GENERATING VALUE
FROM INNOVATION IN
HEALTHCARE & LIFE SCIENCES
Annual Report and Accounts for the year ended 31 December 2017
Stock code: ARIX.L
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Welcome to the Arix Bioscience plc
Annual Report 2017
WHO WE ARE
Arix Bioscience is an operating company, focused on
generating value from innovation and discovery in life
sciences globally.
We are building interests in a diverse group of companies around cutting edge
advances in life sciences. Through the provision of capital and operational
support we seek to help young companies accelerate the translation of scientific
discovery into new medicines. As a listed company, we are able to bring this
exciting growth phase of our industry to a broader range of investors.
Contents
Strategic Report
Our Story
Chairman’s Statement
Chief Executive Officer’s Statement
Q&A with the CEO
Marketplace
Business Model
Business Interests
Strategy
Key Performance Indicators
Operational and Financial Review
Risk Management
Sustainability
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Governance
Board of Directors
Business Development Team
Directors’ Report
Corporate Governance Report
Report of the Nomination Committee
Report of the Audit and
Risk Committee
Directors’ Remuneration Report
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Financial Statements
Independent Auditors’ Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Financial Statements
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Notes to the Company
Financial Statements
Shareholder Information
Advisers
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IBC
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017Heading one
Highlights
13
Group Businesses
Including eight new additions during the year
TO DATE, ARIX HAS PROVIDED FUNDING
AND EXPERTISE TO 13 PROMISING GROUP
BUSINESSES ACROSS DEVELOPMENT STAGES
AND GEOGRAPHIES
£250m
Raised in first two years
ARIX HAS RAISED IN EXCESS OF £250M TO
GROW ITS GROUP BUSINESSES AND EMBRACE
FURTHER NEW OPPORTUNITIES
Global Reach
Including new Fosun and Ipsen partnershps in 2018
ARIX HAS PARTNERSHIPS WITH FOUR GLOBAL
PHARMACEUTICAL COMPANIES, TWO
INTERNATIONAL RESEARCH ACCELERATORS,
EXTENSIVE PERSONAL NETWORKS AND
OFFICES IN LONDON AND NEW YORK
Navigating the report
Further information contained
within this report
Additional information online
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arixbioscience.com Strategic Report
Our Story
Chairman’s Statement
Chief Executive Officer’s Statement
Q&A with the CEO
Marketplace
Business Model
Business Interests
Strategy
Key Performance Indicators
Operational and Financial Review
Risk Management
Sustainability
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ARIX BIOSCIENCE PLCStock code: ARIX.LAnnual Report and Financial Statements 2017Strategic Report Our Story
Arix Bioscience provides strategic, operational, clinical and financial
resources to support potential new drugs and other medical innovations,
with the objective of creating value for investors.
Substantial
market opportunity
• The healthcare and life science markets are
worth over $1 trillion.
• Scientific innovation is driven by leading
academic institutions and smaller companies.
These often lack company development
expertise and access to permanent capital.
• Arix Bioscience can provide a flexible approach
to funding and offer operational support.
Read more about
Our Marketplace on page 12
Arix Bioscience is differentiated within the
healthcare and life science sector due to:
EXTENSIVE GLOBAL NETWORKS
• New strategic agreements have been signed with two
major pharmaceutical companies, Fosun and Ipsen.
These partnerships, alongside existing partnerships
with Takeda and UCB Pharma, develop further the
deep industry experience of Arix.
• Partnerships with research accelerators, BioMotiv in
the US and the Max Planck Lead Discovery Centre
in Europe, provide Arix with a constant, renewable
source of opportunities.
• Privileged academic relationships have been
developed with universities, enabling Arix to access
outstanding research at the earliest opportunity.
• Ownership of an investment management company
with the ability to manage funds in the UK and abroad.
• Extensive professional networks of Arix’s senior
leadership team.
Read more in our Chief Executive
Officer’s Statement on pages 08 and 09
DIVERSIFIED MODEL
• Great ideas, technology and opportunities for value
originate from varied institutions in many countries,
and at all stages of company development, from start-
up and discovery to those about to commercialise
products.
• Arix Bioscience is structured to access opportunities
and provide practical support and capital across this
broad spectrum.
Read more about our Portfolio on page
22 to 24
DISCIPLINED AND EXPERIENCED
BUSINESS DEVELOPMENT
• Our business model is to create long-term value by
supporting the strategic, operational and clinical
plans of our Group Businesses and providing
support in the execution of those plans. We
strengthen their boards and management teams,
provide technical, operational and clinical experience
and expertise where needed, and support the
funding of the businesses.
Read more about our
Business Model on pages 14 and 15
FLEXIBLE, LONG-TERM CAPITAL
• We provide funding from our own working capital
and can offer finance throughout the life cycle of a
business, whether early-stage research funding,
growth capital or later-stage development capital. We
focus on creating value, with a flexible approach to
the length of time we retain an ownership interest in
our Group Businesses. This cushions our businesses
against the normal volatility in funding for healthcare
and life science companies, while allowing us to
pursue the optimal course of action for creating
shareholder value.
DEEP PIPELINE OF
ATTRACTIVE OPPORTUNITIES
• We have reviewed over 800 opportunities across
therapeutic areas, including oncology, rare diseases,
immunology, inflammation and metabolism. These
originate from the UK, Europe and the US, as well
as a range of other countries, including Israel and
Australia.
SCALABLE PLATFORM
• We are building a global infrastructure to support
our long-term strategy to originate opportunities and
apply strategic, operational and clinical direction to a
significant number of businesses, with scalability of
operating costs.
UNIQUE COMBINATION
OF LEADERSHIP SKILLS
• Joe Anderson has over 25 years’ experience in the
life science industry, including senior roles in venture
capital, fund management and scientific development.
He has a successful record of generating investment
returns and extensive board-level experience of
building life science companies.
• Jonathan Peacock was previously Group CFO of
Amgen and Novartis Pharmaceuticals respectively,
where he developed extensive global operational and
strategic experience. He has broad experience in the
acquisition and divestment of life science companies
both large and small and has raised more than $20bn
in capital during his career.
• Professor Sir Christopher Evans has built more than
50 medical companies from start-up over the past
30 years, and floated 20 new medical businesses on
stock markets in six different countries. He has created
11 successful academic spin-outs, and companies
worth over $2.4bn. He has raised $2.6bn from
disposals.
Read more about our
Board of Directors on pages 32 to 35
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ARIX BIOSCIENCE PLCStock code: ARIX.LAnnual Report and Financial Statements 2017Strategic Report Chairman’s Statement
Jonathan Peacock, Chairman
On several dimensions 2017 has been a year
of impressive growth at Arix Bioscience and
this has continued into 2018.”
We also continue to build our relationships
with leading academic institutions in Europe
and North America with a focus on company
creation from their most promising therapeutic
research programmes.
Most of all, it is the talented people in our
organisation that are the key to our success.
We have continued to strengthen our teams in
London and New York in 2017 and we were
very pleased to have Meghan FitzGerald and
Giles Kerr join our Board during the year. Both
bring important and diverse global experience
in healthcare. I’d also like to express my thanks
to Sir John Banham, a great supporter of Arix,
who retired from our Board during the year.
2018 promises to be a year of further progress
and consolidation. Several of our Group
Businesses will have important data read outs
and we will work towards building out our
portfolio to around 20 young companies.
Jonathan Peacock
Chairman
We have built a portfolio of 13 Group
Businesses, all working on breakthrough
therapies in areas of high and unmet
patient need. They are led by experienced
scientists and managers who have previously
demonstrated success in their chosen field.
And reflecting the global reach of our team,
these companies are being developed in
North America, the UK, Europe and Israel.
We have built partnerships with four global
pharmaceutical companies, all of whom have
become strategic investors in the Company.
These partnerships provide access to
substantial research capabilities and a leading
presence in several important global markets,
particularly China (Fosun), Japan (Takeda) and
Continental Europe (UCB and Ipsen). For each
of our partners we provide a window into a
rich pipeline of innovative young companies
working on potential breakthrough therapies.
With our private fund raise in 2016, our initial
public offering in February 2017 and our recent
secondary offering in March 2018, we have
raised a total of £250m to support our existing
Group Businesses and to continue to build
our portfolio. With the use of these funds we
expect to have around 20 companies in the
portfolio within the next 12 to 18 months.
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Stock code: ARIX.LStrategic Report Chief Executive Officer’s Statement
Joe Anderson, PhD, Chief Executive Officer
The future offers unprecedented market
opportunity.”
A year of achievement
We started 2017 with the ambition of building
a business with the capital, skills and
experience to take breakthroughs in life
sciences and accelerate their development
into important new medical treatments. We
enter 2018 having floated Arix on the London
Main Market, built an experienced team
based in London and New York and directed
a substantial amount of the capital we have
raised into 13 promising young life science
companies.
At year-end, we have committed around
$105m into our Group Businesses. In addition,
these companies have raised another $400m
through syndication with expert global investor
groups in life sciences, creating a well financed
group of companies at the cutting edge of
life sciences. These companies are led by
management teams with successful track
records of building value in our industry. We
are now working closely with all of these
businesses, and Arix team members have
taken board seats or observer positions in all
of the private companies to help them achieve
their goals.
In March 2018 we completed our initial
cycle of fundraising with an £87m follow-
on, bringing the total to over £250m raised
since Arix was founded two years ago. With
this capital we are well placed to grow our
collection of companies and embrace further
new opportunities for the benefit of our
shareholders.
It is early days for Arix and for many of our
Group Businesses, and the development
of important new medicines is not a quick
business but already we have achieved
substantive progress across the Group.
Two of our Group Businesses – Autolus and
Harpoon – have already seen increases in
their valuations through a follow-on financing
and an industry collaboration respectively.
Moreover, we have seen meaningful scientific
and technical developments in many of our
other companies, and I believe the value that is
being developed here will become increasingly
apparent to shareholders in 2018 with the
release of clinical data and business updates.
Rich, renewable pipeline
of opportunities
Arix gets its rich pipeline of biotech and life
science opportunities from an extensive
scientific and clinical network to which
Arix has privileged access.
The Arix Board and Management Team have
wide personal networks with leading global
venture capital groups, and Arix has attained
privileged relationships with universities and
research accelerators throughout Europe and
the US. Since inception, we have reviewed
over 800 opportunities, sourced from the UK,
US, Europe and globally.
Well connected with the
pharmaceutical industry
Pharmaceutical companies are one of our key
customers as they seek to get ever closer to
scientific and medical innovation outside of
their own laboratories. During 2017, we have
benefited from valuable strategic partnerships
with two global pharmaceutical companies,
UCB and Takeda, giving us access to deep
scientific knowledge, R&D capabilities, market
intelligence and commercial due diligence.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 discoveries, such as human cell therapy, cures
for diseases like hepatitis C, gene therapy and
gene editing, and a host of other innovative
treatments that are helping to improve and
save patients’ lives.
As a result, life sciences as an industry has the
potential to create high growth companies,
which over the past few years have generated
billions of dollars of value for investors in an era
of low economic growth. Small, development
stage companies are the bedrock of much
invention and discovery in medicine, but these
companies are not readily accessible to most
investors; Arix Bioscience aims to bridge that
gap, bringing the opportunity to a broader
investor base.
We remain well positioned to access the
market opportunity with an experienced team
providing expertise and funding for innovative
life science companies – whatever their size
or development stage. We hunt for the best
ideas globally, and are as committed to helping
companies get started as we are to backing
late stage companies with proven teams going
into pivotal clinical trials.
We are encouraged with what we have been
able to achieve since inception just over two
years ago, and we have certainly hit the ground
running in 2018. It is important to us that the
companies we have already backed continue
to report substantial developments which will
drive clear uplifts in value and we are working
hard to ensure these goals are met through
hands-on involvement with all our Group
Businesses.
We believe our approach has the potential
to generate significant value for patients
and for investors, and we are grateful to our
shareholders for supporting us in this mission.
Joe Anderson, PhD
Chief Executive Officer
We added to this early in 2018, and are
delighted to have signed strategic agreements
with Ipsen, a global specialty driven
biopharmaceutical, and Fosun International,
a large Chinese group with a global foothold
who offer distribution capability across
China. We expect to be sharing life science
developments, ideas and co-investment
opportunities with our new partners. All four of
our pharmaceutical partners have committed
meaningful resources to the relationship, and
invested in the March 2018 financing of Arix.
Early focus on important
areas of human disease
In this early stage of Arix’s development, we
have focused on three key therapeutic areas:
Oncology, Infectious Diseases and Gene
Therapy & Orphan Diseases.
We see significant potential in these
therapeutic areas through the combination of
rapidly developing science, clinical innovation
and significant unmet patient need. We see the
opportunity to make a substantial contribution
to patient well-being by accelerating the
translation of new ideas into new medical
products – and through this, the potential to
deliver shareholder value.
We aim to remain at the forefront of new
exciting therapeutic areas by anticipating
hot areas across the biotech and life science
sectors and by identifying the most promising
investment opportunities early. We access the
best scientific ideas, wherever they emerge,
and help build and finance new companies
following rigorous research and due diligence.
Encouraging developments in
Arix’s Group Businesses
During the year, revaluation uplifts were
achieved by two Group Businesses, Autolus
and Harpoon Therapeutics:
• Autolus: We led the Series B financing for
Autolus in March 2016, and have worked
closely with the company as it successfully
progressed three of its programmes
into clinical trials. Within 18 months, by
September 2017, this progress enabled
Autolus to raise a further $80m in a Series
C financing at a c. 50% uplift in valuation.
The company is now exploring the potential
for an IPO in North America.
• Harpoon Therapeutics: In October 2017,
just five months after we led the Series B
financing, Harpoon signed a collaboration
agreement with AbbVie to develop novel
T-cell engager therapies, resulting in an
increase in the value of our holding by
approximately 25%.
In addition, Verona Pharma, Artios Pharma and
Amplyx Pharmaceuticals all reached important
milestones over the course of the year,
reflecting their continuing strong development
towards important valuation inflexion points.
2018 brings new
opportunities and multiple
milestones
2017 was a period during which we put the
IPO capital to work and built a collection of
13 of the most exciting young life science
companies globally. As we look ahead to
2018, we believe the scale of opportunity in
life sciences looks better than ever. With the
capital raised from our follow-on financing,
we are looking to add around another seven
Group Businesses to our collection, further
broadening and diversifying our Group. Our
pipeline of new ideas is deep and broad and
we see this as a renewable resource and core
to our business. Through 2018 we will be
sifting the best ideas and digging deep into
due diligence to help build and finance more
new companies at the cutting edge of life
sciences.
Our existing Group Businesses are expected
to reach significant development milestones
during the course of the year. Additionally, we
expect to see a series of clinical trial starts
and pre-clinical development milestones
across our Group Businesses. And, of course,
other significant events – such as IPOs, M&A,
licensing agreements and external financings
– can happen at any time, and we will look to
provide our shareholders with full transparency
on any such developments.
The future offers
unprecedented market
opportunity
We are in a golden age of scientific
development. Seventeen years ago the
human genome was first sequenced, a project
which took over a decade and almost $3bn
to complete. These days, it takes about
a day and roughly $1,000 to sequence a
human genome. More broadly, we are seeing
unprecedented advances in life science
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Stock code: ARIX.Larixbioscience.comStrategic Report Q&A with the CEO
Q What was your highlight
Q What do you think one
of your Group Businesses
would say about working
with Arix?
A From the feedback that we’ve had, I’d
say that they notice the deep specialist
experience that our team has and the
enthusiasm with which they’ve helped to
guide progress. Arix has taken board or
observer seats with all of our unquoted
Group Businesses and the directors
responsible for these take a huge
amount of satisfaction from seeing these
businesses progress and getting these
therapies each step closer to making
very real differences to patients.
Q What is your vision
for Arix?
A Arix can become a major source of
support for the life science industry.
After decades of investment in medical
science, there has never been a more
productive time for the emergence of
new ideas. We look forward to helping
accelerate the translation of scientific
ideas into important new therapies for
patients. Our business is structured to
be scalable - we have the potential to
grow significantly. We look forward to
taking advantage of our strong pipeline
of opportunities, and steadily increasing
the number and size of our Group
Businesses. Above all, our vision is to
build companies that deliver improved
treatment options for patients and,
through this, returns for our investors.
of 2017?
A 2017 was certainly a busy year. We
raised £112m in our IPO on the London
Stock Exchange’s Main Market and
grew our number of Group Businesses
up to 13, with a strengthening focus on
gene therapy, oncology and infectious
diseases. What we have not spoken
enough about is the calibre of the team
that we have assembled, both at Arix
and within our Group Businesses. We
now have some of life science’s most
impressive scientists and business
builders, which gives me a huge amount
of confidence in what we can achieve in
the coming months and years.
Q What differentiates
Arix from other similar
business builders?
A We focus purely on life sciences, with
a team that is highly experienced in
this sector. Importantly, we can finance
and support our Group Businesses
throughout their life cycles - we can exit
when we judge each business to have
reached the optimum value, not when a
fixed fund liquidation dictates.
Some of our greatest advantages are that
we are not constrained by attachment to
any single institution, geography, stage
of development, or to either private or
public companies. We can look for the
very best opportunities anywhere. You
can find great ideas in seed-level start-
ups in universities, all the way through to
late-stage and small public companies.
This breadth of focus enhances the flow
of deals, and enriches the quality of the
set we select from.
Q What are you most
excited by in the year
to come?
A We have got a really fantastic collection
of Group Businesses with pipelines at
various stages of development. After
a very busy couple of years of building
Arix, we are now getting to the stage
where this work starts to translate into
transformative milestones for our Group
Businesses.
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ARIX BIOSCIENCE PLC
Stock code: ARIX.L
CASE STUDY:
ITERUM THERAPEUTICS
Iterum Therapeutics is a Dublin-based
clinical-stage Arix Group Business which
is developing new and significantly
differentiated anti-infectives aimed at
combatting the global crisis of multi-drug
resistant (MDR) pathogens.
Iterum is focused on addressing a significant
unmet need in drug resistance. Approximately
two million US citizens develop drug-resistant
infections, leading to 23,000 deaths each year,
and the CDC & Infectious Disease Society of
America have identified an urgent need for new
drugs.
Iterum is advancing its first compound,
sulopenem, a novel penem anti-infective
compound with oral and IV formulations in an IV
only class of antibiotics that has demonstrated
potent in vitro activity against a wide variety of
gram-negative, gram-positive and anaerobic
bacteria resistant to other antibiotics.
The company is headed by Chief Executive
Officer Corey Fishman and Chief Scientific
Officer Michael Dunne, MD, veterans of
antibiotic development who were involved in
the development of dalbavancin at Durata
Therapeutics (now owned by Allergan).
Sulopenem is expected to begin Phase III
studies in the first half of 2018 and is targeting
2019 for FDA approval. Arix co-led a $65m
funding round in Iterum in May 2017, acquiring
an 8.2% interest.
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Strategic Report Marketplace
In a global pharmaceutical market worth over $1 trillion in 2017, we
believe organisations with new high potential science, will provide a
rich pipeline of opportunities for Arix Bioscience.
New molecular entity
approvals by the FDA
45
45
28
24
2011
2013
2015
2017
Source: FDA (www.fda.gov)
The healthcare and life science sector
This sector has brought significant innovation in recent years. Notable
breakthroughs include a cure for Hepatitis C, the rise of CRISPR gene
editing technology and the first FDA approval for both in vivo gene therapy
and genetically edited T cell therapies.
The worldwide peak sales potential of New Molecular Entities (NMEs)
newly approved by the US Food and Drug Administration (FDA) is
estimated to be $49.6bn, with an additional c. $5bn peak sales potential
for Biologics License Applications (BLAs) approved by CBER. Only in 2015
did new drugs approved in a single year show higher revenue potential (45
NMEs approved, $58bn peak sales).
Regulatory environment
A number of regulatory changes have also had a positive impact upon
the healthcare and life science landscape, encouraging innovative
development. These include:
•
•
•
In the US, the March 2010 Affordable Care Act, with comprehensive
health insurance reforms; the April 2012 JOBS Act; and the July 2012
GAIN Act. Plus the creation of a breakthrough drug designation in July
2012.
In the UK, the establishment of the National Institute for Health and
Care Excellence in April 2013.
In Europe, the launch of the Adaptive Pathways pilot by the European
Medicines Agency in March 2014 and the launch of the EMA’s Priority
Medicines (PRIME) initiative in 2016.
We believe the number of new product approvals is likely to remain high
for the foreseeable future.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Smaller companies
Approximately two-thirds of all new drugs
approved since 2010 have been originated
by small companies. In 2017, 76% of NMEs
approved originated from smaller biopharma
companies.
