Adaptimmune Therapeutics plc
Company Number 09338148
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended
31 December 2018
1
Adaptimmune Therapeutics plc
Company Number 09338148
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended
31 December 2018
1
This page intentionally left blank
2
ADAPTIMMUNE THERAPEUTICS PLC
Contents
Page
Directors’ Report
Strategic Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements
Independent Auditor’s Report to the Members of Adaptimmune Therapeutics plc
Consolidated Income Statement
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
7
10
27
49
50
57
58
59
60
61
62
3
ADAPTIMMUNE THERAPEUTICS PLC
This page intentionally left blank
4
ADAPTIMMUNE THERAPEUTICS PLC
COMPANY INFORMATION
DIRECTORS
Mr L M Alleva
Dr A Behbahani
Ms B Duncan
Mr J Furey (Appointed 5 July 2018)
Mr G Kerr
Mr D M Mott
Mr J J Noble
Dr C E Sigal
Dr P A Thompson (Resigned 5 July 2018)
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
5
ADAPTIMMUNE THERAPEUTICS PLC
This page intentionally left blank
6
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REPORT
For the year ended 31 December 2018
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 2018 and 2017, 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 2018 and 2017.
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 the first company to have
a TCR T-cell approved for a solid tumour indication.
RESULTS AND DIVIDENDS
The result for the year is set out in the Consolidated Income Statement on page 57.
The Directors do not propose a dividend (2017: $nil).
CHARITABLE AND POLITICAL CONTRIBUTIONS
No charitable contributions were paid during the year (2017: $nil).
No donations were made during the year to political organisations (2017: $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.
7
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REPORT(CONTINUED)
For the year ended 31 December 2018
DIRECTORS
The following Directors have held office since the dates indicated below.
Mr L M Alleva
Dr A Behbahani
Ms B Duncan
Mr J Furey
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 and re-elected 20 June 2018)
(Appointed 12 February 2015 and re-elected 21 June 2017)
(Appointed 23 June 2016 and re-elected 21 June 2017)
(Appointed 5 July 2018)
(Appointed 1 November 2016 and re-elected 21 June 2017)
(Appointed 12 February 2015 and re-elected 20 June 2018)
(Appointed 3 December 2014 and re-elected 16 June 2016)
(Appointed 12 February 2015 and re-elected 16 June 2016 and 20 June 2018)
(Appointed 12 February 2015 and re-elected 21 June 2017 and resigned 5 July 2018)
(Appointed 14 November 2016 and re-elected 21 June 2017)
During the year ended 31 December 2018, there were six full meetings of the Board of Directors. All of our then Directors
attended a minimum of 75% of the aggregate of the meetings of the Board of Directors and meetings of its committees of
which he or she was a member during 2018, with the exception of Dr Zaks who attended 64% of the meetings. Dr Zaks
had to give apologies for Board and Remuneration Committee meetings in December 2018, due to a clash with the launch
of the IPO of Moderna Inc, of which he is Chief Medical Officer, but he reviewed the Board and Committee papers in
advance and provided feedback to the meetings through the chairman. Mr Furey was appointed to the Board of Directors
and the Remuneration Committee effective from 5 July 2018 and attended 100% of the meetings of the Board of Directors
and of the Remuneration Committee from his appointment date through to the end of 2018. Effective from 5 July 2018,
Dr Thompson stepped down as a member of the Board of Directors. During his service as a director in 2018, Dr Thompson
attended over 75% of the meetings of the Board of Directors and of the Remuneration Committee prior to 5 July 2018.
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.
8
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REPORT(CONTINUED)
For the year ended 31 December 2018
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 26.
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)
so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware;
and
(ii) 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 26 February 2019.
On behalf of the Board
James J Noble
Director
26 February 2019
9
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT
For the year ended 31 December 2018
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 (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 the first company to have
a TCR T-cell approved for a solid tumour indication.
We have three SPEAR T-cells in clinical trials, ADP-A2M10 (MAGE-A10), ADP-A2M4 (MAGE-A4) and ADP-A2AFP
(AFP). All SPEAR T-cells are currently exhibiting acceptable tolerability profiles with no evidence of off-target toxicities
observed.
• Two Phase 1 clinical trials are ongoing with ADP-A2M10. The first clinical trial is in patients with non-
small cell lung cancer (“NSCLC”). The second clinical trial is in patients with three tumour types,
urothelial, melanoma and head and neck cancers. Both trials have progressed to the expansion phase,
with patients being treated with up to 10 billion transduced SPEAR T-cells.
• A Phase 1 clinical trial is ongoing with ADP-A2M4 in bladder, melanoma, head and neck, ovarian,
NSCLC, synovial sarcoma, myxoid round cell liposarcoma (“MRCLS”), oesophageal and gastric
cancers. This trial is now in the expansion phase with patients being treated with up to 10 billion
transduced SPEAR T-cells.
• A Phase 1 clinical trial is ongoing with ADP-A2AFP in patients with hepatocellular carcinoma. The trial
is in dose escalation phase with patients receiving a target dose of 1 billion SPEAR T-cells.
A fourth SPEAR T-cell, the NY-ESO SPEAR T-cell was transitioned to GlaxoSmithKline (“GSK”) during 2018 following
GSK’s exercise of its option to obtain an exclusive global license to the NY-ESO SPEAR T-cell program in September
2017. GSK has assumed full responsibility for all development, manufacturing and commercialization activities for the
NY-ESO SPEAR T-cell including progression of this SPEAR T-cell into further clinical trials.
We have our own manufacturing facility in the United States that routinely manufactures SPEAR T-cells to treat patients
across a broad range of solid tumours. We also have dedicated vector manufacturing in the United Kingdom and we
anticipate producing our first batch of vector to support pilot clinical trials in 2019 which will enable us to continue to
develop enhancements and improvements with the aim of reducing the time taken to manufacture and supply patient
product.
We continue to use our SPEAR T-cell platform to identify and validate further cancer targets (including targets which are
closely related to a specific disease indication) to which SPEAR T-cells can be directed. We have a number of preclinical
programs in progress.
We have a number of next generation and combination strategies designed to further enhance our SPEAR T-cells. In
addition to our internal next generation programs 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 “off-the shelf cells” would be specific
for a given Human Leukocyte Antigen (“HLA”) type and target antigen, they would overcome the current limitation of
10
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
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 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. 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. However, binding of
naturally occurring TCRs to cancer targets 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.
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 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. Finally, we are identifying
targets in the context of different HLA types ensuring a broad patient population for any given target across multiple 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 three wholly owned SPEAR T-cells currently in clinical trials (ADP-
A2M10, ADP-A2M4 and ADP-A2AFP) and a pipeline of SPEAR T-cells in development, including SPEAR T-cells
directed to antigens expressed different HLA-types.
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.
11
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
PRODUCT PIPELINE
ADP-A2M10
Phase 1 clinical trials are ongoing with ADP-A2M10 in NSCLC, urothelial, melanoma and head and neck cancers in the
United States, Canada, the United Kingdom and Spain. These trials are first-in-human, open-label studies utilizing a
modified 3+3 design with escalating target doses of 100 million (Cohort 1), 1 billion (Cohort 2), and 5 billion (Cohort 3)
transduced SPEAR T-cells to evaluate safety, including dose limiting toxicities (DLTs). The first three safety cohorts are
followed by an expansion phase with doses of up to 10 billion SPEAR T-cells. Patients are currently being enrolled in the
expansion phase in both trials.
No evidence of off-target toxicity has been observed and as of 31 December 2018 most adverse events have been consistent
with those typically experienced by cancer patients undergoing cytotoxic chemotherapy or other cancer immunotherapies.
Data from the first two cohorts of the ADP-A2M10 clinical trials were presented at the European Society for Medical
Oncology meeting (ESMO) in October 2018.
ADP-A2M4
A Phase 1 clinical trial is ongoing in nine solid tumour indications including urothelial, melanoma, head and neck,
ovarian, NSCLC, oesophageal, gastric cancers, synovial sarcoma and MRCLS. This trial is a first-in-human, open-label
study utilizing a modified 3+3 design with escalating target doses of 100 million (Cohort 1), 1 billion (Cohort 2), and 5
billion (Cohort 3) transduced SPEAR T-cells to evaluate safety, including DLTs. The first three safety cohorts are
followed by an expansion phase with doses of up to 10 billion SPEAR T-cells. Patients are currently being enrolled in
the expansion phase of the trial.
No evidence of off-target toxicity has been observed in the initial safety cohorts of the trial and as of 31 December 2018
most adverse events have been consistent with those typically experienced by cancer patients undergoing cytotoxic
chemotherapy or other cancer immunotherapies.
Data from the first two cohorts of the ADP-A2M4 clinical trial were presented at ESMO in October 2018.
12
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
ADP-A2AFP
We are dosing in a Phase 1, open label, dose escalation study designed to evaluate the safety and anti-tumour activity of
ADP-A2AFP in hepatocellular carcinoma (“HCC”). The trial is open in the United States, United Kingdom and Spain.
The Phase 1 clinical trial includes a dose escalation to evaluate safety, including dose limiting toxicities (DLTs), followed
by expansion of a tolerable dose to further explore safety and potential evidence of anti-tumour activity. The trial is
currently enrolling patients within the second dose cohort, with patients receiving target doses of 1 billion cells. There
were no DLT events or evidence of off-target toxicity observed in the first dose cohort.
NY-ESO SPEAR T-cell Therapy (transitioned to GSK)
On 7 September 2017, we announced that GSK had exercised its option under the strategic collaboration and license
agreement with GSK (as amended from time to time, 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,
the NY-ESO SPEAR T-cell program was transitioned to GSK in August 2018 at which point GSK assumed full
responsibility for future research, development and potential commercialization of the NY-ESO T-cell therapy (now called
GSK 3377794).
GSK nominated a second target program for the PRAME target antigen, which was announced on 9 January 2017. We
have since completed all work under this collaboration program. The program led to the development of a final lead
candidate SPEAR T-cell directed to a specific peptide from the PRAME antigen. We and GSK agreed that the
collaboration should not continue due to the peptide, to which the lead candidate was directed, not reaching GSK
criteria.
GSK have now nominated a third target program that will evaluate and develop new SPEAR T-cells. We and GSK are in
the process of agreeing a collaboration program for this third target program.
GSK is entitled to nominate two further target programs under the GSK Collaboration and License Agreement,
excluding our ongoing wholly-owned development programs.
Preclinical candidates
We continue to progress development of new SPEAR T-cells directed to new targets and to targets in the context of
HLA-types other than HLA-A2.
Next Generation Technology
We believe that there is potential to enhance the potency and durability of our SPEAR T-cells, for instance by adding
additional active proteins by means of 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 both internally
and with third party collaborators to develop various enhancements to our SPEAR T-cells. For example, we have
development programs for:
•
a dominant negative TGF-Beta (‘dnTGFBRII’) SPEAR T-cell designed to block immune suppression by TGFB
in certain tumour microenvironments,
• CD8 constructs that aim to promote epitope spreading, anti-tumour memory and tumour inflammation,
•
•
phosphodiesterase constructs designed to enhance T-cell proliferation, and
inducible IL-7 constructs that aim is to enhance persistence of our SPEAR T-cells.
13
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
Preclinical development is ongoing for a number of these programs with the aim of having the first next generation
construct ready for IND (Investigational New Drug) submission during the second half of 2019.
Manufacturing Capability
We have our own SPEAR T-cell manufacturing capability at the Navy Yard in Philadelphia, Pennsylvania. Patient product
manufacture for our wholly owned assets has started across a range of solid tumours. The Navy Yard facility is currently
capable of manufacturing T-cell product for up to 10 patients a month. This is scalable to 100 patients per month. We have
dedicated vector manufacturing in the United Kingdom, with the first production of vector for pilot clinical trials in 2019.
Control of our own manufacturing process enables us to improve and further develop our processes for manufacture of
our SPEAR T-cells. We continue to work with our third party T-cell supplier to increase capacity for T-cell manufacture
and are using a third party vector manufacturer for supply of vectors to support our ongoing clinical trials.
Manufacturing Improvements
We have the goal of reducing the time between apheresis of a patient and return of affinity enhanced T-cells back to the
patient. We have made a number of changes to our current SPEAR T-cell manufacturing process and are continuing to
make changes. In particular, we have implemented rapid sterility testing within our Navy Yard facility. We have also
developed a suspension vector manufacturing capability with the first production run for early stage clinical trials expected
in 2019.
