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Amryt Pharma plc
Annual Report 2016
Amryt Pharma plc
Registered Office:
Ivybridge House
1 Adam Street
London WC2N 6LE
Dublin Office:
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2
Ireland
www.amrytpharma.com
The Rare and
Orphan Diseases Specialist
243996 AMRYT AR 0cover 2016.qxp 04/04/2017 12:09 Page 2
Amryt is a specialty pharmaceutical company
focused on developing and delivering innovative
new treatments to help improve the lives of
patients with rare or orphan diseases.
Orphan / Rare Disease focused business with strong
and experienced management team in place
Delivering on strategy to acquire, develop and
commercialise products
Commercial stage pharma company with material
revenues anticipated from Lojuxta sales
Robust pipeline of drug candidates with excellent
progress made on AP101 and AP102
Pivotal phase 3 trial, “EASE” Study, to examine
AP101’s efficacy as a new treatment for EB
commenced in March 2017. Study top line data
expected to be available in H2 2018
Building Lojuxta sales will be a major focus for us in
2017
Non-dilutive EIB funding secures Amryt's near and
mid-term funding needs for its lead product, AP101
Amryt Pharma plc
Perivan Financial Print 243996
01
Contents
STRATEGIC REPORT
• Chairman and CEO’s Statement 02
• Operations Review 05
• Risks and Uncertainties 08
CORPORATE GOVERNANCE
• Board of Directors 10
• Corporate Governance Statement 12
• Group Directors’ Report 14
FINANCIAL STATEMENTS
• Independent Auditor’s Report 20
• Consolidated Statement of Comprehensive Income 22
• Consolidated Statement of Financial Position 23
• Consolidated Statement of Cash Flows 24
• Consolidated Statement of Changes in Equity 25
• Company Statement of Financial Position 26
• Company Statement of Cash Flows 27
• Company Statement of Changes in Equity 28
• Notes to the Financial Statements 29
• Company Information 56
Consolidated Financial Statements for the year ended 31 December 2016
02
STRATEGIC REPORT:
Chairman and CEO’s Statement
Introduction
We are pleased to present the annual
report and consolidated financial
statements of Amryt Pharma plc
(“Amryt” or the “Company”) for the
year ended 31 December 2016. The
publication of this annual report follows
the reverse takeover of Fastnet Equity plc
by Amryt Pharmaceuticals DAC (“Amryt
DAC”), the subsequent name change to
Amryt Pharma plc and the re-admission
of the shares to trading on AIM and ESM.
The financial results comprise the results
of Amryt DAC for the period from
1 January 2016 to 18 April 2016 and
those of the new consolidated Amryt
group from 19 April 2016 to
31 December 2016.
Company focus
Amryt is a specialty pharmaceutical
company focused on developing and
delivering innovative new treatments to
help improve the lives of patients with
rare or orphan diseases. The Company is
building a diversified portfolio of best-
in-class, proprietary new drugs to help
address some of these rare and
debilitating illnesses where there is
significant unmet medical need.
Significant progress made to
date
On 18 April 2016, Amryt DAC
successfully completed the reverse
takeover of Fastnet Equity plc (“RTO”)
and raised £10 million before costs in a
share placing. On the same date Amryt
DAC completed the acquisitions of
Birken AG (“Birken”) and
SomPharmaceuticals (“SOM”) and
Fastnet Equity plc was renamed Amryt
Pharma plc.
Since the RTO, the Group has made
excellent progress. This progress
included advancing its product
candidates, completing an exclusive
licensing deal for a further commercial
product, Lojuxta, and securing access to
non-dilutive funding from the European
Investment Bank (“EIB”) of up to
€20 million.
In addition, the Company has continued
to make strong progress in developing
its lead product AP101 (Episalvan) as a
new treatment for Epidermolysis Bullosa
("EB"). This is a rare and distressing
genetic skin disorder which affects
young children and adults. In March
2017, the Company reached an
agreement with both the Food and
Drug Administration (“FDA”) and the
European Medicines Agency (“EMA”)
for the design of a pivotal phase 3
clinical trial for AP101 in EB. We also
appointed INC Research as the contract
research organisation for this study
which has now commenced with first
site initiation on 27 March 2017.
Approximately 30 clinical trial sites in 15
countries have been pre-qualified. We
expect the study to be completed within
the next 18 months or so with top line
data to be available in H2 2018. As part
of the study an independent data
monitoring committee will conduct an
un-blinded interim efficacy analysis after
50% enrolment.
During the year, we secured key patents
for AP101 in Europe and the US with
expiry dates in 2030. Since year end, we
have secured a further patent for AP101
covering Japan, with the patent lasting
until 2030. We believe that we have a
very robust patent portfolio which will
protect AP101 for a considerable period
of time.
We also obtained orphan designation
from the FDA for our pre-clinical asset,
AP102. AP102 is a somatostatin
analogue therapy with the potential to
treat acromegaly, a disorder that results
from excess growth hormone. In
addition we conducted a pre-clinical
study in diabetic rats that compared
AP102 with pasireotide, an existing
approved product for treating patients
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
03
“It has been a tremendously exciting year for the Company. Amryt has made
significant progress, both strategically and operationally. A landmark point came in
December 2016 when we reached an agreement to in-license the drug, Lojuxta.”
with resistant acromegaly. Significantly,
AP102 did not demonstrate the
potential to cause diabetes, an
observation which if replicated in clinical
studies, could be clinically beneficial in
treating acromegaly.
Towards the end of the financial year in
December 2016, the Company signed
an exclusive licensing agreement with
Aegerion Pharmaceuticals, Inc.
("Aegerion"). This was a
transformational agreement and has
secured us the exclusive rights to sell
Lojuxta (lomitapide) across certain
territories. Lojuxta is a drug therapy
used to treat a very rare life-threatening
disease called Homozygous Familial
Hypercholesterolemia (“HoFH”), which
causes excessive levels of LDL “bad”
cholesterol. Our exclusive licence covers
the treatment of adults with HoFH in
the European Economic Area
(predominantly the EU), the Middle East,
North Africa, Turkey and Israel. The
licensing deal is transformational
because it makes Amryt into a fully-
fledged commercial pharma company
with a sales and distribution
infrastructure that can also be leveraged
for other assets, including AP101 in EB
if the upcoming Phase 3 clinical trial is
successful.
Our in-licensing agreement for Lojuxta
has been immediately cash generative
from the effective date of the
agreement. Based on revenues from the
first three months of operations, we
believe it is capable of generating
annualised revenues of approximately
€10.5 million in 2017. The business is
growing and we see good growth
potential beyond 2017. We believe that
this deal is indicative of the
opportunities which Amryt can
capitalise on in the coming years.
Corporate and Financial
Revenues for the year to 31 December
2016 totalled €1,351,000 and
comprised approximately one month’s
contribution from Lojuxta as well as well
as a partial year’s contribution from
Imlan, the Company’s derma-cosmetics
range of products. The Lojuxta sales are
for the period since the completion date
on 2 December 2016 and totalled
€775,000 in December. Very
encouragingly, since year end, Amryt
recorded sales of €1,859,000 in January
and February. Based on this, we expect
Lojuxta to generate revenues of
approximately €10.5 million on an
annualised basis.
The loss for the year amounted to
€7,804,000 (2015: loss of €1,194,000).
This includes an operating loss before
one-off items associated with the RTO
and the acquisitions of Birken and SOM
of €5,845,000. The operating loss of
€5,845,000 includes non-cash share
based payments of €229,000.
In April 2016, as part of the RTO, the
Company successfully raised €12.6
million (£10 million) before costs. As at
31 December 2016 the Company had a
strong balance sheet with €8.3 million
in cash reserves (2015: €0.2 million). In
December 2016, the Company entered
into a €20 million facility agreement
("Facility") with the EIB on highly
attractive terms for the Company. The
Facility is significant because it provides
non-dilutive funding that secures the
Company's near and mid-term funding
needs for its lead product, AP101. It also
provides the funding required to
progress the Company's acromegaly
drug compound, AP102, through pre-
clinical development. The facility from
the EIB has not yet been drawn down.
Senior Management and Board
appointments
We strengthened the Board and senior
management team with two
appointments since completion of the
RTO. In June 2016, we appointed
Markus Ziener to the Board as a non-
executive Director. Mr Ziener is the CFO
of Software AG Stiftung, a 20.9%
shareholder in Amryt. He has also been
a long term supporter of the Birken
business and was Chairman of the
Birken Supervisory Board until the
Company acquired the business on
18 April 2016.
In September 2016, we were delighted
to welcome Dr Mark Sumeray as Chief
Medical Officer of the Company. Dr
Sumeray has over 17 years' experience
in the pharmaceutical, medical devices
and biotech sectors both in the US and
UK. Most recently, he spent
approximately five years as Chief
Medical Officer at Aegerion and has
extensive knowledge of interacting with
the FDA and EMA and managing late
stage clinical trials. Dr Sumeray, is very
familiar with Lojuxta, having previously
led the clinical development and
regulatory approval of the drug at
Aegerion.
After the year end, in March 2017, we
appointed David Allmond as Chief
Commercial Officer. Mr. Allmond has
over 20 years’ experience in the
pharmaceutical industry in commercial
roles. He joins the Company from
Aegerion Pharmaceuticals where he was
President of EMEA and, in particular,
involved in the commercialization of
Lojuxta (lomitapide), the drug used to
treat Homozygous Familial
Hypercholesterolemia (HoFH).
Mr Allmond replaces Michele Bellandi.
Consolidated Financial Statements for the year ended 31 December 2016
04
STRATEGIC REPORT:
Chairman and CEO’s Statement continued
Amryt has made excellent operational
and strategic progress to date and we
look forward to reporting on further
progress as we continue to develop the
business.
Harry Stratford
Non-executive Chairman
29 March 2017
Joe Wiley
CEO
29 March 2017
Having served on Amryt’s Board for
approximately a year, Cathal Friel
stepped down from the Board of
Directors with effect from 28 March
2017. Cathal was one of the original
founders of Fastnet Equity plc and
instrumental to the RTO of Fastnet
Equity plc and creation of Amryt in April
2016. We would like to thank him for
his important contribution to the
business and his guidance during our
first year as a public company.
Future developments and
outlook
The Company achieved significant
milestones in 2016 and we remain
confident of continuing significant
progress over 2017. Our Phase 3 clinical
trial for our lead product AP101 has just
commenced and we are optimistic of
receiving top-line data in 2018. In the
meantime, we will have the results of
our interim analysis which will be an
assessment of the progress of our study
by an independent data safety
monitoring board. We expect to have
the results of this assessment in Q1
2018.
During 2017, our goal is to complete
our pre-clinical assessment of AP102,
our potential treatment for acromegaly,
and to seek approval from the
regulatory authorities to commence
clinical trials in humans.
We also remain very excited about
growth prospects for our Lojuxta
business. Revenues for the first three
months are exceeding our original
expectations and we believe that there
is a significant opportunity to grow
revenues, with material untapped
opportunities in our licenced territories.
These will be a major focus for us over
the coming quarters.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
05
STRATEGIC REPORT:
Operations Review
Lojuxta
In December 2016, we were delighted
to reach an agreement with Aegerion
Pharmaceuticals, Inc. ("Aegerion"), a
NASDAQ-listed biopharmaceutical
company, for the exclusive rights to sell
Aegerion's drug, Lojuxta (lomitapide) in
certain territories. These territories
comprise the European Economic Area
("EEA"), Middle East and North Africa
("MENA"), Turkey and Israel and our
exclusive licence became effective on
2 December 2016. As anticipated, the
licence agreement has been immediately
cash generative for Amryt.
Lojuxta is used to treat a rare life-
threatening disease called Homozygous
Familial Hypercholesterolemia (“HoFH”)
and was approved in the EU in late
2013. HoFH is a genetic life threatening
disorder that impairs the body's ability
to remove LDL cholesterol (“bad”
cholesterol) from the blood. This
typically results in extremely high blood
LDL cholesterol levels leading to
aggressive and premature narrowing
and blocking of arterial blood vessels
manifesting as cardiovascular disease. If
left untreated, heart attack or sudden
death may occur in childhood or early
adulthood.
Current treatment options include statin
drugs, PCSK9 inhibitors and apheresis (a
blood filtration technique similar to
dialysis). However, they are not
adequate to control LDL cholesterol
levels in some patients, particularly
those with the most severe genetic
mutations. HoFH was historically
estimated to occur in about 1 in
1,000,000 people worldwide although
more recent studies suggest it may
affect up to 1 in 300,000 people. Amryt
believes that there is significant
potential for the drug to become a
mainstay treatment for patients with
HoFH. Lojuxta is currently licenced for
use in adults and as part of the post
approval commitments with the EMA
we will be conducting a paediatric study
that if successful could extend the label
to children also.
Licence Agreement Terms
Under the terms of our licence
agreement, Amryt has the exclusive
right to sell Lojuxta across its licenced
territories in return for which Amryt will:
• make royalty payments to Aegerion,
paid quarterly, based on a percentage
of net sales during a calendar year.
The royalty percentage is 18% of net
sales of the product less than
US$15,000,000 and 20% of net
sales more than US$15,000,000;
• make once-off commercial milestone
payments, subject to achieving
certain sales targets. A one-off
milestone payment of US$1,000,000
is due the first time that aggregate
net sales in a calendar year equals
US$20,000,000 with a further one-
off US$1,500,000 milestone payment
due on reaching US$30,000,000 net
sales in a calendar year; and
• take on the ongoing regulatory and
post-marketing obligations and
commitments in support of Lojuxta
as above.
Our licence agreement has an initial
term until 1 January 2024 and we may,
at our discretion, extend the licence
agreement for a further five years, with
the right to extend in further five year
periods.
2016 Revenue and Plans
In December 2016, Lojuxta generated
net product sales of €775,000. Very
encouragingly, since year end Amryt
recorded sales of €1,859,000 in January
and February. Based on actual Lojuxta
revenues for the first three months
annualised revenues total €10.5 million.
We are currently establishing the
relatively limited additional commercial,
medical and regulatory infrastructure
required to support the
commercialisation of Lojuxta across our
licenced territories. We will defer these
costs until revenues increase so that,
even during the roll-out of this
infrastructure the Lojuxta business will
be a positive cash contributor to the
Company. Furthermore the Company
will also be in a position to leverage this
pan-European and Middle-East
infrastructure for other drug assets, in
particular our lead development asset,
AP101, if its Phase 3 clinical trial in EB
proves to be successful.
AP101 (Episalvan)
Amryt's lead product, AP101 (Episalvan),
received marketing approval for the
treatment of partial-thickness wounds
(“PTWs”) from the European
Commission in January 2016. Amryt
intends to develop AP101 as a new
treatment for Epidermolysis Bullosa
(“EB”) and after the year end, on
27 March 2017, commenced a pivotal
phase 3 trial, EASE, to examine AP101’s
efficacy.