The development of new pharmaceuticals is
a lengthy and capital-intensive process. Small
companies are highly dependent on external
capital to fund their research and bring their
new drugs to market.
Arix is well placed in this regard, as we can
provide permanent capital combined with
sophisticated strategic advice on its use.
Volatile funding environment
Despite improvements in some areas, the
availability of capital to fund research activities
is volatile. It depends on many factors outside
of the control of the drug developer.
This volatility in funding in the healthcare
and life science markets is likely to provide
opportunities for Arix’s permanent capital
model.
Number of drug approvals
by originator company size
34
28
24
21
45
45
38
19
2010
2011
2012
2013
2014
2015
2016
2017
Top Ten
Companies 11-30
Smaller Companies
Source: FDA (www.fda.gov), HBM analysis. Smaller companies defined as those
ranked below the Top 30 pharma companies in global sales.
Total capital raised in biopharma
IPOs and private rounds (US$bn)
16
12
8
4
0
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
Source: BioCentury. Excludes Venture Debt financings
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Stock code: ARIX.Larixbioscience.comStrategic Report
Business Model
Arix Bioscience’s primary business objective as
a global healthcare and life science company is
focusing on the sourcing, financing, development
and commercialisation of innovative technologies.
Case Study
Atox Bio is a late-stage biotechnology company, with a primary focus on serious, life
threatening conditions resulting from acute inflammation caused by severe infections,
such as necrotising soft tissue infections (NSTI) more commonly known as ‘flesh eating
bacteria’ and acute kidney injury (AKI), for which no current therapies exist.
NSTIs progress rapidly and often lead to multiple organ dysfunction, failure and death.
AKI can lead to permanent reduction of kidney function and affects around three
million patients a year in the US, Europe and Japan.
Reltecimod, Atox Bio’s lead therapeutic candidate, is now in Phase III trials for NSTI
and has orphan drug designation from the FDA and EMA, as well as Fast Track
designation. A readout is due by mid-2019. Reltecimod is also being trialled for AKI,
with a Phase II beginning in 2018 and expected to read out in mid-2019.
RESOURCES AND
RELATIONSHIPS
WE SOURCE
WE EVALUATE
Our Unique Approach:
Experienced team drawing
on a broad platform of
partnerships and relationships
The Outcome:
Arix is able to source a unique
range of opportunities in
emerging, private and public
global life sciences companies
Our Unique Approach:
Detailed sector knowledge from
rigorous research, followed
by comprehensive scientific
and clinical evaluation at the
company level
The Outcome:
Arix will only invest in the very
best innovative technologies
targeting unmet medical need
Strong leadership team
Access to capital
Strong industry and
academic relationships
Broad network
of relationships
Case Study
Autolus is a privately held clinical-stage biopharmaceutical company
at the forefront of a global revolution in cancer treatment. Autolus
is developing next-generation programmed T-cell therapies for the
treatment of cancer, which involves harvesting a patients’ own
white blood cells, re-engineering them to improve their properties
and then returning them to the patients, so that the body’s own
immune system can combat cancer more effectively.
Since Arix led a £40m series B financing in March 2016, Autolus
has commenced a further three clinical trials. In 2017, Arix
participated in Autolus’ $80m Series C investment round. Arix’s
stake is valued at £20.1m, making Autolus its largest Group
Business.
DELIVERING
MEDICAL
INNOVATION TO
PATIENTS IN NEED
WE DEVELOP
Through this, creating
substantial shareholder
value
Our Unique Approach:
Arix acts as a patient, trusted
partner, providing operational
and strategic input and capital
throughout an investment’s
growth and development
The Outcome:
A highly attractive group of
maturing and commercially
viable life sciences companies
WE ACQUIRE
Our Unique Approach:
Arix’s public structure and global
presence allows it to invest
flexibly
The Outcome:
Arix offers investors exposure
to a balanced group of high
quality life science businesses,
unconstrained by time frames
WE CREATE
Our Unique Approach:
Arix has expertise to create
new businesses through
leveraging global networks
The Outcome:
Arix has an unconstrained
ability to seek out medical
innovation and create businesses
that drive value
14
15
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ARIX BIOSCIENCE PLCStock code: ARIX.Larixbioscience.comarixbioscience.comAnnual Report and Financial Statements 2017Strategic Report Business Interests
Arix Bioscience’s primary business objective
as a global healthcare and life science
company is focusing on sourcing, financing,
development and commercialisation of
innovative technologies.
16
17
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Read More in Our Portfolio
Summary on pages 22 to 24
ARIX BIOSCIENCE PLCStock code: ARIX.Larixbioscience.comarixbioscience.comAnnual Report and Financial Statements 2017Strategic Report Strategy
Our strategy
Since the inception of Arix Bioscience, our
strategy has been to source and evaluate
exciting opportunities in the biotech and
life science sectors, and having created or
invested in a company to then actively assist in
successfully developing that Group Business
in order to bring medical innovation to market.
We continue to believe that pursuing this
strategy will achieve the twin goals of meeting
patients’ needs that are not being addressed
today, and of creating significant value for our
shareholders.
The delivery of this strategy requires us to
secure access to capital markets to provide
funds, manage a wide pipeline of opportunities
and undertake deep due diligence on potential
deals, attract a strong team and an exceptional
board as well as build partnerships with
major pharmaceutical companies, academic
institutions and research accelerators.
What we have
achieved so far
In February 2017 Arix Bioscience successfully
listed on the London Stock Exchange, raising
£112m. Through Q4 of 2017, significant
progress was made in delivering a follow-on
raise, which closed in March 2018 having
generated a further £87m of funding. These
two achievements compare well with the
Company’s private raise of £52m in 2016,
which means that over £250m has been raised
in just over two years.
During the year, progress was made in putting
these funds to work. Over the 12-month period
Arix grew from five to 13 Group Businesses,
which was an over achievement of the goals
Arix had set itself for the year. These 13
acquisitions followed the deep due diligence
from reviewing and evaluating over 800
potential deals that came from Arix’s strong
pipeline of opportunities.
The deal team was strengthened by the arrival
of John Cassidy; an advisory board structure
was implemented into the fund manager
subsidiary, Arthurian Life Sciences; and
two new Directors, Giles Kerr and Meghan
FitzGerald, joined the Board of Arix Bioscience,
adding to its already deep and broad
experience. Reporting on diversity is shown on
page 45.
Negotiations with major pharmaceutical
companies through the year resulted in an
announcement in February 2018 of two new
strategic agreements with Ipsen and Fosun
International, bringing increased access to
expert knowledge and distribution capability.
What we will aim to
achieve this year
The high pace of achievement continues
into 2018 and is reflected in the corporate
goals, which have been reviewed and agreed
by the Board.
A key theme for the coming year will be
continuing to make use of the funds raised
in March 2018 by identifying new Group
Businesses that meet Arix’s exacting
requirements, and which are capable of
bringing medical innovation to market and
growing shareholder value. Additionally, Arix
will widen its footprint in several key markets,
further develop its team and will also continue
to drive investor relations activities.
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Proof 3
ARIX BIOSCIENCE PLCAnnual Report and Financial Statements 2017 Key Performance Indicators
Group Businesses
Goal
Grow number of Group Businesses from five to 12
Goal
Upwards revaluations in Group Businesses
Achievement
Achieved. The Company now holds interests in 13 Group Businesses
Achievement
Achieved. Upwards revaluation noted in two Group Businesses
Partnering
Goal
Develop number of strategic partners
Goal
Develop number of academic partners
Achievement
Achieved. Ipsen and Fosun are new strategic pharma partners
Achievement
Instead focus was put on building relationships with existing
academic partners.
Investor Relations
Goal
Develop analyst coverage (≥3)
Achievement
Achieved. Notably all three gave strong buy recommendations.
Goal
Strong news flow to provide good transparency on Group
Businesses progress (>1 news item / month)
Achievement
Achieved. Over 50 items published since IPO in February 2017
Fund Management
Goal
Strengthen management structure
Goal
Significantly increase The Wales Life Sciences Investment Fund
Achievement
Achieved. Advisory Board structure implemented bringing the Fund
Manager increased access to relevant expertise
Achievement
Partly achieved. Fund increased by £5m
Financing
Goal
Substantial capital raise on the London Stock Exchange (>£75m)
Achievement
Achieved. Raise of £87m delivered; notably, at a premium to market
25845 20 April 2018 5:02 AM Proof 13
19
Stock code: ARIX.Larixbioscience.comStrategic Report ARIX BIOSCIENCE PLC
Annual Report and Financial Statements 2017
CASE STUDY –
AURA BIOSCIENCES
Aura Biosciences is an Arix Group
Business, headquartered in Cambridge,
Massachusetts, which is developing a new
class of therapies to selectively target and
destroy cancer cells, using viral nanoparticle
conjugates to bind selectively to unique
receptors on cancer cells.
The company’s science builds on core
discoveries made by Dr. John T. Schiller
at the National Cancer Institute (NCI), who
demonstrated that virus-like particles modeled
on the human papilloma virus will selectively
attach to solid tumors and metastases without
binding to normal epithelium.
Aura’s lead programme, light-activated AU-011,
targets ocular melanoma, a rare and aggressive
eye cancer which represents a significant unmet
need. Surgical intervention and radiotherapy
can lead to eye damage and loss of vision, but
ocular melanoma metastasizes to the liver in
about 40% of cases in the long term, where it is
nearly always fatal.
This first-in-class programme uses viral
nanoparticle conjugates to bind selectively to
unique receptors on cancer cells. The therapy is
administered through an intravitreal injection into
the eye and, once activated by an ophthalmic
laser, the treatment kills the cancer cells while
preserving patients’ vision. This approach is
designed to remove cancer cells in the back of
the eye as a first-line therapy, while allowing for
the potential for preserving patients’ vision. The
goal is to treat small ocular melanomas before
the disease progresses and metastasizes to the
liver, saving lives, preserving vision and reducing
complications.
The AU-011 programme is currently in a
Phase 1b/2 trial in ocular melanoma and
has been granted Orphan Drug and Fast
Track Designation by the US Food and Drug
Administration.
Aura is also advancing this approach in other
cancers, including bladder and head and neck.
Arix co-led a Series C financing round in Aura
in December 2017, raising $30m, and holds a
6.6% interest in Aura.
20
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Proof 3
Operational and Financial Review
James Rawlingson, Chief Financial Officer
Valuation events are already driving
an increase in the holding value
of our Group Businesses.”
The consolidated balance sheet of Arix
Bioscience has strengthened during the year
following the successful IPO in February 2017
which raised gross proceeds of £112m. Whilst
our cash balances remain strong (£74.9m at
year-end (2016: £28.9m)) it is also true that a
significant portion of funds raised in Q1 were
put to use within months of the IPO, with the
Group’s interests in Group Businesses and
other investments growing to £71.3m by the
year end (2016: £17.1m).
The Group’s early decision to hold interests in
Group Businesses across the entire development
life cycle, including very early to late stages,
explains why valuation events are already driving
an increase in the holding value of our Group
Businesses. These net positive revaluations
amount to £5.5m (2016: £1.4m) and are the
main cause of the improvement in the Group’s
Operating Loss to £3.6m for the year. This
diversity of holding by stage of development
is expected to bring a number of potential
revaluation events each year.
Subsequent to the balance sheet date, the
Group successfully completed a further capital
raise of £87m, which positions Arix Bioscience
well to continue its strong growth through 2018
and beyond.
Group Businesses
Arix Bioscience is an operating company
whose principal activities include supporting
and assisting the development of life science
and biotech companies that often feature
ground breaking medical innovation. As an
operating company, its interests in Group
Businesses are held on its own balance sheet,
offering strong transparency. The Group has
expanded its Group Businesses from five
to 13 companies over the course of 2017,
diversifying its offering by clinical focus,
stage of development and geography. A total
of £40.9m has been deployed into Group
Businesses during the year, with a further
£28.6m committed to those Group Businesses
but not yet invested as at 31 December 2017.
The Group Businesses have been valued
at 31 December 2017 in accordance with
International Private Equity and Venture
Capital Guidelines, which are consistent with
International Financial Reporting Standards.
In line with these guidelines, Arix applies a fair
value hierarchy when considering a revaluation;
for example, where there is no quoted price for
a stock then an independent transaction in the
market has an acceptably high level of integrity.
This was seen with the revaluation of Autolus
where the company completed a successful
Series C financing, with newly participating
shareholders pricing the funding round. This
arm’s length market event resulted in a £4.8m
positive revaluation of Arix’s existing interest in
the business. Harpoon Therapeutics has also
been positively revalued upwards in the year
by £1m.
All remaining Group Businesses have been
valued at their historic cost, with the exception
of Verona Pharma plc, a dual London Stock
Exchange/Nasdaq listed company, which has
been marked-to-market at year-end.
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Stock code: ARIX.Larixbioscience.comStrategic Report Operational and Financial Review continued
Portfolio Summary
31 December
2016 Value
£m
Net Investment
in Period
£m
Change in
Valuation
(including FX)
£m
31 December
2017 Value
£m
Fully Diluted
Equity Interest
%
Funding
Committed,
Not Yet Invested
£m
Fully Diluted
Equity Interest
When Fully
Committed
%
Autolus
Artios Pharma
Harpoon Therapeutics
Aura Biosciences
Iterum Therapeutics
Amplyx Pharmaceuticals
Atox Bio
LogicBio Therapeutics
PreciThera
OptiKira
Mitoconix Bio
Verona Pharma
Depixus
Group Businesses
BioMotiv
Simbec-Orion Group
Arthurian Life Sciences
Carried Interest Partner LP
The Wales Life Sciences
Investment Fund LP
Other Interests
3.3
1.9
–
–
–
–
–
–
–
1.0
–
2.0
0.8
9.0
3.8
–
4.3
–
8.1
12.0
1.8
4.2
2.5
6.0
2.9
3.0
5.1
0.5
0.4
0.4
1.8
0.3
40.9
2.0
2.0
–
5.3
9.3
TOTAL
17.1
50.2
Oncology
4.8
–
0.9
–
(0.3)
(0.1)
–
(0.3)
–
(0.1)
–
(0.9)
–
4.0
–
–
(0.5)
0.5
–
4.0
8.6%
14.7%
8.0%
4.9%
6.8%
2.8%
3.7%
13.3%
17.8%
26.0%
2.2%
2.5%
17.6%
17.8%
N/A
N/A
N/A
20.1
3.7
5.1
2.5
5.7
2.8
3.0
4.8
0.5
1.3
0.4
2.9
1.1
53.9
5.8
2.0
3.8
5.8
17.4
71.3
8.6%
14.9%
12.4%
6.6%
8.2%
3.8%
6.4%
15.4%
23.4%
26.0%
9.0%
2.5%
19.2%
17.8%
N/A
N/A
N/A
–
1.4
4.4
1.3
4.8
1.9
3.2
2.8
5.6
–
2.8
–
0.4
28.6
–
–
–
–
–
28.6
Equity interest
8.6%
When fully
committed
8.6%
Autolus is a leader
in next generation
T-cell therapies.
Utilising advanced
cell programming
and manufacturing
technologies, they
have established a
development-stage
pipeline of products
for the treatment
of haematological
malignancies and solid
tumours.
Equity interest
14.7%
When fully
committed
14.9%
Artios is a leading
independent DNA
Damage Response
(DDR) company
focused on developing
first-in-class treatments
for cancer. Artios is
building a pipeline
of next-generation
DDR programmes,
including through a
partnership with Cancer
Research Technology,
the development and
commercialisation arm
of Cancer Research
UK, and with leading
DNA repair researchers
worldwide.
Harpoon has created
a novel, proprietary
trispecific antibody
platform (TriTAC™) to
harness T cells to kill
tumour and other cell
types by recruiting T
cells and other immune
cells. Harpoon was
founded in 2015 by
a team led by Patrick
Baeuerle, PhD, Chief
Scientific Officer during
the development
of bispecific T cell
engagers (BiTE) at
Micromet, which was
acquired by Amgen for
$1.2bn in 2012.
Equity interest
8.0%
When fully
committed
12.4%
22
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Oncology
Infectious Diseases
Equity interest
4.9%
When fully
committed
6.6%
Aura Biosciences is
developing a new class
of therapies to target
and destroy cancer
cells selectively, while
leaving surrounding
tissue unharmed. By
safely eliminating cancer
locally, Aura aims to treat
early and transform the
lives of people with a
wide range of cancers
that are poorly managed
today. The company’s
lead program, in ocular
melanoma, is designed
to remove cancer cells
in the back of the eye as
a first-line therapy, while
allowing for the potential
of preserving patients’
vision.
Iterum is a clinical-
stage pharmaceutical
company dedicated to
developing differentiated
anti-infectives aimed at
combatting the global
crisis of multi-drug
resistant pathogens to
significantly improve
the lives of people
affected by serious and
life-threatening diseases
around the world. Iterum
is advancing its first
compound, sulopenem,
a novel penem anti-
infective compound with
oral and IV formulations
in an IV only class of
antibiotics that has
demonstrated potent
in vitro activity against
a wide variety of gram-
negative, gram-positive
and anaerobic bacteria
resistant to other
antibiotics.
Equity interest
6.8%
When fully
committed
8.2%
Equity interest
2.8%
When fully
committed
3.8%
Amplyx Pharmaceuticals
is developing novel,
broad-spectrum
antifungal agents
for the treatment of
life-threatening fungal
infections. Amplyx
has raised $118.5m
in venture capital and
secured more than
$10m in grants from
the National Institutes
of Health to support
its drug discovery and
development efforts.
Infectious Diseases
Gene Therapy & Orphan Diseases
Atox Bio is a late stage
biotechnology company
that develops novel
immunomodulators to
treat critically ill patients.
Initial focus is on patients
with Necrotising Soft
Tissue Infections, a
rare, life threatening
infection for which
no current therapy
exists. Reltecimod, the
company’s lead product,
is currently in phase
3 clinical trials, and
received Orphan Drug
designation from the
FDA and EMA and Fast
Track designation from
the FDA.
Equity interest
3.7%
When fully
committed
6.4%
Equity interest
13.3%
When fully
committed
15.4%
LogicBio is a preclinical-
stage gene-therapy
company with a mission
to develop cures for
life-threatening diseases.
Founded by pioneers
in gene therapy from
leading academic
institutions, LogicBio’s
core platform includes
synthetic gene-therapy
vectors derived from
naturally occurring
human adeno-
associated viruses
and the GeneRide
technology.
PreciThera is a
biotechnology
company committed
to the development of
therapies for rare bone
diseases using the
combined application
of computational
technology and a
deep understanding
of disease pathology.
The company focuses
on heterogeneous
genetic disorders that
primarily manifest in
bone dysfunction.
Understanding of
novel biology will
allow PreciThera’s
targeted strategies to
meaningfully impact
both the skeletal
symptoms as well as
the extraskeletal issues
found in these patients.
Equity interest
17.8%
When fully
committed
23.4%
23
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Stock code: ARIX.Larixbioscience.comStrategic Report Operational and Financial Review continued
Portfolio Summary
Gene Therapy & Orphan Diseases
Respiratory
Equity interest
2.2%
When fully
committed
9.0%
Equity interest
26.0%
When fully
committed
26.0%
OptiKira is developing
novel therapeutics to
prevent cell death.
Founded in 2015, the
company’s technology
is based on discoveries
developed and
exclusively licensed
from the University
of California, San
Francisco. Extensive
research by the founders
on the unfolded protein
response has helped
define the biological
pathway leading to
progressive cell death
which characterises
diseases such as retinitis
pigmentosa, diabetes
and amyotrophic lateral
sclerosis.
Mitoconix Bio is
pioneering a novel
strategy to improving
mitochondrial health
as a disease-modifying
therapeutic for
neurodegenerative
diseases. Mitoconix
Bio’s lead drug is a
first-in-class inhibitor
of pathological
mitochondrial
fragmentation and
dysfunction with
demonstrated in vivo
efficacy in animal models
of Huntington’s and
Parkinson’s diseases
and beneficial activity in
patient-derived cells of
Huntington’s, sporadic
and genetic Parkinson’s,
and sporadic and
genetic Alzheimer’s
disease.
Verona Pharma
plc is a UK-based
clinical stage biotech
company focused on
the development of
innovative prescription
medicines to treat
respiratory diseases
with significant unmet
medical needs, such
as chronic obstructive
pulmonary disease
(COPD), asthma and
cystic fibrosis. Verona
Pharma’s lead drug,
RPL554, is a first-in-
class drug currently
in Phase 2 trials as a
nebulised treatment
for COPD patients with
moderate to severe
disease and possibly
as a treatment of acute
exacerbations of COPD
in the hospital setting.