COLLABORATIONS AND STRATEGIC ALLIANCES
We have entered into core alliance or collaboration agreements with GSK (Collaboration and License Agreement), MD
Anderson Cancer Center (collaboration designed to expedite the development of T-cell therapies for multiple types of
cancer); 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 the GSK Collaboration and License Agreement regarding the development, manufacture and
commercialisation of TCR therapeutic candidates in May 2014. The collaboration is for up to five programs. The first
program was the NY-ESO SPEAR T-cell program, in relation to which GSK has now exercised its option to take an
exclusive license. The second program related to development of a SPEAR T-cell to a peptide derived from the PRAME
antigen. This program has now completed. We are in the process of agreeing the third target program with GSK.
Under the terms of the GSK Collaboration and License Agreement, the Company may be entitled to:
•
•
•
development milestones of up to £18 million ($23 million) per product and HLA-type for the NY-ESO
Program and up to £21.5 million ($27.3 million) per product and HLA-type for other programs (including
the third target program);
regulatory milestones of up to £36 million ($45.7 million) per product and HLA-type for the NY-ESO
program and up to £40 million ($50.8 million) per product and HLA-type for other programs (including the
third target program); and
commercialization milestones upon the first commercial sale of a product of up to £70.5 million ($89.5
million) per product and HLA-type for the NY-ESO Program and up to £80 million ($101.5 million) per
product and HLA-type for other programs (including the third target program).
The development and regulatory milestones are per product milestones and are dependent on achievement of certain
obligations, the nature of the product being developed, stage of development of product, territory in which an obligation
is achieved and type of indication or indications in relation to which the product is being developed. In addition, for any
program, multiple products may be developed in the context of different HLA-types. As of 31 December 2018, we had
achieved development milestones of $66.4 million.
14
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
For other programs (including the third target program) under the GSK Collaboration and License Agreement, an option
fee is also payable of up to £6 million ($7.6 million) on exercise of the option by GSK, after which GSK is responsible for
all development expenses.
For any product that is commercialised by GSK, the Company may receive tiered sales milestones up to £200 million
($253.8 million) per product and HLA-type and mid-single to low double-digit royalties on worldwide net sales of the
applicable product. 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.
On 7 September 2017 we announced that GSK had exercised its exclusive option for the NY-ESO SPEAR T-cell program.
Transition of the program to GSK occurred during 2018. GSK has now assumed full responsibility for the NY-ESO
SPEAR T-cell program including any ongoing clinical trials. As a result of the option exercise, we received £48 million
(~$61 million) from GSK over the course of the transition period. This included development milestones of £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 transition. Successful continuation of development and subsequent commercialization of
NY-ESO would trigger additional payments for development milestones, tiered sales milestones, and mid-single to low
double-digit royalties on worldwide net sales.
Upon nomination of the third target program by GSK, we have granted to GSK an exclusive option to the nominated
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. We are responsible for taking the third target program through
preclinical testing and up to IND application filing. GSK is responsible for the IND filing itself should the preclinical
testing and development be favourable.
Two other targets may be nominated by GSK at specified times under the GSK Collaboration and License Agreement,
excluding any wholly-owned research programs already in progress by us. Upon nomination by GSK of any of these two
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 third target programs), we
will grant to GSK (and have granted in relation to the NY-ESO SPEAR T-cell) 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 commercialisation 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 commercialising T-cell therapeutics directed at the targets subject to
outstanding options granted to GSK.
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 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 licence where GSK ceases development or
withdraws any licensed SPEAR T-cells in specified circumstances.
15
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
BUSINESS STRATEGY
Our strategic objective is to be a world leader in discovering, developing and commercialising TCR-based T-cell therapies
that transform the clinical outcomes of patients with cancer. We have an ambition 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 ADP-A2M10, ADP-A2M4 and ADP-A2AFP. We have three wholly owned SPEAR T-
cells with open INDs covering multiple indications. We plan to advance these wholly owned SPEAR T-cells during 2019
with the aim of providing initial clinical data for ADP-A2M10 and ADP-A2M4 during the first half of 2019. We are
working with leading cancer centres including through our strategic alliance agreement with MD Anderson Cancer Center,
to advance our SPEAR T-cells through clinical studies.
Continue to use our SPEAR T-cell platform to generate SPEAR T-cells for cancers with limited existing therapeutic
approaches. 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. We also continue to develop SPEAR T-cells to address targets from different HLA-types.
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 internally and through multiple collaborations by exploring the addition of other components in our
lentiviral vector, which would be expressed in the SPEAR T-cells alongside our engineered TCR.
Optimise and expand our process development and manufacturing capabilities to maintain our leadership position in
the TCR space. We have a SPEAR T-cell manufacturing facility in the United States and dedicated vector manufacturing
capability in the United Kingdom and we anticipated producing our first batch of vector to support pilot clinical trials in
2019. We will continue to expand our SPEAR T-cell and vector manufacturing capability during 2019 including
optimisation of the manufacture, supply, associated analytical expertise and quality systems for our SPEAR T-cell
therapies. We also continue to work and develop an off-the-shelf product.
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 to strengthen our product pipeline and to defend and expand our position as a leader in the field of T-cell
therapies.
DEVELOPMENT AND PERFORMANCE DURING THE PERIOD
On 1 January 2018, the Group adopted International Financial Reporting Standard (“IFRS”) 15, Revenue from
Contracts with Customers (“IFRS 15”) and IFRS 9, Financial Instruments (“IFRS 9”). The comparative financial
information for the years ended 31 December 2017 has not been restated and is prepared in accordance with the previous
accounting guidance.
Revenue
Revenue increased by 57% to $59.5 million for the year ended 31 December 2018 from $37.8 million for the year ended
31 December 2017. Revenue comprises the following (in thousands):
For the year ended 31 December
Development revenue
License revenue
2018
2017
$ 20,391 $ 37,833 $ (17,442)
Increase/decrease
(46) %
39,114
—
$ 59,505 $ 37,833 $
39,114 NM
21,672
57 %
16
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
Revenue arises from the GSK Collaboration and License Agreement. Development revenue relates to performance under
the NY-ESO SPEAR T-cell transition program and the PRAME pre-clinical development program. License revenue relates
to NY-ESO License.
Revenue for the year ended 31 December 2018 has been recognized under IFRS 15 which is effective 1 January 2018.
Revenue in the ended 31 December 2017 has been recognized under the previous guidance. Development revenue in the
year ended 31 December 2018 under the previous guidance would be $28.7 million and license revenue would be $39.0
million.
Development revenue for the year ended 31 December 2018 has decreased by 46% compared to the year ended 31
December 2017 due to the NY-ESO program having transferred to GSK on 23 July 2018. The development revenue for
the year ended 31 December 2017 benefited from cumulative revenue amortization of $17.5 million in September 2017
due to a reduction in the estimate of the period over which we would be delivering services to GSK in relation to the NY-
ESO SPEAR T-cell development program.
License revenue was $39.1 million in the year ended 31 December 2018 compared to nil in the year ended 31 December
2017. License revenue was recognized upon commencement of the NY-ESO License which occurred in the third quarter
of 2018.
Research and Development Expenses
Research and development expenses increased by 20% to $115.2 million for the year ended 31 December 2018 from $96.4
million for the year ended 31 December 2017.
The increase in our research and development expenses of $18.8 million for the year ended 31 December 2018 compared
to the year ended 31 December 2017 was primarily due to the following:
•
•
•
an increase of $13.5 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 260 to 320;
an increase in operating expenditure of $2.0 million on our manufacturing capabilities at our U.S. facility in
Philadelphia and our facility in Cambridgeshire, UK; and
an increase of $3.3 million in share-based compensation expense.
Our subcontracted costs for the year ended 31 December 2018 were $41.6 million, compared to $41.5 million in the same
period of 2017, of which $3.6 million related to our NY-ESO SPEAR T-cells, $23.0 million related to process development
for our SPEAR T-cell platform and the remaining $14.9 million related to our wholly owned pipeline, including ADP-
A2M10, ADP-A2A4 and ADP-A2AFP.
Administrative Expenses
General and administrative expenses increased by 60% to $48.3 million for the year ended 31 December 2018 from $30.2
million in the same period in 2017.
The net increase of $18.1 million was primarily due to a $7.1 million increase in personnel costs and share-based
compensation expense, due to the addition of key management and other professionals to support our growth, a $3.3
million increase in realized foreign exchange losses due to foreign exchange movements, a $2.7 million increase in costs
associated with supporting and maintaining our IT infrastructure, a $0.9 million increase in legal, accounting and
professional fees and a $0.7 million increase in depreciation and amortization.
17
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
Other Income
Other income primarily relates to reimbursements of expenses, primarily through the U.K. Research and Development
Expenditure Credit. Other income decreased by 13% to $1.4 million for the year ended 31 December 2018 from $1.6
million in the year ended 31 December 2017.
Finance Income
Finance income decreased by $4.5 million to $2.8 million in the year ended 31 December 2018 from $7.3 million in
the year ended 31 December 2017. Finance income comprises interest received and net unrealized foreign exchange gains.
The movement in finance income is due to net unrealized foreign exchange gains arising in the year ended 31 December
2017 compared to net unrealized foreign exchange losses in the year ended 31 December 2018, which are classified within
finance expenses.
Finance Expense
Finance expense increased by $7.5 million to $8.0 million in the year ended 31 December 2018 from $0.5 million in the
year ended 31 December 2017. Finance expense comprises net unrealized foreign exchange losses. The movement in
finance expense is due to net unrealized foreign exchange losses in the year ended 31 December 2018 due to movements
in foreign exchange rates.
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 $7.1
million to $16.2 million for the year ended 31 December 2018 from $9.1 million for the year ended 31 December 2017
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 2018, we have raised:
•
•
•
•
$513.5 million, net of issue costs;
$148.3 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
$24.6 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”.
18
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
As of 31 December 2018, we had cash and cash equivalents of $68.4 million and Total Liquidity of $205.1 million. We
believe that our Total Liquidity will be sufficient to fund our operations, based upon our currently anticipated research and
development activities and planned capital spending, through to late 2020.
SUMMARY OF CASH FLOWS
Operating Activities
Net cash used in operating activities increased by $50.8 million to $104.2 million for the year ended 31 December 2018
from $53.4 million for the year ended 31 December 2017. 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 December 31, 2018, we received $30.2 million of milestone payments from GSK compared to $38.2 million in
the year ended December 31, 2017. After taking into account the GSK milestone payments and the associated VAT, the
increase in cash used in operations was primarily the result of 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 $104.2 million for the year ended 31 December 2018 comprised a loss
before tax of $107.7 million and changes in operating assets and liabilities of $39.6 million offset by noncash items of
$29.5 million, net taxes received of $10.5 million and bank interest received of $3.1 million. The noncash items consisted
primarily depreciation expense on plant and equipment of $7.2 million, equity-settled share-based compensation expense
of $15.9 million, unrealized foreign exchange losses of $6.2 million and realized losses on maturity or redemption of
financial assets at fair value through OCI (2017: available-for-sale financial assets) of $2.5 million, partially offset by bank
interest income of $2.8 million.
Investing Activities
Net cash from investing activities was a cash outflow of $17.6 million and $127.0 million for the years ended 31
December 2018 and 2017, respectively. These amounts included purchases of property and equipment of $3.9 million and
$24.6 million for the years ended 31 December 2018 and 2017, respectively, and acquisition of intangibles of $0.9 million
and $1.3 million for the years ended 31 December 2018 and 2017, respectively. The purchases of property, plant and
equipment for the year ended 31 December 2017 and related predominantly to the expansion of our laboratory facilities in
the United Kingdom and the United States.
The net cash used in investing activities also included:
•
•
investment in short-term deposits with maturities greater than three months but less than 12 months of
$18.0 million for the year ended 31 December 2017; and
investment in marketable securities with maturities greater than three months but less than 12 months of
$150.8 million and $153.3 million in the year ended 31 December 2018 and 2017, respectively;
offset by
•
•
cash inflows from maturity of short-term deposits of $40.6 million in the year ended 31 December 2017;
and
cash inflows from maturity or redemption of marketable securities with maturities greater than
three months but less than 12 months of $138.0 million and $29.1 million in the year ended 31
December 2018 and 2017, respectively.
Financing Activities
Net cash provided by financing activities was $102.7 million and $103.6 million for the years ended 31 December 2018
and 2017, respectively.
19
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
Net cash provided by financing activities for the year ended 31 December 2018 consisted of $99.7 million net of issuance
costs of $0.3 million raised through a registered direct offering in September 2018 and proceeds from exercise of share
options of $3.0 million.
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):
As of 31 December
Cash and cash equivalents
Marketable securities
Total Liquidity
2018
68,379 $
136,755
205,134 $
2017
84,043
124,218
208,261
$
$
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. The
definition of Total Liquidity includes 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.
20
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
Research Programmes
We have a number of pre-clinical and other candidates (including next generation 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, testing and release of our SPEAR T-cells during or following
manufacture, 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, inaccuracy or failure
to produce test results or poor test results, 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.