EB is a chronic and debilitating condition
for which there is currently no known
approved product and significant unmet
medical need. Reflecting the extremely
fragile nature of their skin, children born
with the condition are often referred to
as 'butterfly children'. All forms of the
disorder are considered serious and the
most severe are disfiguring and cause
intense suffering. The patient advocacy
group Debra International estimates
that there are approximately 500,000
people living with EB worldwide, with
some 30,000 in Europe. The
Department of Dermatology at Stanford
University estimates that there are
25,000 people living with EB in the US.
The combined US and European market
Consolidated Financial Statements for the year ended 31 December 2016
06
STRATEGIC REPORT:
Operations Review continued
for a treatment in EB is estimated by
management to be in excess of
€1.3 billion.
AP101 has already demonstrated
encouraging preliminary data in EB in a
Phase 2a clinical trial completed in
2011. In addition, three successful
phase 3 clinical studies in the broad
indication partial thickness wounds
(“PTWs”) have been conducted with
AP101. In each of these studies, AP101
successfully demonstrated faster healing
in both recent wounds and chronic
wounds compared with standard of care
therapy. Amryt is about to commence a
single phase 3 pivotal study in EB to
demonstrate efficacy specifically in EB, a
condition that also causes partial
thickness wounds.
Extended patents and regulatory
approvals
In January 2016, we secured approval
from the European Medicines Agency
(“EMA”) for the use of AP101 in the
European Union for the treatment of all
PTWs. We subsequently secured a
European method of use patent for the
treatment of EB in March 2016 and
obtained a US method of use patent for
the treatment of EB in September 2016.
After year end, in February 2017, Amryt
was granted a patent in Japan by the
Japanese Patent Office for AP101 for
the treatment of EB. All these patents
expire in 2030.
Forward plan and clinical trials
In Q1 2017, we completed discussions
with the Food and Drug Administration
("FDA") and EMA regarding the design
of our pivotal phase 3 clinical trial for
AP101 (Efficacy And Safety of Oleogel-
S10 in EB, the “EASE Study”) as a
potential treatment for EB. With these
discussions now completed and the
design of the clinical trial established,
Amryt Pharma plc
we initiated our first site for the EASE
Study on 27 March 2017 and expect to
have our first patient enrolled
imminently.
We have appointed INC Research as the
contract research organisation for the
phase 3 EASE study, and approximately
30 clinical trial sites in 15 countries have
already been pre-qualified.
Adult and paediatric patients with EB
will be enrolled into a randomised
double blind placebo controlled trial. A
total of 164 evaluable patients will be
treated for a 90 day blinded period. The
proportion of patients with completely
healed target wounds within 45 days
will be evaluated as the primary
endpoint. Secondary endpoints include
the time to achieve wound healing and
changes in pain and pruritus (itch).
We have also agreed with the regulatory
authorities to conduct some further
non-clinical studies in parallel with this
phase 3 study.
An important component of the phase
3 EASE study is an independent data
monitoring committee that will conduct
an un-blinded interim efficacy analysis
after 50% enrolment. The potential
outcomes of this interim analysis include
continuation of the study unchanged,
discontinuation of the study for futility,
or an increase in the number of patients
in the study to preserve adequate
statistical power.
AP102
AP102 is an early stage drug asset,
which shows promise as a novel, next
generation somatostatin analogue
(“SSA”) peptide medicine for patients
with rare neuroendocrine diseases,
where there is a high unmet medical
need, including acromegaly. Acromegaly
is a rare endocrine disorder in which the
body produces excessive growth
hormone, leading to abnormal growth
throughout the body over time.
In November 2016, we secured orphan
drug designation for AP102 from the
FDA. The FDA's Orphan Drug
Designation program provides orphan
status to drugs and biologics that are
being developed to address rare
diseases or disorders that affect fewer
than 200,000 people in the United
States. With orphan designation, AP102
qualifies for various incentives, including
tax credits for qualified clinical trials and
market exclusivity upon regulatory
approval.
After the year end, in February 2017,
we received positive results from a pre-
clinical study that compared AP102 with
pasireotide, an approved product for
treating patients with resistant
acromegaly. Significantly, AP102 did not
demonstrate the potential to cause
diabetes, an observation which, if
replicated in clinical studies, could be
clinically beneficial in treating
acromegaly. Amryt's study used a well-
established diabetic rat model to
examine whether or not AP102 has an
effect on glucose levels or on
food/water intake compared with
controls. The study results showed that
AP102 had no effect on either in
diabetic rats compared with controls.
This indicates no impairment in glucose
control in these diabetic animals when
treated with AP102.
We will continue preparing AP102 for
clinical trials in 2017 and anticipate
submitting a request to conduct clinical
trials in humans by the end of 2017.
Imlan
Amryt has a range of dermo cosmetic
products that we acquired with the
Birken transaction, which are sold under
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
07
finance the phase 3 clinical trial of
AP101 (the EASE study) and the pre-
clinical development of AP102.
Operational progress in relation AP101
and AP102 are reviewed by the Board
on a regular basis and actual costs are
compared to Board approved budgets.
Achieving regulatory clarity is an
important step in the pharmaceutical
development cycle. The post year end
completion of discussions with the FDA
and EMA on the structure of the AP101
phase 3 EASE study enables the
Company to commence enrolment of its
first patients which we expect
imminently. The rate of enrolment into
this study will be a key performance
indicator in 2017.
the Imlan brand. Completely free of
emulsifiers, preservatives, colorants and
fragrances and other additives or
irritants, Imlan is marketed as a
treatment for sensitive, allergy-prone
and dry skin. It is also recommended for
the basic care of eczema or psoriasis.
In the period from the acquisition of
Birken AG in April 2016 to
31 December 2016, Imlan generated
€571,000 in gross revenues.
UK’s Referendum Decision to
leave the European Union
(“Brexit”)
In June 2016, the UK held a European
Union (“EU”) referendum where a
majority of votes were cast in favour of
leaving the EU. This puts the UK on a
course to leave the EU, within two years
of triggering Article 50. Brexit has led to
unsettled financial market conditions
including a depreciation in the value of
Pound Sterling (“GBP”) to EURO of
approximately 16% during 2016. It is
too early for the Company to predict the
potential long term impact of Brexit in
advance of Article 50 negotiations.
These negotiations could have wide
ranging implications for all UK adoption
of European regulations, including those
for the orphan drug market where the
EMA plays a central role in facilitating
the development and authorisation of
orphan medicines within the EU.
The Company did not generate any
revenue within the UK during the
current year and does not expect a
significant contribution from that
market in the medium term. The
Company has exposure to costs
denominated in GBP due to its listing on
the AIM market of the London Stock
Exchange and due to having its parent
holding company incorporated in the
UK. As a whole, the majority of the
Group’s costs and operations are outside
the UK. The Company raised £10 million
in new funding in 2016, and
immediately on receipt the Company
converted these funds into EURO. It is
the Group’s policy to maintain the
majority of cash resources in EURO and
to engage in contracts in EURO
whenever possible. Uncertainty due to
Brexit may affect the ability of
Companies listed on the AIM market to
raise funds in the short term. The
Company has access to a €20 million
loan facility from the European
Investment Bank. This is unaffected by
Brexit related concerns as the loan
facility is available to the main operating
entity within the Group, Amryt
Pharmaceuticals DAC, an Irish registered
company.
The Company will continue to monitor
developments in relation to the Brexit
and will take appropriate actions to
mitigate any potential consequences.
Key Performance Indicators
A qualitative review of the performance
during the year is provided in the
Chairman and CEO’s Statement and the
results for the year are presented in the
Consolidated Financial Statements.
The key indicators of performance for
the Group are its success in identifying,
acquiring and developing drug
candidates to create shareholder value.
During the year the Group completed
the RTO of Fastnet Equity plc and
completed the acquisition of Birken and
SOM. The Company has moved quickly
to assemble a portfolio of products. The
licensing deal for Lojuxta just before
year end was an important step in the
growth plans of the Company.
Control of cash balances is a priority of
the Group and these are budgeted and
monitored closely to ensure that the
Group has access to sufficient funds to
Consolidated Financial Statements for the year ended 31 December 2016
08
STRATEGIC REPORT:
Risks and Uncertainties
The Company is subject to risk factors relating to the business and operations of the Company in the healthcare industry. The
success of the Company depends on its ability to engage in appropriate product selection and to attract sufficient funding to
successfully develop these products. The following table summarises the principal risks and uncertainties of the Group:
Risk
Details
Mitigation
Organisational Risk
Competition Risk
Development Risk
The Group is dependent on the experience and skills
of the executive Directors and senior management to
successfully execute its strategy. The loss of such key
contributors would present a risk to the business.
The ability to continue to attract and retain employees
with the appropriate expertise and skills cannot be
guaranteed. Finding and hiring any additional
personnel and replacements could be costly and might
require the Group to grant significant equity awards or
other incentive remuneration, which could adversely
impact its financial results.
The biotechnology and pharmaceutical industries are
very competitive. The Group’s competitors include
major multinational pharmaceutical companies,
biotechnology companies and research institutions.
Many of its competitors have substantially greater
financial, technical and other resources, such as larger
research and development staff. The Group’s
competitors may succeed in developing, acquiring or
licensing drug product candidates that are earlier to
market, more effective or less costly than any product
candidate which the Group is currently developing or
which it may develop and this may have a material
adverse impact on the Group.
The Group has a number of drug candidates in various
stages of clinical development. Industry experience
indicates that there may be a high incidence of delay
or failure to produce valuable scientific results in
relation to the present development pipeline.
Clinical trials are expensive, time consuming and
difficult to design and implement and involve
uncertain outcomes. Furthermore, results of earlier
pre-clinical studies and clinical trials may not be
predictive of results of future pre-clinical studies or
clinical trials.
The Board believes that the senior management team is
appropriately structured for the Group’s size and is not
overly dependent upon any particular individual. The
Group has entered into contractual arrangements with
these individuals with the aim of securing the services of
each of them. Staffing levels, notice periods and
contingent arrangements are kept under regular review
to ensure that they are appropriate to maintain business
continuity. Remuneration packages and staff rewards are
reviewed to encourage the long-term maintenance of
staff and to align incentivisation with company
objectives.
The Group seeks to develop its products to ensure they
are competitive and monitors its intellectual property
rights to identify and protect against any infringements.
The Group’s selection criteria for products includes
potential for Orphan Drug Designation, identifying areas
of unmet medical need, market opportunity, competitive
profile as a stand-alone opportunity and size and
complexity of clinical trials.
The Group continually seeks to manage this risk by
engaging personnel and consultants with the technical
skills to advance the Group’s development projects.
Amryt Pharma plc
STRATEGIC REPORT
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
09
Risk
Details
Mitigation
Regulatory Risk
Commercial Risk
The regulatory approval processes of the EMA, FDA
and other comparable regulatory agencies may be
lengthy, time-consuming and the outcome is
unpredictable.
The Group’s future success is dependent upon its
ability to develop successfully, obtain regulatory
approval for and then successfully commercialise its
product candidates. There can be no assurance that
AP101 or AP102 will be successful in clinical trials or
receive regulatory approval. In addition, positive Phase
3 data does not guarantee that a product will be given
marketing approval in any jurisdiction. Applications for
any of the Group’s product candidates could fail to
receive regulatory approval for many reasons.
Even if the EMA, FDA or any other comparable
regulatory agency approves the marketing of any
product candidates that the Group develops there is
no guarantee of commercial success. Similarly, the
Company may not be able to increase sales of the
Lojuxta product. Physicians, healthcare providers,
patients or the medical community may not accept or
use the products. Efforts to educate the medical
community and third-party payers on the benefits of
the Group’s product candidates may require significant
resources and may not be successful.
The Board and management team have a broad network
of industry contacts which include experienced advisers
who are engaged to ensure that best practice industry
practices are observed and all legal compliance is up to
date and in order.
The Board feels that the current EU approval of AP101
for partial thickness wounds somewhat de-risks the
future development and approval of the product for the
treatment of EB in Europe.
The management team and Board have an excellent
track record of identifying commercially successful
products and of ultimately commercialising these
products.
Funding Risk
Significant funds are required to continue the
development of the Group’s product portfolio beyond
the date when top-line data in the EB phase 3 study is
anticipated.
The Group continually seeks to manage this risk by
controlling its funding and financing risk and reviewing
methods of securing additional capital including
licensing deals.
The Group will likely need to raise additional funding
to undertake development work and if our product is
approved, commercialisation of AP101 in EB beyond
that being funded by the EIB facility. There is also no
certainty that it will be possible to raise any additional
funds at all or on acceptable terms. Debt financing,
may place restrictions on the financial operating
activities of the Group. If the Group is unable to
obtain additional financing as required, it may be
required to reduce the scope of its operations.
The Group’s objectives when managing capital are to
safeguard the ability to continue as a going concern in
order to provide returns and benefits for shareholders
and other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. Working
capital forecasts that include sensitivity analysis are
prepared to ensure the Group has sufficient funds to
complete contracted work commitments.
The Strategic Report on pages 5 to 9 was approved by the board on 29 March 2017 and signed on its behalf by:
Rory Nealon
Director
Consolidated Financial Statements for the year ended 31 December 2016
10
CORPORATE GOVERNANCE:
Board of Directors
Harry Stratford – Non-Executive Chairman
Harry Stratford, has over 40 years' experience in the pharmaceutical industry and
has built two successful publicly listed pharmaceutical companies. Mr Stratford
founded Shire Plc in 1986 and was CEO for almost a decade. Shire Plc grew from
humble beginnings to be one of the world's largest specialty pharmaceutical
companies and its stock is a constituent of the FTSE100 index. Mr Stratford then
went on to be founder, CEO and Executive Chairman of Prostrakan Plc, another
international specialty pharmaceutical company, which was subsequently acquired
by Kyowa Hakko Kirin of Japan in 2011.
Mr Stratford holds a BSc. in Chemistry from the University of London and was
awarded an OBE in the 2007 New Year's Honours list for his contribution to the
Scottish Life Sciences Industry.
Joe Wiley – CEO
Joe Wiley, founded Amryt. Mr. Wiley has over 20 years of experience in the
pharmaceutical, medical and venture capital industries. Mr Wiley opened and led
Sofinnova Ventures' European office. He was previously a medical director at
Astellas Pharma. Prior to joining Astellas, he held investment roles at Spirit Capital,
Inventages Venture Capital and Aberdeen Asset Managers (UK). He also serves as
a non-executive of NASDAQ listed Innocoll.
Mr. Wiley trained in general medicine at Trinity College Dublin, specialising in
neurology. He is also a Member of the Royal College of Physicians in Ireland and
also has an MBA from INSEAD.