Equity interest
2.5%*
When fully
committed
2.5%*
*Additional 0.2%
indirect interest
via The Wales
Life Sciences
Investment Fund
Technology Platforms
Equity interest
17.6%
When fully
committed
19.2%
Depixus is a young and
dynamic biotechnology
company based in
Paris. Its goal is to
commercialise a highly
innovative technology
platform for the
fast, accurate, and
inexpensive extraction of
genetic and epigenetic
information from single
molecules of DNA
and RNA. Originally
developed in the Physics
Department of École
Normale Supérieure
(ENS) in Paris, the
potential of this exciting
technology has been
recognised through
the award of numerous
grants and innovation
prizes at both national
and international levels.
Other Investments
Other interests include Simbec-Orion and
BioMotiv, a mission-driven development
company associated with The Harrington
Project for Discovery and Development, which
is focused on accelerating breakthrough
discoveries from research institutions into
therapeutics for patients. BioMotiv has no
quoted price and therefore the Company
values its interest in BioMotiv at the price of
the most recent investor into the accelerator;
this is considered to be high quality valuation
evidence as it is an arm’s length market event.
The consolidated accounts also recognise
investments held by Arthurian Life Sciences
Limited (ALS) which is a wholly owned fund
management subsidiary. During the year ALS
committed £5.3m to The Wales Life Sciences
Investment Fund LP and this is valued at £5.8m
at year-end. ALS also holds the carried interest
vehicle of this fund, which was valued at £3.8m
at year end (2016: £4.3m). In line with the
Company’s high integrity approach to valuation,
both of these ALS-held investments have been
subject to external expert review by Duff & Phelps.
Comprehensive Income
Revenues grew in the period, due to increased
net positive revaluations of Group Businesses of
£5.5m (2016: £1.4m). Fund management fee
income in ALS of £1.7m also showed an increase
(2016: £0.6m) and reflects a full year of ALS
trading as it was acquired part way through 2016.
Administrative costs of £11.0m were similar
to the previous period (2016: £10.3m).
Other costs are not cash related and include a
foreign exchange loss of £0.4m (2016: gain of
£0.1m) relating to foreign currency denominated
interests in Group Businesses; and also includes
a share-based payment of £3.7m (2016: £4.7m).
This charge is calculated using financial models
to predict the future value of share options,
and is shown as a cost in the Statement of
Comprehensive Income and as a gain in the
Company’s retained earnings, with no impact on
the Company’s net assets.
Financial Position
Arix greatly strengthened its Balance Sheet
during the period, raising gross proceeds of
£112m from its IPO on the London Stock
Exchange Main Market in February 2017.
The proceeds from this have been deployed
into developing Arix’s Group Businesses,
resulting in investments of £71.3m at year-end
(2016: £17.1m).
The Company’s cash position is strong, with
£74.9m held at year-end (2016: £28.9m). Arix
maintains robust cash reserving processes
which requires that cash for commitments
already made to Group Businesses are duly
reserved, as is a cash runway for operational
expenses. Soft reserving (not related to
existing legal commit ments) is also carried
out for follow-on injections into current Group
Businesses where Arix has an appetite and
sees an opportunity for further participation.
24
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25
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25845 20 April 2018 5:02 AM Proof 13
Stock code: ARIX.LStrategic Report Risk Management
The Group monitors a number of principal risks and uncertainties that
may affect the business. These include financial, non-financial, internal and
external concerns.
Risk management framework
The Directors are able to manage the business, and achieve its strategic
objectives, due to an effective risk management framework which
features multiple layers.
Board
Managing risk is a key responsibility of the Board, who set a strong tone,
in line with best practice corporate governance.
Key committees
The Audit and Risk Committee oversees the effectiveness of the
risk management processes with expert input from the independent
auditors.
The Remuneration Committee ensures incentives and reward are
balanced and appropriate for achieving the strategy.
The Nomination Committee addresses the need for continuing
strength at the senior levels of the Company and is responsible for
succession planning.
Executive management
The management team is responsible for identifying, assessing and
mitigating the day-to-day operational risks.
Group Business boards and
independent assurance
The boards of our Group Businesses are responsible for ensuring they
meet key commercial objectives, and in this they are typically supported
by senior members of the Arix Bioscience team, who also sit on their
boards.
Independent assurance is provided by industry experts when required.
For example, Duff & Phelps is engaged to provide regulatory compliance
support to the Board of ALS, Arix Bioscience’s FCA-regulated fund
management subsidiary.
THE BOARD
Sets the tone for corporate governance
KEY COMMITTEES
Three committees oversee the effectiveness; they ensure balance
and are responsible for succession
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
EXECUTIVE MANAGEMENT
Day-to-day operational risks
GROUP BUSINESS BOARDS AND
INDEPENDENT ASSURANCE
Group Business boards and independent assurance
26
25845 20 April 2018 5:02 AM Proof 13
l
e
g
d
e
w
o
n
K
l
a
n
r
e
n
t
I
l
a
n
r
e
x
E
t
e
c
n
a
r
u
s
s
a
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
Principal risks and uncertainties
We have assessed the key risks to Arix in light of the current environment. These, along with the steps we take to manage those risks, are detailed below.
Risk
Impact
Mitigation Action/Control
Arix’s Group
Businesses may
not generate the
financial returns
anticipated.
Arix’s net assets increasingly comprise a
range of Group Businesses; below-forecast
performance from a Group Business may
adversely affect Arix’s profitability and ability
to generate positive cash flows from future
realisations
Arix has a world-class team responsible for identifying and developing
Group Businesses, resulting in a high standard of due diligence before the
commitment of any money. Post-investment, Arix typically has representatives
on the company’s board of directors, ensuring it is fully aware of business
developments, and allowing for mitigation of possible issues as they arise.
Arix funds a range of Group Businesses and intends to continue growing its
portfolio across a range of interests. As such, it will achieve a diverse portfolio,
with financial performance not overly reliant on any one business.
Arix deploys capital to Group Businesses at all stages of a company’s life cycle.
Therefore, it is exposed not only to very early-stage businesses but also holds
interests in more mature companies, where risk of failure is reduced.
Loss of key
personnel - to
competitors, or from
an external event
The financial performance of Arix depends
on its ability to identify and develop
outstanding Group Businesses and, as
such, is reliant on its key personnel. Loss of
key individuals could affect Arix’s financial
performance and future prospects.
Arix has market-appropriate remuneration for senior employees, including share
incentive schemes which reward long-term service and performance.
Arix has three very senior industry figures performing active day-to-day roles.
Therefore, the loss of a single member of the executive team would be mitigated
by the stature and experience of others within the organisation.
Arix’s Nomination Committee is responsible for succession planning.
Adverse market
conditions may
affect Arix’s
operational model
An economic downturn may reduce
opportunities for Arix to realise capital from
Group Businesses, affecting cash flow and
financial performance if business valuations
are reduced. The availability of capital for
any external fundraising by Arix or its Group
Businesses may also be affected.
Arix’s strategy is to deploy permanent capital into innovative businesses which
have unique, high-impact outcomes; Arix believes that such businesses are less
susceptible to macroeconomic cycles.
Arix has funded Group Businesses across a range of geographies, including
the UK, USA, Europe, Canada and Israel. As such, it is not overly reliant on a
downturn or market shock in a single geography.
Arix monitors its availability of capital closely, ensuring sufficient balances are
available for the continuing operation of the business.
Changes to
government policy
or regulation in the
research, healthcare
or life sciences
industries
A change in government regulation may
adversely affect the profitability of the
healthcare and life sciences industry,
reducing both the availability of external
funding and potential exit opportunities for
Arix’s Group Businesses.
Arix is a global healthcare company, with Group Businesses in the UK, the
USA, Europe, Canada and Israel. As such, the portfolio is diversified against the
adverse actions of any one government.
Viability statement
The Board has assessed the prospects of Arix over three year period; a timeframe over which the Board expects the majority of Arix’s commitments and
new proceeds to be deployed; and is consistent with the duration of cash flow forecasts used by management and periodically reviewed by the Board.
The Board has carried out a robust assessment of the principal risks and their mitigants, noted above. In particular, the Board was influenced by a number
of factors that may impact the financial returns from Group Businesses. It was ensured that the projections of the Group over the assesment period were
consistent with the Group’s strategy.
The Board assessed Arix’s ability to manage the risk of over-commitment to Group Businesses by reviewing cash flow projections, which included
scenarios with differing impacts to the cash flow forecast inputs. Four stress test scenarios were reviewed, and included external factors such as a
worsening of market conditions and an industry specific downturn, and internal factors such as the loss of key personnel. Finally, one scenario looked at the
impact of all these stress test events happening concurrently.
Based on its review, the Board has a reasonable expectation that Arix will be able to continue in operation and meet its liabilities as they fall due over a
three-year period and confirm that preparing the financial statements on a going concern basis is appropriate.
The Strategic Report has been approved by the Board and signed on its behalf by:
Jonathan Peacock
Chairman
23 April 2018
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27
Stock code: ARIX.Larixbioscience.comStrategic Report Sustainability
Greenhouse gas emissions
The section below includes our mandatory
reporting of greenhouse gas emissions. The
reporting period is the same as the Group’s
financial year.
Organisation boundary and
scope of emissions
We have reported on all of the emission
sources required under the Companies Act
2006 (Strategic Report and Directors’ Reports)
Regulations 2013. These sources fall within the
Group’s consolidated financial statement.
An operational control approach has been
used in order to define our organisational
boundary. This is the basis for determining the
Scope 1 and 2 emissions for which the Group
is responsible.
Methodology
For the Group’s reporting, the Group has
employed the services of a specialist adviser,
Verco, to quantify and verify the Greenhouse
Gas (GHG) emissions associated with the
Group’s operations.
The following methodology was applied by
Verco in the preparation and presentation of
this data:
•
the Greenhouse Gas Protocol published by
the World Business Council for Sustainable
Development and the World Resources
Institute (the ‘WBCSD/WRI GHG Protocol’);
• application of appropriate emission factors
to the Group’s activities to calculate GHG
emissions;
•
•
implementation of the new Scope
2 reporting methods – application of
location-based and market-based emission
factors for electricity supplies;
inclusion of all the applicable Kyoto gases,
expressed in carbon dioxide equivalents,
or CO2e;
• presentation of gross emissions as the
Group does not purchase carbon credits (or
equivalents);
Absolute emissions
The total Scope 1 and 2 GHG emissions from the Group’s operations in the year ending
31 December 2017 were:
• 32.6 tonnes of CO2 equivalent (tCO2e) using a ‘location-based’ emission factor methodology
for Scope 2 emissions;
• 21.2 tonnes of CO2 equivalent (tCO2e) using a ‘market-based’ emission factor methodology for
Scope 2 emissions.
Intensity ratio
As well as reporting the absolute emissions, the Group’s GHG emissions are reported below on
the metrics of tonnes of CO2 equivalent per employee and tonnes of CO2 equivalent per square
foot of the occupied areas. These are the most appropriate metrics given that the majority of
emissions result from the operation of the Group’s offices and the day-to-day activities of the
employees.
Target and baselines
Given the comparatively low GHG impact of the Group’s operations, the Group’s objective is to
maintain or reduce its GHG emissions per employee and per square foot of office space each
year and will report each year whether it has been successful in this regard.
Key figures
2017 (market-based)
2017 (location-based)
0%
20%
40%
60%
80%
100%
Scope 1
Scope 2
GHG emissions
Scope 11
Scope 22
Scope 23
Total GHG emissions (location-based Scope 2)
Total GHG emissions (market-based Scope 2)
Tonnes
CO2e
14.1
18.5
7.0
32.6
21.2
2017
tCO2e /
emp.4
0.88
1.15
0.44
2.04
1.32
tCO2e /
sq. ft.5
0.002
0.002
0.001
0.004
0.003
1 Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities.
2 Scope 2 being electricity (from location-based calculations), heat, steam and cooling purchased for the
Group’s own use.
3 Scope 2 being electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s
own use.
4 Employee numbers: 16.
5 Occupied office space: 8,239 sq.ft.
Understanding the indirect environmental impacts
of our business activities
The Group’s day-to-day operational activities have a limited impact on the environment. We do,
however, recognise that the more significant impact occurs indirectly, through the investment
decisions we make and the operation of the companies we choose to invest in. The Group
therefore considers it important to establish and invest in businesses that comply with existing
applicable environmental, ethical and social legislation. It is also important that these businesses
can demonstrate that an appropriate strategy is in place to meet future applicable legislative and
regulatory requirements and that these businesses can operate to specific industry standards,
striving for best practice.
28
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
arixbioscience.com
29
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20 April 2018 5:02 AM
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25845 20 April 2018 5:02 AM Proof 13
Stock code: ARIX.LStrategic Report Governance
Board of Directors
Business Development Team
Directors’ Report
Corporate Governance Report
Report of the Nomination Committee
Report of the Audit and
Risk Committee
Directors’ Remuneration Report
32
36
37
40
44
46
50
30
arixbioscience.com
arixbioscience.com
31
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Proof 3
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCStock code: ARIX.LAnnual Report and Financial Statements 2017Governance Board of Directors
Our strong Board represents a commercial advantage
as we seek to leverage our professional networks to
generate shareholder value.
Jonathan Peacock
Chairman
Joe Anderson, PhD
Chief Executive Officer
Professor Sir Chris Evans, PhD, OBE
Deputy Chairman
Joe has over 25 years’ experience in the life
sciences industry, with a successful track
record of generating investment returns. He
was formerly a Partner at Abingworth LLP
for 12 years, where he led venture-capital
style investments in public companies. He
has founded and managed public equities
funds and been a director of Algeta (acquired
by Bayer Ag for $2.9bn), Amarin plc, Cytos
(merged with Kuros), Epigenomics Ag, and is
currently a director of Autolus Ltd. He began his
career at the Ciba (now Novartis) Foundation,
before joining the The Wellcome Trust in 1990
where he became head of the strategy team.
He then moved to the City of London as a
pharmaceuticals analyst at Dresdner Kleinwort
Benson, before being appointed as Head
of Global Healthcare and Portfolio Manager
at First State Investments, Commonwealth
Bank of Australia, in London. Joe has a PhD
in Biochemistry and extensive board level
experience of building successful life sciences
companies.
Chris is the founder and Chairman of Excalibur
Group and a renowned scientist and highly
successful entrepreneur with numerous
prestigious awards and medals for his work over
the last 30 years. He has created 11 successful
academic spin-outs. Chris directed the raising
of approximately $450m for Merlin Biosciences
Funds and $2.6bn from disposals including the
sale of BioVex Group, Inc. to Amgen Inc. and
Piramed Limited to Roche Group. Through Merlin
Ventures Limited, he co-founded and advised
Biotech Growth Trust plc. Arakis Limited, one
of the companies developed by Chris, was
sold to Sosei Co. Ltd for $187m. As of the end
of April 2016, he has founded multiple listed
companies with a collective market cap of
around $2.4bn. He has positively impacted many
millions of lives with his work. Chris has founded
notable companies such as Chiroscience,
Celsis, ReNeuron, Vectura, Biovex and Merlin
Biosciences Ltd. Appointed an OBE in 1995 for
services to medical bioscience he was knighted
in 2001 for services to bioscience and enterprise.
Jonathan has 35 years’ global experience in
operations, strategy and business development.
He is the former CFO of Amgen Inc. based in
California, USA and prior to that was the CFO
of the Pharmaceuticals Division of Novartis AG,
based in Switzerland with global responsibilities
including business development and strategy.
During Jonathan’s tenure as CFO of Amgen,
Amgen Inc.’s share price increased by
approximately 125%. Novartis Pharma AG’s
operating profit increased over 40% during his
tenure as CFO of that company. Before joining the
pharmaceutical industry, Jonathan was a partner
at McKinsey & Company where he was co-head
of the European Corporate Finance practice.
He was also a partner at PricewaterhouseCoopers
in London and New York from 1993 to 1998.
He has a Masters degree in Economics from
the University of St Andrews in Scotland.
Jonathan has extensive expertise in strategy,
finance and operations within the biopharma
industry. He has raised over $20bn in new capital
and has been engaged throughout his career
in business development and mergers and
acquisitions on both the buy-side and sell-side
globally. Jonathan was the CEO of NASDAQ-listed
Bellerophon Therapeutics until 11 November 2016
and is currently the Chairman; he was formally a
non-executive director of Kite Pharma from 2014
to 2017 where he sat on the Board’s Transaction
Committee for the successful acquisition of Kite by
Gilead Sciences for $11.9bn in August 2017. He
brings to the Company hands-on experience in
managing large and small biopharma companies,
and a unique perspective on the factors driving
successful partnerships or investments by bigger
biopharma companies.
32
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Committee Key
N Nomination Committee
AR Audit and Risk Committee
R
Remuneration Committee
James Rawlingson
Chief Financial Officer
Franz Humer
Senior Independent Director
James has substantial experience at board and
senior management level gained through over
20 years of involvement in financial services
and UK public companies. His former role was
Group CFO of Charles Stanley plc, a leading
wealth manager with over £20bn of funds under
management and administration.
Before that, James was Group CFO for Coutts,
the Wealth Management Division of RBS, where
he was responsible for the global finance function
and held a key role in setting strategy. During
his time in this role James was also a director
of: Coutts & Co., Adam & Company plc, RBS
Pension Trustee Ltd and additionally served
as Chairman of the Audit Committee for RBS
Collective Investment Funds Ltd.
Prior to this James was formerly CFO of UBS
Wealth UK where he held a strategic role in
Europe before spending two years based in
Zurich in UBS Wealth Management’s head office.
James originally qualified as an accountant
with Deloitte and is a Chartered Member of the
Chartered Institute of Securities and Investment.
Franz has over 25 years of experience as an
executive director of global blue chip companies.
He was the managing director of Glaxo
Pharmaceuticals UK Limited, was elected to
the board of Glaxo Holdings plc, and became
the chief operating director for its worldwide
operations, in 1992. In 1995, he joined Hoffman-
La Roche as a member of its Board and the
head of its pharmaceuticals division, progressing
to become Chairman and CEO in 2001, and
between 2008 and 2014 the Chaiman of Roche
Holding Limited. Franz joined the board of
Diageo in 2005, became Chairman in 2008 and
resigned in 2016. He is also Chairman of PCI
Services; a non-executive director of Citigroup,
Inc., Bial Pharmaceuticals of Portugal and
Allogene Therapeutics, Inc.; and an Advisor to
Temasek Holdings. From 2015 to 2017, he was
a non-executive director of Kite Pharma, until the
company’s acquisition by Gilead Sciences for
$11.9bn in August 2017.
Dr Humer has a PhD in law from the University
of Innsbruck and an MBA from INSEAD in
Fontainbleau, France. He is the Chairman of the
Board of the International Centre for Missing and
Exploited Children. Franz has been awarded
the Singapore Public Service Star and Austria’s
‘Grosses goldenes Ehrenzeichen mit dem Stern
für Verdienste’.
Committee Memberships
N
R
(Chairman)
25845 20 April 2018 5:02 AM Proof 13
33
Stock code: ARIX.Larixbioscience.comGovernance Board of Directors continued
David U’Prichard
Non-Executive Director
The Right Honourable
Lord Hutton of Furness, PC
Non-Executive Director
Professor Trevor Jones, CBE
Non-Executive Director
David trained as a pharmacologist in Scotland.
During a 45-year career in the USA, David
has been a leader in drug receptor research,
pharmaceutical R&D, biotechnology and venture
investing. With an academic career at the Johns
Hopkins University and Northwestern University
medical schools, David then led Zeneca’s global
research activities, and subsequently, SmithKline
Beecham’s R&D, in the 1990s. David led
3-Dimensional Pharmaceuticals Inc. to an IPO in
2000, and then a sale to Johnson & Johnson in
2003. He is an experienced early-stage venture
capitalist and corporate director in both the USA
and the UK.
From 2012 David has worked to establish The
Harrington Project for Discovery & Development;
a USA-wide non-profit scholarship scheme to
translate the best American academic research
into new drug development and is a member
of the Board of Managers of BioMotiv, and the
Chairman of the Advisory Board of BioMotiv.
Committee Memberships
AR
N (Chairman)
Lord Hutton was the elected Member of
Parliament for Barrow and Furness from 1992
until 2010, and served in the Labour cabinet
as Secretary of State for Work and Pensions,
Secretary of State for Business, and Secretary of
State for Defence.
John achieved his BCL at Magdalen College,
Oxford, and before becoming an MP, had a
career in law.
John Hutton is now an adviser to Bechtel and
Lockheed Martin. He also chairs the Nuclear
Industry Association and is a non-executive
director at Circle Holdings plc and Sirius Minerals
plc. In 2010 he was created a Life Peer as Baron
Hutton of Furness.