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, UK 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.
21
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
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.
Third Parties
Commercialisation of the NY-ESO SPEAR T-cell therapy and our own ability to commercialise 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 two further target programs in addition to the NY-ESO SPEAR T-cell, PRAME
SPEAR T-cell program and third target 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.
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.
22
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
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 patients 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 maintain insurance coverage against damage to our property and equipment and business
interruption and research and development.
Brexit
The United Kingdom is currently negotiating the terms of its exit from the European Union (“Brexit”) scheduled for 29
March 2019. If no agreement can be reached and the U.K. leaves the European Union with no agreement (“hard
Brexit”), there will be a period of considerable uncertainty particularly in relation to United Kingdom financial and
banking markets, the regulatory process in Europe and movement of goods and people between U.K. and European
Union. We may also face new regulatory costs and challenges that could have a material adverse effect on our
operations. In the absence of any clear indication that any agreed form of Withdrawal Agreement will contain a contrary
requirement, we are already in the process of ensuring that any impact on our operations is limited. In addition, currency
exchange rates in the pound sterling and the euro with respect to each other and the U.S. dollar have already been
adversely affected by Brexit and could result in volatility in our financial results.
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 2018, we held $136.8 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
23
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
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 2018, the last business day of the reporting period, was £1.00 to
$1.27.
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 $0.2 million as of 31 December 2018 and 2017, 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 was $0.2 million past due as of 31
December 2018.
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 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.
24
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
GREENHOUSE GAS REPORT
Our greenhouse gas emissions estimates for 2018 and 2017 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 409 full-time equivalent employees during the year
ended 31 December 2018 (2017: 330).
Year ended
Year ended
31 December 2018 31 December 2017
Tonnes carbon
Tonnes carbon
dioxide equivalent dioxide equivalent
(tCO2-e)
(tCO2-e)
0.00
0.00
3,263.63
3,263.63
916.26
916.26
8.038
2.777
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.
The increase in greenhouse gas emissions in the year ended 31 December 2018 compared to the year ended 31 December
2017 is driven by several factors, including the increase in the Group’s employees during 2018 and the increase in routine
manufacturing of T-cells at our facility in the USA.
The Group actively looks to minimise indirect areas of emissions by enabling remote working and promoting online
conferencing facilities to reduce business travel.
EMPLOYEES
As at 31 December 2018, we had 430 employees (including our Chief Executive Officer who is also a Company Director),
compared to 371 as at 31 December 2017. Of these employees, 337 were in R&D (including in manufacturing and
operations, and quality control and quality assurance) and 93 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 2018 was 409 (year ended 31
December 2017: 330).
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.
25
ADAPTIMMUNE THERAPEUTICS PLC
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2018
A breakdown of the employment statistics on the basis of employees as at 31 December 2018 is as follows:
Position
Company Director (1)
Senior Manager
Other Employees
Total Employees (2)
Includes our Chief Executive Officer
(1)
(2) Excludes our Chief Executive Officer
EMPLOYEE CONSULTATION AND HUMAN RIGHTS
Male
Female
Total
8
3
185
188
1
2
239
241
9
5
424
429
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 26 February 2019.
On behalf of the Board
James J Noble
Director
26 February 2019
26
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2018
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 2018. Shareholders will be invited to approve the Report on Remuneration (which
will be a non-binding advisory vote) at the Annual General Meeting of shareholders to be held on 2 May 2019.
Period Covered by the Directors’ Remuneration Report
The Directors’ Remuneration Report that follows is for the full year period from 1 January 2018 to 31 December 2018
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 2018
Our primary goal in 2018 was to progress the development of the Group including:
•
•
•
•
advancement of our clinical trials for ADP-A2M10, ADP-A2M4 and ADP-A2AFP;
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 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.
2018 Business Highlights
2018 was a year of strong operational performance for Adaptimmune.
Key business highlights during 2018 included:
Advancement of our clinical trials for ADP-A2M10, ADP-A2M4 and ADP-A2AFP
• Two Phase 1 clinical trials are ongoing with ADP-A2M10. The first clinical trial is in patients with non-
small cell lung cancer (“NSCLC”). The second clinical trial is in patients with three cancer tumour types,
urothelial, melanoma and head and neck cancers.
27
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2018
o
In 2018, both trials have progressed to the expansion phase, with patients being treated with up to
10 billion transduced SPEAR T-cells.
• A Phase 1 clinical trial is ongoing with ADP-A2M4 in bladder, melanoma, head and neck, ovarian, NSCLC,
synovial sarcoma, myxoid round cell liposarcoma (“MRCLS”), oesophageal and gastric cancers.
o
In 2018, this trial progressed to the expansion phase with patients being treated with up to 10 billion
transduced SPEAR T-cells.
• A Phase 1 clinical trial is ongoing with ADP-A2AFP in patients with hepatocellular cancer.
o
In 2018, this trial moved into the dose escalation phase within the second dose cohort, with patients
in Cohort 2 receiving a target dose of 1 billion SPEAR T-cells.
Successful transition of NY-ESO program
• During 2018, a fourth SPEAR T-cell, the NY-ESO SPEAR T-cell was transitioned to GlaxoSmithKline (“GSK”)
following GSK’s exercise of its option to obtain an exclusive global license to the NY-ESO SPEAR T-cell
programme in September 2017. GSK has assumed full responsibility for all development, manufacturing and
commercialization activities for the NY-ESO SPEAR T-cell including progression of this SPEAR T-cell into
further clinical trials.
Optimization and expansion of our manufacturing capabilities
•
Impressive progress was achieved in manufacturing:
o we initiated manufacture of cell product in January 2018 at the Adaptimmune SPEAR T-cell
manufacturing plant in Philadelphia
o we scaled to the routine manufacture of SPEAR T-cells at target doses to treat patients across a broad
range of solid tumours
o we established a dedicated vector manufacturing capability in the U.K. and our first vector production
run to support pilot clinical trials is anticipated for late 2019
o we secured existing vector production with our third party vendor
• These achievements enable us to continue to develop manufacturing enhancements and improvements with the
aim of reducing the time taken to manufacture and supply patient products.
Progression of our pre-clinical pipeline
• We continued to maintain development of our pipeline, including:
o making good progress with an off-the-shelf product and presenting progress to date at ASGCT 2018
o
continuing to develop multiple next generation approaches, with the goal of having the first next
generation construct ready for IND submission in 2H 2019
investigating new targets in the context of new HLA types to be brought to the clinic beyond 2019
o
Other corporate achievements
• The Company completed a Registered Direct Offering raising net proceeds of approximately $100 million in
September 2018.
28
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2018
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 2019.
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. For our CEO, this resulted in a base salary
of £457,126 effective from 1 January 2019, to maintain competitive positioning against the peer group.
In December 2018 the Committee also considered the extent of achievement of 2018 calendar year objectives by the
executive team and determined the level of bonus incentive awards payable in respect of the 2018 calendar year. The
awards made to our CEO and senior executive officers recognised that most of our corporate objectives for 2018 were
achieved, with our CEO receiving a bonus award at 85% of the target amount.
In January 2019 the Committee approved the objectives to be achieved by the executive team during 2019. 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 commercialising 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 2019 objectives are linked to our business goals, which include the continuation of some 2018 goals, with the addition
of a key objective for 2019:
•
•
•
•
•
the advancement of our clinical trials for ADP-A2M10, ADP-A2M4 and ADP-A2AFP. A key objective is to
advance these wholly owned SPEAR T-cells further during 2019 with the aim of providing initial clinical data
for ADP-A2M10 and ADP-A2M4 during the first half of 2019;
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 2019 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 2018
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 peer group data
from comparable companies provided in a benchmarking analysis undertaken by Willis Towers Watson in 2018.
David M Mott
Director and Chairman of the Remuneration Committee
26 February 2019
29
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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 2018, which will be
put to shareholders for a non-binding vote at the Annual General Meeting to be held on 2 May 2019.
Single Total Figure of Remuneration for each Director
The following table shows the remuneration received by the Directors for the year ended 31 December 2018. For reference
only, the table also shows the remuneration received by the Directors for the year ended 31 December 2017, which
information was included in the Company’s annual report and financial statements for the year ended 31 December 2017
and approved by shareholders at the Annual General Meeting held on 20 June 2018.
For the year ended 31 December 2018:
Fixed Pay (1)
Variable Pay (1)
For the year ended 31 December 2017:
Fixed Pay (1)
Variable Pay (1)
Salary
and fees
£
Taxable Annual
benefit
bonus
£
£
Equity-
Pension
Based
allowance Awards Total
£
(6) £
£
Salary
and fees
£
Taxable Annual
benefit
bonus
£
£
Equity-
Pension
Based
allowance Awards Total
£
(6) £
£
420,065 (2)
906 (3) 196,380 (4)
21,003 (5)
— 638,354 407,830 (2)
844 (3) 183,524 (4)
20,392 (5)
— 612,590
—
23,511
—
—
—
39,594
—
—
34,286
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
23,511
—
—
—
39,594
—
—
34,286
—
—
—
—
—
37,648
—
—
33,493
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
37,648
—
—
33,493
Name of Director
Executive
James Noble (CEO)
Non-executives
David Mott (Chairman)
Lawrence Alleva
Ali Behbahani
Barbara Duncan
John Furey
Giles Kerr
Elliott Sigal
Peter Thompson
Tal Zaks
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 Mr Lawrence Alleva and Dr Tal Zaks for the year ended 31 December 2018 have been translated into pounds sterling based on
the U.S. dollar/pound sterling exchange rate at 31 December 2018 ($1.27602 to £1). 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).
(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 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 2018 and the year ended 31 December 2017 represents the total
bonus payment that related to performance in each of 2018 and 2017.
(5) The pension allowance for each of the year ended 31 December 2018 and the year ended 31 December 2017 represents an amount
equating to 5% of the base salary for each of 2018 and 2017.
(6) There were no performance obligations linked to the equity-based awards. In each of the year ended 31 December 2018 and the year
ended 31 December 2017, 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.
30
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Annual Bonus
The annual bonus for the year ended 31 December 2018 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 ADP-A2M10, ADP-A2M4 and ADP-A2AFP; 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; 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 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.
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 2018. No Director exercised any share options during the year ended
31 December 2018. The table only reflects shares held individually by each Director, or a family investment vehicle or
trust, and does not include shares held by any investment fund with which the Director is affiliated.
Name of Director
Executive Director
James Noble (CEO)
Non-Executive Directors
David Mott (Chairman)
Lawrence Alleva
Ali Behbahani
Barbara Duncan
John Furey
Giles Kerr
Elliott Sigal
Peter Thompson
Tal Zaks
Total share Vested share Options exercised during year
Shares owned
options
options (1)
ended 31 December 2018
11,172,600 (2) 11,418,148 7,701,405
—
—
—
—
—
844,530
117,864 (3) 1,114,628
715,841
719,774
284,233
556,000
367,038 (4) 1,104,236
565,603
556,000
—
—
657,200
958,143
561,032
499,141
—
333,000
916,942
565,603
333,000
—
—
—
—
—
—
—
—
—
—
(1) All share options that were outstanding as at 31 December 2018 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 and 47,280 Ordinary
shares represented by 7,880 ADSs purchased by the Lawrence M. Alleva Revocable Trust in December 2018.
(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.
31
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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. The scale of our
CEO’s share ownership is well in excess of the most stretching shareholding guidelines demanded by investors and proxy
advisors.
Directors’ Equity-based Awards Held at 31 December 2018
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 2018. 3,415,470 options were granted to Directors during the year ended 31
December 2018. None of our Directors exercised any options during the year ended 31 December 2018.