Rory Nealon – CFO/COO
Rory Nealon, was previously a board member of Trinity Biotech Plc joining as Chief
Financial Officer in January 2003. He was subsequently appointed Chief
Operations Officer in November 2007. Mr Nealon left Trinity in 2014. Prior to
joining Trinity Biotech plc, he was Chief Financial Officer of Conduit plc, an Irish
directory services provider with operations in Ireland, the UK, Austria and
Switzerland. Prior to joining Conduit he was an Associate Director in AIB Capital
Markets, a subsidiary of AIB Group plc, the Irish banking group.
Mr Nealon holds a Bachelor of Commerce degree from University College Dublin,
is a Fellow of the Institute of Chartered Accountants in Ireland, a member of the
Institute of Taxation in Ireland and a member of the Institute of Corporate
Treasurers in the UK.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
11
Ray Stafford – Non-Executive Director
Ray Stafford, has worked in the pharmaceutical industry for thirty years. He was
Chairman, CEO and majority shareholder of the Tosara Group who owned,
manufactured and marketed the successful international brand Sudocrem.
Following the integration of Tosara Group into the U.S. based NYSE listed
company Forest Laboratories in 1988, Mr Stafford held numerous senior positions
within that corporation including CEO Forest UK and Ireland, CEO Forest Europe
and since 1999 to him retiring from the business in 2014 Mr Stafford was
Executive Vice President Global Marketing. Separately Mr Stafford was founder of
what is today one of Ireland's leading multi-channel sales, marketing and
distribution service providers approved by the Irish Medicines Board to service the
wholesale and retail trade.
James Culverwell – Non-Executive Director
James Culverwell, has over 30 years' experience in analysing and valuing
pharmaceutical companies. Mr Culverwell joined Hoare Govett in 1982, and then
moved to Merrill Lynch in 1995, where he became global head of pharmaceutical
equity research. In 2004, Mr Culverwell set up Sudbrook Associates, a healthcare
corporate adviser. Mr Culverwell currently sits on the board of four companies in
the specialty pharmaceutical, drug development and diagnostic fields, including
NASDAQ-listed Innocoll AG.
Mr Culverwell has an MSc from the University of Aberdeen.
Markus Ziener – Non- Executive Director
Markus Ziener joined Software AG Stiftung in 2013 as a Director of Asset
Management before becoming Chief Financial Officer in August 2014. Prior to
joining Software AG Stiftung, a 20.9% shareholder in Amryt, Mr Ziener worked in
a number of senior roles across a broad range of industries including as Managing
Director of Handelskontor Willmann für Naturprodukte.
Mr Ziener was previously a supervisory board member of Birken AG before it was
acquired by Amryt and is also a supervisory board member of Software AG.
Consolidated Financial Statements for the year ended 31 December 2016
12
CORPORATE GOVERNANCE:
Corporate Governance Statement
Compliance Statement
The Board seeks to follow best practice in corporate governance appropriate to the Company’s size and in accordance with the
regulatory framework that applies to AIM and ESM companies. Although the Quoted Companies Alliance Corporate Governance
Code for Small and Mid-Size Quoted Companies 2013 (“QCA Code”) is not compulsory for AIM and ESM quoted companies,
the Board intend to comply, so far as practicable and having regard to the size and nature of the Company’s business, with the
principles and disclosures as set out in the QCA Code. Given its size and the nature of its current operations the Company does
not seek to adopt the full UK Corporate Governance Code. The main features of the Company’s corporate governance
arrangements are:
• The Board intends to meet regularly and at least six times per year for formal board meetings. It will consider strategy,
performance and approve financial statements, dividends and significant changes in accounting practices and key commercial
matters, such as decisions to be taken on whether to take forward or to cancel a research project. There is a formal schedule
of matters reserved for decision by the Board in place.
• The Company has an audit committee and remuneration committee, further details of which are provided below.
• The Company does not and will not have a nomination committee, as the Board does not consider it appropriate to establish
one at this stage of the Company’s development. The Board will take decisions regarding the appointment of new directors as
a whole and this will follow a thorough assessment of a potential candidate’s skill and suitability for the role.
Board Composition
The Company is managed by a Board of directors and they have the necessary skills and experience to effectively operate and
control the business. There are currently six directors as at the date of this report being; Harry Stratford, Joe Wiley, Rory Nealon,
James Culverwell, Ray Stafford, and Markus Ziener. The Board comprises 4 non-executive directors, including the Chairman, and
2 executive directors. The Board believe the current split of non-executive and executive directors is appropriate for the
requirements of the Company. The board considers that Harry Stratford, James Culverwell and Ray Stafford are independent in
character and judgment. James Culverwell was appointed as the senior non-executive director on 29 March 2017.
As the business develops, the composition of the Board will remain under review to ensure that it remains appropriate to the
managerial requirements of the Company. All new Directors appointed since the previous Annual General Meeting are required
to seek election at the next Annual General Meeting and one third of the other Directors retire annually in rotation in accordance
with the Company's articles of association. This enables the shareholders to decide on the election of the Company's Board. The
Directors required to seek re-election at the next Annual General Meeting are Markus Ziener as a director appointed since the
previous AGM and Harry Stratford and Joe Wiley by rotation.
Board Committees
The Company has an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities. The
composition of these committees may change over time as the composition of the Board changes.
Audit Committee
The Audit Committee has responsibility for, among other things, the monitoring of the financial integrity of the financial
statements of the Company and the involvement of the Company’s auditors in that process. It focuses, in particular, on
compliance with accounting policies and ensuring that an effective system of internal and external audit and financial control is
maintained, including considering the scope of the annual audit and the extent of the non-audit work undertaken by external
auditors and advising on the appointment of external auditors.
The Audit Committee meets at least twice a year at the appropriate times in the financial reporting and audit cycle. The Audit
Committee comprises of two members, who are both non-executive Directors: James Culverwell and Ray Stafford. On 28 March
2017, Cathal Friel resigned as a member of the Board and was replaced as a member of the Audit Committee by Ray Stafford on
29 March 2017. The Audit Committee is chaired by James Culverwell.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
13
Remuneration Committee
The Remuneration Committee has responsibility for the determination of specific remuneration packages for each of the
executive directors, including pension rights and any compensation payments, and recommending and monitoring the level and
structure of remuneration for senior management, and the implementation of the employee share option plan, or other
performance related schemes. It meets at least twice a year.
The Remuneration Committee comprises three members, who are all non-executive Directors: Harry Stratford, Ray Stafford and
James Culverwell. The Remuneration Committee is chaired by Harry Stratford.
Meetings and attendance
The directors’ attendance at Board and Committee meetings during the year is shown below:
Meetings held during the year
Directors’ Attendance:
Cathal Friel
Michael Edelson
Michael Nolan
Harry Stratford
Joe Wiley
Rory Nealon
James Culverwell
Ray Stafford
Markus Ziener
Audit Remuneration
Committee
Committee
4
4/4
4/4
5
5/5
5/5
5/5
Full Board
11
11/11
2/3
2/3
11/11
8/8
8/8
8/8
8/8
5/6
Internal Controls and Financial Risk Management
The Directors are responsible for the Group's system of internal controls, the setting of appropriate policies on these controls,
and regular assurance that the system is functioning effectively and that it is effective in managing business risk. Principal risk and
uncertainties are discussed in the Strategic Report and financial risk management objectives and policies are detailed in note 23
of the Notes to the Financial Statements.
The Audit Committee monitors the Group's internal control procedures, reviews the internal control process and risk
management procedures and reports its conclusions and recommendations to the Board.
Communications with Shareholders
Good and effective communication with shareholders has been given a high priority by the Board. We regard good
communication with investors (both institutional and retail) and analysts as an essential part of the on-going operations of the
Company. Amryt is committed to providing up to date corporate information to existing and potential shareholders. The Group
maintains a website (www.amrytpharma.com) which contains an Investors & Media section whereby existing and potential
investors can access Company information and reports, contact the Company and register to receive Company news alerts.
During the year, the senior management team conducted an extensive programme of face-to face communication. This included
both one-on-one and group meetings with institutional investors in the UK, Ireland, the USA and across Europe, as well as
attendance at investor and industry conferences.
Consolidated Financial Statements for the year ended 31 December 2016
14
CORPORATE GOVERNANCE:
Group Directors Report For the year ended 31 December 2016
The Directors of Amryt Pharma plc (the “Company”) present their report and the Financial Statements of the Company and its
subsidiary undertakings (together the “Group” or “Amryt”) for the year to 31 December 2016.
Change of Name and Strategy
On the 18 April 2016 at a general meeting of the Company, the Company’s shareholders approved resolutions to effect the
reverse takeover of the Company by Amryt Pharmaceuticals DAC, an Irish incorporated specialty pharmaceutical company
focused on best in class drugs in the orphan drug market. As part of the approved resolutions the Company’s name was changed
to Amryt Pharma plc from Fastnet Equity plc and trading on the AIM and ESM markets commenced under the new Company
name on 19 April 2016.
Amryt is a specialty pharmaceutical company focused on developing and delivering innovative new treatments to help improve
the lives of patients with rare and orphan diseases.
Directors
The Directors who served on the Board during the year and to the date of this report are as follows:
Cathal Friel (resigned on 28 March 2017)
Michael Edelson (resigned on 19 April 2016)
Michael Nolan (resigned on 19 April 2016)
Harry Stratford
Joe Wiley (appointed 19 April 2016)
Rory Nealon (appointed 19 April 2016)
James Culverwell (appointed 19 April 2016)
Ray Stafford (appointed 19 April 2016)
Markus Ziener (appointed 27 June 2016)
Policy on Executive Directors and Senior Management Remuneration
When determining the Board policy for remuneration, the Committee considers all factors which it deems necessary including
relevant legal and regulatory requirements and the provisions and recommendations of relevant guidance. The objective of this
policy is to help attract, retain and motivate the executive and senior management of the Company without paying more than
necessary. The remuneration policy bears in mind the Company’s appetite for risk and is aligned to the Company’s long term
strategic goals. A significant proportion of remuneration is structured to link rewards to corporate and individual performance
and be designed to promote the long-term success of the Company.
Base Salaries Review
During the year, the Committee appointed Radford, a part of the AON Group, to perform a review of executive and non-
executive remuneration. Radford have no connection with the Company.
The Committee developed its 2017 remuneration proposals based on the recommendations of this report and what the
Committee believe to be appropriate remuneration levels for the Company at its current stage of development. The Company
has set target remuneration for both executive management and non-executive directors at the 50th percentile for European
companies as outlined in the report.
Bonus Payments
All executive directors and senior management are eligible for a discretionary annual bonus. Annual cash bonuses are paid on the
achievement of pre-set strategic objectives. The Committee in conjunction with the Board reviews and sets these objectives at
the start of each calendar year.
In the current year, the executive management team achieved all pre-set objectives and have received 100% of their target cash
bonus which amounts to 50% of their 2016 base salaries.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
15
Long Term Incentives
The Company has adopted an Employee Share Option Plan (the “Plan”) with all directors, senior management and consultants to
the Company eligible to receive awards on the Plan. Details of options issued under the plan in 2016 are included in note 19. No
options were issued to executive directors during the year. In accordance with UK best practice on corporate governance, it is the
Company’s current policy not to award share options to non-executive directors.
The share options granted to employees during the year all contain 3-year vesting periods with the options used to motivate and
retain key individuals.
Directors’ Remuneration – Current Year
The remuneration of Directors for the year ended 31 December 2016 was as follows:
Pension
Base Salary Contri- Other 2016
and Fees Bonuses butions Benefits Total
€‘000 €‘000 €‘000 €‘000 €‘000
Cathal Friel A 59 – – – 59
Michael Edelson A 4 – – – 4
Michael Nolan A 4 – – – 4
Harry Stratford 60 – – – 60
Joe Wiley 239 120 24 14 397
Rory Nealon 181 91 18 6 296
James Culverwell 36 – – – 36
Ray Stafford 24 – – – 24
Markus Ziener 16 – – – 16
2016 TOTAL 623 211 42 20 896
Period to 31 December 2015 – Total fees
Period to 31 December 2015 –
Share based payments
Period to 31 December 2015 – Total
2015
Total
€‘000
94
11
11
2
–
–
–
–
–
224
23
247
A Companies controlled by the Directors, also received payments in respect of consultancy and other services performed outside of their Directors contract. These are
disclosed as consulting fees, office facilities and administration and other fees in Note 21 Related party transactions.
Consolidated Financial Statements for the year ended 31 December 2016
16
CORPORATE GOVERNANCE:
Group Directors Report For the year ended 31 December 2016
Directors and their Interests
Interest in ordinary shares of 1p
The Directors of the Company held the following interest in the ordinary shares of Amryt Pharma plc:
31 December
2016
Director Number
31 December
2016
%
31 December
2015
Number
31 December
2015
%
Cathal Friel A, B 33,077,347
Joe Wiley 20,772,895
Rory Nealon 9,443,031
Ray Stafford 2,296,369
15.88
9.97
4.53
1.10
4,968,940
–
–
–
11.51
–
–
–
A 32,660,698 of these shares are held by Raglan Road Capital Limited, a company owned by Cathal Friel and his wife Pamela Iyer.
B The prior year share number, 39,751,525 ordinary shares, has been adjusted by a factor of 8 to take into account the 8 to 1 share consolidation that took place on
19 April 2016.
C Markus Ziener represents Software AG-Stiftung's 20.9% shareholding in the Company.
Share options and warrants
The Directors of the Company held the following warrants of Amryt Pharma plc which were issued to them along with other
investors in the RTO on 18 April 2016:
Director
Joe Wiley
Rory Nealon
Ray Stafford
Results and Dividends
31 December
2016
Number
165,208
656,250
826,041
Exercise price
Expiry Date
24p
24p
24p
31/12/18
31/12/18
31/12/18
The results for the year are set out on pages 22 to 28 and are also discussed in the Strategic Report. The Directors do not
recommend payment of a dividend (2015: nil).
Share Capital Structure
On 19 April 2016, every 8 ordinary shares of par value 3.8p in the Company at close of business on 18 April 2016 became 1 new
ordinary share of par value 1p and 1 deferred share of par value 29.4p. The rights attaching to the new ordinary shares of 1p are
identical in all respects to those of the old ordinary shares of 3.8p.
The deferred shares created are effectively valueless as they will not carry any rights to vote or dividend rights. In addition,
holders of deferred shares will only be entitled to a payment on a return of capital or on a winding up of the Company after
each of the holders of ordinary shares of 1p each have received a payment of £10,000,000 on each such share. The deferred
shares are not and will not be listed or traded on the Official List, AIM, the ESM or any other investment exchange and are only
transferable in limited circumstances.