Committee Memberships
R
Trevor has led a distinguished career in both
the pharmaceutical and biotech industries,
as well as in academia. He was Group R&D
director at The Wellcome Foundation Limited,
responsible for the development of AZT, Zovirax,
Lamictal, Malarone and other medicines. He was
a director of Allergan Inc. (USA) for ten years,
until 2015, and was formerly Director General
of the Association of the British Pharmaceutical
Industry (ABPI), served for 12 years as a member
of the UK Government Regulatory Agency
Medicines Commission and Chairman of the
UK Government Advisory Group on Genetics
Research.
He is a visiting professor at King’s College,
London and holds honorary degrees and Gold
Medals from six universities. In 2004, he was
appointed to the World Health Organisation
Commission on Intellectual Property Rights,
Innovation and Public Health. In 2003 he
was awarded the CBE for services to the
pharmaceutical industry.
Committee Memberships
R
34
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Committee Key
N Nomination Committee
AR Audit and Risk Committee
R
Remuneration Committee
Meghan FitzGerald
Non-Executive Director
Giles Kerr
Non-Executive Director
Meghan has broad experience in the US
healthcare industry, with a strong emphasis
on operations, health policy and business
development. She is a Partner at L1 Health, with
a focus on investing in healthcare services. She
is also an Assistant Professor of Health Policy
and Management at Columbia University. Prior to
joining L1 Health, Meghan served as Executive
Vice President of Strategy and Health Policy at
Cardinal Health, the global integrated healthcare
services and products provider, and before then
was President of Cardinal’s Specialty Solutions
division. She holds a DrPh in Healthcare Policy
from New York Medical College, a BSN in Nursing
from Fairfield University, and a Master of Public
Health from Columbia University.
Committee Memberships
AR
Giles has 36 years’ experience in finance
across a broad range of industrial sectors
with a particular focus on life sciences. He
is currently CFO of the University of Oxford
and during his tenure he has established a
successful investment office with £2.5 bn
under management and a £650m early-stage
investment fund. Through his role on the board
of the University of Oxford’s technology transfer
company, Oxford University Innovation Ltd.,
he has gained considerable experience of
establishing and growing technology-based
companies. Prior to joining the University of
Oxford he was CFO of Amersham plc and during
his time at Amersham the share price increased
seven-fold. Giles has extensive experience as
chairman and senior independent director, and
as chairman of UK and US listed company audit
committees. He is currently Chairman of the audit
committees of Senior plc, Paypoint plc and a
member of the audit committees of BTG plc and
Adaptimune Therapeutics plc. Prior to joining
Amersham plc he was an audit partner with
Arthur Anderson & Co.
Committee Memberships
AR
(Chairman)
25845 20 April 2018 5:02 AM Proof 13
35
Stock code: ARIX.Larixbioscience.comGovernance Business Development Team
Edward Rayner
Edward Rayner joined Arix Bioscience in January 2016 and his responsibilities include leading the further
developments of ALS, including management of the WLSIF. He currently sits on the boards of Depixus
and Simbec-Orion. Before joining Arix Bioscience at its inception, Ed spent 18 years as an equity analyst
and Portfolio Manager in Europe and Australia. From 2004 to 2014, he was Head of Research at
Alliance Bernstein and then a senior portfolio manager at AMP Capital, a leading Australian investment
house with over A$178bn in funds under management in Australia. At AMP Capital, he managed the
growth equity portfolios and launched a small companies’ fund. As part of his responsibilities he focused
on the healthcare sector.
Prior to his move to Australia, Ed analysed European equities at UBS Asset Management and JP
Morgan Investment Management. He gained an MA in Chemistry and MSc in Management at the
University of Oxford and is a Chartered Financial Analyst.
Mark Chin
Mark has over ten years of experience in the life sciences industry. He currently sits on the boards of
Iterum Therapeutics, Harpoon Therapeutics, Aura Biosciences, and OptiKira, and has a Board Observer
position at Amplyx Pharmaceuticals. He was previously a principal at Longitude Capital, where he
focused on investments in both private and public biotechnology and medical technology companies.
Prior to Longitude, he was a consultant at the Boston Consulting Group, where he was responsible for
strategy and corporate development projects for pharmaceutical and biotechnology companies. Before
BCG, Mark worked in corporate development at Gilead Sciences and market planning at Genentech.
Mark has an MBA from The Wharton School at the University of Pennsylvania, an MS in Biotechnology
from the University of Pennsylvania, and a BS in Management Science from the University of California
at San Diego.
Jonathan Tobin
Jonathan specialises in biotechnology investments. He currently sits on the boards of Artios Pharma
and Atox Bio, and has a Board Observer position at Mitoconix. Prior to joining Arix Bioscience, Jonathan
spent five years at Imperial Innovations, where he was a Principal in the Healthcare Ventures team. He
was involved with the formation and investment in a number of early-stage companies, including Inivata,
Auspherix, Abingdon Health, Cell Medica, and Psioxus. Jonathan worked at MRC Technology, sourcing
and evaluating new small molecule and antibody drug discovery projects.
He has a first-class degree in Biology from the University of Oxford, a PhD in Molecular Medicine from
UCL, carried out postdoctoral research at the Cancer Research UK London Research Institute (now
Crick Institute), and published research in journals including PNAS, New England Journal of Medicine
and Nature Genetics. Jonathan also has an MBA with distinction from Imperial College, and is a Trustee
of the Autism Research Trust.
Daniel O’Connell
Daniel has over ten years of experience in healthcare. He currently sits on the boards of LogicBio and
Precithera. Daniel joined Arix Bioscience from OrbiMed Advisors, where he played key roles across
investments in both biotherapeutics and medical devices. Investments he has been involved in include
CardiAQ (acquired by Edwards), Civitas Therapeutics (acquired by Acorda), Relypsa (acquired by
Galenica), Cynapsus (acquired by Sunovion), as well as other public and private companies. Prior to
OrbiMed, Daniel was the Associate Director of Cardiovascular Research at Arisaph Pharmaceuticals
where he was responsible for pre-IND discovery and development for programmes in lipid modulation.
He received his MD and PhD in Biochemistry from Tufts University School of Medicine, and has
undergraduate degrees in Mathematics and Chemistry from MIT.
John Cassidy
John Cassidy joined Arix Bioscience in February 2018. John previously worked at L.E.K. Consulting LLP,
as a Senior Life Science Specialist, responsible for strategy and transaction support for pharma, biotech
and private equity clients. John has a first-class degree in Biochemistry from Imperial College London, a
PhD in Neuroscience from University College London and has published research in journals including
PNAS Proceedings of the National Academy of Sciences, Nature Communications and Journal of
Neuroscience.
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25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Directors’ Report
For the year ended 31 December 2017
The Directors present their report for the year ended 31 December 2017. Additional information which is incorporated by reference into this
Directors’ Report, including information required in accordance with the Companies Act 2006 and Listing Rule 9.8.4R of the Financial Conduct
Authority’s Listing Rules, can be located as follows:
Disclosure
Location
Important events affecting the Company since the year-end, future
business developments and research and development activities
Strategic Report,
pages 4 to 28
Financial risk management objectives and policies (including hedging
policy and use of financial instruments)
Notes to the financial statements,
pages 80 to 86
Statement of Directors’ responsibilities
page 39
Details of long-term incentive schemes
Waiver of emoluments by a Director
Note 18 to the financial statements,
pages 92 and 93
Directors’ Remuneration Report,
pages 50 to 67
Directors
The Directors of the Company who held office during the year are:
Current Directors
Jonathan Peacock
Professor Sir Chris Evans
Joe Anderson
James Rawlingson
Dr Franz Humer
David U’Prichard
The Right Hon. Lord Hutton of Furness
Professor Trevor Jones
Giles Kerr
Appointed 17 October 2017
Meghan FitzGerald
Appointed 21 July 2017
Previous Directors
Sir John Banham
Resigned 10 November 2017
Non-independent
Independent
Past Directors
Results and dividend
The results for the year ended 31 December 2017 are set out in the
Consolidated Statement of Comprehensive Income on page 76.
The Board’s intention during the current phase of the Group’s
development is to retain any Group earnings for the foreseeable future
to finance growth and expansion and to invest in the infrastructure
of Group Businesses. Accordingly, the Board is not recommending a
dividend for the year ended 31 December 2017.
Articles of Association
The rules governing the appointment and replacement of Directors
are set out in the Company’s Articles of Association. The Articles of
Association may be amended by a special resolution of the
Company’s shareholders.
Share capital
Details of the Company’s share capital, including changes during
the year, are set out in note 17 to the financial statements. As at 31
December 2017, the Company’s share capital consisted of:
• 96,153,090 Ordinary Shares of £0.00001 each (99.95% of total
share capital by number, 1.90% by nominal value)
• 49,671 C Shares of £1.00 each (0.05% of total share capital by
number, 98.10% by nominal value)
In accordance with the resolution passed at the AGM on 5 June 2017,
the Deferred Shares were cancelled during the year.
25845 20 April 2018 5:02 AM Proof 13
37
Stock code: ARIX.Larixbioscience.comGovernance
Directors’ Report
For the year ended 31 December 2017
Other than as set out above, the Directors are
not aware of any other agreements between
holders of the Company’s shares that may
result in the restriction of the transfer of
securities or on voting rights. No shareholder
holds securities carrying any special rights or
control over the Company’s share capital.
Authority for the Company to
purchase its own shares
Subject to authorisation by shareholder
resolution, the Company may purchase its own
shares in accordance with the Act. Any shares
which have been bought back may be held as
treasury shares or cancelled immediately upon
completion of the purchase.
At the AGM on 5 June 2017, the Company
was generally and unconditionally authorised
by its shareholders to make market purchases
(within the meaning of section 693 of the
Companies Act 2006) of up to a maximum
of 9,609,108 of its Ordinary shares. The
Company has not repurchased any of its
Ordinary shares under this authority, which is
due to expire on the date of this year’s AGM or
30 June 2018.
Directors’ interests
The number of Ordinary Shares of the Company
in which the Directors were beneficially interested
at 31 December 2017, is set out in the Directors’
Remuneration Report on page 66.
Directors’ indemnities
The Company’s Articles of Association (the
‘Articles’) provide, subject to the provisions
of UK legislation, an indemnity for Directors
and officers of the Company and the Group
in respect of liabilities they may incur in the
discharge of their duties or in the exercise
of their powers. The Company has made
qualifying third party indemnity provisions for
the benefit of its Directors during the period
and these remain in force at the date of this
report.
The Company maintains Directors’ and
officers’ liability insurance cover and this is in
place for all the Company’s Directors at the
date of this report. The Company will review its
level of cover annually.
Overseas offices
Arix Bioscience, Inc. has an office in
New York, USA.
Significant interests
The table below shows the interests in shares notified to the Company in accordance with the
Disclosure Guidance and Transparency Rules as at
31 December 2017:
At 31 December 2017
Number
of Ordinary
Shares of
0.001 pence
each held+
Percentage
of total
voting
rights
held+
At 18 April 2018
Number
of Ordinary
Shares of
0.001 pence
each held+
Percentage of
total
voting
rights
held+
29,538,005
10,432,914
7,316,039
4,830,917
4,100,000
3,869,902
30.7%
10.9%
7.6%
5.0%
4.3%
4.0%
33,093,560
10,432,914
7,316,039
7,497,583
6,921,088
5,647,679
–
–
–
–
11,111,111
6,666,666
24.6%
7.8%
5.4%
5.6%
5.1%
4.2%
8.2%
5.0%
Name of Shareholder
Woodford Investment
Management Limited
C Chipperton
C Evans
Takeda Ventures, Inc
Ruffer LLP
UCB Ventures SA
Fosun International
Holdings Limited
Ipsen Pharma SAS
Ordinary shareholders are entitled to receive
notice of, and to attend and speak at, any
general meeting of the Company. On a show
of hands every shareholder present in person
or by proxy (or being a corporation represented
by a duly authorised representative) shall have
one vote, and on a poll every shareholder who
is present in person or by proxy shall have one
vote for every share they hold. The Notice of
Annual General Meeting specifies deadlines
for exercising voting rights and appointing
a proxy or proxies. Ordinary Shares held as
Restricted Shares pursuant to the Restrictive
Share Agreement are disenfranchised and,
accordingly, holders of such Restricted Shares
are not entitled to vote, attend the meetings
of the Company or receive dividends or other
distributions made or paid on the Ordinary
Share capital of the Company.
No voting rights attach to the C Shares and
their holders are not entitled to receive notice
of, or to attend and speak at, any general
meeting of the Company. Holders of C Shares
are not entitled to receive any dividend or
distributions made or paid on the Ordinary
Share capital of the Company.
Other than the general provisions of the Articles
of Association (and prevailing legislation),
there are no specific restrictions of the size
of a holding or on the transfer of any class of
shares in the Company except as follows:
• Prior consent of the Directors is required for
the transfer of C Shares;
• Holders of Restricted Shares may not
dispose of Restricted Shares until and
unless the relevant Restricted Shares are
released from their respective undertakings
pursuant to the Restrictive Share
Agreement;
• Pursuant to lock-up arrangements under
the Placing Agreement dated 2 February
2017, each of the Directors has agreed
not to offer, sell, contract to sell, pledge or
otherwise dispose of any Ordinary Shares
which they hold directly or indirectly for a
period of 365 days from the date of the
Placing Agreement (subject to certain usual
and customary exemptions and exceptions
on the transfer of shares);
• Pursuant to a lock-up deed, certain
shareholders agreed not to offer, sell,
pledge or otherwise dispose of any of
their interests for specified periods up to
a maximum of 365 days from the date of
Admission (subject to certain usual and
customary exceptions, for example when
the Company has given its consent to any
such transfer); all such agreements ended
by 22 February 2018.
38
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
The Directors consider that the Annual Report
and Accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess the Group’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed on pages 32 to 35, confirm
that, to the best of their knowledge:
•
•
the Group financial statements, which have
been prepared in accordance with IFRS as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position
and profit of the Group;
the Strategic Report includes a fair review
of the development and performance of
the business and the position of the Group,
together with a description of the principal
risks and uncertainties that it faces.
By order of the Board
James Rawlingson
Chief Financial Officer
23 April 2018
Political donations
The Company did not make any political
donations during the year.
Change of control –
significant agreements
There are a number of agreements that may
take effect, alter or terminate on a change of
control of the Company, such as commercial
contracts and property lease agreements.
None of these are considered to be significant
in their likely impact on the business as a
whole.
Audit information
At the date of the approval of this report, each
Director confirms that:
• so far as they know, the Company’s
auditors are aware of all relevant audit
information;
• each Director has taken all the reasonable
steps to make themselves aware of any
relevant audit information and to establish
that the Company’s auditors are aware of
the information.
The confirmation is given and should be
interpreted in accordance with the provisions
of section 418 of the Companies Act 2006.
Independent Auditors
PricewaterhouseCoopers LLP have indicated
their willingness to continue in office and a
resolution seeking to reappoint them will be
proposed at the forthcoming Annual General
Meeting.
Annual General Meeting
The Annual General Meeting will be held
at the offices of Brown Rudnick, 8 Clifford
Street, London W1S 2LQ on 17 May 2018 at
11am. The Notice of Annual General Meeting
is contained in a separate letter from the
Chairman accompanying this report.
The Strategic Report on pages 4 to 28 and
this Directors’ Report have been drawn up and
presented in accordance with, and in reliance
upon, applicable English company law and
any liability of the Directors in connection with
these reports shall be subject to the limitations
and restrictions provided by such law.
Statement of Directors’
responsibilities
The Directors are responsible for preparing the
Annual Report, the Directors’ Remuneration
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 prepared the
Group financial statements in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the European Union
(EU), and the Company financial statements
in accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable
law). Under company law the Directors must
not approve the financial statements unless
they are satisfied they give a true and fair view
of the state of affairs of the Group and the
Company and of the profit or loss of the Group
for that period. In preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently
• make reasonable and prudent judgements
and accounting estimates
• state whether IFRS as adopted by the EU
and applicable UK Accounting Standards
have been followed, subject to any material
departures disclosed and explained in the
Group and Company financial statements
respectively
• prepare the financial statements on
the going concern basis, unless it is
inappropriate to presume the Company will
continue in business.
The Directors are responsible for keeping
adequate accounting records sufficient to
show and explain the Group’s and Company’s
transactions, and to disclose with reasonable
accuracy at any time the financial position of
the Company and the Group and enable them
to ensure that the financial statements and the
Directors’ Remuneration Report comply with
the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation. They are also responsible for
safeguarding the assets of the Company and
the Group and hence for taking reasonable
steps to prevent and detect fraud and other
irregularities.
25845 20 April 2018 5:02 AM Proof 13
39
Stock code: ARIX.Larixbioscience.comGovernance Corporate Governance Report
Chairman’s introduction to governance
UK Corporate
Governance Code –
Compliance Statement
As a company admitted to the standard
segment of the Official List, the Company
is not required to adopt the UK Corporate
Governance Code but it has voluntarily chosen
to observe the requirements of the Code as far
as it has been able in 2017. Since listing on
22 February 2017 the Company has applied all
of the main principles of the Code and provides
below explanations of its non-compliance with
the Code provisions:
A.3.1 The Chairman was not independent
on appointment. Due to the nature of the
strategic objectives of the Company and
its recent incorporation, the Company has
a highly experienced Chairman, Jonathan
Peacock. The Company considers it essential
to have leadership of this quality available to
it alongside a Board containing experienced
Non-Executive Directors.
B.6.1 – The Board has not carried out a
performance evaluation. The majority of the
Directors were only appointed to the Board
prior to the IPO in February 2017, and since
then there have been a number of changes to
the Board. As a result it was felt that a Board
evaluation would be better suited when the
Board had spent longer working together. An
evaluation will be considered during 2018.
B.6.3 – As described above, the Non-
Executive Directors have not formally evaluated
the Chairman’s performance as a formal Board
evaluation has not been carried out.
The Board structure
The role of the Board is to provide
entrepreneurial leadership to the Group, set
strategy and monitor performance, and to
ensure that the necessary financial and human
resources are in place to enable the Group
to meet its objectives. In addition, the Board
ensures the appropriate financial and business
systems and controls are in place to safeguard
shareholders’ interests and maintain effective
corporate governance.
The Board operates in accordance with the
Company’s Articles of Association and its own
written terms of reference. The Board has
established a number of committees. Each has
its own terms of reference, which are reviewed
at least annually. A summary of the matters
reserved for decision by the Board is set out
below:
Jonathan Peacock, Chairman
This year the Board has been
strengthened even further.”
Dear Shareholders,
The Company listed its ordinary shares on the
main market of the Stock Exchange on
22 February 2017. In the weeks leading
up to the listing, the Board implemented
a number of measures and procedures in
preparation for becoming a listed company.
These included appointing a number of highly
experienced independent Non-Executive
Directors. Additionally, this year the Board
membership has been strengthened further by
the appointment of two additional Independent
Non-Executive Directors: Ms Meghan
FitzGerald, who has broad experience in the
US healthcare industry; and Mr Giles Kerr,
who has a wealth of experience in finance
across a broad range of industrial sectors
with a particular focus on life sciences.
These Directors have already made a great
contribution in their short tenure so far, and I’m
sure will continue to do so.
During the year Sir John Banham retired from
the Board. Sir John helped to oversee the
Company’s growth both as a private company
and since its successful IPO. It was a pleasure
and a privilege to work with Sir John and on
behalf of the Board, I would like to thank him
again for his contribution to the successful
creation and early development of Arix
Bioscience.
This report includes a description of the
Company’s governance structure, how it
has applied the principles and the extent of
compliance with the provisions of the Code
throughout 2017.
Jonathan Peacock
Chairman
40
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Key Board roles and responsibilities
The Board currently consists of ten Directors (including the Chairman), six of whom are considered to be independent.
Senior Independent Director
Franz Humer is the Senior Independent Director (SID). The SID’s role is to act as a sounding board for the Chairman and serve as an intermediary for
the other Directors when necessary. The SID will meet other Non-Executive Directors without the Chairman present at least once a year, to appraise
the Chairman’s performance, taking into account the views of Executive Directors, plus on such other occasions as are deemed appropriate.
The SID is also available to shareholders should they wish to discuss concerns they have failed to resolve through the normal channels of Chairman,
Chief Executive Officer or Executive Directors or for which such contact is inappropriate.