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
John Furey (4)
Giles Kerr (4)
Total
Elliott Sigal (3)
Options
Held
Grant
date
Start date Exercise
for vesting
price
First date of exercise of Date of
some or all options (1)
expiry
1,335,000
438,100
3,500,000
1,968,016
2,072,976
1,719,936
384,120
11,418,148
163,229
191,410
302,561
187,330
844,530
519,481
30,745
196,678
243,724
124,000
1,114,628
155,682
184,562
220,788
154,809
715,841
332,776
228,765
158,233
719,774
20/03/15
20/03/15
20/03/15
18/01/16
13/01/17
12/01/18
12/01/18
31/03/14 £
31/03/14 £
19/12/14 £
18/01/16 £
13/01/17 £
12/01/18 £
12/01/18 £
0.1120
0.1120
0.3557
0.89
0.59
0.96
0.001
11/05/15
11/08/16
03/07/17
22/06/18
11/05/15 £
11/08/16 £
03/07/17 £
22/06/18 £
16/03/15
11/05/15
11/08/16
03/07/17
22/06/18
16/03/16 £
11/05/15 £
11/08/16 £
03/07/17 £
22/06/18 £
11/05/15
11/08/16
03/07/17
22/06/18
11/05/15 £
11/08/16 £
03/07/17 £
22/06/18 £
1.82
0.97
0.58
1.65
0.50
1.82
0.97
0.58
1.65
1.82
0.97
0.58
1.65
23/06/16
03/07/17
22/06/18
23/06/16 £
03/07/17 £
22/06/18 £
1.01
0.58
1.65
31/03/14
31/03/15
19/12/15
18/01/17
13/01/18
12/01/19
12/01/19
11/05/15
11/08/17
03/07/18
22/06/19
16/03/16
11/05/15
11/08/17
03/07/18
22/06/19
11/05/15
11/08/17
03/07/18
22/06/19
23/06/17
03/07/18
22/06/19
30/03/24
30/03/24
19/12/24
18/01/26
13/01/27
12/01/28
12/01/28
11/05/25
11/08/26
03/07/27
22/06/28
16/03/25
11/05/25
11/08/26
03/07/27
22/06/28
11/05/25
11/08/26
03/07/27
22/06/28
23/06/26
03/07/27
22/06/28
284,233
05/07/18
05/07/18 £
1.49
05/07/19
05/07/28
288,000
144,000
124,000
556,000
519,481
24,596
184,562
220,788
154,809
29/11/16
03/07/17
22/06/18
29/11/16 £
03/07/17 £
22/06/18 £
0.65
0.58
1.65
16/03/15
11/05/15
11/08/16
03/07/17
22/06/18
16/03/16 £
11/05/15 £
11/08/16 £
03/07/17 £
22/06/18 £
0.50
1.82
0.97
0.58
1.65
29/11/17
03/07/18
22/06/19
16/03/16
11/05/15
11/08/17
03/07/18
22/06/19
29/11/26
03/07/27
22/06/28
16/03/25
11/05/25
11/08/26
03/07/27
22/06/28
32
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Total
Peter Thompson (5)
Total
Tal Zaks (4)
Total
1,104,236
155,682
186,142
223,779
565,603
288,000
144,000
124,000
556,000
11/05/15
11/08/16
03/07/17
11/05/15 £
11/08/16 £
03/07/17 £
1.82
0.97
0.58
29/11/16
03/07/17
22/06/18
29/11/16 £
03/07/17 £
22/06/18 £
0.65
0.58
1.65
11/05/15
11/08/17
03/07/18
29/11/17
03/07/18
22/06/19
11/05/25
11/08/26
03/07/27
29/11/26
03/07/27
22/06/28
Notes to table of Directors’ Equity-based Awards Held at 31 December 2018
(1) All share options awarded to Directors that were outstanding as at 31 December 2018 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 vested and became exercisable on 3 July 2018. All options granted to Non-Executive Directors on 22
June 2018 vest and become exercisable on 22 June 2019.
(4) 332,776 options granted to Barbara Duncan, 288,000 options granted to Giles Kerr 288,000 options granted to Tal Zaks and 284,233
options granted to John Furey 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.
(5) Peter Thompson stood down from the Board on 5 July 2018 and did not receive an annual award of options in 2018. In recognition
of Dr Thompson’s service as a Board member and as a member of the Remuneration Committee up to 5 July 2018, he was permitted
a 12 month period in which to exercise those options which had vested as at 5 July 2018. Any options that are not exercised by 5
July 2019 will lapse and cease to be exercisable.
The closing market price of our ADSs on 31 December 2018 was $5.75. One ADS represents six Ordinary shares.
Payments Made to Past Directors
During the year ended 31 December 2018, we made no payments to former Directors of the Company.
Payments for Loss of Office
During the year ended 31 December 2018, we made no payments with respect to a Director’s loss of office.
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,
which commenced on 6 May 2015. We selected the Nasdaq Biotech Index because our ADSs trade on The Nasdaq Global
33
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Select Market and we believe this indicates our relative performance against a group consisting of more similarly situated
companies.
Chief Executive Officer Total Remuneration History
The table below sets out total remuneration details for the Chief Executive Officer.
Period
Year ended 31 December 2018:
Year ended 31 December 2017:
Single total figure of
remuneration £ (1)
638,354
612,590
against maximum
opportunity (2)
Annual bonus payout Long term incentive
vesting rates against
maximum opportunity (3)
100 %
100 %
47 %
45 %
(1) The Single total figure of remuneration for the year ended 31 December 2018 includes the annual bonus payment for performance
in the year ended 31 December 2018. 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.
(2) The bonus payout percentage amount for the year ended 31 December 2018 relates to the total annual bonus payment for
performance in the year ended 31 December 2018. 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. 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.
34
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Chief Executive Officer’s Remuneration Compared to Other Employees
The Chief Executive Officer’s average fixed salary of £420,065 for the year ended 31 December 2018 was 5.8 times the
value of the average fixed salary of the Group’s comparator employees for such period. His average fixed salary of
£407,830 for the year ended 31 December 2017 was 6.1 times the value of the average fixed salary of the Group’s
comparator employees for that period.
The following table shows the percentage change in remuneration of the Chief Executive Officer in comparison to the
percentage change in remuneration of an employee in the comparator group (1) between the year ended 31 December 2018
and the year ended 31 December 2017.
Percentage change in remuneration in the year ended 31 December 2018
compared with remuneration in the year ended 31 December 2017
Base salary
Annual bonus
Taxable benefits
CEO
Average change per employee
(1)
3.0 %
7.0 %
7.3 %
7.9 %
10.8 %
(1.1) % (2)
(1) The employee comparator group comprises all UK and US employees who were employed for the full 24 month period ended 31
December 2018. The percentage change calculations were performed in local currency and then combined using a weighted average
based on the number of employees. This group is considered to be an appropriate comparator group because it is representative of
the Group’s employees in terms of seniority and demographics; additionally, using a consistent employee group, with the same
individuals appearing in the 2017 and 2018 groups, enables a meaningful comparison to be made.
(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 2018, the CEO’s taxable benefits totalled £906 (2017:
£844) – 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 2018 and the year ended 31 December 2017. 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 57 of its
Annual Report and Financial Statements for the year ended 31 December 2018.
Period:
Total spend on remuneration (1):
Research and development expenses:
Year ended
Year ended
31 December 2018 31 December 2017
$ 64,276,000 $ 47,358,000
$ 115,242,000 $ 96,381,000
(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 2019
Salary
In 2018, 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 2019.
35
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 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. For our CEO, this resulted in a base salary
of £457,126 effective from 1 January 2019.
Annual bonus
For the year ending 31 December 2019, the CEO is eligible for a target bonus award of 60% of his base salary of £457,126
(that is, £274,276), subject to the achievement of objectives. These are linked to our business strategies, which include:
the advancement of our clinical trials for ADP-A2M10, ADP-A2M4 and ADP-A2AFP. A key objective is to advance
these wholly owned SPEAR T-cells further during 2019 with the aim of providing initial clinical data for ADP-A2M10
and ADP-A2M4 during the first half of 2019; 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 2020 to assess the performance of the CEO for the year
ending 31 December 2019 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 2019. 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 2019, awards of share options were made to our CEO and other Senior Executive Officers. These awards
were within market competitive levels 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 8 January 2019.
The Remuneration Committee
The Remuneration Committee is comprised of Mr Mott (Chairman), Mr Furey 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 2018, the amounts paid to Willis Towers Watson totalled $130,783 and the amounts paid to Radford totalled
$7,050.
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
36
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
bonuses to be paid to these persons for service in the year ended 31 December 2018 and base salaries effective from 1
January 2019 and with respect to equity-based awards made to these persons in January 2019. 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 20 June 2018, 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 2017 and the
resolution proposing the approval of the Directors’ Remuneration Policy to apply effective from the end of that Annual
General Meeting. No votes were withheld.
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 2017, and in relation to the resolution proposing the approval of the Directors’
Remuneration Policy were as follows:
Resolution
To approve the Directors’ Remuneration Report
To approve the Directors’ Remuneration Policy
Votes For
444,072,376
444,092,212
Votes
% of Total Against
Votes
% of Total Withheld
99.88 523,800
99.88 514,152
0.12 144,768
0.12 134,580
% of Total
0.033
0.0003
Statement of Implementation of Remuneration Policy in the Year ended 31 December 2018
There have been no changes to the Directors’ Remuneration Policy, as approved at the Annual General Meeting of
shareholders held on 20 June 2018. In 2019, the Company intends to adhere to the policy as approved.
37
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
PART II - DIRECTORS’ REMUNERATION POLICY
The information provided in this part of the Directors’ Remuneration Report is not subject to audit.
We have set forth below a summary of the remuneration policy for the Executive Directors and for our Non-Executive
Directors.
The Directors’ Remuneration Policy was approved at the Annual General Meeting held on 20 June 2018 and remains
effective for a maximum of three years, until 19 June 2021, or until a revised policy is approved by shareholders. The
last approved remuneration policy can also be found in the Annual Report and Financial Statements of the Company for
the year ended 31 December 2017, which is available in the Investors section of our website:
http://www.adaptimmune.com
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 last approved 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.
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.
As described in the last approved Directors’ Remuneration Policy, the elements of remuneration for the Executive
Director(s) and Senior Executives 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.
In 2018, 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 2019. 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.
38
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
The following tables present the elements of remuneration for our CEO (our sole Executive Director) and our other senior
executives.
Purpose and link to strategy
Element of
Remuneration
Base salary Rewards skills and
experience and provides
the basis for a competitive
remuneration package.
Performance
targets
Not applicable.
Operation
Maximum
Salaries will be reviewed
annually by reference to:
(i)
market practice and market
data on which the Committee
(cid:3)
receives independent advice;
(ii)
and scope of the role; (iii)
employee increases and (iv)
of inflation.
the individuals
experience
’
(cid:3)
(cid:3)
broader
rates
(cid:3)
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.
percentile of
We typically expect to align
salaries with the 50th
peer group comparator data but
may vary from this general
where we consider that
rule
special circumstances apply or
where recruitment or retention of
a particular role is required.
(cid:3)
(cid:3)
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 the Executive
Directors’ base
salaries to ensure
that we can attract
and retain the
necessary talent to
effectively compete
in the global
marketplace.
5% of basic salary.
Not applicable.
Pension
Enables Executive
Directors to build
long-term retirement
savings.
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.
39
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Purpose and link to strategy
Operation
Maximum
Not applicable.
Performance
targets
Not applicable.
Element of
Remuneration
Benefits
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.
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.
40
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.
Judgement as to
whether
achievements in a
calendar year are
considered to be
exceptional is at the
discretion of the
Committee.
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;
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Element of
Remuneration
Purpose and link to strategy
Operation
Maximum
Performance
targets
• key regulatory
steps (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.
41
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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.
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.
42
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Element of
Remuneration
Purpose and link to strategy
Operation
Maximum
We seek to establish
equity-based
remuneration to be
reasonably
competitive to that
offered by a set of
comparable
companies with
whom we may
compete for
executive talent.
Performance
targets
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.
Notes to policy tables
(1) 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.
43
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
Application of the Remuneration Policy to Executive Director Remuneration for the year ending 31 December 2019
The following table provides an illustration of the potential remuneration for the year ending 31 December 2019 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
£457,126 per annum effective from 1 January 2019.
The value of benefits receivable for the year ending 31 December 2019 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 2018.
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 60% of base salary, being the target
level of bonus payment for the year ending 31 December 2019.
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.
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
44
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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 approved Directors’ Remuneration Report for the year ended 31 December 2016, and
subsequent reports, 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, 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 applicable reporting requirements of
the Securities and Exchange Commission.
45
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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. Our
remuneration arrangements for Non-Executive Directors continue to 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 made in 2018 were established at competitive levels taking into account peer data from comparable companies
provided in a benchmarking analysis undertaken by Willis Towers Watson in 2018 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.
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.
Operation
Maximum
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.
The value of each
individual’s aggregate fees
will not exceed the
75th percentile of peer
group comparator data for
the relevant role.
percentile of peer group comparator data
where we
We typically expect to align fees with the
50th
but may vary from this general rule
consider that special circumstances apply or
where recruitment or retention of a particular
role is required.
(cid:3)
(cid:3)
Fees will typically consist of a basic fee for
Non-Executive Director responsibilities plus
incremental fees for additional
46
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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.
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.
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.
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.
47
ADAPTIMMUNE THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
For the year ended 31 December 2018
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.
Approval
This report was approved by the Board of Directors on 26 February 2019 and signed on its behalf by:
David M Mott
Director
26 February 2019
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 Group and parent Company 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 the law and as permitted by the NASDAQ the directors have elected to prepare the Group financial statements
in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by
the EU) and applicable law and they have elected to prepare the parent Company financial statements in accordance with
UK accounting standards and applicable law (UK 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, relevant, reliable and prudent;
•
•
•
•
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the
EU;
for the parent Company financial statements, state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
use 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.