The Company’s ordinary shares of 1p are listed on the Alternative Investment Market (“AIM”) market of the London Stock
Exchange (ticker: AMYT.L) and the Enterprise Securities Market of the Irish Stock Exchange (ticker: AYP). At the date of this
report, 208,339,632 ordinary shares of 1p each were in issue. Details of share issues and changes to the capital structure during
the year are set out in note 17.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
17
Substantial Shareholdings
The Company is aware that the following had an interest of 3% or more in the issued ordinary share capital of the Company:
31 December
2016
Rank Investor Number
31 December
2016
%
31 December
2015
Number
31 December
2015
%
1 Software AG-Stiftung A 43,545,567
2 Cathal Friel B, C 33,077,347
3 Joe Wiley 20,772,895
4 Axa Framlington 20,625,000
5 Rory Nealon 9,443,031
6 Alan Harris 8,869,090
20.90
15.88
9.97
9.90
4.53
4.26
–
4,968,940
–
–
–
–
–
11.51
–
–
–
–
A Markus Ziener represents Software AG-Stiftung's 20.9% shareholding in the Company.
B 32,660,698 of these shares are held by Raglan Road Capital Limited, a company owned by Cathal Friel and his wife, Pamela Iyer.
C The prior year share number, 39,751,525 ordinary shares, has been adjusted by a factor of 8 to take into account the 8 to 1 share consolidation that took place on
19 April 2016.
There were no notified changes in these holdings in the period after year end to the date of signing the financial statements.
Qualifying Indemnity Provision
The Group has in place insurance protection, including a Directors and Officers liability policy, to cover the risk of loss when
management deems it appropriate and cost effective; however in some cases risks cannot be effectively covered by insurance
and the cover in place may not be sufficient to cover the extent of potential liabilities.
Going Concern
After making appropriate enquires, the Directors consider that the Company and the Group has adequate resources to continue
in business for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial
Statements. As part of their enquires the Directors reviewed budgets, projected cash flows, and other relevant information for
12 months from the date of approval of the Consolidated Financial Statements for the year ended 31 December 2016.
The board’s strategy is for the Group to acquire, build, develop and commercialise a portfolio of medicines focused on rare and
orphan diseases.
As part of the reverse takeover of the Company, €12.6 million (£10 million) before costs of new funds were introduced to the
Group. In addition, before year end the Group secured a €20 million facility agreement from the European Investment Bank
(“EIB”). The Board intends to use the net proceeds of the placing and the EIB facility to progress a Phase 3 clinical trial of AP101
with a view to obtaining approval for the treatment of EB in Europe and the US. INC Research has been appointed as the
contract research organisation for the Phase 3 EASE study.
In early December 2016, the Group secured the exclusive rights to sell Lojuxta across the EU and other territories. This licensing
deal is immediately cash generative and resulted in revenues of €775,000 in December 2016 alone. This licensing deal is a net
cash contributor to the ongoing running costs of the rest of the Amryt business.
The Group’s forecasts and projections reflect the Directors’ plans for the coming year and include operating expenditures,
revenues and costs associated with the Lojuxta business, and expenditure on clinical trials associated with seeking the approval of
AP101 to treat EB and pre-clinical testing of its third asset, AP102. The Group performs sensitivity analysis on its projected
cashflows and when performing sensitivities has taken into account reasonable changes in market conditions.
Consolidated Financial Statements for the year ended 31 December 2016
18
CORPORATE GOVERNANCE:
Group Directors Report For the year ended 31 December 2016
The Group’s forecasts, taking into account reasonably possible changes as described above, show that the Group will be able to
operate and have significant financial headroom for the 12 months from the date of approval of the Consolidated Financial
Statements for the year ended 31 December 2016.
Events after the Reporting Period
Events after the reporting period are set out in note 25 to the Financial Statements. Likely future developments in the business
are discussed in the Strategic Report.
Auditors
The Board are recommending BDO LLP for re-appointment as auditor of the Company. BDO LLP have expressed their willingness
to accept this appointment and a resolution re-appointing them will be submitted to the forthcoming Annual General Meeting.
Disclosure of Information to the Auditors
All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information
needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that
information. The Directors are not aware of any relevant audit information of which the auditors are unaware.
Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have
elected to prepare the Group and Company Financial Statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. 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 Company and of the profit or loss of
the Group for that period. The Directors are also required to prepare Financial Statements in accordance with the Rules of the
London Stock Exchange for companies trading securities on the Alternative Investment Market and the ESM exchange of the
Irish Stock Exchange.
In preparing these Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the Financial Statements;
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
19
Website Publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website.
Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also
extends to the on-going integrity of the Financial Statements contained therein.
This report was approved by the board on 29 March 2017 and signed on its behalf by:
Rory Nealon
Director
Consolidated Financial Statements for the year ended 31 December 2016
20
FINANCIAL STATEMENTS:
Independent Auditor’s Report For the year ended 31 December 2016
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AMRYT PHARMA PLC
We have audited the financial statements of Amryt Pharma plc for the year ended 31 December 2016 which comprise the
consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement
of cash flows, the consolidated statement of changes in equity, the company statement of financial position, the company
statement of cash flows, the company statement of changes in equity and the related notes. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
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.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Financial Reporting Council’s (FRC) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 31
December 2016 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
21
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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 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.
Anne Sayers (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
29 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated Financial Statements for the year ended 31 December 2016
22
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Administrative, selling and marketing expenses
Share based payment expenses
Reverse takeover and acquisition related costs
Non-cash deemed cost of reverse takeover
Total administrative, selling and marketing expenses
Research and development expenses
Operating loss before finance expense
Net finance expense
Loss on ordinary activities before taxation
Tax on loss on ordinary activities
Loss for the year attributable to the equity holders of the Company
Other comprehensive loss attributable to the equity holders of the Company
Exchange translation differences which may be reclassified through the profit
and loss account
Total other comprehensive loss
Total comprehensive loss for the year attributable to the equity holders
of the Company
Note
3
19
9
9
4
6
7
12 months to
31 December
2016
For the
period ended
31 December
2015
€’000
1,351
(586)
765
(4,037)
(229)
(867)
(971)
(6,104)
(2,344)
(7,683)
(121)
(7,804)
–
(7,804)
€’000
–
–
–
(66)
–
(484)
–
(550)
–
(550)
(644)
(1,194)
–
(1,194)
(5)
(5)
–
–
(7,809)
(1,194)
Loss per share:
Loss per share – basic and diluted, attributable to ordinary equity holders
of the parent (cent)
8
(4.78)
(2.14)
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
23
Consolidated Statement of Financial Position
As at 31 December 2016
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Accumulated deficit
Total equity
Non-current liabilities
Contingent consideration
Deferred tax liability
Total non-current liabilities
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
31 December
2016
31 December
2015
Note
€’000
€’000
10
11
14
15
16
9
21
20
52,521
1,183
53,704
2,540
770
8,271
11,581
–
–
–
1,599
–
171
1,770
65,285
1,770
20,419
43,695
(22,079)
(8,998)
33,037
23,314
5,384
28,698
3,550
3,550
32,248
1
–
–
(1,194)
(1,193)
–
–
–
2,963
2,963
2,963
Total equity and liabilities
65,285
1,770
The Financial Statements set out on pages 22 to 55 were approved and authorised for issue by the Directors on 29 March 2017.
They are signed on the Board’s behalf by:
Rory Nealon Company Number
Director 5316808
Consolidated Financial Statements for the year ended 31 December 2016
24
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
12 months to
31 December
2016
€’000
For the
period ended
31 December
2015
€’000
(7,804)
121
194
229
971
(1,975)
2,236
(83)
(6,111)
(10,150)
(89)
705
11,993
(12)
10
1
2,458
11,251
545
–
(47)
11,749
4
8,100
171
8,271
(1,194)
644
–
–
–
(54)
322
–
282
(1,000)
–
–
–
–
–
–
(1,000)
1
1,455
1,000
(1,003)
1,453
–
171
–
171
Note
6
10, 11
19
9
9
9
9
11
11
16
Cash flows from operating activities
Loss on ordinary activities before taxation
Net finance expense
Depreciation and amortisation
Share based payment expense
Non-cash deemed cost of reverse takeover
Movements in working capital and other adjustments:
Change in trade and other receivables
Change in trade and other payables
Change in inventories
Net cash flow (used in)/from operating activities
Cash flow from investing activities
Cash consideration on acquisition of Birken AG
Cash consideration on acquisition of SOM
Cash inflow on acquisition of Birken AG
Cash inflow on reverse takeover of Fastnet Equity plc
Payments for property, plant and equipment
Cash inflow on sale of property, plant and equipment
Deposit interest received
Net cash flow from/(used in) investing activities
Cash flow from financing activities
Proceeds from issue of equity instruments – net of expenses
Issue of convertible debenture securities
Short term loans received
Repayment of short term loans
Net cash flow from financing activities
Exchange and other movements
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year/period
Cash and cash equivalents at end of year/period
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
25
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share based Exchange
Share Share payment Merger Reverse translation Accumulated
capital premium reserve reserve acquisition reserve deficit Total
Note €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000
Balance at
17 August 2015 – – – – – – – –
Loss and total
comprehensive
loss for the period – – – – – – (1,194) (1,194)
Issue of shares 1 – – – – – – 1
Balance at
31 December 2015 1 – – – – – (1,194) (1,193)
Balance at
1 January 2016 1 – – – – – (1,194) (1,193)
Loss for the year – – – – – – (7,804) (7,804)
Foreign exchange
translation reserve – – – – – (5) – (5)
Total comprehensive
income – – – – – (5) (7,804) (7,809)
Issue of shares by Amryt
DAC on acquisition of
Birken – 11,179 – – – – – 11,179
Issue of shares by Amryt
DAC on acquisition of SOM – 3,715 – – – – – 3,715
Issue of shares by Amryt
DAC on conversion of CDS – 2,600 – – – – – 2,600
Issue of shares on
acquisition of Amryt DAC 1,557 – – 35,818 – – – 37,375
Issue of placing
shares – net of costs 526 10,725 – – – – – 11,251
Issue of placing warrants 9 – (2,251) 2,251 – – – – –
Share based payments 19 – – 229 – – – – 229
Reverse acquisition
adjustment 18,335 17,727 1,735 – (62,107) – – (24,310)
Balance at
31 December 2016 20,419 43,695 4,215 35,818 (62,107) (5) (8,998) 33,037
Share capital represents the cumulative par value arising upon issue of ordinary shares of 1p each and deferred shares of 29.4p each.
Share premium represents the consideration that has been received in excess of the nominal value on issue of share capital.
Share based payment reserve and capital reserve relate to the charge for share based payments in accordance with International Financial
Reporting Standard 2.
The reverse acquisition reserve arose during the period ended 31 December 2016 in respect of the reverse acquisition of Amryt Pharma plc by
Amryt Pharmaceuticals DAC (“Amryt DAC”). Since the shareholders of Amryt DAC became the majority shareholders of the enlarged group the
acquisition is accounted for as though there is a continuation of Amryt DAC’s Financial Statements. The reverse acquisition reserve is created to
maintain the equity structure of Amryt Pharma plc in compliance with UK company law.
The merger reserve was created on the acquisition of Amryt DAC. Consideration on the acquisition included the issuance of shares. Under
section 612 of the Companies Act 2006, the premium on these shares has been included in a merger reserve.
The exchange translation reserve was created on the retranslation of non-Euro denominated foreign subsidiaries.
Accumulated deficit represents losses accumulated in previous periods and the current year.
Consolidated Financial Statements for the year ended 31 December 2016
26
Company Statement of Financial Position
As at 31 December 2016
Assets
Non-current assets
Investment in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity attributable to owners of the company
Share capital
Share premium
Other reserves
Accumulated deficit – prior periods
Accumulated deficit – current year/period
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
31 December
2016
31 December
2015
Note
€’000
€’000
13
14
16
17
17
20
59,454
59,454
95
51
146
–
–
283
12,625
12,908
59,600
12,908
20,419
43,695
40,033
(42,819)
(1,915)
59,413
187
187
187
18,336
35,221
1,721
(40,182)
(2,637)
12,459
449
449
449
Total equity and liabilities
59,600
12,908
The Financial Statements set out on pages 22 to 55 were approved and authorised for issue by the Directors on 29 March 2017.
They are signed on the Board’s behalf by:
Rory Nealon Company Number
Director 5316808
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
27
Company Statement of Cash Flows
For the year ended 31 December 2016
Cash flows from operating activities
Loss for the year/period – continuing operations
Profit/(loss) for the year/period – discontinued operations
Loss for the year/period
Net interest income
Share based payment expense
Impairment of investments in subsidiaries
Impairment of exploration and evaluation assets
Impairment of loans advanced
Movements in working capital and other adjustments:
Change in trade and other receivables
Change in trade and other payables
Net cash flow used in operating activities
Cash flow from investing activities
Bank interest received
Expenditure on exploration and evaluation assets
Funds advanced to subsidiary companies
Net cash inflow/(outflow) on disposal of subsidiaries
Net cash flow used in investing activities
Cash flow from financing activities
Proceeds from issue of equity instruments - net of expenses
Net cash flow from financing activities
Exchange and other movements
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year/ period
Cash and cash equivalents at end of year/period
12 months to
31 December
2016
€’000
Note
For the
period ended
31 December
2015
€’000
(1,955)
40
(1,915)
(5)
243
–
–
(40)
188
(262)
(1,791)
2
–
(22,078)
40
(22,036)
11,251
11,251
2
(12,574)
12,625
51
(1,310)
(1,327)
(2,637)
(57)
40
577
71
660
(134)
244
(1,236)
51
(71)
(577)
(660)
(1,257)
–
–
6
(2,487)
15,112
12,625
18
12
14
22
13
12
16
Consolidated Financial Statements for the year ended 31 December 2016
28
Company Statement of Changes in Equity
For the year ended 31 December 2016
Share
based
Share Share payment Merger Accumulated
capital premium reserve reserve deficit Total
Note €’000 €’000 €’000 €’000 €’000 €’000
Balance at 1 April 2015 18,336 35,221 1,681 10,388 (50,570) 15,056
Loss and total comprehensive loss
for the period – – – – (2,637) (2,637)
Reserve movement on disposal of
subsidiaries – – – (10,388) 10,388 –
Share based payments – – 40 – – 40
Balance at 31 December 2015 18,336 35,221 1,721 – (42,819) 12,459
Balance at 1 January 2016 18,336 35,221 1,721 – (42,819) 12,459
Loss and total comprehensive
loss for the year 18 – – – – (1,915) (1,915)
Issue of shares on acquisition of
Amryt DAC 17 1,557 – – 35,818 – 37,375
Issue of placing shares –
net of costs 526 10,725 – – – 11,251
Issue of placing warrants 9 – (2,251) 2,251 – – –
Share based payments – – 243 – – 243
Balance at 31 December 2016 20,419 43,695 4,215 35,818 (44,734) 59,413
The merger reserve was created on the reverse acquisition of Amryt DAC. Consideration on the acquisition included the issuance
of shares. Under section 612 of the Companies Act 2006, the premium on these shares has been included in a merger reserve.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
29
Notes to the Financial Statements
For the year ended 31 December 2016
1 General information
Amryt Pharma plc (“Amryt” or the “Company”) is a company incorporated in England and Wales. Details of the registered
office, the officers and advisers to the Company are presented on the Company Information page at the end of this report. The
Company is listed on the AIM market of the London Stock Exchange (ticker: AMYT.L) and the Enterprise Securities Market of the
Irish Stock Exchange (ticker: AYP).