Responsibilities of the Board
Other
• Approval and monitoring of the share dealing code
• Approval and monitoring of CSR
• Approving policies and political and charitable donations
• Approval of the overall levels of insurance for the Group
Remuneration
• Determining the policy for remuneration
of Chairman, the Executive Directors,
Company Secretary and other
senior executives
• Determining the remuneration of the
•
Non-Executive Directors
Introducing new share incentive plans or
major changes to existing plans
Corporate governance
• Review of Group’s overall
governance framework
• Determining the independence
of Directors
• Considering the balance of interests
between shareholders and
other stakeholders
• Authorising any conflicts of interest
Leadership, strategy and management
• Providing leadership and setting values and standards
• Approving the Company’s strategic aims and objectives
• Overseeing operations
Structure and capital
• Changes to the Group’s capital
or corporate structure
• Changes to the Group’s management
and control structure
Financial reporting
• Approval of financial statements
• Approval of the dividend policy
• Approval of material changes in
accounting policies
• Approval of major capital
expenditure
THE
BOARD
Board membership
• Changes to the structure, size and composition
of the Board
• Ensuring adequate succession planning
• Appointment or removal of the Chairman, CEO,
SID and Company Secretary
Risk management and internal controls
• Ensuring maintenance of a sound system of internal control
and risk management
• Determining the principal risks of the Company and how they
are managed and mitigated
• Reviewing the effectiveness of the risk and controls processes
25845 20 April 2018 5:02 AM Proof 13
41
Stock code: ARIX.Larixbioscience.comGovernance Corporate Governance Report
Board process
The Board meets formally at least four times
a year, with ad hoc meetings called as and
when circumstances require at short notice.
The table below shows the attendance of each
Director at formal meetings of the Board and
the committees of which they are a member:
All Directors are expected to attend all
meetings of the Board, and any committees
they are members of, and to devote sufficient
time to the Company’s affairs to fulfil their
duties as Directors. Where Directors are unable
to attend a meeting, they will be encouraged
to submit to the Chairman any comments on
papers to be considered at the meeting in
advance, to ensure their views are recorded
and taken into account.
The Chairman and Non-Executive Directors
have met without the Executive Directors
present on a number of occasions throughout
the year. The Non-Executives also meet after
each Board meeting without the Chairman and
the Executive Directors present.
Board attendance
Jonathan Peacock
Professor
Sir Chris Evans
Joe Anderson
James Rawlingson
Sir John Banham
Dr Franz Humer
David U’Prichard
Lord Hutton
Professor Trevor Jones
Meghan FitzGerald
Giles Kerr
Board
Audit
Remuneration
Nomination
5/5
5/5
5/5
5/5
3/5
4/5
5/5
3/5
5/5
2/2
1/1
–
–
–
–
2/3
–
3/3
2/3
–
2/2
1/1
–
–
–
–
–
3/3
–
–
3/3
–
–
–
–
–
–
–
2/2
2/2
–
–
–
–
Strategy Committee
During the year the Board has created a
Strategy Committee, the membership of which
includes the Chairman, Deputy Chairman and
CEO. The Committee’s roles are to regularly
review the Group’s existing strategic objectives
and report to the Board on the Group’s
progress in implementing those objectives. It
will also make recommendations to the Board
on adjustments to the strategic objectives and
implement strategic objectives approved by
the Board.
Commitment
The Board expects Non-Executive Directors to
commit sufficient time to allow them to meet
their obligations to the Company. The Non-
Executive Directors are required to confirm, on
acceptance of the role, that they have sufficient
time to meet the expectations of their role.
Non-Executive Directors will need to attend
scheduled and emergency Board meetings,
and committees as well as the AGM, as well as
allowing appropriate preparation time ahead of
each meeting.
Conflicts of interest
The Company’s Articles of Association set out
the policy for dealing with Directors’ conflicts of
interest, in line with the Companies Act 2006.
The Articles permit the Board to authorise
conflicts and potential conflicts, as long as the
potentially conflicted Director is not counted
in the quorum and does not vote on the
resolution to authorise. A record of Directors’
interests is kept and Directors are reminded at
the beginning of each Board meeting to notify
the Board of any further conflicts of interest, in
accordance with Sections 175, 177 and 182 of
the Companies Act 2006.
Board independence
Non-independent
Independent
Jonathan Peacock
Franz Humer
Christopher Evans
Giles Kerr
Joe Anderson
David U’Prichard
James Rawlingson
John Hutton
Trevor Jones
Meghan FitzGerald
Read more about the Board of Directors
on pages 32 to 35
Non-independent
42
Independent
Jonathan Peacock
Franz Humer
Christopher Evans
Giles Kerr
Joe Anderson
David U’Prichard
James Rawlingson
John Hutton
Trevor Jones
Meghan FitzGerald
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 During the year the Company presented at
a number of investor attended conferences
and additionally held a Capital Markets Day
presentation in September 2017.
Annual General Meeting
The Company’s Annual General Meeting will
take place on 17 May 2018 at 11am at the
offices of Brown Rudnick, 8 Clifford Street,
London W1S 2LQ.
To encourage shareholders to participate in the
AGM process, we propose to offer electronic
proxy voting through the CREST service and
all resolutions will be proposed and voted on
at the meeting individually by shareholders
or their proxies. Results will be announced
through the Regulatory News Service and
made available on the Company’s website.
Visit us online at:
www.arixbioscience.com
Jonathan Peacock
Chairman
Training and development
The Company Secretary regularly provides the
Board with updates on Corporate Governance
and regulatory matters at Board meetings.
An induction is also provided to Directors on
joining the Board.
Information and support
An agenda and accompanying detailed papers
are circulated to the Board well in advance of
each Board meeting. These include reports
from Executive Directors and other members
of senior management, and all Directors have
direct access to senior management should
they require additional information on any of
the items to be discussed.
The information supplied to the Board and its
committees will be kept under review to ensure
it is fit and proper for purpose, and that it
enables sound decision-making.
The Company has adopted a formal
procedure through which Directors may
obtain independent professional advice at
the Company’s expense. The Directors also
have access to the services of the Company
Secretary.
Performance evaluation
The majority of the Directors were appointed
only in the year immediately preceding the
listing in February 2017 with an additional two
Directors appointed during 2017. Accordingly,
the Board has considered the evaluation and
has concluded that a meaningful evaluation of
the Board can only take place after the Board
has been working together longer in its current
composition. The Board will consider an
annual evaluation policy during 2018.
Relations with shareholders
Dialogue with shareholders
During the year a Head of Investor Relations
was appointed to guide the investor relations
function. As part of its investor relations
programme, the Group maintains a dialogue
with its key stakeholders, including institutional
investors, to discuss issues relating to the
performance of the Group including strategy
and new developments. The Non-Executive
Directors are available to discuss any matter
stakeholders might wish to raise, and the
Chairman attends meetings with investors and
analysts as required.
25845 20 April 2018 5:02 AM Proof 13
43
Stock code: ARIX.Larixbioscience.comGovernance Report of the Nomination Committee
Composition
David U’Prichard (Chairman)
Franz Humer
Visit us online at:
www.arixbioscience.com
David U’Prichard, Chairman of the Nomination Committee
Dear Shareholders,
On behalf of the Board, I am pleased to present the Nomination Committee report for the year ended 31 December 2017.
Role and responsibilities
The role of the Nomination Committee is set out in its terms of reference, available on the Company’s website.
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make-up of the Board and its
committees.
Specific duties of the Nomination Committee include:
Effectiveness and Succession
Planning
• Review the results of the Board
performance evaluation process that
relate to the composition of the Board
• Ensure all members of the Board are
devoting sufficient time to fulfil their
duties
• To assist with succession planning,
and to keep informed about strategic
and commercial changes affecting the
Company
• Satisfy itself that processes and plans
are in place for succession planning
44
KEY
RESPONSIBILITIES
Board and Committee Composition
• Review structure, size and
composition of the Board regularly
• Evaluate the balance of skills,
knowledge, experience and diversity
on the Board
• Recommend changes to membership
of the Board’s committees
• Recommend suitable candidates for
the role of the Senior Independent
Director
• Consider and review the Board’s
policy on diversity
Appointments
• Prepare role description for Board appointments
•
Identify and nominate to the Board candidates to fill Board vacancies
• Make recommendations to the Board regarding the reappointment of NEDs
at the end of their term of office
• Make recommendations to the Board regarding the re-election of Directors
by shareholders
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Stock code: ARIX.L
Governance
Annual evaluation
As the Nomination Committee and the
Board itself has only been established for a
short time, we have not conducted a formal
performance evaluation. We will consider the
annual evaluation process and policy during
2018.
David U’Prichard
Chairman of the Nomination Committee
23 April 2018
Meetings
The Nomination Committee has met twice
during the year. Only members of the
Nomination Committee have the right to attend
meetings, but we may invite other Directors,
executives or advisers to attend all or part of
any meeting as appropriate. In practice, the
Chairman attends most meetings.
The Nomination Committee has met this year
to discuss the following matters:
• To review the composition of the Board and
the Board’s committees
• To review the balance of skills required
by the Board and its committees and the
business as a whole
• To discuss and set the process for the
search for new Non-Executive Directors
• To recommend for approval new Directors
to be appointed to the Board
• To consider the re-election of Directors at
the AGM
Diversity
The Company’s policy is that recruitment,
promotion and any other selection exercises
will be conducted on the basis of merit against
objective criteria that avoid discrimination.
No individual should be discriminated against
on the ground of race, colour, ethnicity,
religious belief, political affiliation, gender,
age or disability, and this extends to Board
appointments. The Board recognises the
benefits of diversity, including gender diversity,
on the Board, although it believes that all
appointments should be made on merit, while
ensuring there is an appropriate balance of
skills and experience within the Board. The
Board currently consists of 10% (one) female
and 90% (nine) male board members. The
Group consists of 75% (12) male employees
and 25% (four) female employees; no
employees other than board members are
classified as senior managers.
25845 20 April 2018 5:02 AM Proof 13
45
arixbioscience.com Report of the Audit
and Risk Committee
Composition
Giles Kerr (Chairman)
David U’Prichard
Meghan FitzGerald
Giles Kerr, Chairman of the Audit and Risk Committee
Dear Shareholders,
On behalf of the Board, I am pleased to present the Audit and Risk Committee report for the year
ended 31 December 2017.
The Arix Bioscience plc Audit and Risk Committee was formally established by the Board in the
lead-up to IPO. The Committee has, during the year, been strengthened further by adding an
additional Non-Executive Director to its membership. Meghan FitzGerald joined the Committee on
her appointment to the Board in July 2017.
I joined the Board in October 2017 and took over the chairmanship of the Committee when Sir
John Banham stepped down from the Board in November 2017. I would like to thank Sir John
for his contribution to the progress made by the Committee. Lord Hutton also stepped down
from the Committee to join the Remuneration Committee. All members of the Committee are
Independent Non-Executive Directors. The Board considers that I have recent and relevant
financial experience as recommended under provision C.3.1 of The UK Corporate Governance
Code (the Code) as it applies to the Company. I and the other members of the Committee also
have competence relevant to the sector the Company operates in, as also recommended by
provision C.3.1 of the Code.
The Committee’s role is to assist the Board with the discharge of its responsibilities in relation
to internal and external audits and controls, including reviewing the Group’s annual financial
statements, considering the scope of the annual audit and the extent of the non-audit work
undertaken by external auditors, advising on the appointment of external auditors and reviewing
the effectiveness of the internal control systems in place within the Group.
We have met three times during the year. Further details on the activities of the Committee during
the year and how it has discharged its responsibilities are provided in the report below.
Giles Kerr
Chairman of the
Audit and Risk Committee
23 April 2018
46
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Duties and responsibilities
The Audit and Risk Committee’s duties and responsibilities are set out in its terms of reference which are available on the Company’s website.
Visit us online at:
www.arixbioscience.com
Specific duties of the Audit and Risk Committee include:
Internal controls and
risk management
• Monitor and review the adequacy and effectiveness
of the Company’s internal financial controls and risk
management systems
• Review and recommend to the Board the
disclosures in the annual report concerning internal
controls and risk management
• Promote sound risk management and internal
control systems
• Monitor and keep under review the policies and
overall process for identifying and assessing
business risk
External audit
• Recommend the appointment, reappointment or removal of the auditors
• Oversee the relationship, make recommendations on their remuneration,
approve terms of engagement and review independence and objectivity
• Meet regularly without management present
• Develop policy on the supply of non-audit services
• Ensure the audit contract is tendered at least every ten years
• Review and approve the audit plan
• Review the findings of the audit
DUTIES AND
RESPONSIBILITIES
Whistleblowing, fraud, bribery
and other compliance
• Review the Company’s arrangements
for its employees and contractors to
raise concerns in confidence
• Review procedures for detecting fraud
and preventing bribery
• Review the Company’s code of
corporate conduct/business ethics
Financial and narrative reporting
• Monitor the integrity of the financial statements
• Review and report to the Board on significant financial issues
and judgements
• Review and challenge accounting policies, methods used to
account for significant or unusual transactions, clarity and
completeness of disclosure
25845 20 April 2018 5:02 AM Proof 13
Internal audit
• To review the need for an internal
audit function
•
If an internal audit function is
appointed:
— Approve the appointment or
termination of the head of
internal audit
— Consider and approve the Terms
of Reference for the internal audit
— Monitor and review the operation
and the effectiveness
— Review and assess the internal
audit plan and reports
• Ensure access to the Board and
Committee Chairmen, review the
findings of the audit
47
Stock code: ARIX.Larixbioscience.comGovernance Report of the Audit
and Risk Committee continued
Meetings and attendees
The Audit and Risk Committee has met three times during the year. The Audit and Risk Committee will normally meet no fewer than three times a
year with further meetings being called as required.
The external auditors are invited to attend the majority of the meetings. Outside of the formal meeting programme, the Audit and Risk Committee
chairman maintains a dialogue with key individuals involved in the Company’s governance, including the Chairman, the Chief Executive Officer, the
Chief Financial Officer and the external audit lead partner.
Activity since IPO
The Audit and Risk Committee has met three times since the IPO. Matters discussed have included:
• Reviewing the Committee’s terms of reference and recommending changes to the Board
• Considering the Group’s policy on the provision of non-audit services by the external auditors
• Reviewing the Audit Plan, process and scope
• Reviewing the independence of the External Auditor
• Reviewing the significant issues in the External Audit report
• Reviewing the Annual Report and Financial statements and recommending their approval by the Board
Significant issues considered in relation to the financial statements
Significant issues and accounting judgements are identified by the finance team and the external audit process and are considered and reviewed by
the Audit and Risk Committee. The significant issues considered by the Committee in respect of the year ended 31 December 2017 are set out in
the table below:
Significant issues and judgements
How the issues were addressed
Valuation of unquoted Investments
Financial interest in The Wales Life Sciences
Investment Fund
Calculation of share-based payment expense
Presentation of the Annual Report
The Audit and Risk Committee reviewed management’s determination of the valuations
of the unquoted investments, including the work performed by the External auditors
to evaluate the valuation methodology applied. The Committee concluded that the
valuations of the unquoted investments were properly prepared in accordance with the
stated accounting policy and the evidence available.
The Audit and Risk Committee reviewed and considered the key assumptions, noting
also that both the valuation of investment in carried interest and the valuation of the fund’s
unquoted investments are determined at the reporting date by management’s appointed
experts. The Audit and Risk Committee was satisfied that procedures and assumptions
used were appropriate and both the carried interest valuation and fund interest valuation
were in the appropriate range.
The Audit and Risk Committee considered management’s calculation of the share-based
payment expense relating to founder shares, founder options, management options and
the Executive Incentive Plan, including the assumptions made regarding volatility and the
risk-free interest rate. The Committee was satisfied that the expense had been calculated
appropriately.
The Audit and Risk Committee reviewed management’s presentation of the Annual
Report, noting that this was the Company’s first period-end as a Main Market-listed
Company. The Committee concluded that management has presented the report in a
suitable manner.
48
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 permitted services above £5,000 is subject
to the specific approval of the Audit and Risk
Committee. The policy recognises that certain
non-audit services may not be carried out by
the external auditors (in accordance with the
EU Statutory Audit regime).
During the year ended 31 December 2017,
PwC was engaged to provide certain non-
audit services for the Group’s February 2017
IPO; and the Group’s capital raising which
completed in March 2018. This included
preparing reports on the Company’s financial
position and prospects, working capital and a
report to the Company’s sponsors regarding
the Company’s business and operations. In
approving the use of PwC to provide these
services, the Board took the view that PwC’s
knowledge of the Company and its operations
meant it was best placed to provide the
services, and was comfortable that PwC’s
independence would not be compromised.
Services were also provided relating to
remuneration and training. The fees paid to
PwC for non-audit services during the period
totalled £186,750, representing 91% of the
total audit fee.
Whistleblowing
The Group has adopted procedures where
employees may, in confidence, raise concerns
relating to possible improprieties in matters
of financial reporting, financial control or any
other matter. The whistleblowing policy applies
to all Group employees. The Audit and Risk
Committee is responsible for monitoring the
Group’s whistleblowing arrangements and the
Board will review the policy periodically.
Giles Kerr
Chairman of the Audit
and Risk Committee
23 April 2018
Risk management and
internal control
The Board has overall responsibility for
setting the Group’s risk appetite and ensuring
there is an effective risk management
framework to maintain levels of risk within
this risk appetite. The Board has, however,
delegated responsibility for reviewing the risk
management methodology and effectiveness
of internal control to the Audit and Risk
Committee. The Audit and Risk Committee
provides oversight and advice to the Board on
current risk exposures and future risk strategy.
Further details of the Group’s risk management
approach, structure and principal risks are set
out in the Strategic Report on pages 4 to 28.
The Group’s system of internal control
comprises entity-wide high level controls,
controls over business processes and centre
level controls. Policies and procedures and
clearly defined levels of delegated authority
have been communicated across the Group
and management has identified the key
operational and financial processes which exist
within the business and implemented internal
controls over these processes, in addition
to the higher level review and authorisation
based controls. Policies cover defined lines
of accountability and delegation of authority;
financial reporting procedures; and preparation
of monthly management accounts; these
facilitate the accuracy and reliability of financial
reporting and govern the preparation of
financial statements.
The Board is ultimately responsible for the
Group’s system of internal controls and risk
management. No failings were identified,
having discharges its duties in this area by:
• holding regular Board meetings to consider
the matters reserved for its consideration
•
receiving regular management reports
which provide an assessment of key risks
and controls
• scheduling annual Board reviews of
strategy including reviews of the material
risks and uncertainties facing the business
• ensuring there is a clear organisational
structure, with defined responsibilities and
levels of authority
• ensuring there are documented policies and
procedures in place
•
reviewing regular reports containing
detailed information regarding financial
performance, rolling forecasts, actual and
forecast covenant compliance and financial
and non-financial KPIs.
In reviewing the effectiveness of the system
of internal controls, the Audit and Risk
Committee:
•
•
•
reviews the risk register compiled and
maintained by senior managers within the
Group and questions and challenges where
necessary
reviews the system of financial and
accounting controls regularly
reports to the Board on the risk and control
culture within the Group.
Internal audit
The Group does not have an internal audit
function. The Audit and Risk Committee keeps
under review the need for an internal audit
function but feels it is not currently required
given the Group’s size.
External auditors
The Audit and Risk Committee is responsible
for overseeing the Group’s relationship with its
external auditors, PricewaterhouseCoopers
LLP (PwC). This includes the ongoing
assessment of the auditors’ independence and
the effectiveness of the external audit process,
by regular meetings and assessment of non-
audit engagements. The results of this inform
the Committee’s recommendation to the Board
as to the auditors’ appointment (subject to
shareholder approval) or otherwise.
Appointment and tenure
PwC was first appointed as the external
auditors of the Group in December 2016. The
current lead audit partner, Richard McGuire,
has been in place for two years.
PwC generally require the rotation of the
lead audit partner every five years for a listed
client. Therefore, we expect a new lead audit
partner to be selected for the 2021 audit. In
accordance with EU legislation, the Committee
intends to put the external audit out to tender
at least every ten years.
Non-audit services
The engagement of the external audit firm to
provide non-audit services to the Group can
affect the independence assessment, and the
Group has therefore adopted a policy which
conforms to the Revised Ethical Standard
2016 published by the Financial Reporting
Council. Under the policy the engagement
of the external auditors to provide statutory
audit services, certain assurance, taxation
and certain advisory services with fees
of less than £5,000 is pre-approved. Any
engagement of the external auditors to provide
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Stock code: ARIX.Larixbioscience.comGovernance Directors’ Remuneration Report
Composition
Franz Humer (Chairman)
Trevor Jones
John Hutton
Franz Humer, Chairman of the Remuneration Committee
Annual Statement by the Chairman
of the Remuneration Committee
Dear Shareholders,
As Chairman of the Remuneration Committee
(the “Committee”) I am pleased to introduce
our 2017 Directors’ Remuneration Report.
Last year, in an effort to ensure clear
and transparent remuneration reporting,
we provided levels of disclosure around
remuneration which met those of a listed
company, despite the fact that we were not
subject to the same rules and regulations.