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 are responsible for
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, and 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.
The directors have prepared a Directors’ Remuneration Report in accordance with Schedule 8 to The Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the Companies Act 2006.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, a Directors’
Report and a Directors’ Remuneration Report that complies 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 2018 which comprise the Consolidated Income Statement, Consolidated Statement of Financial Position,
Company Statement of Financial Position, Consolidated Statement of Changes in Equity, Company Statement of Changes
in Equity, Consolidated Statement of Cash Flows, 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 2018 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 as applied to listed entities. We
believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
2 Key audit matters: including 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.
50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
The impact of
uncertainties due to the
UK exiting the
European Union on our
audit
Refer to page 23
(principal risks).
The risk
Unprecedented levels of uncertainty
All audits assess and challenge the
reasonableness of estimates, related
disclosures and the appropriateness of the
going concern basis of preparation of the
financial statements below. All of these
depend on assessments of the future
economic environment and the group’s
future prospects and performance.
the most significant
Brexit
economic events for the UK and at the date
of this report its effects are subject to
unprecedented
levels of uncertainty of
outcomes, with the full range of possible
effects unknown.
is one of
Our response
We developed a standardised firm-wide
approach to the consideration of the
uncertainties arising from Brexit in planning
and performing our audits.
Our procedures included:
• Our Brexit knowledge – We
considered the directors’ assessment of
Brexit-related sources of risk for the
group’s business and financial resources
compared with our own understanding
of the risks. We considered the
directors’ plans to take action to
mitigate the risks.
• Sensitivity analysis – When addressing
areas that depend on forecasts, we
compared the directors’ analysis to our
assessment of the full range of
reasonably possible scenarios resulting
from Brexit uncertainty and, where
forecast cash flows are required to be
discounted, considered adjustments to
discount rates for the level of remaining
uncertainty.
• Assessing transparency –We
considered all of the Brexit related
disclosures together, including those in
the strategic report, comparing the
overall picture against our
understanding of the risks.
51
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
IFRS opening balance
restatement
($8.6 million; 2017: $0.0
million)
Refer to page 69
(accounting policy).
Accounting application
Our procedures included:
The new accounting policies require the
exercise of judgement across a number of
areas and this gives rise to a significant audit
risk.
• Assessing principles: We conducted a
detailed assessment of the accounting
policy papers prepared by the Directors
that detailed the new policies to be
applied. These papers set out the
the
interpretation
Directors’
requirements and key judgements made.
alternative
We
interpretations
the
and
appropriateness of the new policies and
challenged
the Directors on key
assumptions made using our knowledge
of Group.
considered
assessed
any
of
restatement
• Test of detail: We substantively tested
the
opening
consolidated balance sheet as at 1
January 2018 and
the consolidated
income statement for the year ended 31
December 2018. This testing included:
the
of
• Reading the GSK
Collaboration Agreement
(“Agreement”) and held
discussions with the Directors
to gain an understanding of the
Agreement and specific
milestones required to be met.
• Challenged the Directors on
the assumptions, particularly
the forecast costs to complete
and the probability of
achieving future developmental
milestones, used in the
forecast.
• Retrospective testing to
validate whether performance
milestones were historically
achieved.
- Assessing transparency: We assessed
whether the Group’s disclosure provided
sufficient detail of the impacts applying the
new standard, and of the key judgements
applied under the new policies adopted.
52
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
Recoverability of the
parent company’s
investment in
subsidiary and of the
amounts owed by group
entities
(Investments: $118.1
million; 2017: $104.8m)
(Amounts due from
group entities: $227.7
million; 2017: $274.0m)
Refer to pages 66 and 67
(accounting policy) and
pages
83
82
(financial disclosures).
and
Low risk, high value Investments
Our procedures included:
The carrying amount of the parent
company’s investment in the subsidiary and
amounts owed by group entities represent
23.6% (2017: 27.6%) and 45.2% (2017:
72.1%), respectively of the company’s total
assets.
Their 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, these are
considered to be the areas that had the
greatest effect on our overall parent
company audit.
Tests of detail: Compared the aggregate of
the carrying amount of the investment and
amounts owed by group entities to the
adjusted market capitalisation as at 15
February 2019, which is an approximation
of the minimum recoverable amount of the
aggregation of the investment and amounts
owed by group entities, to assess whether it
was in excess of the aggregated carrying
amount.
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 $6.0m for the year ended 31 December 2018 (2017:
$4.0m), determined with reference to a benchmark of Group Loss Before Tax, normalised to exclude this year’s Licence
Revenue as disclosed in note 2 ,of $146,4m (2017: $74.6m).Materiality represents 4.1% of normalised loss for the year
(2017: 5.4%). The benchmark is consistent with prior year.
Materiality for the Parent Company financial statements as a whole was set at $4.5m for the year ended 31 December
2018 (2017: $2.0m) determined with reference to a benchmark of Total Assets of $501.3m (2017: $380.8m), of which it
represents 0.9% (2017: 0.5%). The benchmark is consistent with prior year.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $0.2m
(2017: $0.2m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the 3 (2017: 3) components which report to group, we subjected 3 (2017: 3) to full scope audits for Group reporting
purposes. The components within the scope of our work accounted for 100% of Group revenue, loss before tax and total
assets. The Group audit team carried out the audits of all 3 components (2017: 3), which includes the audit of the parent
company, according to the following component materialities, having regard to the mix of size and risk profile of the
Group across the components:
• Adaptimmune Limited: $4.5 million (2017: $3.1 million)
• Adaptimmune LLC: $3.0 million (2017: $2.7 million)
The Group team visited 2 (2017: 2) component locations in UK and USA (2017: UK and USA).
4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as they have concluded that the Company’s and the Group’s
financial position means that this is realistic. They have also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of
the financial statements (“the going concern period”).
53
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future
events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a
guarantee that the group or the company will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business
model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue
operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and
Company’s available financial resources over this period were:
• Significant development cost overruns on the remaining wholly owned programs - MAGE-A10, MAGE-A4, and
AFP.
• The ability to successfully advance MAGE-A10, MAGE-A4 and the timing within which they can recruit patients
and treat patients in their clinical trials
• The ability to secure future funding to support research and development activities
• The impact of a disorderly Brexit on the Group’s supply chain, or the ability to secure sponsorship for EU based
clinical trials.
As these were risks that could potentially cast significant doubt on the Group’s and the Company's ability to continue as a
going concern, we considered sensitivities over the level of available financial resources indicated by the Group’s financial
forecasts taking account of reasonably possible (but not unrealistic) adverse effects that could arise from these risks
individually and collectively and evaluated the achievability of the actions the Directors consider they would take to
improve the position should the risks materialise. We also considered less predictable but realistic second order impacts,
such as the impact of a disorderly Brexit, which could result in a rapid reduction of available financial resources.
Based on this work, 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 a year from the date of approval of the financial statements.
We have nothing to report in these respects, and we did not identify going concern as a key audit matter.
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 addition to our audit of the financial statements, the directors have engaged us to audit the information in the Directors’
Remuneration Report that is described as having been audited, which the directors have prepared because the company is
required to comply with the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (SI 2008 No. 410) made under the Companies Act 2006.
54
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
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 which we were
engaged to audit 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.
55
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ADAPTIMMUNE
THERAPEUTICS PLC (CONTINUED)
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
27 February 2019
56
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
2018
$’000
2017
$’000
2
59,505
37,833
3
4
7
7
8
(115,242)
(48,286)
1,449
(162,079)
(102,574)
2,849
(7,992)
(96,381)
(30,229)
1,581
(125,029)
(87,196)
7,273
(529)
(107,717)
16,162
(80,452)
9,144
(91,555)
(71,308)
Basic and diluted loss per share
1
(0.16)
(0.14)
Weighted average number of shares used to calculate basic and diluted loss per
share
1
584,338,942
527,637,086
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 financial assets at fair value through OCI (2017:
available-for-sale financial assets)
2018
$’000
2017
$’000
(91,555)
(71,308)
8,261
(3,115)
62
(218)
Total comprehensive loss for the period
(83,232)
(74,641)
All of the above figures relate to continuing operations.
The notes on pages 63 to 99 form part of these financial statements
57
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company Number 09338148
As of year ended 31 December
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
Financial assets at fair value through OCI (2017: available-for-sale financial
assets)
Cash and cash equivalents
Total current assets
Total assets
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
Note
2018
$’000
2017
$’000
9
10
13
14
15
21
17
18
19
20
36,118
7,686
3,953
4,097
51,854
40,679
7,404
4,695
4,253
57,031
9,310
192
16,459
136,755
68,379
231,095
9,889
579
11,454
124,218
84,043
230,183
282,949
287,214
939
381,903
131,013
(17,034)
(243,722)
253,099
854
279,298
131,013
(25,357)
(176,757)
209,051
5,414
5,414
3,849
3,849
24,436
—
24,436
74,314
—
74,314
282,949
287,214
The notes on pages 63 to 99 form part of these Financial Statements
The financial statements on pages 57 to 99 were approved by the Board of Directors on 26 February 2019 and are signed
on its behalf by:
James J Noble
Director
26 February 2019
58
ADAPTIMMUNE THERAPEUTICS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
Company Number 09338148
As of year ended 31 December
Assets
Non-current assets
Investments in subsidiaries
Financial assets at amortised cost
Total non-current assets
Current assets
Prepayments
Trade and other receivables
Financial assets at fair value through OCI
Cash and cash equivalents
Total current assets
Total assets
Equity & liabilities
Equity
Share capital
Share premium
Other reserves
Accumulated Other comprehensive income
Retained earnings
Total Equity
Current liabilities
Trade and other payables
Total equity & liabilities
Note
2018
$’000
2017
$’000
11
12
15
21
18
118,062
219,056
104,827
269,619
337,118
374,446
250
8,692
136,755
19,461
165,158
196
4,382
—
799
5,377
502,276
379,823
939
381,903
79,990
(156)
37,640
854
279,298
79,990
—
19,115
500,316
379,257
20
1,960
566
502,276
379,823
The notes on pages 63 to 99 form part of these Financial Statements
The financial statements on pages 57 to 99 were approved by the Board of Directors on 26 February 2019 and are signed
on its behalf by:
James J Noble
Director
26 February 2019
59
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Share
Capital Premium
$’000
$’000
Other
reserve
$’000
Exchange
reserve
$’000
Fair value
reserves
$’000
Retained
Losses
$’000
Total
equity
$’000
Balance at 1 January 2017
Total comprehensive loss for the period:
Loss for the period
Other comprehensive loss for the period
Issuance of common stock, net of issuance
costs
Issuance of common stock upon exercise of
options
Transactions with owners, recorded
directly in equity:
Equity-settled share based payment expense
Balance at 31 December 2017
Change in accounting policy
Balance at 1 January 2018
Total comprehensive loss for the period:
Loss for the period
Other comprehensive loss for the period
Issuance of common stock, net of issuance
costs
Issuance of common stock upon exercise of
options
Transactions with owners, recorded
directly in equity:
Equity-settled share based payment expense
Balance at 31 December 2018
683 175,901 131,013 (22,024)
— (114,806) 170,767
—
—
—
—
—
—
—
(3,115)
—
(218)
(71,308) (71,308)
(3,333)
—
170 102,997
—
—
—
— 103,167
1
400
—
—
—
—
401
—
—
854 279,298 131,013 (25,139)
—
—
—
9,357
9,357
(218) (176,757) 209,051
—
—
—
—
854 279,298 131,013 (25,139)
—
8,645
8,645
(218) (168,112) 217,696
—
—
—
—
78
99,575
7
3,030
—
—
—
—
—
8,261
—
62
(91,555) (91,555)
8,323
—
—
—
—
—
—
99,653
—
3,037
—
—
939 381,903 131,013 (16,878)
—
—
—
15,945
15,945
(156) (243,722) 253,099
The notes on pages 63 to 99 form part of these Financial Statements
60
ADAPTIMMUNE THERAPEUTICS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
Balance at 1 January 2017
Total comprehensive loss for the year:
Loss 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
Balance at 31 December 2017
Balance at 1 January 2018
Total comprehensive loss for the year:
Profit for the year
Other comprehensive loss for the period
Transactions with owners, recorded directly in equity:
Issuance of common stock, net of issuance costs
Issuance of common stock upon exercise of options
Transactions with owners, recorded directly in equity:
Equity-settled share based payment expense
Balance at 31 December 2018
Share Share
Capital Premium
$’000
$’000
Other
Fair value
Reserve reserves
$’000
$’000
Retained
Total
Earnings Equity
$’000
$’000
683 175,901 79,990
—
8,345 264,919
—
—
—
—
1,413
1,413
170 102,997
400
—
—
—
—
854 279,298 79,990
1
—
— 103,167
—
401
—
—
9,357
9,357
—
— 19,115 379,257
854 279,298 79,990
— 19,115 379,257
—
—
—
—
—
—
—
(156)
2,580
—
2,580
(156)
78
7
99,575
3,030
—
—
—
—
—
—
99,653
3,037
—
—
939 381,903 79,990
—
—
15,945
15,945
(156) 37,640 500,316
The notes on pages 63 to 99 form part of these Financial Statements
61
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
Note
2018
$’000
2017
$’000
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 financial assets at fair value through
OCI (2017: available-for-sale financial assets)
Unrealized foreign exchange gains
Bank interest income
Other
Changes in:
Decrease (increase) in other current and other non-current assets
Decrease in trade and other receivables
(Decrease) increase in trade and other payables
Cash used in operations
Net taxes received
Interest received
Net cash used in operating activities
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 financial assets at fair value through OCI (2017: available-for-sale
financial assets)
Maturity of financial assets at fair value through OCI (2017: available-for-sale
financial assets)
Net cash used in 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
The notes on pages 63 to 99 form part of these Financial Statements
(107,717)
(80,452)
9
10
23
7,188
622
15,945
5,032
391
9,357
2,473
6,191
(2,849)
(36)
646
(5,043)
(2,230)
1,006
7
551
742
(40,923)
(117,814)
10,457
3,114
(104,242)
(3,314)
2,115
12,439
(60,053)
4,893
1,784
(53,376)
(3,910)
(944)
—
—
—
(24,643)
(1,308)
550
(18,000)
40,625
(150,787)
(153,334)
138,038
(17,603)
29,090
(127,020)
99,653
3,037
102,690
103,167
401
103,568
(19,155)
3,491
84,043
(76,827)
2,092
158,779
68,379
84,043
62
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES
(a) Domicile
Adaptimmune Therapeutics plc is registered in England and Wales. Its registered office is 60 Jubilee Avenue, Milton Park,
Abingdon, Oxfordshire OX14 4RX.