Amryt is a specialty biopharmaceutical company focused on the development and commercialisation of new medicines for rare
conditions with unmet needs and is committed to bring new hope to people affected by these rare diseases.
2 Accounting policies
Basis of preparation
The consolidated Financial Statements consolidate those of the Company and its subsidiaries (together the “Group”). The
consolidated Financial Statements of the Group and the individual Financial Statements of the Company have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) and their interpretations issued by the International
Accounting Standards Board (“IASB”) as adopted by the EU and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The IFRS adopted by the EU as applied by the Company and the Group in the preparation of
these Financial Statements are those that were effective from 1 January 2016.
Consolidation
The consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries for the year ended
31 December 2016. Subsidiaries are entities controlled by the Group. Where the Group has control over an investee, it is
classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over an
investee, exposure to variable returns from the investee, and the ability of the investor to use its power of affect those variable
returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of
control. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Intergroup balances and any unrealised gains or losses or income or expenses arising from intergroup transactions are eliminated
in preparing the consolidated Financial Statements.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it derecognises the related assets, liabilities, and other components of equity while any
resultant gain or loss is recognised in profit or loss on discontinued operations. Any investment retained is recognised at fair
value.
Reverse Acquisition
On 18 April 2016 Fastnet Equity plc (“Fastnet”) became the legal parent company of Amryt Pharmaceuticals DAC (“Amryt
DAC”) in a share for share transaction, and on the same date changed its name from Fastnet to Amryt Pharma plc (“Amryt”). On
the same date Amryt DAC completed the acquisitions of Birken AG (“Birken”) and SomPharmaceuticals (“SOM”). The
acquisition of Birken by Amryt DAC constitutes a business combination. Due to the relative size of Amryt DAC and Fastnet,
Amryt DAC’s shareholders became the majority shareholders of the enlarged share capital (before a share placing on the same
date). In addition, the Company’s continuing operations and executive management became those of Amryt DAC. Management
considers that the acquisition constitutes a reverse acquisition of Fastnet by Amryt DAC. It would normally be necessary for the
Company’s consolidated accounts to follow the legal form of the business combination – with Amryt DAC’s results from the
acquisition date of 18 April 2016 consolidated into the Group results. In this case, the consolidated accounts have been treated
as being a continuation of the accounts of Amryt DAC with Fastnet being treated for accounting purposes as the acquired entity.
As the consolidated group results represent a continuation of the financial statements of the legal subsidiary (Amryt DAC), the
assets and liabilities of Amryt DAC have been recognised and measured in the consolidated results at their pre-combination
Consolidated Financial Statements for the year ended 31 December 2016
30
Notes to the Financial Statements continued
For the year ended 31 December 2016
carrying amounts. The accumulated deficit and other equity balances recognised are the accumulated deficit and other equity
balances of Amryt DAC immediately before the business combination and the amount recognised as issued equity instruments
has been determined by adding to the issued equity of Amryt DAC immediately before the business combination the cost of the
combination, being the value of notional shares issued by Amryt DAC. To comply with UK company law adjustments have been
made to the consolidated reserves to reflect the equity structure of the legal parent company, Amryt Pharma Plc.
Merger reserve
The current year merger reserve was created on the acquisition of Amryt DAC by Amryt Pharma plc. Ordinary shares in Amryt
Pharma plc were issued to acquire the entire issued share capital of Amryt DAC. Under section 612 of the Companies Act 2006,
the premium on these shares has been included in a merger reserve.
Comparative Information
The comparative figures presented in the consolidated financial statements are those for Amryt DAC and relate to the period
from incorporation on 17 August 2015 to 31 December 2015. The comparative figures presented in the company financial
statements are those for Amryt Pharma plc and related to the period from 1 April 2015 to 31 December 2015.
Except as indicated above, the financial statements have been prepared on a basis consistent with that reported for the period
ended 31 December 2015.
Presentation of Balances
The Financial Statements are presented in € which is the functional and presentational currency of the Company. Balances in the
Financial Statements are rounded to the nearest thousand (€’000) except where otherwise indicated.
The following table discloses the major exchange rates of those currencies utilised by the Group:
Foreign currency units to 1 €
Average period to 31 December 2016
At 31 December 2016
Average period to 31 December 2015
At 31 December 2015
(US$ = US Dollars; £ = Pounds Sterling, CHF = Swiss Franc)
Changes in accounting policies and disclosures
US$
1.1024
1.0516
1.0987
1.0908
£
0.8161
0.8521
0.7198
0.7367
CHF
1.0896
1.0715
N/A
N/A
The accounting policies adopted are consistent with those of the previous financial period. New standards and amendments to
IFRS effective as of 1 January 2016 have been reviewed by the Group. These standards and amendments principally relate to
clarifications and presentation and there has been no material impact on the financial statements as a result. The new standards
include:
• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
• Clarification of Acceptable Methods of Depreciation and Amortisation: Disclosure Initiative
• Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception.
Standards issued but not yet effective
There were a number of standards and interpretations which were in issue at 31 December 2016 but were not effective at
31 December 2016 and have not been adopted for these Financial Statements. With the exception of IFRS 16, the Directors have
assessed the impact of these accounting changes on the Company. To the extent that they may be applicable, the Directors have
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
31
concluded that none of these pronouncements will cause material adjustments to the Group’s Financial Statements. During the
year, the Directors completed a preliminary assessment of the impact of IFRS 15. As the Group utilises third party distributors the
point of revenue recognition may be affected under the revenue model outlined in IFRS 15. The Directors believe that if IFRS 15
had been adopted for the current year that it would not have had a material impact on the revenue recognised during the year.
The new standards include:
IFRS 9 Financial Instruments2
IFRS 15 Revenue from Contracts with Customers3
IFRS 16 Leases3
Improvements to IFRSs Annual Improvements 2014-2016 Cycle 2, 3
Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses 1
Amendments to IAS 7 Disclosure Initiative 1
Clarifications to IFRS 15 Revenue from Contracts with Customers 2
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions 2
1 Effective for annual periods beginning on or after 1 January 2017
2 Effective for annual periods beginning on or after 1 January 2018
3 Effective for annual periods beginning on or after 1 January 2019
Critical accounting judgements and key sources of estimation uncertainty
The preparation of Financial Statements in conformity with IFRS requires management to make estimates and judgements that
affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the period end
and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.
The Group’s accounting policy descriptions set out the areas that involve significant estimation, uncertainty and critical
judgement. The most significant of which are research and development expenditure, fair value of contingent consideration,
business combinations and acquired intangible assets and share based payments.
Principal accounting policies
The principal accounting policies are summarised below. They have been consistently applied throughout the period covered by
the Financial Statements.
Research and development expenses
The costs relating to the development of products are accounted for in accordance with IAS 38 “Intangible Assets”, where they
meet the criteria for capitalization.
Development costs are capitalised as an intangible asset if all of the following criteria are met:
1. The technical feasibility of completing the asset so that is will be available for use or sale;
2. The intention to complete the asset and use or sell it;
3. The ability to use or sell the asset;
4. The asset will generate probable future economic benefits and demonstrate the existence of a market or the usefulness of the
asset if it is to be used internally;
5. The availability of adequate technical, financial and other resources to complete the development and to use or sell it; and
Consolidated Financial Statements for the year ended 31 December 2016
32
Notes to the Financial Statements continued
For the year ended 31 December 2016
6. The ability to measure reliably the expenditure attributable to the intangible asset.
Research costs are expensed when they are incurred.
The assessment whether development costs can be capitalized requires management to make significant judgements.
Management has reviewed the facts and circumstances of each project in relation to the above criteria and in management’s
opinion, the criteria prescribed under IAS 38.57 “Intangible Assets” for capitalising development costs as assets have not yet
been met by the Company in relation to AP101 or AP102. Accordingly, all of the Company’s costs related to research and
development projects are recognised as expenses in the income statement in the period in which they are incurred. Management
expects that the above criteria will be met on filing of a submission to the regulatory authority for final drug approval or
potentially in advance of that on the receipt of information that strongly indicates that the development will be successful.
Revenue recognition
Revenue comprises the fair value of consideration received or receivable for the sale of products. Revenue is recorded
immediately where substantially all the risks and rewards of ownership have transferred to the customer, this normally occurs on
the despatch of products.
The Company uses third parties in the distribution of pharmaceutical products to its customers. The Company’s revenue
recognition for these arrangements is the same as that which applies to direct product sales and normally occurs on the despatch
of the products by the distributors to the customers.
Financial instruments
Financial instruments are classified on initial recognition as financial assets, financial liabilities or equity instruments in accordance
with the substance of the contractual arrangement. Financial instruments are initially recognised when the Company becomes
party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-
recognised when the obligation specified in the contract is discharged, cancelled or expired.
Financial assets
All financial assets are categorised as ‘loans and receivables’.
Cash and cash equivalents
Cash comprises cash on hand and bank balances. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three
months or less at the date of acquisition.
Trade and other receivables
Trade and other receivables have fixed or determinable payments that are not quoted in an active market, are measured at initial
recognition at fair value, and are subsequently measured at amortised costs using the effective interest method less impairment.
Trade and other receivables are reduced by appropriate allowances for estimated irrecoverable amounts. Interest income is
recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
Impairment of financial assets
At each statement of financial position date, financial assets are assessed for indicators of impairment. Financial assets are
impaired if indications exist that events have occurred after the initial recognition of the financial asset that estimated future cash
flows have been impacted. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the
Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Any impairment loss arising
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
33
from the review is charged to the statement of comprehensive income whenever the carrying amount of the asset exceeds its
recoverable amount.
Financial liabilities
Financial liabilities are categorised as ‘fair value through profit or loss’ or ‘other financial liabilities measured at amortised costs
using the effective interest method’.
Trade and other payables
Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost using
the effective interest rate method except for short-term payables when the recognition of interest would be immaterial.
Convertible debentures securities
The proceeds received on issue of convertible debenture securities are allocated into their host debt liability and embedded
derivative components. The conversion feature fails equity classification or the ‘fixed for fixed’ classification under IAS32 and is
therefore accounted for as a derivative liability. The host debt liability is initially measured as its fair value plus transaction costs
that are directly attributable to the acquisition. Subsequently, the debt component is accounted for as a financial liability
measured at amortised cost until extinguished on conversion or maturity of the bond. The embedded derivative component is
measured at fair value with changes in value being recorded in profit or loss.
Contingent consideration
Contingent consideration arising as a result of business combinations is initially recognised at fair value using a probability
adjusted present value model. Key inputs in the model include the probability of success and the expected timing of potential
revenues. The fair value of the contingent consideration will be updated at each reporting date. Adjustments to contingent
consideration are recognised in the income statement.
Inventories
Inventories are valued at the lower of cost or net realisable value. The costs are calculated according to the first in first out
method (FIFO). Cost includes materials, direct labour and an attributable proportion of manufacturing overheads based on
normal levels of activity. Work in progress valuation is based on the stage of quality checks successfully performed during the
production process. An inventory valuation adjustment is made if the net realisable value is lower than the book value. Net
realisable value is determined as estimated selling prices less all costs of completion and costs incurred in selling and distribution.
Inventories held by third party distributors are included in inventory totals when the risks and rewards of ownership have been
deemed as transferred to the Company under the contract terms of the distribution agreement. The cost to acquire the inventory
held by the distributors is recognised as a liability of the Company.
Leases
Lease agreements are categorised as either finance leases or operating leases. If the lessor has passed all significant opportunities
and risks onto the Company as a lessee, the Company is considered to have the risk and rewards of ownership and the lease is
categorized as a finance lease. The Company has generally concluded contracts categorised as operating lease contracts. The
ongoing lease payments are stated as expenses when incurred. Leases classified as finance leases are capitalised at the lower of
the present value of the minimum lease payments or the fair value of the leased asset at the beginning of the lease and are
depreciated over the shorter of the period of the term of the lease or the useful economic life of an asset.
Foreign currency translation
The Company translates foreign currency transactions into its functional currency, €, at the rate of exchange prevailing at the
transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at
the rate of exchange prevailing at the Statement of Financial Position date. Exchange differences arising are taken to the
Consolidated Financial Statements for the year ended 31 December 2016
34
Notes to the Financial Statements continued
For the year ended 31 December 2016
Statement of Comprehensive Income except those incurred on borrowings specifically allocable to development projects which
are capitalised as part of the cost of the asset. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates of the initial transactions.
Group entities with a functional currency other than € are translated into € at: average exchange rates for income and expenses;
and reporting date exchange rates for assets and liabilities. Exchange differences arising on consolidation are recognised in other
comprehensive income.
Property, plant and equipment
Property, plant and equipment comprise computer equipment and furniture and fittings. The value of property, plant and
equipment is recorded at cost less depreciation.
Depreciation of property, plant and equipment is spread over the estimated useful economic life of assets. The useful economic
lives are:
Property, plant and machinery – 5 to 15 years, straight line
Office equipment – 3 to 23 years, straight line
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate business area, geographical region
or major line of business. Classification as a discontinued operation occurs upon disposal or earlier if the operation meets the
criteria to be classified as held for sale.
Non-current assets and disposal groups are classified as held for sale if the carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are
measured at the lower of their carrying amount and fair value less costs to sell.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the
acquiree. Fair values are attributed to the identifiable assets and liabilities and contingent considerations unless the fair value
cannot be measured reliably, in which case the value is subsumed into goodwill. In the consolidated Financial Statements,
acquisition costs incurred are expensed and included in general and administrative expenses.
Frequently, the acquisition of pharmaceutical patents and licences is effected through a non-operating corporate structure. As
these structures do not represent a business, it is considered that the transactions do not meet the definition of a business
combination. Accordingly, the transactions are accounted for as the acquisition of an asset. The net assets acquired are
recognised at cost.
Acquired intangible assets
Acquired intangible assets are stated at the lower of cost less provision for amortisation and impairment or the recoverable
amount. Acquired intangibles assets are amortised over their expected useful economic life on a straight line basis and are tested
for impairment annually. In determining the useful economic life each acquisition is reviewed separately and consideration given
to the period over which the Group expects to derive economic benefit.
