effective until 1 June 2017).
During the year ended 31 December 2017, all of the Group’s U.K-based research and development and corporate staff moved
into the Group’s new building at Milton Park, Oxfordshire, which comprises laboratory and office space. Consequently, the
Group’s lease from Immunocore of premises formerly used for research and development terminated on 1 June 2017 and
the Group received $550,000 in relation to leasehold improvements, as provided for under the lease. The lease of the Group’s
former corporate office premises was assigned to Immunocore effective from 1 July 2017 in a transaction on arms-length
terms.
As of the closing of the Group’s registered direct offering of its American Depositary Shares on 10 April 2017, Immunocore
held less than 5% of the Group’s shares. Due to several factors including the decrease in share ownership, the termination
of the target collaboration agreement and our lack of common directors, the Group no longer considers Immunocore to be a
related party with effect from 1 January 2018.
Remuneration of Key Management Personnel
The remuneration of the Directors and Executive Officers (excluding non-executive directors), who are the key management
personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24, ‘Related Party
Disclosures’.
For the year ended 31 December
Short-term employee benefits
Share-based payments
2017
$’000
3,332
5,235
8,567
2016
$’000
2,733
5,173
7,906
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91
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2017
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