This year, we are building upon this level of
disclosure to ensure that we improve upon
our existing high standards and continue
to provide transparency around pay policy
and decision making. I have set out below
a summary of the guiding principles behind
our current policy, approved by a significant
majority of shareholders (88.6%) at the AGM
on 5 June last year:
• To have a Remuneration Policy which
supports the Company strategy of
providing strategic operational and clinical
direction to its Group Businesses;
• The need to offer remuneration packages
which attract, retain and motivate global
talent of the highest calibre in the market in
order to add value to the Group Businesses
and drive shareholder value creation;
• To align the interests of the shareholders
with those of the Directors, and;
• To support a high-performance culture
with appropriate reward for superior
performance without creating incentives
that will encourage excessive risk taking or
unsustainable company performance.
Business Performance and
Remuneration Outcomes for
2017
This year has been one of significant progress
for the company since IPO. Over the course of
2017, the Company has been working hard to
expand its Group Businesses, investing £50.2m
and adding eight new Group Businesses,
expanding it to 13 companies in total.
Several Group Businesses have hit important
strategic milestones during 2017, with a
successful listing on the Nasdaq for Verona
Pharma; and continued clinical trial development
at Autolus and Amplyx, with the latter receiving
data from two Phase 1 clinical trials.
During 2017, the Company was focused on
building towards a capital raise in the early
stages of 2018, which has subsequently been
successfully completed. The capital raised
will allow for continued investment into new
opportunities and provide the management
team with the flexibility to make the right
decisions around appropriate investments.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 The Company has engaged in a successful
recruitment initiative, with the addition of two
new Non-Executive Directors to the board,
Meghan FitzGerald and Giles Kerr. Both
Meghan and Giles bring additional sector
experience to the Board and further bolster the
knowledge and experience at board level.
After the strong performance in 2017, the
annual bonus is set to payout at 80% of
base salary for the management team, with
the bonus delivered fully in cash based on
successful delivery against a large number of
strategic and operational objectives. In line with
the opt-out provisions in the current policy,
the Committee made the decision not to defer
a portion of the bonus into shares due to the
already significant shareholding of the majority
of the management team and the fact that
any incremental bonus deferral will have an
immaterial impact on aligning their interests
with those of shareholders. A full breakdown
of the performance conditions and level of
performance achieved can be found on
page 64.
As the first grant of the Executive Incentive
Plan (EIP) occurred in 2017, the performance
period is still ongoing and no shares are eligible
to vest until 2020.
How we will apply our
Remuneration Policy in 2018
The structure of remuneration arrangements
for 2018 will remain largely unchanged from
that applied in 2017. Executive directors will
continue to have the opportunity to earn a
bonus of up to 100% of salary, subject to
stretching and rigorously applied performance
conditions aligned to our business KPIs.
It is expected that awards will be made to
management under the EIP and will feature
stretching share price growth targets in line
with the Remuneration Policy.
The Committee has agreed that base salaries
for the management team will be maintained
at their current level, with no increase for 2018.
During the year the Remuneration Committee
has considered various elements of executive
pay and has agreed an amendment to the
consultancy agreement with Merlin Scientific
LLP (further details of this agreement can be
found on page 62). Under the new agreement
the fixed consultancy fee will cease in 12
months’ time, with a view to renegotiating the
arrangement in 2019. Sir Chris Evans’ service
agreement remains unchanged.
These decisions reflect the Company’s belief
in the importance of the variable portion of
remuneration, which is structured to encourage
and drive long-term performance aligned to the
strategy of the business.
Below board level, the Company has
conducted a full pay review, and is
implementing some changes to pay structure
and quantum, with pay increases across a
range of positions and levels. The Committee
is aware of the prevailing changes in corporate
governance towards the expectation that the
Committee should have a wider remit when
addressing remuneration related issues and
has made a conscious effort to take a broad
company-wide view in this respect. In future,
when reviewing and developing new iterations
of the Remuneration Policy, how the Policy
filters through the organisation will be a key
consideration.
The Committee and I are satisfied that
the current remuneration structure and
outcomes for 2017 are in the best interests
of shareholders and reflect strong corporate
and personal performance. We will continue
to make sure that our executives’ pay
reflects performance achieved and corporate
governance best practice as it develops, while
ensuring that an exceptional management
team is appropriately retained and motivated.
In that regard, the Committee acknowledges
that a new corporate governance code is
in preparation and, together with the whole
Board, will look to pro-actively respond to
developments arising from this as part of our
2018 agenda.
I hope that you find the information contained
in this report helpful, thoughtful and clear.
I welcome any feedback from shareholders
and look forward to answering any questions
at the Company’s AGM when we will be asking
shareholders to approve the Annual Report
on Remuneration contained in the rest of this
report, which sets out payment made to the
Directors during the year.
Franz Humer
Chairman of the
Remuneration Committee
23 April 2018
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Remuneration snapshot
Topic
Base salary
Description
The base salaries for the Executive Directors remain unchanged in 2018,
and are as follows:
• Joe Anderson £500,000
• Jonathan Peacock £400,000
• Professor Sir Christopher Evans £250,000
• James Rawlingson £270,000
Benefits
The Executive Directors are eligible to receive private health cover, life assurance, income
protection and a company car or car allowance.
Pension contribution
A maximum contribution of 10% gross base salary for UK employees
Annual bonus
• 100% of salary for the Executive Directors
• Bonuses for 2018 will be based on a range of challenging strategic measures aligned
with the company’s KPIs
• Up to 50% of the annual bonus can be deferred into shares for a period of 3 years
Long term incentive
• Award of up to 150% of salary for the Executive Directors.
• 100% of the base award will vest based on the achievement of the performance
target with up to 150% of the award vesting based on the achievement of the
outperformance target.
• Awards vest after three years subject to share price performance targets.
Shareholding guidelines
100%–200% of salary for Executive Directors
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 The following table sets out each element of remuneration for Executive Directors and how it supports the Company’s short and long-term strategic
objectives:
Remuneration policy table
Element of
Remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Opportunity and
Performance metrics
Salary and
fees
Provide salaries and fees that
support the Company to acquire and
retain the highly qualified Executive
Directors who are needed to develop
and implement the Group’s strategy.
An Executive Director’s basic salary
and fees are set on appointment and
reviewed annually or when there is a
change in position or responsibility.
When determining an appropriate
level of salary, the Committee
considers:
•
individual degree of responsibility;
The Committee ensures that
maximum salary and fee levels are
positioned with consideration for:
•
the need to acquire and retain
Executives with the skills and
experience to develop and
implement the Company’s
strategy;
• companies that are comparable
in terms of business activities,
complexity and size to Arix, which
we would compete for talent
against.
In general, increases for Executive
Directors will be in line with the
increase for employees.
The Group will set out in the
section headed Implementation of
Remuneration Policy, in the following
financial year, the salaries for that year
for each of the Executive Directors.
See description of benefits in previous
column.
•
•
•
the general operational
performance of the Group
and individual performance (if
applicable);
the economic environment and
the sustainable development of
the Group;
remuneration structures in
companies that are comparable
in terms of business activities,
complexity and size;
• any change in scope, role and
responsibilities; and
•
remuneration practices within the
Group.
The Executive Directors are eligible
to receive private health cover, life
assurance, income protection and a
company car or car allowance.
The Committee recognises the need
to maintain suitable flexibility in the
benefits provided to ensure it is able
to support the objective of attracting
and retaining personnel in order to
deliver the Group strategy. Additional
benefits may therefore be offered,
such as relocation allowances on
recruitment and reasonable tax
advice and filing support.
The maximum will be set at the cost
of providing the benefits described.
Benefits
Provides a benefits package in
line with practice relative to its
comparator group to enable the
Group to recruit and retain Executive
Directors with the experience and
expertise to deliver the Group’s
strategy.
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Element of
Remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Opportunity and
Performance metrics
Pensions
Provides a pension provision in
line with practice relative to its
comparator group to enable the
Company to recruit and retain
Executive Directors with the
experience and expertise to deliver
the Group’s strategy.
Pension arrangements are provided
in line with practice relative to its
comparator group to enable the
Group to recruit and retain Executive
Directors with the experience and
expertise to deliver the Group’s
strategy.
The Group operates a defined
contribution (DC) scheme for UK
employees and US employees
contribute into the Arix 401(k)
pension scheme (which is open to all
employees) with a contribution made
by Arix alongside an employee’s
contribution.
The maximum contribution for UK
employees into a defined contribution
plan or a salary supplement in lieu of
pension will be 10% of gross basic
salary (or salary plus fees).
US employees contribute into the
Arix 401(k) pension scheme with a
matching contribution made by Arix
on their contributions up to the US
government limits imposed on the
401(k) Plan.
The Group will set out in the
section headed Implementation
of Remuneration Policy, in the
following financial year the pension
contributions for that year for each
of the Executive Directors.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Element of
Remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Opportunity and
Performance metrics
Percentage of bonus maximum
earned for levels of performance:
Threshold: 0%
On target: 50%
Maximum: 100%
Annual and
Deferred
Bonus Plan
(“ABP”)
The ABP provides a significant
incentive to the Executive Directors
linked to achievement in delivering
goals that are closely aligned with the
Company’s strategy and the creation
of value for shareholders.
In particular, the Annual Bonus Plan
supports the Company’s objectives
allowing the setting of annual targets
based on the businesses’ strategy at
the time, meaning that a wider range
of performance metrics can be used
that are relevant and achievable.
The Committee has discretion to
defer part of the annual bonus
earned in shares under the ABP. The
advantage of deferral is:
•
increased alignment between
Executives and shareholders
created through deferral and
the increased equity stake of
management in the Group; and
• amounts deferred in shares are
subject to a Director’s continuing
employment, which provides an
effective lock-in.
The maximum bonus (including
any part of the bonus deferred into
an ABP Award) deliverable under
the ABP will not exceed 100% of a
participant’s annual base salary (or
salary plus fees).
The Board will determine the bonus
to be delivered following the end of
the relevant financial year.
The Group will set out in the
Remuneration Report in the following
financial year, the nature of the targets
and their weighting for each year.
Details of the performance conditions,
targets and their level of satisfaction
for the year being reported on will
be set out in the Annual Report on
Remuneration.
The Committee can determine that
part of the bonus earned under the
ABP is provided as an award of
shares.
The maximum value of deferred
shares is 50% of the bonus earned.
The main terms of these awards are:
• minimum deferral period of
three years, during which no
performance conditions will apply;
and
•
the participant’s continued
employment at the end of the
deferral period unless he / she is a
good leaver.
The Group will set out in the
Remuneration Report in the following
financial year, the nature of the
deferral mechanism being operated
for the annual bonus for the awards
to be made in that financial year.
The Committee may award dividend
equivalents on those shares to plan
participants to the extent that they
vest.
The Committee has the discretion to
apply a holding period of two years
post vesting for deferred bonus
shares.
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Element of
Remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Opportunity and
Performance metrics
Long-Term
Incentive Plan
(“EIP”)
The purpose of the EIP is to
incentivise and reward Executive
Directors in relation to long-term
performance and achievement of
Group Strategy.
This will better align Executive
Directors’ interests with the long-term
interests of the Group and will also
act as a retention mechanism.
The Award is designed to incentivise
Executive Directors to grow the
investment portfolio and value
creation by successfully delivering the
Group’s strategy and increase in total
shareholder value, assessed via share
price growth.
Awards are granted annually to
Executive Directors in the form of
a conditional share award, nil cost
option or restricted share award.
Details of the performance conditions
for grants made in the year will be
set out in the Annual Report on
Remuneration.
These awards will vest over three
years subject to:
•
the Executive Director’s continued
employment at the date of
vesting; and
• satisfaction of the performance
conditions.
The Committee may award dividend
equivalents on awards in either
shares or cash to the extent that
these vest.
The Committee has the discretion to
apply a holding period of two years
post vesting for the EIP.
Normal maximum value of 225% of
salary (or salary plus fees) p.a. based
on the market value at the date of
grant set in accordance with the rules
of the Plan.
In exceptional circumstances the
Committee may grant an award with
a maximum of 300% of salary (or
salary plus fees).
100% of the base award will vest
based on the achievement of the
performance target with up to 150%
vesting based on the achievement
of the outperformance target which
is set at a level that rewards for
significant outperformance of the
performance target.
For the 2017 award:
• None of the award will vest if the
share price growth is less than 8%
p.a. compound;
• 8% p.a. compound growth
provides vesting of 100% of the
base award;
• 20% p.a. compound provides
vesting of 125% of the base
award;
• 30% p.a. compound growth
provides vesting of 150% of the
base award (which results in
the maximum value of 225% of
salary).
The Remuneration Committee
retains discretion in exceptional
circumstances to change
performance measures and targets
and the weightings attached to
performance measures part way
through a performance period if there
is a significant and material event
which causes the Remuneration
Committee to believe the original
measures, weightings and targets
are no longer appropriate. Any
changes made and the exceptional
circumstances will be clearly
disclosed to shareholders in the
Annual Report on Remuneration.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Element of
Remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Opportunity and
Performance metrics
Minimum
Shareholding
Requirement
The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up over
a five year period and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to
these guidelines is a condition of continued participation in the equity incentive arrangements. This policy ensures that
the interests of Executive Directors and those of shareholders are closely aligned.
The following table sets out the minimum shareholding requirements:
Role
Shareholding Requirement (percentage of salary, or salary plus fees)
Main Board Executive Directors
100%–200% (dependent on historical level of EIP awards)
The Committee retains the discretion to increase the shareholding requirements.
Non-Executive
Director Fees
Provides a level of fees to support
recruitment and retention of high-
calibre Non-Executive Directors
with the necessary experience to
advise and assist with establishing
and monitoring the Group’s strategic
objectives.
The Chairman and Executive
Directors are responsible for setting
the remuneration of the Non-
Executive Directors. Non-Executive
Directors are paid an annual fee and
additional fees for chairmanship of
committees.
Up to 50% of their total annual fee
shall be satisfied by the issue and
allotment of Ordinary Shares at the
prevailing market price following
the annual general meeting of the
Company each year. The remaining
balance of their fee is payable in
quarterly equal instalments in arrears.
Fees are reviewed annually based
in line with the review policy for the
Executive Directors. Non-Executive
Directors do not participate in any
variable remuneration or benefits
arrangements.
The fees for Non-Executive Directors
are set at broadly the median of the
comparator group.
In general, the level of fee increase
for the Non-Executive Directors will
be set taking account of any change
in responsibility and will take into
account the general rise in salaries
across the UK workforce.
The Company will pay reasonable
expenses incurred by the Non-
Executive Directors and may settle
any tax incurred in relation to these.
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Historic awards
Any historic awards that were granted under any previous share schemes operated by the Group but remain outstanding, remain eligible to vest
based on their original award terms. See Annual Report in Remuneration for details of outstanding share awards.
Malus and Clawback
The ABP and the EIP include best practice malus and clawback provisions.
Malus is the adjustment of unpaid bonus and deferred share awards under the ABP and outstanding EIP awards as a result of the occurrence of one
or more of the circumstances listed below. The adjustment may result in the value being reduced to nil.
Clawback is the recovery of payments or vested awards under the ABP and vested EIP awards as a result of the occurrence of one or more of the
circumstances listed below. Clawback may apply to all or part of a participant’s award and may be effected, among other means, by requiring the
transfer of shares, payment of cash or reduction of awards or bonuses.
The circumstances in which malus and clawback could apply are as follows:
• discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any Group company;
•
•
the assessment of any performance condition or condition in respect of an ABP and EIP Award was based on error, or inaccurate or misleading
information;
the discovery that any information used to determine the cash payment under the ABP or the number of shares subject to an ABP or EIP Award
was based on error, or inaccurate or misleading information;
• action or conduct of a participant which amounts to fraud or gross misconduct; or
• events or the behaviour of a participant have led to the censure of a Group company by a regulatory authority or have had a significant
detrimental impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant was responsible for
the censure or reputational damage and that the censure or reputational damage is attributable to the participant.
Annual Bonus
Deferred Bonus
EIP
Malus
Up to the date of payment of
a cash bonus
To the end of the three-year
deferral period
To the end of the three-year
vesting period
Clawback
–
–
Two years post vesting
The Committee believes that the rules of the Plans provide sufficient powers to enforce malus and clawback where required.
Discretion
The Remuneration Committee has discretion in several areas of Policy as set out in this report. The Remuneration Committee may also exercise
operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules. In addition, the Remuneration
Committee has discretion to amend the Policy with regard to minor or administrative matters where it would be, in the opinion of the Remuneration
Committee, disproportionate to seek or await shareholder approval.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Recruitment Policy
The Group’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive Directors, as
set out in the Remuneration policy table below. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a
preferred candidate with the appropriate calibre and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding one-off or enhanced
short-term or long-term incentive payments as well as giving consideration for the appropriateness of any performance measures associated with
an award.
The Group’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below
Remuneration element
Recruitment policy
Salary, Benefits and Pension
These will be set in line with the policy for existing Executive Directors.
Annual Bonus
EIP
Maximum annual participation will be set in line with the Group’s policy for existing Executive Directors and
will not exceed 100% of salary.
Maximum annual participation will be set in line with the Group’s policy for existing Executive Directors and
will not exceed 225% of salary in normal circumstances and 300% of salary in exceptional circumstances.
“Buy Out” of incentives
forfeited on cessation of
employment
Where the Committee determines that the individual circumstances of recruitment justifies the provision of
a buyout, the equivalent value of any incentives that will be forfeited on cessation of an Executive Director’s
previous employment will be calculated taking into account the following:
•
•
the proportion of the performance period completed on the date of the Executive Director’s cessation of
employment;
the performance conditions attached to the vesting of these incentives and the likelihood of them being
satisfied; and
• any other terms and conditions having a material effect on their value (“lapsed value”);
The Committee may then grant up to the same value as the lapsed value, where possible, under the
Company’s incentive plans. To the extent that it was not possible or practical to provide the buyout within the
terms of the Company’s existing incentive plans, a bespoke arrangement would be used.
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would be no
retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the
remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned.
These would be disclosed to shareholders in the remuneration report for the relevant financial year.
The Company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current
Non-Executive Directors.
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Payment for Loss of Office
Remuneration element
Treatment on Cessation of Employment
Salary, Benefits
and Pension
Annual Bonus
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Good Leaver Reason
• Performance conditions will be measured at the bonus measurement date. Bonus will normally be prorated
for the period worked during the financial year.
Other Reason:
• No bonus payable for year of cessation
Discretion:
The Committee has the following elements of discretion:
• To determine that an executive is a good leaver. It is the Committee’s intention to only use this discretion in
circumstances where there is an appropriate business case which will be explained in full to shareholders;
and
• To determine whether to prorate the bonus to time. The Remuneration Committee’s policy is that it will
prorate bonus for time. It is the Remuneration Committee’s intention to use discretion to not prorate in
circumstances where there is an appropriate business case which will be explained in full to shareholders.
Deferred
Bonus Shares
Good Leaver Reason
• All subsisting deferred share awards will vest in full on cessation of employment.
Other Reason:
• Lapse of any unvested deferred share awards.
Discretion:
The Committee has the following elements of discretion:
• To determine that an executive is a good leaver. It is the Committee’s intention to only use this discretion in
circumstances where there is an appropriate business case which will be explained in full to shareholders;
• To vest deferred shares at the end of the original deferral period or at the date of cessation. The
Remuneration Committee will make this determination depending on the type of good leaver reason resulting
in the cessation; and
• To determine whether to prorate the maximum number of shares to the time from the date of grant to the
date of cessation. The Remuneration Committee’s policy is that it will not prorate awards for time. The
Remuneration Committee will determine whether or not to prorate based on the circumstances of the
Executive Director’s departure.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Remuneration element
Treatment on Cessation of Employment
EIP
Good Leaver:
• Prorated to time and performance in respect of each subsisting EIP award.
Other Reason:
• Lapse of any unvested EIP awards.
Discretion:
The Committee has the following elements of discretion:
• To determine that an executive is a good leaver. It is the Committee’s intention to only use this discretion in
circumstances where there is an appropriate business case which will be explained in full to shareholders;
• To measure performance over the original performance period or at the date of cessation. The Committee
will make this determination depending on the type of good leaver reason resulting in the cessation; and
• To determine whether to prorate the maximum number of shares to the time from the date of grant to the
date of cessation. The Remuneration Committee’s policy is that it will prorate awards for time. It is the
Remuneration Committee’s intention to use discretion to not prorate in circumstances where there is an
appropriate business case which will be explained in full to shareholders.
Other contractual
obligations
There are no other contractual provisions other than those set out above agreed prior to 27 June 2012, the date
at which the new regime of Directors’ Remuneration Report obligations applies.
A good leaver reason is defined as cessation in the following circumstances:
• death;
•
ill health;
•
injury or disability;
•
retirement;
• employing company ceasing to be a Group company;
•
transfer of employment to a company which is not a Group company; and
• at the discretion of the Committee (as described above).