Intangibles assets acquired during the current year as part of the acquisitions of Birken AG and SomPharmaceuticals are currently
not being amortised as it is the Company’s policy not to amortise assets in development that are not ready for use.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
35
Software that is purchased is valued at cost and amortized on a straight line basis over a useful economic life of three to ten
years.
Only intangible assets acquired from third parties have been capitalised, as the conditions have not been met for the
capitalisation of self-created intangible assets.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less impairment.
Impairment
At each Statement of Financial Position date, the Company reviews the carrying amounts of its investments and acquired
intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Any
impairment loss arising from the review is charged to the Statement of Comprehensive Income whenever the carrying amount of
the asset exceeds its recoverable amount.
The Group assesses each asset or cash-generating unit annually to determine whether any indication of impairment exists. Where
an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of
the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as discount
rates, future capital requirements, general risks affecting the pharmaceutical industry and other risks specific to the individual
asset. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction
between knowledgeable and willing parties. Fair value is generally determined as the present value of estimated future cash
flows arising from the continued use of the asset, using assumptions that an independent market participant may take into
account. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. Assets are grouped into the smallest group that generate cash
inflows are independent of other assets.
Taxes
Tax comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax
rates enacted or substantially enacted at the reporting date. Deferred tax assets or liabilities are recognised where the carrying
value of an asset or liability in the Statement of Financial Position differs to its tax base, and is accounted for using the statement
of financial position liability method. Recognition of deferred tax assets is restricted to those instances where it is probable that
taxable profit will be available against which the difference can be utilised.
Share based payments
The Group issues share options as an incentive to certain senior management and staff. The fair value of options granted is
recognised as an expense with a corresponding credit to the share-based payment reserve. The fair value is measured at grant
date and spread over the period during which the awards vest.
For equity-settled share-based payment transactions, the goods or services received and the corresponding increase in equity are
measured directly at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If it is not
possible to estimate reliably the fair value of the goods or services received, the fair value of the equity instruments granted as
calculated using the Black-Scholes model is used as a proxy.
The Group may issue warrants to key consultants, advisers and suppliers in payment or part payment for services or supplies
provided to the Group. The fair value of warrants granted is recognised as an expense. The corresponding credits are charged to
the share-based payment reserve. The fair value is measured at grant date and spread over the period during which the warrants
vest. The fair value is measured using the Black-Scholes model if the fair value of the services received cannot be measured
reliably.
Consolidated Financial Statements for the year ended 31 December 2016
36
Notes to the Financial Statements continued
For the year ended 31 December 2016
The fair value of share based payments is measured by use of valuation models, which take into account conditions attached to
the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility
percentage factor used in the calculation is based on historical share price performance.
3 Segmental information
An operating segment is a component of an entity that (1) engages in business activities from which it may earn revenues and
incur expenses, (2) whose operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), to make
decisions about the resources to be allocated to the segment and assess its performance; and (3) for which discrete financial
information is available.
For the year ended 31 December 2016, the CODM has been identified as the executive management team of the Chief
Executive Officer (“CEO”) and Chief Financial Officer/Chief Operating Officer (“CFO/COO”). All areas of the business are
engaged in the development of a range of pharmaceutical products and are deemed to have similar economic and regulatory
environments. Therefore, all business areas have been combined into a single reporting segment: pharmaceuticals. The
information reported to the CODM during the year is set out below. Lojuxta revenue is for the month of December 2016 and the
Imlan revenue is from 19 April 2016 to 31 December 2016.
Revenue by type
Lojuxta
Imlan
Other
Total revenue
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
775
571
5
1,351
–
–
–
–
The revenue information above is based on the location of the customer. Imlan is sold through distributors with 5 distributors
accounting for €430,000 of the Imlan sales total.
Revenue geographic information
Germany
Other European countries
Total revenue
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
564
787
1,351
–
–
–
The Group has not generated external customer revenue in the UK. 100% of the revenue generated in Germany is from sales of
Imlan. The Group generates over 90% of its Lojuxta revenue in Italy, the Netherlands and Greece.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
37
Location of non-current assets
Germany
Switzerland
Other countries
Total non-current assets
31 December
2016
€’000
31 December
2015
€’000
49,640
4,062
2
53,704
–
–
–
–
Non-current assets consist of intangible assets and property, plant and equipment. Acquired intangible assets are classified under
the location where the acquired subsidiary is incorporated.
4 Operating loss for the year
Operating loss for the year/period is stated after charging/(crediting):
Fees payable to the Company’s auditor for audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Tax compliance services
Assurance services on corporate finance transactions
Audit-related assurance services
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals
Foreign exchange gains
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
31
16
9
218
7
192
2
83
(4)
2
–
–
–
–
–
–
–
Consolidated Financial Statements for the year ended 31 December 2016
38
Notes to the Financial Statements continued
For the year ended 31 December 2016
5 Employees
Including the Directors, the Group’s average number of employees during the year was 26 (period to 31 December 2015: 3).
Including the Directors, the Company’s average number of employees during the year was 6 (period to 31 December 2015: 4).
Aggregate remuneration comprised:
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
Group Company
Other wages and salaries 1,356
Social security costs 228
Directors remuneration 896
Share based payments – directors –
Share based payments – employees/consultants 229
Total employee costs 2,709
The Directors were not granted any share options during the year.
Highest paid director
–
–
–
–
–
–
–
6
156
–
243
405
Group’s highest paid director, year to 31 December 2016:
Base Salary
and Fees Bonuses
€’000 €’000
Pension
Contributions
€’000
Other
Benefits
€’000
Joe Wiley 239 120
24
14
Company’s highest paid director period to 31 December 2015:
–
–
224
23
17
264
2016
Total
€’000
397
2015
Total
€’000
129
Base Salary
and Fees
€’000
106
Share based
payments
€’000
23
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
124
2
(1)
(4)
121
641
3
–
–
644
Carol Law
6 Net finance expense
Fair value of embedded derivatives (see note 20)
Interest and fees paid
Deposit interest received
Foreign exchange gains
Total
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
39
7 Tax on ordinary activities
No corporation tax charge arises in the year ended 31 December 2016 and the period ended 31 December 2015. A
reconciliation of the expected tax benefit computed by applying the tax rate applicable in the primary jurisdiction, the Republic of
Ireland, to the loss before tax to the actual tax credit is as follows:
Loss before tax
Tax credit at Irish corporation tax rate of 12.5%
Effect of:
Losses unutilised
Expenses not deductible for tax purposes
Differences in overseas taxation rates
Total tax charge on loss on ordinary activities
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
(7,804)
976
1,663
1
(688)
–
(1,194)
149
74
75
–
–
The Group has tax losses of up to €32,449,000 (31 December 2015: €593,000) to carry forward against future profits.
€25,691,000 of the losses relate to subsidiaries acquired by Amryt Pharma plc during the year. €20,938,000 of the subsidiaries’
losses relate to the German domiciled Birken AG, these losses may not be available to the Group going forward. In addition, due
to the fundamental change in the Company’s business following the exit of the oil and gas industry, UK tax losses carried
forward may not be fully available for use against the future profits of the Group. The deferred tax asset on tax losses at 12.5%
of €4,056,000 (31 December 2015: €74,000) has not been recognised due to the uncertainty of the recovery.
8 Loss per share – basic and diluted
The Group presents basic and diluted loss per share (“LPS”) data for its ordinary shares. Basic LPS is calculated by dividing the loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during
the year. Diluted LPS is determined by adjusting the loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise warrants and share options
granted by the Company.
In the current year, the weighted average number of shares in the loss per share (“LPS”) calculation, reflects the legal subsidiary’s,
Amryt Pharmaceuticals DAC (“Amryt DAC”), weighted average pre-combination ordinary shares multiplied by the exchange ratio
established in the acquisition, and the weighted average total actual shares of the legal parent, Amryt Pharma plc (“Amryt”), in
issue after the date of acquisition.
The comparative LPS figure is based on Amryt DAC’s reported loss for the period divided by the weighted average number of
shares in issue in Amryt DAC for the period multiplied by the exchange ratio established in the acquisition.
Consolidated Financial Statements for the year ended 31 December 2016
40
Notes to the Financial Statements continued
For the year ended 31 December 2016
Issued share capital – ordinary shares of £0.01 each
17 August 2015 – Shares on Incorporation
24 August 2015 – Issue of shares by Amryt DAC 1
31 December 2015
18 April 2016 – Issue of shares by Amryt DAC on acquisition of Birken
18 April 2016 – Issue of shares by Amryt DAC on acquisition of SOM
18 April 2016 – Issue of shares by Amryt DAC on conversion of convertible
debentures securities
19 April 2016 – Issue of shares by Amryt Pharma plc – share for share
exchange on acquisition of Amryt DAC B ordinary shares 1
19 April 2016 – Issue of shares by Amryt Pharma plc – share consolidation
19 April 2016 – Issue of shares by Amryt Pharma plc – share placing
Weighted
average shares
Number
11,615,044
46,460,177
58,075,221
55,683,886
37,048,622
12,277,102
8,590,365
7,503,786
43,171,134
41,673,402
31 December 2016
208,339,632
163,336,437
1 As part of the 24 August 2015 share placing, Amryt DAC issued B ordinary shares. These shares have not been included in the pre-acquisition weighted average
number of shares as they did not carry rights to dividends or repayment of capital on the winding up of Amryt DAC.
The calculation of loss per share is based on the following:
Loss after tax attributable to equity holders of the Company (€’000)
Weighted average number of ordinary shares in issue
Fully diluted average number of ordinary shares in issue
Basic and diluted loss per share (cent)
12 months to
31 December
2016
€’000
(7,804)
163,336,437
163,336,437
Period to
31 December
2015
€’000
(1,194)
55,683,886
55,683,886
(4.78)
(2.14)
Where a loss has occurred, basic and diluted LPS are the same because the outstanding share options and warrants are anti-
dilutive. Accordingly, diluted LPS equals the basic LPS. The share options and warrants outstanding as at 31 December 2016
totalled 39,102,583 (31 December 2015: 1,307,466) and are potentially dilutive.
9 Business Combinations and Asset Acquisitions
Reverse Acquisition of Fastnet Equity Group plc by Amryt Pharmaceuticals DAC
On 16 October 2015, Fastnet Equity plc (“Fastnet”) signed non-binding heads of terms with Amryt Pharmaceuticals DAC
(“Amryt DAC”), for the acquisition of Amryt DAC’s entire issued and to be issued share capital. The acquisition was completed
on 18 April 2016 and on the same date Amryt DAC completed the acquisitions of Birken AG (“Birken”) and SomPharmaceuticals
(“SOM”), for consideration satisfied by the issue of new ordinary shares in Amryt DAC. To complete the acquisition of Amryt
DAC a total of 123,495,095 new ordinary shares of 1p in Fastnet were issued at an issue price of 24p per share (“Consideration
Shares”).
As detailed in note 2 the acquisition by Fastnet of Amryt DAC has been treated for accounting purposes as a reverse acquisition
by Amryt DAC of Fastnet. In a reverse acquisition, the cost of the business combination is deemed to have been incurred by the
legal subsidiary (Amryt DAC) in the form of notional equity instruments issued to the owners of the legal parent. The value of the
notional shares is calculated by reference to the proportion of shares that would be needed to be issued by Amryt DAC to
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
41
Fastnet if the old shareholder base of Fastnet was to acquire the same percentage holding in Amryt DAC as it received in the
combined Group.
The value of these notional shares issued by Amryt DAC was compared to the Net Asset value of Fastnet on the date of
acquisition and the excess (€971,000) was charged to the Statement of Comprehensive Income as a deemed share based
payment cost of the business combination.
In addition, €867,000 in professional fees was charged to the Statement of Comprehensive Income in the current year (2015:
€484,000) as part of the costs associated with the reverse acquisition and acquisition of Birken and SOM (see details below).
These costs include legal, due diligence, accounting and tax advisory and corporate finance.
Amryt Pharma plc 2016 Results
See note 18 for details of Amryt Pharma plc’s loss for the year. Amryt Pharma plc did not generate external customer revenue
during the year.
Acquisition of Birken
Amryt DAC signed a conditional share purchase agreement to acquire Birken on 16 October 2015 (“Birken SPA”). The Birken
SPA was completed on 18 April 2016 with Amryt DAC acquiring the entire issued share capital of Birken. The consideration
comprises:
• Initial cash consideration of €1,000,000 (paid by Amryt DAC prior to its acquisition by the Company);
• Milestone payments of:
o €10,000,000 on receipt of first marketing approval by the EMA of Episalvan, paid on the completion date (18 April 2016);
o Either (1) €5,000,000 once net ex-factory sales of Episalvan have been at least €100,000 or (ii) if no commercial sales are
made within 24 months of EMA first marketing approval (being 14 January 2016), €2,000,000 24 months after receipt of
such approval and €3,000,000 following the first commercial sale;
o €10,000,000 on receipt of marketing approval by the EMA or FDA of a pharmaceutical product containing Betulin as its
API for the treatment of Epidermolysis Bullosa;
o €10,000,000 once net ex-factory sales/net revenue in any calendar year exceed €50,000,000;
o €15,000,000 once net ex-factory sales/ net revenue in any calendar year exceed €100,000,000;
• Cash consideration of €150,000, due and paid on the completion date (18 April 2016);
• Royalties of 9% on sales of Episalvan products for 10 years from first commercial sale; and
• Shares in Amryt DAC that equated to a 30% equity shareholding prior to the acquisition of Amryt DAC by the Company. The
Birken sellers received 37,048,622 in Consideration Shares (valued at €11.2 million) for their shareholding in Amryt DAC.
Provisional Fair Value Measurement of Contingent Consideration
Contingent consideration comprises the milestone payments and sales royalties detailed above. As at the acquisition date, the
fair value of the contingent consideration was estimated to be €23,314,000. The fair value of the royalty payments was
determined using probability weighted revenue forecasts and the fair value of the milestones payments was determined using
probability adjusted present values (see note 23 for fair value hierarchy applied). The probability adjusted present values took into
account published orphan drug research data and statistics which were adjusted by management to reflect the specific
circumstances applicable to the drugs acquired in the Birken transaction. A discount rate of 28.5% was used in the calculation of
the fair value of the contingent consideration and this was sense checked by Management against the implied rate of return
Consolidated Financial Statements for the year ended 31 December 2016
42
Notes to the Financial Statements continued
For the year ended 31 December 2016
(“IRR”) on the project. As noted earlier in the report the size of the market for the products under development provides a real
opportunity to the Company to meet its forecast revenue targets and therefore the milestone targets which underpin the
contingent consideration payments. At present management anticipate that AP101 for EB will be ready to launch in 2019.
However, management note that due to issues outside their control (i.e. regulatory requirements and the commercial success of
the product) the timing of when such revenue targets may occur may change. Such changes may have a material impact on the
assessment of the fair value of the contingent consideration.