The Group 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 2018, the
Group had retained losses of approximately $243.7 million.
(b) 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.
(c) 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 2018 and 2017.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these financial statements.
(d) 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 26. 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.
63
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
(e) Management Estimates and Judgements
The preparation of the financial statements in conformity with IFRS 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.
(f) 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.
(g) 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.
64
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
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
(h) 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.
65
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
(i) 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.
(j) 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.
(k) Impairment of Non-financial Assets Excluding Inventories and Deferred Tax 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.
(l) Financial Instruments (after the adoption of IFRS 9, Financial Instruments (“IFRS 9”)
On 1 January 2018, the Group adopted new guidance on financial instruments included in IFRS 9.
(i) Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through other comprehensive income (“OCI”) or
through profit or loss); and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of
the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. The
group reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to
purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit and loss are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash
flow characteristics of the asset. The Group’s debt securities are held for collection of cash flows where those cash flow
represent solely payments of principal and interest and to manage liquidity. As of 31 December 2018, the Group has
invested in debt securities, including corporate debt securities and commercial paper, and money market funds. The debt
securities are subsequently measured at fair value through OCI. Interest income from these financial assets is included in
66
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in
profit or loss and presented in other gains/(losses).
(iv) Impairment
From 1 January 2018, the Group recognises loss allowances for expected credit losses on financial assets measured at
amortised cost, debt investments measured at fair value through OCI, and contract assets.
The Group measures loss allowances at an amount equal to lifetime expected credit losses, except for debt securities that
are determined to have low credit risk at the reporting date and other debt securities and bank balances for which credit
risk has not increased significantly since initial recognition, which are measured at 12-month expected credit losses.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime expected
credit losses.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
For debt securities at fair value through OCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Debt securities
Our investment in debt securities 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. The debt securities have been determined to have a low credit risk at 1 January 2018 and 31 December
2018 and 12-month expected credit losses are not material.
Cash and cash equivalents
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, no material impairment loss
was identified.
Trade and other receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
(v) Accounting policies applied until 31 December 2017
The Group has applied IFRS 9 retrospectively but has elected not to restate comparative information. As a result, the
comparative information provided continues to be accounted for in accordance with the group’s previous accounting
policy.
(m) Non-Derivative Financial Instruments (prior to the adoption of IFRS 9)
Until 1 January 2018, the Group classified 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.
67
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
Available-For-Sale Financial Assets
The initial measurement of available-for-sale assets has not changed under IFRS 9. Until 1 January 2018, 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.
Trade and Other Receivables
Until 1 January 2018, 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
Until 1 January 2018, 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. Debt securities with a maturity at acquisition of less than three months are categorized as cash
equivalents.
Financial Assets Impairment
Until 1 January 2018, 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.
68
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
(n) Fair value hierarchy
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.
(o) Revenue (after the adoption of IFRS 15, Revenue from Contracts with Customers (“IFRS 15”))
On 1 January 2018, the Group adopted new guidance on revenue recognition included in IFRS 15. The accounting
policy applicable from 1 January 2018 is described below and further details below. The comparative financial
information for the year ended 31 December 2017 and as of 31 December 2017 has not been restated and is prepared in
accordance with the accounting policies that are described further below.
The Group has one contract with a customer, which is the GSK Collaboration and License Agreement. The GSK
Collaboration and License Agreement consists of multiple performance obligations, including the transition of the NY-
ESO SPEAR T-cell program to GSK, the development of a second target, PRAME, and an exclusive license (the “NY-
ESO License”) to research, develop, and commercialize the Group’s NY-ESO SPEAR T-cell therapy program.
In September 2017, GSK exercised its option to obtain the NY-ESO License and the first tranche ($26.6 million or £20
million) of the option exercise payment became payable to the Group. In connection with the option exercise, in
September 2017, the GSK Agreement was amended to, among other things, include a detailed transition plan identifying
the steps needed to complete transition of the Investigational New Drug Application (IND) process with the Food and
Drug Administration (FDA) for the NY-ESO SPEAR T-cell program to GSK. On 23 July 2018, the transition activities
were substantially completed and the IND for the NY-ESO SPEAR T-cell program transferred to GSK.
GSK nominated a second target program for the PRAME target antigen, which was announced on 9 January 2017. We
have since completed all work under this collaboration program. The program led to the development of a final lead
candidate SPEAR T-cell directed to a specific peptide from the PRAME antigen. We and GSK agreed that the
collaboration should not continue due to the peptide, to which the lead candidate was directed, not reaching GSK
criteria.
The aggregate transaction price consists of an upfront payment of $42,123,000 received in June 2014, development
milestones achieved of $66,404,000, an option exercise fee of $39,785,000. There was no variable consideration at 31
December 2018.
The Group determines the variable consideration to be included in the transaction price by estimating the most-likely
amount that will be received and then applies a constraint to reduce the consideration to the amount which is probable of
being received. The determination of whether a milestone is probable includes consideration of the following factors:
69
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
• Whether achievement of a development milestone is highly susceptible to factors outside the entity’s influence,
such as milestones involving the judgment or actions of third parties, including regulatory bodies or the
customer;
• Whether the uncertainty about the achievement of the milestone is not expected to be resolved for a long period
of time;
• Whether the Group can reasonably predict that a milestone will be achieved based on previous experience; and.
•
The complexity and inherent uncertainty underlying the achievement of the milestone.
Under the terms of the GSK Collaboration and License Agreement, the Group may also be entitled to development
milestones. The development and regulatory milestones are per product milestones and are dependent on achievement
of certain obligations, the nature of the product being developed, stage of development of product, territory in which an
obligation is achieved and type of indication or indications in relation to which the product is being developed. In
addition, for any program, multiple products may be developed to address different HLA-types. These amounts have not
been included within the transaction price as of 31 December 2018 because they are not considered probable.
The Group may also receive commercialization milestones upon the first commercial sale of a product based on the
indication and the territory and mid-single to low double-digit royalties on worldwide net sales. These amounts have not
been included within the transaction price as of 31 December 2018 because they are sales or usage-based royalties
promised in exchange for a license of intellectual property, which will be recognized when the subsequent sale or usage
occurs.
The payments to the Group under the contract are typically due upon achievement of milestones and within standard
payment terms (approximating to 45 days). The contract does not include a significant financing component.
The upfront payment of $42,123,000 was allocated between the performance obligations using the Group’s best estimate
of the relative selling price. In determining the best estimate, the Group considered internal pricing objectives it used in
negotiating the contract, 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 included in the contract.
The variable consideration is allocated to the performance obligation to which it relates.
The amount of the transaction price allocated to the performance obligation is recognized as or when the Group satisfies
the performance obligation. The Group satisfies the performance obligations relating to the transition of the NY-ESO
SPEAR T-cell program and the development of a second target, PRAME, over time and recognizes revenue based on an
estimate of the percentage of completion of the project determined based on the costs incurred on the project as a
percentage of the total expected costs. The Group considers that this depicts the progress of the project, where the
significant inputs are internal project resource and third-party clinical and manufacturing costs. The determination of the
percentage of completion requires the Group to estimate the costs-to-complete the project. The Group makes a detailed
estimate of the costs-to-complete on an annual basis as part of the Group’s budgeting process, which is re-assessed every
reporting period based on the latest project plan and discussions with project teams. If a change in facts or
circumstances occurs, the estimate 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.
The Group has determined that the performance obligation relating to the NY-ESO License is recognized at a point-in-
time, upon commencement of the license, which occurred in September 2018.
The Group recognizes a contract asset, when the value of satisfied (or part satisfied) performance obligations is in excess
of the payment due to the Group, and deferred revenue (contract liability) when the amount of unconditional
70
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
consideration is in excess of the value of satisfied (or part satisfied) performance obligations. Once a right to receive
consideration is unconditional, that amount is presented as a receivable.
The timing and amount of milestone payments for the development and transition of the NY-ESO SPEAR T-cell
program are intended to be commensurate with the cost and effort involved in achieving the milestones and therefore a
contract asset would typically arise. The Group received $26,610,000 of the option exercise fee in September 2017,
which was included in deferred revenue at 1 January 2018 and this amount was recognized as revenue, along with a
further option exercise fee of $13,175,000, in September 2018 upon commencement of the license.
Changes in deferred revenue typically arise due to:
•
•
•
•
adjustments arising from a change in the estimate of the cost to complete the project, which results in
a cumulative catch-up adjustment to revenue that affects the corresponding contract asset or deferred
revenue;
a change in the estimate of the transaction price due to changes in the assessment of whether variable
consideration is constrained because it is not considered probable of being received;
the recognition of revenue arising from deferred revenue; and
the reclassification of amounts to receivables when a right to consideration to becomes unconditional.
A change in the estimate of variable consideration constrained (for example, if a development milestone becomes
probable of being received) could result in a significant change in the revenue recognized and deferred revenue.
Revenue is recognized when earned and realized or realizable, which is generally when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or
determinable, and collectability is reasonably assured. Where applicable, all revenues are stated net of value added and
similar taxes.
(p) Revenue (prior to the adoption of IFRS 15)
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.
(q) 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.
71
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
(r) 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
72
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
(w) Dividends
Dividends received from subsidiary undertakings are accounted for when received. Dividends paid are accounted for in
the period when they are paid.
(x) 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 following table reconciles the numerator and denominator in the basic and diluted loss per share computation (in
thousands):
For the year ended 31 December
Numerator for basic and diluted loss per share
Loss for period
Loss attributable to shareholders used for basic and diluted EPS calculation
2018
$'000
2017
$'000
(91,555)
(91,555)
(71,308)
(71,308)
Denominator for basic and diluted loss per share
Weighted average number of shares used to calculate basic and diluted loss per
share
584,338,942
527,637,086
The effects of the following 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:
As of
Weighted average number of share options(1)
2018
2017
88,553,474
70,374,832
(y) 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 16, Leases (mandatory for year commencing on or after 1 January 2019) (“IFRS 16”)
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is
12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance,
with IFRS 16’s approach to lessor accounting substantially unchanged from the previous guidance.
The Group is currently evaluating the impact of adopting IFRS 16. However, the adoption of IFRS 16 is likely to have a
material impact on the consolidated financial statements due to the following:
73
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
•
•
It is anticipated that lease assets of approximately $21 million and a corresponding lease liability of
approximately $26 million will be recorded upon adoption.
Under current guidance, the costs in respect of operating leases are charged to the income statement on a
straight line basis over the lease term. Under IFRS 16, the cost in respect of leases are the depreciation of the
right-of-use asset and an imputed interest charge arising on the lease liability.
The Group plans to apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Therefore, the
cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained losses at 1
January 2019, with no restatement of comparative information.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future transactions.