Cessation of employment in circumstances other than those set out above is cessation for other reasons
Change of Control
Name of Incentive Plan
Change of Control
Discretion
ABP Cash Awards
Prorated to time and performance to the date of
the change of control.
The Committee has discretion regarding whether to prorate
the bonus to time.
The Committee’s policy is that it will prorate the bonus for
time. It is the Committee’s intention to use its discretion to not
prorate in circumstances only where there is an appropriate
business case which will be explained in full to shareholders.
ABP Deferred
Share Awards
Subsisting deferred share awards will vest on a
change of control.
The Committee has discretion regarding whether to prorate
the award to time.
EIP
The number of shares subject to subsisting EIP
awards will vest on a change of control, prorated
to time and performance.
The Committee’s policy is that it will not prorate awards for
time. The Committee will make this determination depending
on the circumstances of the change of control.
The Committee will determine the proportion of the EIP Award
which vests taking into account, among other factors, the
period of time the EIP Award has been held by the participant
and the extent to which any applicable performance
conditions have been satisfied at that time.
61
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Stock code: ARIX.Larixbioscience.comGovernance Directors’ Remuneration Report
continued
Service agreements and letters of appointment
The Executive Directors’ service agreements are for a rolling term and, with the exception of James Rawlingson’s, may be terminated by the
Company or the Executive Director by giving 12 months’ notice.
Name
Jonathan Peacock1
Sir Chris Evans²
Joe Anderson
James Rawlingson
Date of service agreement
2 February 2017
1 November 2015
8 February 2016
9 February 2016
Notice periods by
Company (months)
12
12
12
6
Notice periods by
Director (months)
12
12
12
6
1 J Peacock became Chairman in February 2016. He also entered into a service agreement with Arix Bioscience, Inc dated 2 February 2017 effective from 1 October
2016 (in replacement of his service agreement with the Company which was effective 1 January 2016 to 1 February 2017). Either party may terminate the employment
at any time and depending upon the reason for such termination, severance including 12 months of salary may be payable.
2 The Company entered into a consultancy agreement on 1 February 2016 with Merlin Scientific LLP, a limited liability partnership wholly owned and controlled by C
Evans. Under the Consultancy agreement Merlin Scientific LLP agreed to make C Evans available for the performance of services. The Consultancy agreement can be
terminated by either party upon 12 months’ notice in writing.
The Non-Executive Directors of the Company do not have service contracts, but are appointed by letters of appointment. Each Non-Executive
Director’s term of office runs for an initial period of three years unless terminated earlier upon written notice or upon their resignations.
The terms of the Non-Executive Directors’ appointments are subject to their re-election by the Company’s shareholders at the AGM scheduled to be
held on 17 May 2018 and to re-election at any subsequent AGM at which the Non-Executive Directors stand for re-election.
The details of each Non-Executive Director’s current term are set out below:
Name
Franz Humer
Lord John Hutton
Professor Trevor Jones
David U’Prichard
Meghan FitzGerald
Giles Kerr
Date of appointment
7 June 2016
8 February 2016
8 February 2016
8 February 2016
21 July 2017
17 October 2017
Current term
(full years)
3
3
3
3
3
3
Notice
periods by
Company
(months)
3
3
3
3
3
3
Notice
periods by
Director
(months)
3
3
3
3
3
3
Exceptions to Remuneration Policy for Executive and Non-Executive Directors
Notwithstanding the restrictions set out in the Policy, where the Group has made a commitment to a Director which:
• was in accordance with the then prevailing Remuneration policy at the time the commitment was made; and/or
• was made before the Director became a Director;
the Company will continue to give effect to it, even if it is inconsistent with the policy which is in effect at that time. For example, earlier remuneration
policies of the Group may continue to apply in relation to awards under bonus or share incentive plans in operation pre-IPO which were made pre-
IPO but which may vest or be exercised, or may have vested and been exercised, post-IPO.
Statement of conditions elsewhere in the Company
The Remuneration Committee considers pay and employment conditions across the Company when reviewing the remuneration of the Executive
Directors and other senior employees. In particular, the Remuneration Committee considers the range of base pay increases across the Group. While
the Company does not directly consult with employees as part of the process of reviewing executive pay and formulating the Remuneration Policy
set out in this report, the Company does receive updates from the Executive Directors on their discussions and reviews with senior management and
employees.
Consideration of shareholder views
The Company welcomes dialogue with its shareholders; shareholder views are considered when evaluating and setting the remuneration strategy
and the Remuneration Committee will consult with key shareholders prior to any significant changes to its Remuneration Policy.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Annual Report on Remuneration
This section sets out details of the remuneration of the Executive and Non-Executive Directors received during the financial year ended
31 December 2017 and also describes the operation of the Remuneration Committee.
Remuneration Committee
Membership
Franz Humer is Chairman of the Committee. The other members of the Committee are Professor Trevor Jones and Lord Hutton. The Committee has
met three times during the year under review.
The Board considers each of the members of the Committee to be independent in accordance with the UK Corporate Governance Code (the
Code). The Chairman of the Board and Chief Executive will also attend meetings of the Committee by invitation, but will not be present when matters
relating to their own remuneration are discussed.
Role of the Remuneration Committee
The Remuneration Committee’s responsibilities are set out in its Terms of Reference which are available on request to shareholders and on the
Company’s website.
Visit us online at:
www.arixbioscience.com
Its role includes:
• Setting the remuneration policy for all executive Directors of the Company, the Chairman of the Board and management (being all personnel
receiving an annual basic salary of £250,000 or more).
• Within the terms of the remuneration policy and in consultation with the Chairman of the Board and/or Chief Executive, as appropriate,
determining the total individual remuneration package of each Executive Director and the Chairman and other designated senior executives
including bonuses, incentive payments and share option or other share awards.
• Approving the design of, and determining targets for, any performance-related pay schemes operated by the Company and approving total
annual payments made under such schemes.
• Ensuring that contractual terms on termination, and any payments made, are fair to the individual, and the Company, that failure is not rewarded
and that the duty to mitigate loss is fully recognised.
In carrying out its duties the Remuneration Committee takes into account any legal and regulatory requirements, including the Code, the UK Listing
Rules and FCA Remuneration Codes. Determining the fees of the Non-Executive Directors is a matter for the Executive Directors and the Chairman
as a whole.
Key matters considered by the Remuneration Committee
Key issues reviewed and discussed by the Remuneration Committee have included:
•
•
Review and consideration of remuneration policy;
Review of Executive Directors and senior manager bonuses for 2017.
Advisers to the Committee
The Committee has not appointed advisers at this stage and will review its position now that the Company is listed. The Committee receives advice
and guidance on senior executive remuneration from the Chief Executive Officer, and the Company Secretary in respect of the UK Corporate
Governance Code and share schemes. The Company Secretary acts as Secretary to the Committee, ensures that the Remuneration Committee
fulfils its duties under its terms of reference and provides regular updates to the Remuneration Committee on relevant regulatory developments in
the UK.
25845 20 April 2018 5:02 AM Proof 13
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Stock code: ARIX.Larixbioscience.comGovernance Directors’ Remuneration Report
continued
Single Figure Table – Executive Directors (audited)
Basic salary
Pension
2016
2017
£’000
£’000
2017
£’000
2016
£’000
2017
£’000
Benefits
2016
£’000
Jonathan Peacock
Sir Chris Evans
Joe Anderson
James Rawlingson
400
250
500
270
229
229
427
247
11
19
39
20
13
8
19
13
22
18
37
20
–
–
32
19
Annual bonus
2016
£’000
2017
£’000
320
375
-
400
216
–
750
405
LTIP
Other*
Total
2017
£’000
2016
£’000
2017
£’000
2016
£’000
2017
£’000
2016
£’000
–
–
–
–
–
500
– 1,052
–
750
–
337
– 1,253
617
955 1,339 1,192
– 1,726 1,228
684
–
863
* One-off awards of share options were issued to Executive Directors upon the Company’s Initial Public Offering in February 2017; these have a two-year vesting period
but for disclosure purposes are recognised in the period in which they are awarded
• Base salary: amount earned for the year. During 2016, J Peacock waived £150k of his annual £400k base salary
• Benefits: the taxable value of benefits received in the year, including life assurance, long-term sickness insurance, private healthcare and company car cash allowance
• Pension: the value of the Company’s contribution during the year; 7.5% or in the case of Jonathan Peacock, 6.0% Company contributions to 401(k) plan
• Annual Bonus: all amounts are payable in 2018
• Other: Sir Chris Evans’ balance includes amounts paid via Merlin Scientific LLP, a limited liability partnership wholly owned and controlled by Sir Chris Evans
Single Figure Table – Non-Executive Directors (audited)
Franz Humer
Lord John Hutton
Professor Trevor Jones
David U’Prichard
Meghan FitzGerald
Giles Kerr
Sir John Banham (retired)
Fees
Benefits
Pension
2017
£’000
2016
£’000
2017
£’000
2016
£’000
2017
£’000
2016
£’000
Annual bonus
2016
£’000
2017
£’000
88
43
43
44
27
13
26
67
52
52
54
–
–
54
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
LTIP
Other*
Total
2017
£’000
2016
£’000
2017
£’000
2016
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70
34
34
34
23
24
20
–
–
–
–
–
–
–
2017
£’000
158
77
77
78
50
37
46
2016
£’000
67
52
52
54
–
–
54
* Non-Executives receive 50% of their remuneration in the form of shares, annually following the Company’s AGM. Other amounts relate to share issues.
Annual Bonus Payout Table (audited)
For the Executive Directors, the annual bonus objective outcomes were as follows (certain outcomes not listed due to commerical sensitivity):
Category
Performance Outcome
Bonus Contribution
Rationale
Grow number and value
of Group Businesses:
Increase number of Group Businesses
•
• Deliver positive revaluations (>1 Group
Business)
Financing
• Substantial raise made on London Stock
Exchange (>£75m)
Business partnering
•
Increase strategic reach by developing
strategic partners
Increase commercial potential by
developing academic partners
•
Fund management
• Strengthen the management structure of
the fund management division
• Significantly increase The Wales Life
Sciences Investment Fund (WLSIF)
Investor Relations
• Research coverage from high quality
analysts (minimum three)
• Strong news flow to keep shareholders
well informed (>1 news item per month)
Percentage of
Base Salary Awarded
64
30%
Goals achieved. Eight new Group Businesses acquired,
taking total from five to 13. This was an outperformance,
as was the two positive revaluations seen in the year
30%
Goals achieved. In addition to the successful £112m IPO
in February 2017, there was a successful follow-on raise in
March 2018 of £87m. Notably the follow-on raise was at a
premium to the prevailing share price
5%
5%
10%
Goals partly achieved. Number of strategic partners
doubled from two to four, by the addition of Ipsen in
Europe and Fosun in China. However, the focus on
academic relationships in the year was on deepening
relationships with existing partners rather than increasing
the number of relationships
Goals partly achieved. The governance of the fund
management business was successfully restructured to
create an Advisory Board; and a new fund manager was
appointed for WLSIF. Although WLSIF was increased by a
further £5m fund raise, this was not considered sufficient
by the Remuneration Committee to fully meet the goal
Research coverage goals achieved with strong buy
recommendations from Jefferies, Stifel and H.C.
Wainwright & Co. High levels of news flow achieved,
with over 50 news items released following IPO in
February 2017
80%
Primary goals achieved
Threshold
Maximum
25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
LTIPs Vesting in the Year (audited)
During 2017, no shares vested under the EIP. The first grant of EIP shares was made in 2017 and will not vest until 2019.
Implementation of Remuneration Policy for Executive Directors – Base Salary (audited)
Jonathan Peacock
Sir Chris Evans
Joe Anderson
James Rawlingson
2017
£’000
400
250
500
270
2016
£’000
400
250
500
270
Increase in
Salary
%
0%
0%
0%
0%
Scheme Interests Awarded in 2017 (audited)
During the year ended 31 December 2017, the Executive Directors were awarded options or conditional share awards under the EIP, details of which
are summarised below.
Director
Jonathan Peacock
Joe Anderson
James Rawlingson
Date of Grant
26/05/2017
26/05/2017
26/05/2017
Number
Awarded
379,746
569,619
205,062
Award Price
£
1.975
1.975
1.975
Face Value
£
750,000
1,125,000
405,000
% of Base
Salary
188%
225%
150%
Vesting Date
26/05/2020
26/05/2020
26/05/2020
Performance Measure
Weighting
Performance Period
Compound share price growth
100% Grant to 26 May 2020
Performance
<8% per annum
8% per annum
20% per annum
≥30% per annum
% Vesting
0%
67%
83%
100%
The award price of £1.975 was the closing share price of Arix Bioscience plc the day prior to the award. The exercise price differs from the market
value at the date of the grant due to the awards being nil-cost options.
Awards relating to Arix’s IPO were also made during the year under the EIP, in the form of options or conditional share awards. Details of the award
were fully disclosed in the Directors’ Remuneration Report for the period ended 31 December 2016.
CEO – Historic Remuneration Information (audited)
Single Figure Total
Annual Variable against maximum opportunity
EIP vesting rates against maximum opportunity
2017
£’000
1,726
80%
N/A
2016
£’000
1,228
N/A
N/A
Note: Arix Bioscience plc was incorporated in 2015; it listed on the London Stock Exchange in February 2017; as such, only the previous two periods of data is included
Percentage Change in Remuneration of CEO (audited)
Percentage change in 2017 remuneration compared with remuneration in 2016
Base Salary
Annual Bonus
Benefits
Note: the above table reflects annualised balances for the prior period, as it was Arix’s first accounting period
25845 20 April 2018 5:02 AM Proof 13
All Employees
excl. CEO
0%
-21%
0%
CEO
0%
-46%
0%
65
Stock code: ARIX.Larixbioscience.comGovernance Directors’ Remuneration Report
continued
Implementation of Remuneration Policy for 2018
Base Salary
Salary reviews normally take place in January of each year, and take effect from February. No base salary increases were proposed for 2018.
Benefits and Pension
No changes are proposed to benefits or pension arrangements in 2018.
Annual Bonus
The operation of the bonus plan for 2018 will be consistent with the framework detailed in the Policy section of this report. The maximum opportunity
for the year ending 31 December 2018 will be 100% of salary for all Executive Directors. Up to 50% of the annual bonus can be deferred into shares,
which will be held for three years, subject to the participants’ continued employment.
Proposed target levels have been set to be challenging relative to the 2018 business plan and the performance conditions comprise of a range
of strategic measures aligned to the long-term growth of the Group. Specific targets will not be disclosed because the Remuneration Committee
consider forward looking targets to be commercially sensitive. However, the Committee intends to disclose these retrospectively in next year’s
Remuneration Report to the extent that they do not remain commercially sensitive.
Long Term Incentive
The anticipated 2018 grant of the EIP will be in line with the policy laid out in the 2016 Directors’ Remuneration Report. The maximum opportunity
for executive directors will be 225% of base salary. The grant will be subject to threshold performance targets over a three-year period.
A Total Shareholder Return graph will be included in the 2018 Directors’ Remuneration Report. It is not included this year as the Company’s shares
were not traded throughout the period.
Directors’ Shareholdings and Share Interests (audited)
Executive Directors’ interests in the Company as at 31 December 2017 are shown in the table below. Shareholding guidelines are 100%-200% of
salary for Executive Directors. Only the 2017 EIP Awards are subject to performance conditions.
Director
Jonathan Peacock
Joe Anderson**
Sir Chris Evans***
James Rawlingson
Ordinary
Shares Held
#
595,056
354,310
7,316,039
37,484
C Shares
Held
#
49,671
–
–
–
Shareholding
as % of Base
Salary
303%
138%
5,707%
27%
IPO Awards*
(unvested)
#
241,545
362,318
295,893
163,043
2017 EIP
Awards*
(unvested)
#
379,746
569,619
–
205,062
Founder
Options (not
exercised)
#
1,242,125
1,518,155
–
–
Founder
Options
(unvested)
#
1,242,125
1,518,154
–
–
* Awards are options, other than for Jonathan Peacock, which are conditional share awards
** Joe Anderson holds 138,889 Ordinary Shares through PAL Trustees Limited, the trustee of his SIPP
*** Sir Chris Evans holds part of his interest through Ectoplasm Limited as to 6,096,699 Ordinary Shares. Ectoplasm Limited is wholly owned by Abacus Trust Company
Limited as Trustee of the Ectoplasm Settlement, of which the discretionary beneficiaries include C Evans and members of his close family
Implementation of Remuneration Policy for Non-Executive Directors – Fees
Base Fees
Senior Independent Director
Non-Executive Director
Additional Fees
Audit Committee Chair
Audit Committee Member
Remuneration Committee Chair
Remuneration Committee Member
Nomination Committee Chair
Nomination Committee Member
66
25845 20 April 2018 5:02 AM Proof 13
2017
£’000
100
50
10
7.5
10
7.5
10
7.5
ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Non-Executive Directors’ interests in Ordinary shares of the Company
Non-Executive Directors are not subject to a shareholding requirement. Details of their interests in Ordinary Shares in the Company are set out
below:
Non-Executive Director
Franz Humer
Lord John Matthew Patrick Hutton
Professor Trevor Jones
David U’Prichard
Meghan FitzGerald
Giles Kerr
Statement of Voting on Remuneration – 2017 AGM
To approve the Directors’ Remuneration Policy
Relative Importance of Spend on Pay
Underlying operating loss
Dividends
Total company spend on remuneration
Votes For
#
41,408,348
Votes For
%
88.59%
Votes Against
#
5,333,387
Votes Against
%
11.41%
2017
£’000
(3,589)
–
5,933
Shareholding
as at
31 December
2017
56,763
27,777
27,777
28,985
30,344
31,663
Votes
Withheld
#
942
2016
£’000
(8,304)
–
6,324
Underlying operating loss is considered the most appropriate metric given the current stage of the Group.
Total Group spend on remuneration fell by 6% compared to the previous period.
External Board Appointments
Subject to Board approval, the Company allows its Executive Directors to hold non-executive positions outside of the Company that complement
and enhance their current role. Any fees may be retained by the Director. Non-Executive Director positions in exchange-listed companies held by the
Company’s Executive Directors are: Jon Peacock (Bellerophon Therapeutics Inc, Nasdaq-listed) and Sir Chris Evans (Reneuron Group plc,
AIM-listed).
25845 20 April 2018 5:02 AM Proof 13
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Stock code: ARIX.Larixbioscience.comGovernance Financial Statements
Independent Auditors’ Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Financial Statements
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Notes to the Company
Financial Statements
Shareholder Information
Advisers
70
76
77
78
79
80
96
97
98
99
IBC
68
arixbioscience.com
arixbioscience.com
69
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25845 20 April 2018 5:02 AM Proof 13
ARIX BIOSCIENCE PLCStock code: ARIX.LAnnual Report and Financial Statements 2017Financial Statements Independent Auditors’ Report
to the members of Arix Bioscience plc
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided to
the Group or the Company.
Other than those disclosed in the note 5 to the financial statements, we
have provided no non-audit services to the Group or the Company in the
period from 1 January 2017 to 31 December 2017.
Our audit approach
Context
The principal activity of Arix Bioscience plc is to source, finance and
develop healthcare and life sciences businesses globally. The Group
works with its Group Businesses to support them in delivering their
strategy. The Parent Company is incorporated and domiciled in the
United Kingdom and was formed in September 2015. The Arthurian
Life Sciences Limited (‘ALS’) Group, comprising Arthurian Life Sciences
Limited (a 100% owned direct subsidiary of Arix Bioscience plc),
Arthurian Life Sciences SPV GP Limited and Arthurian Life Sciences
Carried Interest Partner LP were acquired during the prior period.
The ALS Group manages the Wales Life Sciences Investment Fund
(the ‘WLSIF’) and receives a management fee and carried interest from
the WLSIF.
Report on the audit of the financial statements
Opinion
In our opinion:
• Arix Bioscience plc’s Group financial statements and Company
financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 31
December 2017 and of the Group’s loss and cash flows for the year
then ended;
•
•
•
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
the Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”, and applicable law); and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual
Report and Accounts (the “Annual Report”), which comprise: the
Consolidated and Company Statements of Financial Position as at
31 December 2017; the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Cash Flows, and the
Consolidated and Company Statements of Changes in Equity for the
year then ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk
Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to
• Overall Group materiality: £1.46 million (2016: £463,000), based on 1% of net assets.
• Overall Company materiality: £1.45 million (2016: £460,000), based on 1% of net assets capped at lower than
Group materiality.
• We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the geographic structure of the Group, the accounting
processes and controls, and the industry in which the Group operates.