Provisional Fair Value Measurement of Assets Acquired
A fair value exercise was performed on the identifiable assets and liabilities of Birken AG as at the acquisition date. An income
based approach was used to value the intangible assets acquired. Key assumptions of the approach include the probability of
success, the discount factor applied, the timing of future revenue flows, market penetration and peak sales and expenditure
required to complete development.
Assets acquired and liabilities acquired:
Assets
Intangible assets
Property, plant and equipment
Cash and cash equivalents
Inventories
Trade and other receivables
Total assets
Liabilities
Accounts payable and accrued liabilities
Deferred tax liability
Total liabilities
Total net assets
Consideration
Issue of fully paid ordinary shares
Cash consideration
Contingent consideration
Total consideration
Provisional
FV at date
of acquisition
€’000
48,461
1,373
705
687
133
51,359
332
5,384
5,716
45,643
11,179
11,150
23,314
45,643
The fair values set out above are provisional figures which will be finalised in the 2017 interim financial statements following
management’s final review of key judgemental areas relating to the business combination of Birken AG. Under IFRS 3, business
combination accounting needs to be finalised within 12 months of the acquisition date.
Birken 2016 Results
Birken’s loss and revenue, after adjusting for intercompany transactions, for the period from its acquisition date to 31 December
2016 were €1,179,000 and €571,000 respectively. On an annualised basis these amount to €1,489,000 and €721,000.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
43
SOM Acquisition
Amryt DAC entered into conditional stock purchase agreements to acquire SomPharmaceuticals SA and SomTherapeutics, Corp
on 15 December 2015 and 4 December 2015 respectively (“Som SPAs”). The aggregate consideration payable under the Som
SPAs was US$4.25 million which was satisfied by the issue of US$4.15 million in new ordinary shares in Amryt DAC and
US$100,000 (€89,000) in cash to the shareholders of SOM. The SOM SPAs were completed on 18 April 2016. The SOM sellers
received 12,277,102 of Consideration Shares for their shareholding in Amryt DAC. The acquisition of SOM has been treated for
accounting purposes as an asset acquisition with the value of the consideration issued, €4,062,000, recognised as an Intangible
Asset.
10 Intangible Assets
Cost
At 17 August 2015 and 31 December 2015
Acquired on acquisition of Birken
Acquired on acquisition of SOM
At 31 December 2016
Accumulated amortisation
At 17 August 2015 and 31 December 2015
Amortisation charge
At 31 December 2016
Net book value
Net book value at 17 August 2015
Net book value at 31 December 2015
Net book value at 31 December 2016
In process R&D
€’000
Software
€’000
–
48,453
4,062
52,515
–
–
–
–
–
52,515
–
8
–
8
–
2
2
–
–
6
Total
€’000
–
48,461
4,062
52,523
–
2
2
–
–
52,521
The Company reviews the carrying amounts of its intangible assets to determine whether there are any indications that those
assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss. Impairment indications include events causing significant changes in any of the
underlying assumptions used in the income approach utilised in valuing in process R&D. These key assumptions are: the
probability of success; the discount factor; the timing of future revenue flows; market penetration and peak sales assumptions;
and expenditures required to complete development. During the year the Group did not identify any potential changes in the
assumptions used in the assessment of the carrying value of the assets.
Consolidated Financial Statements for the year ended 31 December 2016
44
Notes to the Financial Statements continued
For the year ended 31 December 2016
11 Property, plant and equipment
Property
€’000
Cost
At 17 August 2015 and 31 December 2015 –
Additions –
Disposals –
Acquired on acquisition of Birken AG 337
At 31 December 2016 337
Accumulated depreciation
At 17 August 2015 and 31 December 2015 –
Depreciation charge 61
At 31 December 2016 61
Net book value
Net book value at 17 August 2015 –
Net book value at 31 December 2015 –
Net book value at 31 December 2016 276
Plant and
Machinery
€’000
Office
Equipment
€’000
–
–
(10)
811
801
–
88
88
–
–
713
–
12
–
225
237
–
43
43
–
–
194
Total
€’000
–
12
(10)
1,373
1,375
–
192
192
–
–
1,183
12 Discontinued operations – Company
On 18 December 2015, the Company divested of its remaining oil and gas interests.
As part of the demerger of the oil and gas interests an unsecured four year term loan of €660,000 was granted to finance the
residual running of the oil and gas assets. The operations of the trust structure set up to administer the oil and gas assets are
managed entirely separately from the remaining operations of Amryt. €165,000 of the €660,000 loan related to Pathfinder
Hydrocarbon Ventures Limited, a company that was wound down during the year. The Company received a loan repayment of
€40,000 as part of the wind down process. The Company fully provided for the loan advanced in the prior period with an
impairment charge of €660,000 recognised in the prior period income statement.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
45
13 Investment in subsidiaries
Cost
At 1 April 2015
Additions
Discontinued operations
At 1 January 2016
Additions
At 31 December 2016
Impairment
At 1 April 2015
Impairment charge
Discontinued operations
At 1 January 2016 and 31 December 2016
Net book value
At 31 March 2015
At 31 December 2015
At 31 December 2016
Equity in
subsidiary
companies
€’000
17,839
–
(17,839)
–
37,376
37,376
(17,839)
–
17,839
–
–
–
Subsidiary
funding
€’000
25,309
577
(25,886)
–
22,078
22,078
(25,309)
(577)
25,886
–
–
–
Total
€’000
43,148
577
(43,725)
–
59,454
59,454
(43,148)
(577)
43,725
–
–
–
37,376
22,078
59,454
Current year equity in subsidiary companies additions relate to the issue price of ordinary shares on the acquisition of Amryt
Pharmaceuticals DAC. Current year subsidiary funding additions relate to the advancement of loans to Amryt Pharmaceuticals
DAC and its underlying subsidiary companies to fund the operations of those companies including the R&D costs of AP101 and
AP102. Recoverability of the loans and the carrying value of the investments is directly linked to Amryt Pharmaceuticals DAC’s
operations including the success or failure of the development of AP101 and AP102. The carrying value of these investments are
held at cost and will be reviewed at each reporting date for signs of impairment.
Consolidated Financial Statements for the year ended 31 December 2016
46
Notes to the Financial Statements continued
For the year ended 31 December 2016
List of subsidiary companies:
Company 2016 % 2015 %
holding
Subsidiary company Activities Number Incorporation holding
Amryt Pharmaceuticals DAC Holding company and
management services 566448 Ireland 100
Amryt Research Limited Pharmaceuticals R&D 571411 Ireland 100
Amryt Endocrinology Limited Pharmaceuticals R&D 572984 Ireland 100
Amryt Lipidology Limited Licensee for Lojuxta 593833 Ireland 100
Amryt Pharma (UK) Limited Management services 10463152 UK 100
Amryt Pharma France Dormant 824 418 156 00017 France 100
Amryt Pharma Italy SRL Management services 2109476 Italy 100
Birken AG Product Sales and
Pharmaceuticals R&D HRB 711487 Germany 100
SomPharmaceuticals SA Pharmaceuticals R&D
and management services CHE-435.396.568 Switzerland 100
SomTherapeutics, Corp Licence holder P14000071235 USA 100
–
–
–
–
–
–
–
–
–
–
The Company did not have any subsidiaries at 31 December 2015, all subsidiaries relating to the old oil and gas business were
disposed of during the prior period.
List of registered offices:
Company Registered Office Address
Amryt Pharmaceuticals DAC Fitzwilliam Hall, Fitzwilliam Place, Dublin 2
Amryt Research Limited Fitzwilliam Hall, Fitzwilliam Place, Dublin 2
Amryt Endocrinology Limited Fitzwilliam Hall, Fitzwilliam Place, Dublin 2
Amryt Lipidology Limited Fitzwilliam Hall, Fitzwilliam Place, Dublin 2
Amryt Pharma (UK) Limited 3rd Floor 1 Ashley Road, Altrincham, Cheshire, United Kingdom, WA14 2DT
Amryt Pharma France 17 Avenue George V, 75008 Paris
Amryt Pharma Italy SRL Milano (MI)-Via Dell’ Annunciata 23/4
Birken AG Streiflingsweg 11, 75223 Niefern-Öschelbronn
SomPharmaceuticals SA Bahnofstrasse 21, 6300 Zug
SomTherapeutics, Corp 3795 Coventry Lane, Boca Raton, FL 33496
There were no active subsidiary companies at 31 December 2015. The results for the period ending 31 December 2015 relate
entirely to those of Amryt Pharmaceuticals DAC.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
47
14 Trade and other receivables
Group Company
31 December
2016
€’000
31 December
2015
€’000
31 December
2016
€’000
31 December
2015
€’000
Trade receivables 844
Prepayments and accrued income 1,652
VAT recoverable 44
Prepaid costs of reverse takeover –
Convertible debenture security receivable –
Trade and other receivables 2,540
–
1,000
54
–
545
1,599
35
35
25
–
–
95
–
22
65
196
–
283
The 31 December 2016 prepayments and accrued income balance includes €1,548,000 in relation to prepaid phase 3 clinical trial
costs.
15 Inventories
Raw materials
Work in progress
Finished goods
Inventories
16 Cash and cash equivalents
31 December
2016
€’000
31 December
2015
€’000
299
219
252
770
–
–
–
–
31 December
2016
€’000
31 December
2015
€’000
31 December
2016
€’000
31 December
2015
€’000
Total Cash and cash equivalents 8,271
171
51
12,625
Group Company
Cash and cash equivalents include cash in hand, deposits held at call with banks and short term bank deposits, available with no
penalty, with maturity less than three months.
Consolidated Financial Statements for the year ended 31 December 2016
48
Notes to the Financial Statements continued
For the year ended 31 December 2016
17 Share capital – Company
Details of ordinary shares of 1p each issued are in the table below:
Number of
ordinary shares
Number of
deferred shares
At 31 March 2015 and 31 December 2015 43,171,134 1
19 April – Share consolidation (43,171,134)
19 April – Issue of new ordinary shares on
share consolidation 43,171,134
19 April – Creation of deferred shares on
share consolidation –
19 April 2016 – Issue of ordinary shares at £0.24
on acquisition of Amryt Pharmaceuticals DAC 123,495,096
19 April 2016 – Issue of ordinary shares at £0.24 41,673,402
Total Share
Capital
€’000
18,336
(18,336)
603
Total Share
Premium
€’000
35,221
–
–
–
1,557
526
20,419
–
8,474
43,695
–
–
–
–
–
43,171,134
17,733
At 31 December 2016 208,339,632
43,171,134
1 The prior year share number, 345,369,071 ordinary shares, has been adjusted by a factor of 8 to take into account the 8 to 1 share consolidation that took place on
19 April 2016.
On 19 April 2016, every 8 ordinary shares of par value 3.8p in the Company at close of business on 18 April 2016 (total shares
345,369,071) became 1 new ordinary share of par value 1p (total shares 43,171,134) and 1 deferred share of par value 29.4p
(total shares 43,171,134). The rights attaching to the new ordinary shares of 1p are identical in all respects to those of the old
ordinary shares of 3.8p.
The deferred shares created are effectively valueless as they do not carry any rights to vote or dividend rights. In addition, holders
of deferred shares are only entitled to a payment on a return of capital or on a winding up of the Company after each of the
holders of ordinary shares of 1p each have received a payment of £10,000,000 on each such share. The deferred shares are not
and will not be listed or traded on the Official List, AIM, the ESM or any other investment exchange and are only transferable in
limited circumstances.
On 19 April 2016, 123,495,096 ordinary shares of 1p were issued as part of the completion of the acquisition of Amryt
Pharmaceuticals DAC by the Company. Under section 612 of the Companies Act 2006, the premium on these shares has been
included in the merger reserve.
On 19 April 2016, 41,673,402 ordinary shares of 1p were issued at 24p per share as part of a £10,000,000 (before expenses)
fund raising.
18 Statement of Comprehensive Income – Company
In accordance with the provisions under section 408 of the Companies Act 2006, the Company has not presented a Statement
of Comprehensive Income. The Company’s loss for the year was €1,915,000 (9 month period to 31 December 2015:
€2,637,000).
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
49
19 Share-based payments
The Company has issued share options as an incentive to certain senior management and staff. In addition, the Company has
issued warrants to key consultants, advisers and suppliers in payment or part payment for services or supplies provided to the
Group. All share options granted during the year were granted under the terms of the Amryt Share Option Plan and are subject
to vesting conditions. All warrants granted during the year were granted under individual agreements as part of the April 2016
share placing. In addition to the share options and warrants granted during the year a total of 1,307,466 share options and
warrants were in existence at 31 December 2015 that relate to the old oil and gas business.
Each share option and warrant converts into one ordinary share of Amryt Pharma plc on exercise and are accounted for as
equity-settled share-based payments. The options and warrants may be exercised at any time from the date of vesting to the
date of their expiry. The equity instruments granted carry neither rights to dividends nor voting rights.
Share options and warrants in issue:
Share Options1 Warrants1
Units
Balance at 17 August 2015 1,415,954
Lapsed during the period (600,000)
Balance at 31 December 2015 815,954
Exercisable at 31 December 2015 815,954
Balance at 1 January 2016 815,954
Granted during the year 15,451,564
Lapsed during the year (472,204)
Balance at 31 December 2016 15,795,314
Exercisable at 31 December 2016 343,750
Weighted
average
exercise price
133.6p
201.6p
84.0p
84.0p
84.0p
19.1p
110.0p
19.8p
48.0p
Weighted
average
exercise price
120.8p
176.0p
102.4p
102.4p
102.4p
24.0p
112.0p
25.3p
25.4p
Units
661,512
(170,000)
491,512
491,512
491,512
22,909,951
(94,194)
23,307,269
21,234,014
1 Following the 19 April 2016 share consolidation, as described in note 17, all existing rights attached to share options and warrants were amended to reflect the new
share structure. The rights are now over Amryt Pharma plc new ordinary shares of 1p, with the original units divided by a factor of 8 and the original exercise price
increased by a factor of 8. The pre 19 April 2016 numbers included in the table above have been adjusted to take into account the share consolidation.
The fair value is estimated at the date of grant using the Black-Scholes pricing model, taking into account the terms and
conditions attached to the grant. The following are the inputs to the model for the equity instruments granted during the year:
Days to Expiry
Volatility
Risk free interest rate
Share price at grant
Options Inputs Warrant Inputs
2,555
43%-50%
0.64%-0.82%
15.5p-24p
1,006-1,844
50%
0.82%
24p
During the current year a total of 15,451,564 share options exercisable at a weighted average price of £0.191 were granted. The
fair value of share options granted during the period is €1,642,000. The share options outstanding as at 31 December 2016 have
a weighted remaining contractual life of 6.39 years with exercise prices ranging from £0.155 to £0.48.