(z) IFRS adopted in the year ended 31 December 2018
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 has adopted the guidance using the modified retrospective approach, with the cumulative effect of initially
applying the guidance recognized as an adjustment to retained losses at 1 January 2018. Therefore, the comparative
information has not been adjusted and continues to be reported under previous guidance.
The quantitative impacts of the changes on the consolidated income statement for the year ended 31 December 2018 are
set out below:
Under previous
revenue
guidance
$'000
Adjustment As reported
$'000
$'000
Revenue
Operating loss
Loss before income taxes
Loss for the period
Basic and diluted loss per share
67,802
(94,277)
(99,420)
(83,258)
(0.14)
74
(8,297)
(8,297)
(8,297)
(8,297)
59,505
(102,574)
(107,717)
(91,555)
(0.16)
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
The quantitative impacts of the changes on the consolidated balance sheet as of 31 December 2018 are set out below:
Accumulated Other comprehensive income
Retained losses
Total Equity
Under previous
revenue
guidance
$'000
Adjustment As reported
$'000
$'000
(16,686)
(244,070)
253,099
(348)
348
—
(17,034)
(243,722)
253,099
The quantitative impacts of the changes on the consolidated statement of cash flows for the year ended 31 December
2018 are set out below:
Loss for the period
(Decrease) increase in trade and other payables
Under previous
revenue
guidance
$'000
Adjustment As reported
$'000
$'000
(83,258)
(49,220)
(8,297) (91,555)
(40,923)
8,297
The cumulative effect of adopting the guidance on the consolidated financial statements at 1 January 2018 is a credit to
opening retained losses and corresponding decrease in deferred revenue of $8,645,000.
The adoption of IFRS 15 has had a material impact on the consolidated financial statements due to the following:
• Under the GSK Collaboration and License Agreement, the Group will receive non-substantive milestone
payments in the future upon achievement of specified development milestones. Non-substantive milestones
are currently included within the transaction price upon achievement of the milestone and recognized over
the period during which the Group is delivering services to GSK. 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.
• Upfront payments and non-refundable milestone payments were previously recognized in revenue using the
proportional performance model rateably over the period that services are rendered, unless another
attribution method more closely approximates the delivery of the goods or services to the customer. 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. The Group considers that an input measure, such as costs incurred,
relative to the total expected inputs is the appropriate measure to depict the transfer of control of the services
under the GSK Collaboration and License Agreement, which impacts the timing of its revenue from the
GSK Collaboration and License Agreement.
The Group has applied the practical expedient for contracts that were modified before the adoption of IFRS 15, which
permits entities to not retrospectively restate the contract for those contract modifications. Instead, the aggregate effect
of all modifications that occurred before the adoption date has been reflected when:
a. Identifying the satisfied and unsatisfied performance obligations
75
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. ACCOUNTING POLICIES (CONTINUED)
b. Determining the transaction price
c. Allocating the transaction price to the satisfied and unsatisfied performance obligations.
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 included within Note 2, which are more
extensive than the previously required revenue disclosures.
Impact of adopting IFRS 9
IFRS 9 replaces the previous guidance relating to the recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts
recognised in the financial statements. The new accounting policies are set out above. In accordance with the transitional
provisions of IFRS 9, comparative figures have not been restated. The adoption of IFRS 9 had no impact on the opening
retained losses of the Group.
(i) Classification and measurement
On 1 January 2018 (the date of initial application of IFRS 9), the Group’s management has assessed which business
models apply to the financial assets held by the Group and has classified its financial instruments into the appropriate
IFRS 9 categories. This had no impact on the measurement of the financial assets.
(ii) Impairment of financial assets
The Group’s financial assets are subject to IFRS 9’s new expected credit loss model. This Group’s financial assets are
considered to be low risk because they are predominately high-grade investments, and therefore the impairment
provision is determined as 12 months’ expected credit losses. Applying the expected credit risk model did not result in
the recognition of a loss allowance as of 1 January 2018 or during the year ended 31 December 2018.
.
2 REVENUE & SEGMENTAL REPORTING
Group
Revenue from contracts with customers arises from one customer, which is GSK, in one geographic location, which is
the United Kingdom.
Revenue comprises the following categories:
For the year ended 31 December
Development
Licenses
2018
$'000
20,391
39,114
59,505
76
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
2 REVENUE & SEGMENTAL REPORTING (CONTINUED)
The deferred revenue balance as of 1 January 2018 and 31 December 2018 is as follows:
Deferred revenue
31 December
2018
$'000
—
1 January
2018
$'000
30,090
Deferred revenue has decreased from $30,090,000 at 1 January 2018 to $0 at 31 December 2018 primarily due to the
recognition of license revenue of $39,114,000 for the NY-ESO License which commenced in September 2018, of which
$27,001,000 was included in the opening balance of deferred revenue. A further $3,089,000 of the deferred revenue at 1
January 2018 was recognized in the year ended 31 December 2018.
The impact of changes in variable consideration in the year ended 31 December 2018 was a reduction in deferred
revenue of $10,396,000, respectively, and the impact of changes in the percentage of completion in the year ended 31
December 2018 was to increase deferred revenue by $5,027,000.
At 31 December 2018, there were no unsatisfied (or partially satisfied) performance obligations. The NY-ESO program
transferred to GSK on 23 July 2018 which resulted in the revenue allocated to the NY-ESO License and the transition
activities being recognized in year ended 31 December 2018. The revenue allocated to the PRAME pre-clinical
development program was recognized over the development period, which was completed as at 31 December 2018.
Geographic information
Noncurrent assets (excluding intangibles, financial instruments, and deferred tax) based on geographic location:
As of 31 December
United Kingdom
United States
2018
$’000
18,828
17,290
36,118
2017
$’000
22,786
17,893
40,679
Clinical materials of $3,953,000 and $4,695,000, included within non-current assets as of 31 December 2018 and 2017,
respectively, are not included within the table above because they can easily be transferred between geographic location.
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
2018
$’000
2017
$’000
—
639
810
1,449
150
981
450
1,581
77
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4 EXPENSES AND AUDITOR’S REMUNERATION
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
5 STAFF NUMBERS AND COSTS
Group
2018
$’000
2017
$’000
3,399
3,953
7,188
622
7
589
172
—
10
3,617
652
5,032
391
194
193
110
—
6
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
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)
2018
2017
320
89
409
260
70
330
2018
$’000
42,709
3,774
15,945
1,848
64,276
2017
$’000
33,830
2,907
9,357
1,264
47,358
78
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
6 DIRECTORS’ REMUNERATION
Group
For the year ended 31 December
Directors’ emoluments
2018
$’000
2017
$’000
983
975
Directors’ emoluments include employer social security contributions of $119,000 (2017: $94,000).
Total Directors’ pension contributions for the period were $nil (2017: $nil).
No retirement benefits are accruing to Directors (2017: none) under the Group’s pension schemes. No Directors (2017:
none) exercised share options in the parent company during the period.
For the year ended 31 December
Highest paid Director
Aggregate emoluments and benefits
(Excluding gains on exercise of share options)
2018
$’000
2017
$’000
853
877
The highest paid Director’s pension contributions for the year ended 31 December 2018 were $nil (2017: $nil). The highest
paid Director exercised no share options in the period (2017: nil)
7 FINANCE INCOME AND EXPENSE
Group
Finance income recognised in the income statement:
For the year ended 31 December
Net unrealized foreign exchange gains
Interest income on financial assets at fair value through OCI (2017: 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
Net unrealized foreign exchange losses
Amortization and accretion of financial assets at fair value through OCI (2017: available-
for-sale financial assets)
Other
2018
$’000
2017
$’000
—
5,043
2,422
427
2,849
1,406
824
7,273
2018
$’000
2017
$’000
7,748
244
—
7,992
—
507
22
529
79
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
8 TAXATION CREDIT
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
2018
$’000
2017
$’000
16,350
(497)
309
16,162
9,566
(452)
30
9,144
The total tax credit is lower (2017: 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% (2017: 19.5%)
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
R&D tax credits generated
Other
2018
$’000
2017
$’000
107,717
80,452
20,465
1,029
(16,634)
(1,252)
12,330
(5,156)
4,814
566
16,162
15,485
631
(9,966)
(1,071)
6,954
(3,011)
—
123
9,144
As of 31 December 2018, there are accumulated tax losses for carry forward in the U.K. of approximately $175,600,000
(2017: $129,500,000), expenditure credit carryforwards of $600,000 and U.S. tax credit carryforwards of $4,200,000
(2017: $205,000). Unsurrendered U.K. tax losses and tax credit carryforwards 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 2018 and 2017 was 19% and 19.25%, 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 2018 was 21%. This rate has decreased from 34% for the
year ending 31 December 2017 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.
80
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
9 PROPERTY, PLANT & EQUIPMENT
Group
Computer Office
Equipment Equipment Equipment Improvements Total
$’000
$’000
Laboratory Leasehold
$’000
$’000
$’000
Cost
At 1 January 2017
Additions
Disposals
Effect of foreign currency translation
At 31 December 2017
Additions
Disposals
Effect of foreign currency translation
At 31 December 2018
Depreciation
At 1 January 2017
Charge for period
Disposals
Effect of foreign currency translation
At 31 December 2017
Charge for period
Disposals
Effect of foreign currency translation
At 31 December 2018
Carrying value
At 1 January 2017
At 31 December 2017
At 31 December 2018
1,904
702
—
100
2,706
313
—
(103)
2,916
605
643
—
54
1,302
783
—
(67)
2,018
265
558
—
35
858
21
—
(32)
847
81
78
—
8
167
172
—
(13)
326
11,423
6,118
—
1,204
18,745
3,571
—
(1,036)
21,280
3,318
2,752
—
430
6,500
3,940
—
(533)
9,907
18,830 32,422
9,265 16,643
(1,373) (1,373)
2,451
1,112
27,834 50,143
3,910
—
(840) (2,011)
26,999 52,042
5
—
4,523
519
5,032
1,559
(629)
(629)
538
46
9,464
1,495
7,188
2,293
—
—
(115)
(728)
3,673 15,924
1,299
1,404
898
184
691
521
8,105
12,245
11,373
18,311 27,899
26,339 40,679
23,326 36,118
81
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
10 INTANGIBLES
Group
Cost
At 1 January 2017
Additions
Effect of foreign currency translation
At 31 December 2017
Additions
Effect of foreign currency translation
At 31 December 2018
Amortization
At 1 January 2017
Charge for period
Effect of foreign currency translation
At 31 December 2017
Charge for period
Effect of foreign currency translation
At 31 December 2018
Carrying value
At 1 January 2017
At 31 December 2017
At 31 December 2018
Licensed In-process Computer
R&D
technology
$’000
$’000
Software
$’000
Total
$’000
183
—
17
200
10
(13)
197
11
23
2
36
25
(4)
57
4,625
939
503
6,067
146
—
6,213
—
—
—
—
—
—
—
1,310
369
110
1,789
788
(83)
2,494
214
368
34
616
597
(52)
1,161
6,118
1,308
630
8,056
944
(96)
8,904
225
391
36
652
622
(56)
1,218
172
164
140
4,625
6,067
6,213
1,096
1,173
1,333
5,893
7,404
7,686
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 and milestone
payments of $0.2 million, $0.9 million and $3.0 million in the years ended 31 December 2018, 2017 and 2016, respectively.
Further milestone payments of up to $43.5 million are payable if certain development and product milestones are achieved.
82
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
11 INVESTMENTS IN SUBSIDIARIES
Company
Cost and carrying value
At 1 January 2017
Capital contributions in respect of share-based payment transactions
At 31 December 2017
Capital contributions in respect of share-based payment transactions
At 31 December 2018
The Company has the following (direct or indirect) interest in subsidiary undertakings:
$’000
97,660
7,167
104,827
13,235
118,062
Name of
Company
Adaptimmune
Limited
Adaptimmune
LLC
Country of
Proportion
Incorporation
Holding
Held
England and Wales
United States of
America
Ordinary shares of
£0.001
Ordinary Shares of $1
Nature of Business
Biotechnology Research &
Development
Biotechnology Research &
Development
100 %
100 %
12 FINANCIAL ASSETS AT AMORTISED COST
Company
As of 31 December
Loan receivables from group undertakings
2018
$’000
2017
$’000
219,056
269,619
Loan receivables 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.
13 RESTRICTED CASH
Group
As of 31 December 2018 and 2017, the Group had restricted cash of $4,097,000 and $4,253,000, respectively, relating to
security deposits for letters of credit relating to leased properties.