During the current year, as part of the share placing that coincided with the completion of the reverse takeover of the Company,
a total of 22,909,951 warrants exercisable at a weighted average price of £0.24 were granted. The fair value of warrants
granted during the period is €2,251,000. The warrants outstanding as at 31 December 2016 have a weighted remaining
contractual life of 2.19 years with exercise prices ranging from £0.24 to £1.12.
Consolidated Financial Statements for the year ended 31 December 2016
50
Notes to the Financial Statements continued
For the year ended 31 December 2016
The value of share options and warrants charged to the Statement of Comprehensive Income during the year is as follows:
Share options
Total
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
229
229
–
–
In addition to the above charges, a further €2,251,000 was charged to share premium during the year.
20 Trade and other payables
Group Company
31 December
2016
€’000
31 December
2015
€’000
31 December
2016
€’000
31 December
2015
€’000
Trade payables 1,918
Accrued expenses 1,499
Social security costs and other taxes 133
Convertible debenture security liabilities –
Trade and other payables 3,550
195
292
–
2,476
2,963
87
94
6
–
187
278
168
3
–
449
During the prior period the Group issued €2,000,000 of zero interest Convertible Debenture Securities (“CDS”). The CDS
automatically converted, at a 30% premium, to ordinary shares in the Company as part of the reverse takeover of Fastnet Equity
plc (“RTO”) and the principal value of the CDS and the related embedded derivative was cleared as a result.
The increase in trade payables reflects the increase in R&D activity in the Group. The increase in accrued expenses reflects the
provision for 2016 staff bonuses and amounts accrued relating to the distribution of Lojuxta.
A €124,000 finance charge (2015: €41,000) was recognised in the current year in relation to the CDS.
21 Deferred tax liability
At 1 April 2015 and 31 December 2015
Recognised on business combinations
At 31 December 2016
Total
€’000
–
5,384
5,384
The deferred tax liability arose during the year on the acquisition of Birken AG (see note 9). An intangible asset was recognised in
relation to in process R&D. As the intangible asset only arises on consolidation and there may not be tax deductions available on
sale, its tax base is nil.
When the intangible asset is amortised the tax difference will reduce and the movement in the deferred tax liability will be
recognised in profit or loss. The in process R&D is currently not being amortised.
The Company intends to continue to hold the acquired asset but does not expect it to generate taxable profits in the acquired
subsidiary. The Company expects to incur any taxable benefits in relation to the asset in Ireland. This is the jurisdiction of the
acquirer of Birken AG and the location where the majority of future R&D work in relation to the asset will be incurred. Ireland’s
tax rate of 12.5% has been used in calculation of the deferred tax liability.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
51
22 Related party transactions
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the
Company. In the opinion of the Board, the Company’s key management are the Directors of Amryt Pharma plc.
Amounts included in the Financial Statements, in aggregate, by category of related party are as follows:
12 months to
31 December
2016
Directors €’000
Period to
31 December
2015
€’000
12 months to
31 December
2016
€’000
Period to
31 December
2015
€’000
Group Company
Directors remuneration (short term benefits) 854
Directors remuneration (pension cost) 42
Share based payments –
Sub total 896
Related party transactions with former Directors
Consulting fees 113
Office facilities and administration costs 82
Other fees 74
Total 1,165
–
–
–
–
156
–
–
156
181
113
– –
74
–
181
343
224
–
23
247
222
–
24
493
At year end, €15,170 (both Group and Company) (2015: €150,000 Group, €38,581 Company) was due to former Directors in
relation to related party transactions. Office facilities and administration costs include €55,000 in relation to office licence fees.
The office licence fees were charged on an at arm’s length basis.
Shares purchased by Directors
As part of an April 2016 share placing (see note 17), the Directors of the Company purchased ordinary shares of 1p as follows:
Director
Joe Wiley
Rory Nealon
Ray Stafford
Total
Number
330,417
1,312,500
1,652,083
3,295,000
As part of the share placing, placing warrants were granted to all placees on the basis of one placing warrant for every two
placing shares. The directors received 1,647,500 placing warrants. Share-based payments of €157,000 were charged to share
premium in the year in relation to these placing warrants.
Consolidated Financial Statements for the year ended 31 December 2016
52
Notes to the Financial Statements continued
For the year ended 31 December 2016
23 Financial risk management
Categories of Group and Company financial instruments
31 December
2016
Directors €’000
31 December
2015
€’000
31 December
2016
€’000
31 December
2015
€’000
Group Company
Financial assets (all at amortised cost):
Cash and cash equivalents 8,271
Trade receivables 844
Convertible debenture security (“CDS”) receivable –
Total financial assets 9,115
Financial liabilities:
At amortised cost
Trade payables and accrued expenses 3,417
CDS principal liability –
At fair value
CDS embedded derivative –
Contingent consideration 23,314
Total financial liabilities 26,731
Net (17,616)
171
–
545
716
487
2,000
476
–
2,963
(2,247)
51
35
–
86
181
–
–
–
181
(95)
12,625
–
–
12,625
446
–
–
–
446
12,179
The Board considers that the carrying values of all financial assets and liabilities shown above to be the fair value of the Group’s
and the Company’s assets and liabilities.
Financial instruments evaluated at fair value can be classified according to the following valuation hierarchy, which reflects the
extent to which the fair value is observable:
• Level 1: fair value evaluations using prices listed on active markets (not adjusted) of identical assets or liabilities.
• Level 2: fair value evaluations using input data for the asset or liability that are either directly observable (as prices) or indirectly
observable (derived from prices), but which do not constitute listed prices pursuant to Level 1.
• Level 3: fair value evaluations using input data for the asset or liability that are not based on observable market data
(unobservable input data).
The CDS embedded derivative element and contingent consideration have been valued using level 3. The contingent
consideration relates to the acquisition of Birken AG (see note 9). The €23,314,000 fair value compromises royalty payments and
milestone payments. The fair value of the royalty payments was determined using probability weighted revenue forecasts and the
fair value of the milestones payments was determined using probability adjusted present values.
An increase of 10% in estimated revenue forecasts would result in an increase to the fair value of €1,410,000. A decrease would
have the opposite effect. A 5% increase in the discount factor used would result in a decrease to the fair value of €4,700,000. A
decrease of 5% would result in a increase to the fair value of €6,550,000.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
53
Policies and Objectives
The Group’s operations expose it to some financial risks arising from its use of financial instruments, the most significant ones
being liquidity, market risk and credit risk. The Board of Directors is responsible for the Group and Company’s risk management
policies and whilst retaining responsibility for them it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Group’s finance function. The main policies for
managing these risks are as follows:
Liquidity risk
The Group is not subject to any externally imposed capital requirement, accordingly the Group’s objectives when managing
capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to
other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Working capital forecasts are
prepared to ensure the Group has sufficient funds to complete contracted work commitments.
The following table shows the maturity profile of current liabilities of the Group:
31 December 2016 Less than 1
month
Between 1
and 3 months
Between 3
and 6 months
Current liabilities 3,089
393
68
31 December 2015 Less than 1
month
Between 1
and 3 months
Between 3
and 6 months
Current liabilities 310
2,532
121
The following table shows the maturity profile of current liabilities of the Company:
31 December 2016 Less than 1
month
Between 1
and 3 months
Between 3
and 6 months
Current liabilities 124
—
63
31 December 2015 Less than 1
month
Between 1
and 3 months
Between 3
and 6 months
Current liabilities 380
—
69
The following table shows the maturity profile of contingent consideration of the Group:
Total
3,550
Total
2,963
Total
187
Total
449
31 December 2016 Less than 1 Between 1
year and 3 years
Between 3
and 5 years
Greater than
5 years
Contingent consideration — 5,176
5,144
12,994
Total
23,314
Capital management
The Group considers its capital to be its ordinary share capital, share premium, other reserves and accumulated deficit. The Group
manages its capital to ensure that entities within the Group will be able to continue individually as going concerns, while
maximising the return to shareholders through the optimisation of debt and equity balances. The Group manages its capital
structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust its capital structure,
the Group may adjust or issue new shares or raise debt. On a regular basis, management receives financial and operational
performance reports that enable continuous management of assets, liabilities and liquidity. No changes were made in the
objectives, policies or processes during the year/period ended 31 December 2016 and 31 December 2015.
Consolidated Financial Statements for the year ended 31 December 2016
54
Notes to the Financial Statements continued
For the year ended 31 December 2016
Market risk
Market risk arises from the use of interest bearing financial instruments and represents the risk that future cash flows of a
financial instrument will fluctuate as a result of changes in interest rates. It is the Group’s policy to ensure that significant
contracts are entered into in its functional currency whenever possible and to maintain the majority of cash balances in the
functional currency of the Company. The Group considers this policy minimises any unnecessary foreign exchange exposure. In
order to monitor the continuing effectiveness of this policy the Board reviews the currency profile of cash balances and
managements accounts.
During the year, the Group earned interest on its interest bearing financial assets at rates between 0% and 0.5%. The effect of a
1% change in interest rates obtainable during the period on cash and on short-term deposits would be to increase or decrease
the Group loss before tax by €82,000.
In addition to cash balances maintained in €, the Group had balances in £ and US$ at year-end. A theoretical 10% adverse
movement in the year end €:£ exchange rate would lead to an increase in the Group loss before tax by €24,000 with a
corresponding reduction in the Group loss before tax with a 10% favourable movement. A theoretical 10% adverse movement
in €:US$ exchange rates would lead to an increase in the Group loss before tax by €1,000 with a corresponding reduction in the
group loss before tax with a 10% favourable movement.
Credit risk
Credit risk is the risk that the counterparty will default on its contractual obligations resulting in financial loss. Credit risk arises
from cash and cash equivalents and from exposure via deposits with the Group and Company’s bankers. For cash and cash
equivalents, the Group and Company only uses recognised banks with high credit ratings.
24 Capital commitments and contingencies
Contingent liabilities
Birken AG (“Birken”) Share Purchase Agreement
See note 9 in relation to contingent consideration as a result of the acquisitions of Birken.
INC Research LLC (“INC”) Services Agreement
In December 2016, the Group entered into a clinical research and related services agreement with INC for the provision of
services in connection with the support of the Phase 3 Clinical trial for AP101 in the Epidermolysis Bullosa indication. The total
estimated project costs payable to INC are €12.6 million. €322,000 costs were incurred in the current year in relation to the
agreement with a further €1,548,000 prepaid at 31 December 2016. Costs are expected to be incurred over the period to
completion of the follow on study, estimated Q1 2021.
Aegerion Pharmaceuticals Inc. (“Aegerion”) Lojuxta Licence Agreement
Under the terms of the Lojuxta licence agreement Amryt has the exclusive right to sell Lojuxta across the licenced territories. As
part of the agreement, Amryt will make royalty payments to Aegerion of 18%-20% of net sales and will pay one-off milestones
payments of US$1,000,000 and US$1,500,000 if calendar year net sales targets of US$20,000,000 and US$30,000,000
respectively are achieved.
Amryt Pharma plc
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
55
Operating lease commitments
Future minimum obligations under operating lease contracts (in €’000):
At 31 December 2016 Less than
1 year
1 year to
5 years
Greater than
5 years
Leases for business premises 97
Leases for equipment 3
139
–
–
–
Total
236
3
There were no operating lease commitments in the prior period.
25 Events after the reporting period
Pre-clinical study results
In February 2017, the Company received positive results of a completed pre-clinical study that compared drug compound AP102
with pasireotide, an approved product for treating patients with resistant acromegaly. AP102 did not demonstrate the potential
to cause diabetes, an observation which, if replicated in clinical studies, could be clinically beneficial in treating acromegaly.
Grant of patent in Japan for AP101
In February 2017, the Company was granted a patent in Japan by the Japanese Patent Office for its lead drug candidate AP101.
AP101 trial discussions completed
In March 2017, discussions with the Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) regarding
the design of the phase 3 clinical trial for AP101 as a potential treatment for Epidermolysis Bullosa (“EB”) were completed. With
the design of a single phase 3 study established the Company can now commence the enrolment of its first patients.
Directorate change
Cathal Friel, a non-executive Director of the Company, resigned from the Board of Directors with effect from 28 March 2017.
Senior management change
In March 2017, David Allmond was appointed Chief Commercial Officer (“CCO”) and replaced Michele Bellandi in the role.
Consolidated Financial Statements for the year ended 31 December 2016
56
Company Information
Registered Office
Ivybridge House
1 Adam Street
London, WC2N 6LE
United Kingdom
Dublin Office
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2
Ireland
Company Number
5316808
Directors
Harry Stratford – Non-executive Chairman
Joe Wiley – CEO
Rory Nealon – CFO/COO
James Culverwell – Non-executive Director
Ray Stafford – Non-executive Director
Markus Ziener – Non-executive Director
Company Secretary
Rory Nealon
Company Website
www.amrytpharma.com
Amryt Pharma plc
AIM Nominated Adviser
Shore Capital and Corporate Limited
Bond Street House
14 Clifford Street
London, W1S 4JU
United Kingdom
Joint Broker
Shore Capital Stockbrokers Limited
Bond Street House
14 Clifford Street
London, W1S 4JU
United Kingdom
Joint Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London, EC2V 6ET
United Kingdom
ESM Adviser and Joint Broker
J & E Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Solicitors
Kuits Steinart Levy LLP
3 St Mary’s Parsonage
Manchester, M3 2RD
United Kingdom
Auditors
BDO LLP
55 Baker Street
London, W1U 7EU
United Kingdom
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Kent, BR3 4TU
United Kingdom
243996 AMRYT AR 0cover 2016.qxp 04/04/2017 12:09 Page 2
Amryt is a specialty pharmaceutical company
focused on developing and delivering innovative
new treatments to help improve the lives of
patients with rare or orphan diseases.
Orphan / Rare Disease focused business with strong
and experienced management team in place
Delivering on strategy to acquire, develop and
commercialise products
Commercial stage pharma company with material
revenues anticipated from Lojuxta sales
Robust pipeline of drug candidates with excellent
progress made on AP101 and AP102
Pivotal phase 3 trial, “EASE” Study, to examine
AP101’s efficacy as a new treatment for EB
commenced in March 2017. Study top line data
expected to be available in H2 2018
Building Lojuxta sales will be a major focus for us in
2017
Non-dilutive EIB funding secures Amryt's near and
mid-term funding needs for its lead product, AP101
Amryt Pharma plc
Perivan Financial Print 243996
243996 AMRYT AR 0cover 2016.qxp 04/04/2017 12:09 Page 1
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Amryt Pharma plc
Annual Report 2016
Amryt Pharma plc
Registered Office:
Ivybridge House
1 Adam Street
London WC2N 6LE
Dublin Office:
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2
Ireland
www.amrytpharma.com
The Rare and
Orphan Diseases Specialist