14 OTHER CURRENT ASSETS
Group
As of 31 December
Prepayments
Clinical materials
Other current assets
2018
$’000
2017
$’000
6,279
1,087
1,944
9,310
6,120
3,760
9
9,889
83
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
15 TRADE & OTHER RECEIVABLES
Group
As of 31 December
Trade receivables
Other receivables
Company
As of 31 December
Amounts owed from group undertakings
2018
$’000
2017
$’000
192
—
192
206
373
579
2018
$’000
2017
$’000
8,692
8,692
4,382
4,382
Amounts owed from group undertakings are trading balances, which are unsecured and have no fixed date of repayment.
16 FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI (2017: AVAILABLE-FOR-SALE FINANCIAL
ASSETS)
Group
As of 31 December
Marketable securities denominated in U.S. dollars
17 CASH AND CASH EQUIVALENTS
Group
As of 31 December
Cash and cash equivalents held in pounds sterling
Cash and cash equivalents held in U.S. dollars
2018
$’000
2017
$’000
136,755
136,755
—
—
2018
$’000
2017
$’000
27,914
40,465
68,379
42,166
41,877
84,043
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.
84
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
18 CAPITAL AND RESERVES
Group and Company
Share capital
As of 31 December
Allotted, called up and fully paid 627,454,270 (As of 31 December 2017: 562,119,334)
Ordinary shares of 0.1p each
Ordinary shares
2018
$’000
2017
$’000
939
854
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.
2018 Registered direct offering
On 7 September 2018, the Company completed a registered direct offering of its American Depositary Shares (“ADSs”)
following its entry into a definitive agreement with Matrix Capital Management Company, LP, New Enterprise
Associates 16, L.P., New Enterprise Associates 14, L.P. and Syncona Portfolio Limited. The Company sold 10,000,000
ADSs (representing 60,000,000 ordinary shares) at a price of $10.00 per ADS. The net proceeds were $99,653,000 after
deducting offering expenses of $347,000.
2017 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.
2017 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 2018 and 2017.
85
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
18 CAPITAL AND RESERVES (CONTINUED)
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.
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 financial assets at fair value through OCI
(2017: 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.
19 NON-CURRENT TRADE AND OTHER PAYABLES
Group
As of 31 December
Accruals
20 CURRENT TRADE AND OTHER PAYABLES
Group
As of 31 December
Trade payables
Other taxation and social security
Deferred income
Accruals
31 December 31 December
2018
$’000
2017
$’000
5,414
5,414
3,849
3,849
2018
$’000
4,398
509
—
19,529
24,436
2017
$’000
8,378
6,204
38,735
20,997
74,314
86
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
20 CURRENT TRADE AND OTHER PAYABLES (CONTINUED)
Company
As of 31 December
Trade payables
Amounts owed to group undertakings
Accruals
2018
$’000
2017
$’000
33
1,247
680
1,960
42
—
524
566
Amounts owed to group undertakings are unsecured, have no fixed date of repayment, and are interest free.
87
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
21 FINANCIAL INSTRUMENTS
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 2018 are as follows:
Fair Value Measurements Using
31 December
2018
$’000
Level 1
$’000
Level 2
$’000
Level 3
$’000
Assets:
Financial assets at fair value through OCI (2017: available-for-sale
financial assets): Corporate debt securities
136,755 125,813
10,942
—
The Group estimates the fair value of financial assets at fair value through OCI (2017: 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.
88
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
21 FINANCIAL INSTRUMENTS (CONTINUED)
Disclosure of fair values of financial assets and liabilities:
As of
Financial assets not measured at fair value:
Receivables
Trade receivables
Tax receivable
Other receivables
31 December 2018
31 December 2017
Carrying
Carrying
amount Fair value
$’000
$’000
amount Fair value
$’000
$’000
192
16,459
—
16,651
192
16,459
—
16,651
206
11,454
373
12,033
206
11,454
373
12,033
Cash and cash equivalents
68,379
68,379
84,043
84,043
31 December 2018
31 December 2017
As of
Financial liabilities not measured at fair value:
Trade payables
Other taxation and social security
Accruals
Tax payable
Carrying
amount Fair value
$’000
$’000
Carrying
amount
$’000
Fair value
$’000
4,398
509
19,529
—
24,436
4,398
509
19,529
—
24,436
8,378
6,204
24,846
—
39,428
8,378
6,204
24,846
—
39,428
For cash and cash equivalents, 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.
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
31 December 2018
Carrying Contractual 1 year or
amount
$’000
cash flows
$’000
less
$’000
4,398
509
19,529
24,436
4,398
509
19,529
24,436
4,398
509
19,529
24,436
89
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
21 FINANCIAL INSTRUMENTS (CONTINUED)
As of
Financial liabilities at amortised cost
Trade payables
Other taxation and social security
Accruals
Foreign Exchange Risk
Carrying
amount
$’000
31 December 2017
Contractual 1 year or
cash flows
$’000
less
$’000
8,378
6,204
24,846
39,428
8,378
6,204
24,846
39,428
8,378
6,204
20,997
35,579
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.
Financial assets and liabilities in foreign currencies are as follows:
As of 31 December
Financial assets:
Cash and cash equivalents
Financial liabilities:
Accruals
Trade payables
2018
Carrying
amount
$’000
2017
Carrying
amount
$’000
27,914
42,116
4,736
681
4,726
6,422
A 1% increase in exchange rates would reduce the carrying value of net financial assets and liabilities in foreign currencies
at 31 December 2018 by $225,000 (2017: $1,499,000).
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 2018, the last business day of the reporting period, was £1.00 to $1.27.
Credit risk
Trade receivables were $192,000 and $579,000 as of 31 December 2018 and 2017, 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 was $192,000 past due as of 31 December 2018.
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.
90
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
21 FINANCIAL INSTRUMENTS (CONTINUED)
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.
Financial assets and liabilities subject to variable interest rates are as follows:
As of 31 December
Cash and cash equivalents
2018
Carrying
amount
$’000
2017
Carrying
amount
$’000
68,379
84,043
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 2018 by $341,000 (31 December 2017: $420,000).
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.
22 EMPLOYEE BENEFITS
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 2018 were $134,000 (2017: $280,000). The pension cost charge for the year ended 31
December 2018 was $1,847,000 (2017: $1,264,000).
91
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
23 SHARE BASED PAYMENTS
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.
Generally, the vesting dates for the options granted under these plans up to 31 December 2018 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 to non-executive directors on 22 June 2018: 100% on the first anniversary of the grant date
Options granted to a non-executive director on 5 July 2018:
25% on the first anniversary of the grant date and 75% in
monthly instalments over the following two years
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.
92
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
23 SHARE BASED PAYMENTS (CONTINUED)
Prior to 31 December 2014, the Group granted options to purchase ordinary shares in Adaptimmune Limited under three
option schemes:
(i) 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.
(ii) 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.
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:
Options granted in December 2014:
100% on the third anniversary of the grant date
25% on the first anniversary of the grant date and 75% in
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.
93
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
23 SHARE BASED PAYMENTS (CONTINUED)
The number and weighted average exercise prices of share options (including grant in the year) are as follows:
For the year ended
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
2018
2017
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
Number
74,943,667 £ 0.58
49,237,290 £ 0.58
20,771,970 £ 0.63
(5,334,936) £ 0.42
(2,815,982) £ 0.80
87,564,719 £ 0.60
47,678,481 £ 0.55
29,924,787 £ 0.62
(1,142,904) £ 0.19
(3,075,506) £ 1.04
74,943,667 £ 0.58
31,449,602 £ 0.51
There were 20,771,970 and 29,924,787 options granted in the years ended 31 December 2018 and 2017, respectively, of
which 8,603,676 had a nominal exercise price (similar to a restricted stock unit (RSU). The weighted average fair value
of stock options with an exercise price equating to the fair market value on the date of grant granted in the years ended
31 December 2018 and 2017 were $0.87 and $0.74, respectively. The weighted average fair value of RSU-style stock
options granted in the year ended 31 December 2018 was $1.37.
There were 5,334,936 and 1,142,904 share options exercised in the years ended 31 December 2018 and 2017,
respectively. In the years ended 31 December 2018 and 2017 the total intrinsic value of stock options exercised was
$7,258,000 and $1,522,000, respectively and the cash received from exercise of stock options was $3,037,000 and
$401,000, respectively. The Company satisfies the exercise of stock options through newly issued shares.
For options outstanding at 31 December 2018, the range of exercise prices and weighted average remaining contractual
life are as follows:
Outstanding
Exercisable
Exercise Price
Weighted-Average
Remaining
Contractual Life
£0
£0 – £0.25
Total Share
Options
8,099,412
7,268,412
£0.26 – £0.50 16,714,988
£0.51 – £0.75 28,617,051
£0.76 – £1.00 22,317,845
2,751,818
£1.01 – £1.50
1,795,243
£1.51 – £2.00
Total 87,564,769
Weighted-Average
Exercise Price
Total Share Weighted-Average
Options
Exercise Price
9.2 £
4.9 £
6.1 £
8.2 £
8.0 £
8.5 £
8.6 £
7.6 £
— £
0.00
0.12
7,268,412 £
0.43 16,156,497 £
0.61 13,465,614 £
9,323,729 £
0.93
934,295 £
1.18
1.71
529,934 £
0.60 47,678,481 £
—
0.12
0.42
0.61
0.90
1.04
1.82
0.55
The total charge for the year relating to share based payment plans was $15,945,000 (2017: $9,357,000), all of which
related to equity-settled share based payment transactions.
94
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
23 SHARE BASED PAYMENTS (CONTINUED)
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
2018
5 years
66 - 69% %
2017
5 years
66-71 %
0.90 - 1.15% % 0.40-0.76 %
0 %
0% %
The expected term of the option is based on management judgment. Due to the Company’s lack of sufficient history as a
publicly traded company, management’s estimate of expected volatility for grants prior to May 2017 are based on the
average volatilities of seven public companies with similar attributes to the Company. For grants subsequent to May
2017, there is over two years of historical data upon which to determine the volatility of the Company’s share price,
which management consider is sufficient to estimate the volatility based on the Company’s historical share price. The
risk free rate is based on the Bank of England’s estimates of gilt yield curve as of the respective grant dates.
The Group has analysed historic forfeiture rates for share options and determined approximately 2% of options granted
are expected to be forfeited.
24 CAPITAL COMMITMENTS AND CONTINGENCIES
Group
As of 31 December
Future capital expenditure contracted but not provided for
Other commitments
Commitments for clinical materials, clinical trials and contract manufacturing
2018
$’000
2017
$’000
963
945
As of 31 December 2018, the Group had non-cancellable commitments for purchase of clinical materials,
contract manufacturing and committed funding under the MD Anderson strategic alliance of up to $25,849,000, of which
the Group expects to pay $13,213,000 within one year and $12,636,000 in one to three years. The amount and timing of
these payments vary depending on the rate of progress of development. Future clinical trial expenses have not been
included within the purchase commitments because they are contingent on enrolment in clinical trials and the activities
required to be performed by the clinical sites. The Group’s subcontracted costs for clinical trials and contract
manufacturing were $41,580,000 and $41,505,000 for the years ended 31 December 2018 and 2017, respectively.
95
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
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.
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.
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 in order for any study to be included under the alliance 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 milestone payments of $2,325,000 in the year ended 31 December
2018. The Group is obligated to make further payments to MD Anderson as certain milestones are achieved. These costs
are 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.
96
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
24 CAPITAL COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 $0.2 million and $0.9 million in the year
ended 31 December 2018 and 2017, respectively. 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 license and start-up fee
and milestone payments were expensed to research and development when incurred.
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 31 December 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.
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:
2018
2017
As of 31 December
Within one year
Within two to five years
Over five years
Land and
buildings
$’000
Other
$’000
Land and
buildings
$’000
Other
$’000
3,682
14,504
13,772
31,958
—
—
—
—
2,886
15,326
15,215
33,427
—
—
—
—
The annual charge in the income statement for operating leases was $3,399,000 for the year ended 31 December 2018
(2017: $3,617,000). The leases refer to laboratory and office property in Oxfordshire, U.K. and Philadelphia, U.S.
97
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
25 RELATED PARTIES
Group
Immunocore Limited (“Immunocore”)
The Group has historically entered into several agreements with Immunocore Limited (“Immunocore”). As of the
closing of the Company’s registered direct offering of its American Depositary Shares on 10 April 2017, Immunocore
held less than 5% of the Company’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 Company no longer considers
Immunocore to be a related party with effect from 1 January 2018.
During the year ended 31 December 2017, Immunocore 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.
During the year ended 31 December 2017, 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
Amounts Amounts
Invoiced to
related
party*
$’000
Purchases
from
related party
$’000
owed
from related
party
$’000
owed
to related
party
$’000
Immunocore Limited
555
785
—
—
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
2018
$’000
2017
$’000
4,150
3,332
5,673
9,823
5,235
8,567
98
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
This page intentionally left blank
99