• We audited the Parent Company and three significant subsidiaries of the Group, which together account for
83% of its loss before tax, and 99% of its net assets. The three significant subsidiaries subject to audit were Arix
Bioscience Holdings Limited, Arthurian Life Sciences Limited and Arthurian Life Sciences SPV GP Limited and
these were subject to audit as they represent a significant portion of the Group’s income, loss before tax or net
assets.
• Valuation of unquoted investments (Group).
• Financial interest in Wales Life Sciences Investment Fund (Group).
• Share based payments expense (Group and Company).
Overview
Materiality
Audit scope
Key
audit
matters
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We did not identify any key audit matters relating to irregularities,
including fraud. As in all of our audits we also addressed the risk of
management override of internal controls, including testing journals
and evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and
any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of all risks
identified by our audit.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are
inherently uncertain.
We gained an understanding of the legal and regulatory framework
applicable to the Group and the industry in which it operates, and
considered the risk of acts by the Group which were contrary to
applicable laws and regulations, including fraud. We designed audit
procedures at Group and significant component level to respond to the
risk, recognising that the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
We focused on laws and regulations that could give rise to a material
misstatement in the Group and Company financial statements, including,
but not limited to, Companies Act 2006, the Listing Rules and the UK
tax legislation. Our tests included, but were not limited to, review of the
financial statement disclosures to underlying supporting documentation,
review of correspondence with the regulators, review of correspondence
with legal advisors, and enquiries of management that there is no
undisclosed litigation against the Arix Group.
There are inherent limitations in the audit procedures described above
and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements,
the less likely we would become aware of it.
Key audit matter
How our audit addressed the key audit matter
Valuation of unquoted investments
Refer to pages 83 and 84 (Accounting policies), pages 89 and 90 (notes)
and page 48 (Report of the Audit and Risk Committee).
We understood and evaluated the valuation methodology applied, by
reference to industry practice and applicable accounting standards, and
tested the techniques used by management in determining the fair value
of the investee entities, we performed the following:
The fair value of the unquoted investments is £58.8m as at 31 December
2017. This is an area of focus due to the fact that unquoted investments
(“investee entities”) do not have readily determinable prices. The valuation
methodology primarily used by the Group is based on the ‘price of
recent investment’ or a ‘milestone approach’. The price of recent
investment approach refers to any investment in the investee company
that would give an indication of fair value. The milestone approach refers
to monitoring the fair value of the investments for potential adjustments
based on meeting certain milestones or performance targets. As such, the
valuation of unquoted investments is judgemental, increasing the risk of
material misstatement based on the size of the investments held in relation
to the overall financial statements.
• Agreed the price of recent investments to supporting documentation,
such as purchase agreements, funding drawdown requests or bank
statements.
• Held meetings with management to understand the performance of
each investee company in relation to its plan and the rationale for
the valuation methodology applied and then obtained supporting
financial information and board papers from the investee companies
that corroborated those discussions held with management.
We found that management’s valuations of investments, and in
particular that the assumptions used were supported by the audit
evidence we obtained.
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Stock code: ARIX.Larixbioscience.comFinancial Statements Independent Auditors’ Report continued
to the members of Arix Bioscience plc
Key audit matter
How our audit addressed the key audit matter
Financial interest in The Wales Life Sciences
Investment Fund
Refer to pages 83 and 84 (Accounting policies), pages 89 and 90 (notes)
and page 48 (Report of the Audit and Risk Committee).
In 2017 Arthurian Life Sciences Limited (“ALS”) invested directly into the
Wales Life Science Investment Fund (“the WLSIF”). The direct investment
into the WLSIF is held at Fair Value and was valued at £5.85m at the year
end. This value is derived from the amounts entitled to ALS from WLSIF
as at 31 December 2017 based on its Net Asset Value (“NAV”). This
is an area of focus due to the fact that WLSIF does not have a readily
determinable price and the underlying investments consist of unquoted
securities.
The investment in carried interest arises through Arthurian Life Sciences
Limited’s 100% interest in the ‘carried interest’ vehicle (Arthurian
Life Sciences Carried Interest Partner LP) of WLSIF. Carried interest
represents a share of the profits arising in the WLSIF. The fair value of this
carried interest investment is determined to be £3.8m and is included in
investments held at fair value in the financial statements.
The valuation of investment in the carried interest is determined at the
reporting date through the assistance of a management’s expert using a
discounted cash flow model which takes into account the future carried
interest cash flows arising from the WLSIF. The key assumptions used
in the model include the expected ‘exit values’ and ‘exit dates’ for the
underlying investments in the WLSIF and the discount rate to be applied.
As noted above, this is an area of focus due to the fact that WLSIF does
not have a readily determinable price and the underlying investments
consist of unquoted securities.
Share based payments expense
Refer to page 85 (Accounting policies), pages 92 and 93 (notes) and
page 48 (Report of the Audit and Risk Committee).
The share based payment expense is determined to be an area of focus
given the assumptions used by management, judgements made, and
the complexity of the Black-Scholes and the Monte Carlo valuation
models.
These factors increase the risk of material misstatement based on the
size of the share based payment charges in relation to the financial
statements. There is also a risk that due to the complexity of some of
the incentive and share arrangements that the charge is not completely
recognised. The share based payment expense amounted to £3.6m for
the year.
We understood and evaluated the valuation methodology applied, by
reference to industry practice and applicable accounting standards,
and tested the techniques used by management in determining the fair
value of the investment.
• We obtained the management expert’s report, the discounted
cash flow model for the carried interest valuation and tested the
mathematical accuracy of the model and agreed the calculation to
the supporting documents.
• We assessed the competence, capability and objectivity of
management’s expert.
• We engaged our internal valuation experts to perform a review of
the methodology applied to determine the fair value and derive an
appropriate discount rate.
• We held meetings with management to understand the
assumptions made in determining the value of the investments in
the WLSIF. We obtained supporting information, including board
papers and financial projections of the investee companies and
market comparable information to support the values.
• We applied various sensitivities to the assumptions used by
management in the valuation model to assess the impact that this
would have on the overall carried interest valuation.
We found that management’s valuation of the investment in WLSIF
and carried interest, including assumptions used in the valuation was
supported by the audit evidence we obtained.
In testing the share based payment expense, we performed the following
testing to address the risks identified for the types of share based payment
transaction:
• Obtained and read the contracts for new and amended awards in the
year and shareholder agreements to examine whether all share based
payments have been accounted for. We did not identify any material
omissions.
• Tested each of the new awards in the year by checking that they were
appropriately authorised, consistent with scheme plans, classified
correctly as equity or cash settled and used an appropriate share
price.
• Obtained the valuation models for new schemes and grants made
in the year and tested those models by agreeing key inputs (service
commencement date, exercise price, share amount, vesting period)
used to the share agreements in place, and examining that this model
was appropriate in the context of an industry accepted pricing model.
• Assessed the reasonableness of the estimates in relation to
performance conditions and/or service conditions for existing awards.
The key assumptions in calculating the share based payment expense
are the share volatility of the Group, the exercise date for the shares,
the assumed dividend yields of the Group’s shares, the forfeiture rates
of the share options, the leaver rate and performance conditions.
• Assessed whether all disclosures required by IFRSs as adopted
by the EU had been made and appropriately reflected the scheme
agreements and the calculations and estimates made.
Based on our work, we found that the pricing model used to value
the awards was in line with accepted market practice and that the
assumptions made by management were supported by audit evidence
we obtained.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company,
the accounting processes and controls, and the industry in which they
operate.
This is a first audit for the Group since listing on the London Stock
Exchange and therefore we have held a number of early planning
discussions with those charged with governance and with management
from the listing date in order to appropriately scope and plan the audit.
This has allowed us to adequately capture the areas of focus for the
audit. We audited the Company and three significant subsidiaries of the
Group, which together account for 83% of its loss before tax, and 99%
of its net assets. This, together with procedures performed over the
consolidation, has provided the evidence we need for our opinion on the
Group financial statements.
We also performed audit procedures on the Group consolidation
adjustments and the financial statement disclosures. The three
significant subsidiaries subject to audit were Arix Bioscience Holdings
Limited, Arthurian Life Sciences Limited and Arthurian Life Sciences
SPV GP Limited and these were subject to audit as they represent a
significant portion of the Group’s income, loss before tax or net assets.
In addition to the Group audit and audit of the three subsidiaries we
have performed specified audit procedures over Arix Bioscience, Inc.,
holding the Group’s significant North American investments, which is a
specific risk and a key audit matter for the audit.
Materiality
The scope of our audit was influenced by our application of materiality.
We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our
audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Group financial
statements
£1.46 million (2016:
£463,000).
1% of net assets.
Net assets is the primary
measure used by the
shareholders in assessing
the performance of the
Group, and is a generally
accepted auditing
benchmark for a business
such as the Group, which
invests in other businesses
for capital appreciation.
Company financial
statements
£1.45 million (2016:
£460,000).
1% of net assets, capped
at lower than Group
materiality.
Net assets is the primary
measure used by the
shareholders in assessing
the performance of
the Company, and is
a generally accepted
auditing benchmark for
a business such as the
Company, which invests
in other businesses for
capital appreciation.
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The range
of materiality allocated across components was £300,000 and £1.45
million. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We agreed with the Audit and Risk Committee that we would report to
them misstatements identified during our audit above £73,000 (Group
audit) (2016: £23,000) and £72,000 (Company audit) (2016: £22,000) as
well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Outcome
We have nothing material to add
or to draw attention to. However,
because not all future events or
conditions can be predicted, this
statement is not a guarantee as to
the Group’s and Company’s ability
to continue as a going concern.
Reporting obligation
We are required to report if we
have anything material to add
or draw attention to in respect
of the directors’ statement in
the financial statements about
whether the directors considered
it appropriate to adopt the going
concern basis of accounting in
preparing the financial statements
and the directors’ identification of
any material uncertainties to the
Group’s and the Company’s ability
to continue as a going concern
over a period of at least twelve
months from the date of approval
of the financial statements.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our
opinion on the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except to the
extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate
Governance Statement, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken
in the course of the audit, the Companies Act 2006, (CA06) and ISAs
(UK) require us also to report certain opinions and matters as described
below (required by ISAs (UK) unless otherwise stated).
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Independent Auditors’ Report continued
to the members of Arix Bioscience plc
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the
year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
(CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement on page
49 about internal controls and risk management systems in relation to financial reporting processes and on pages 37 to 39 about share capital
structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct
Authority (“DTR”) is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement on pages 40
to 43 with respect to the Company’s corporate governance code and practices and about its administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility to report if a Corporate Governance Statement has not been prepared by the Company.
(CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the
solvency or liquidity of the Group
As a result of the directors’ voluntary reporting on how they have applied the UK Corporate Governance Code (the “Code”), we are required to
report to you if we have anything material to add or draw attention to regarding:
• The directors’ confirmation on pages 26 and 27 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 27 of the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report in respect of this responsibility.
Other Code Provisions
As a result of the directors’ voluntary reporting on how they have applied the Code, we are required to report to you if, in our opinion:
• The statement given by the directors, on page 39, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and performance,
business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing our
audit.
• The section of the Annual Report on pages 46 to 49 describing the work of the Audit and Risk Committee does not appropriately address
matters communicated by us to the Audit and Risk Committee.
We have nothing to report in respect of this responsibility.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 •
the Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee, we were
appointed by the directors on 9 December 2016 to audit the financial
statements for the period ended 31 December 2016 and subsequent
financial periods. The period of total uninterrupted engagement is 2 years,
covering the period ended 31 December 2016 to 31 December 2017.
Other voluntary reporting
Going concern
The directors have requested that we review the statement on page 27
in relation to going concern as if the Company were a premium listed
Company. We have nothing to report having performed our review.
The directors’ assessment of the prospects of the
Group and of the principal risks that would threaten
the solvency or liquidity of the Group
The directors have requested that we perform a review of the directors’
statements on pages 26 and 27 that they have carried out a robust
assessment of the principal risks facing the Group and in relation to the
longer-term viability of the Group, as if the Company were a premium
listed Company. Our review was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’
process supporting their statements; checking that the statements are
in alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge and
understanding of the Group and Company and their environment
obtained in the course of the audit. We have nothing to report having
performed this review.
Richard McGuire (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 April 2018
Responsibilities for the financial statements and
the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set
out on page 39, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and
for being satisfied that they give a true and fair view. The directors are
also responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or
have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for and only for
the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not received all the information and explanations we require
for our audit; or
• adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not
made; or
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Stock code: ARIX.Larixbioscience.comFinancial Statements Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Change in fair value of investments
Revenue
Administrative Expenses
Operating loss
Net finance (costs)/income
Exceptional gain
Exceptional costs
Foreign exchange (losses)/gains
Share-based payment charge
Loss before taxation
Taxation
Loss for the year/period
Other Comprehensive Income
Exchange differences on translating foreign operations
Taxation
Total comprehensive loss for the year/period
Attributable to
Owners of Arix Bioscience plc
Earnings per share
Basic earnings per share (p)
Diluted earnings per share (p)
2017
£’000
5,544
1,857
(10,990)
(3,589)
(15)
–
–
(432)
(3,654)
(7,690)
221
(7,469)
(1,202)
59
(8,612)
15 Sept 15 to
31 Dec 2016
£’000
1,354
635
(10,293)
(8,304)
26
3,962
(596)
97
(4,712)
(9,527)
692
(8,835)
434
-
(8,401)
(8,612)
(8,401)
(0.11)
(0.11)
(0.36)
(0.36)
Note
11
3
6
7
23
18
9
9
10
10
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
Consolidated Statement of Financial Position
As at 31 December 2017
ASSETS
Non-Current Assets
Investments held at fair value
Intangible assets
Property, plant and equipment
Current Assets
Cash and cash equivalents
Trade and other receivables
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Deferred tax liability
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital and share premium
Retained earnings
Other reserves
TOTAL EQUITY
Note
2017
£’000
2016
£’000
11
12
13
15
14
16
17
71,331
2,057
523
73,911
74,938
1,266
76,204
17,115
2,344
750
20,209
28,929
3,262
32,191
150,115
52,400
(3,670)
–
(3,670)
(5,791)
(280)
(6,071)
(3,670)
(6,071)
146,445
46,329
105,125
42,088
(768)
146,445
51
45,844
434
46,329
146,445
46,329
The accompanying notes form an integral part of the financial statements. The financial statements on pages 76 to 98 were approved by the Board
of Directors and authorised for issue on 23 April 2018, and were signed on its behalf by
James Rawlingson
Chief Financial Officer
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
As at 1 January 2017
Loss for the year
Other comprehensive income
Contributions of equity, net of transaction costs and tax
Share-based payment charge
As at 31 December 2017
Share
Capital
£'000
Share
Premium
£'000
Translation
Reserve
£'000
51
–
–
–
–
–
–
–
105,074
–
434
–
(1,202)
–
–
51
105,074
(768)
For the period from 15 September 2015 to 31 December 2016
At Incorporation
Loss for the period
Other comprehensive income
Contributions of equity, net of transaction costs and tax
Share capital reorganisation
Share-based payment charge
As at 31 December 2016
Share
Capital
£'000
Share
Premium
£'000
Translation
Reserve
£'000
–
–
–
51
–
–
51
–
–
–
49,967
(49,967)
–
–
–
–
434
–
–
–
434
Retained
Earnings
£'000
45,844
(7,469)
59
–
3,654
42,088
Retained
Earnings
£'000
–
(8,835)
–
–
49,967
4,712
45,844
Total
£'000
46,329
(7,469)
(1,143)
105,074
3,654
146,445
Total
£'000
–
(8,835)
434
50,018
–
4,712
46,329
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
Consolidated Statement of Cash Flows
For the year ended 31 December 2017
Net cash from operating activities
Finance expenses paid
Net cash from operating activities
Cash flows from investing activities
Purchase of equity investments
Purchase of property, plant and equipment
Acquisition of subsidiaries, net of cash and other assets acquired
Net cash from investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of period .
Effect of exchange rate changes
Cash and cash equivalents at end of period
Note
19
15 Sept 15 to
31 Dec 2016
£’000
(7,457)
–
(7,457)
2017
£’000
(8,768)
(16)
(8,784)
(50,239)
(12,385)
(5)
–
(888)
(359)
(50,244)
(13,632)
105,074
105,074
50,018
50,018
46,046
28,929
28,929
(37)
74,938
–
–
28,929
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Notes to the Financial Statements
1. General information
The principal activity of Arix Bioscience plc (the ‘Company’) and together with its subsidiaries (the ‘Arix Group’ or ‘the Group’) is to source, finance
and develop healthcare and life science businesses globally.
The Company is incorporated and domiciled in the United Kingdom. Arix Bioscience plc was incorporated on 15 September 2015 as Perceptive
Bioscience Investments Limited and changed its name to Arix Bioscience Limited. It subsequently re-registered as a public limited company and
changed its name to Arix Bioscience plc. The address of its registered office is 20 Berkeley Square, London, W1J 6EQ. The registered number is
09777975.
2. Accounting policies
a. Basis of preparation
The consolidated financial statements of the Arix Group have been prepared in accordance with International Financial Reporting Standards (IFRS)
and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS as adopted by the
European Union. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB) as adopted by the
European Union.
The financial statements have been prepared on a historical cost basis, except for certain financial assets which have been measured at fair value.
The financial statements are presented in British pounds sterling, which is the functional and presentational currency of the Company, and the
presentational currency of the Group; balances are presented in thousands of British pounds sterling unless otherwise stated.
The Arix Group has applied all standards and interpretations issued by the IASB that were effective at the period end date. The accounting policies
set out below have, unless otherwise stated, been applied consistently to all periods presented.
Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Arix
Group’s accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Significant estimates are made by the Arix Group when determining the appropriate methodology for valuing investments (see Note 2(i)) and share-
based payments (see Note 2(o) and Note 18).
In preparing these financial statements, the Directors have considered the relationship that the Group has with The Wales Life Sciences Investment
Fund (the “WLSIF”) and specifically as to whether the Group controls WLSIF. The Directors note that while Arthurian Life Sciences Limited (a 100%
subsidiary of Arix Bioscience plc), in its role as fund manager to WLSIF, and Arthurian Life Sciences SPV GP Limited (a 100% subsidiary of Arix
Bioscience plc) in its role as general partner of the WLSIF, both exercise power over the activities of WLSIF, they do not have sufficient exposure to
variability of returns from WLSIF to meet the definition of control and therefore acts as agents, rather than principals of WLSIF. Accordingly, WLSIF
has not been consolidated into these financial statements.
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b. Basis of consolidation
Subsidiaries
Subsidiaries are entities over which the Arix Group has control. The Arix Group controls an entity when it is exposed to, or has the right to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred. They are deconsolidated from the date that control ceases. The acquisition method of
accounting is used to account for business combinations by the Group.
The consolidated financial statements comprise a consolidation of the subsidiary entities listed below. This table contains the disclosures required by
Section 409 of the Companies Act 2006 for subsidiaries.
Entity
Arix Bioscience Holdings Limited
Arix Bioscience, Inc
Arthurian Life Sciences Limited
Arthurian Life Sciences GP Limited
Arthurian Life Sciences SPV GP Limited
Arthurian Life Sciences Carried Interest Partner LP Scotland
Australia
Arix Bioscience Pty Limited
Country of
Incorporation
England and Wales
United States
England and Wales
Scotland
England and Wales
Registered Address
20 Berkeley Square, London, W1J 6EQ
250 West 55th Street, 33rd Floor, New York NY 10019
3 Assembly Square, Britannia Quay, Cardiff, CF10 4PL
16 Charlotte Square, Edinburgh, EH2 4DF
3 Assembly Square, Britannia Quay, Cardiff, CF10 4PL
16 Charlotte Square, Edinburgh, EH2 4DF
Level 27, AMP Centre, 50 Bridge Street, Sydney NSW 2000
Ownership
100%
100%
100%
100%
100%
100%
100%
All companies are involved in the sourcing, financing and development of healthcare and life science businesses, other than the Arthurian Life
Sciences companies, which are engaged in fund management activity, and Arthurian Life Sciences Carried Interest Partner LP, which holds a
financial interest in a limited partnership.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Associates
Associates are entities over which the Group has significant influence, but does not control, generally accompanied by a shareholding of between
20% and 50% of the voting rights.
No associates are presented on the Statement of Financial Position as the Group elects to hold such investments at fair value through profit and
loss. This treatment is permitted by IAS 28 Investment in Associates and Joint Ventures, which permits investments held by entities that are akin to
venture capital organisations to be excluded from its measurement methodology requirements where those investments are designated, upon initial
recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
Changes in fair value of associates are recognised in the Statement of Comprehensive Income in the period in which the change occurs. The Group
has no interests in associates through which it carries on its business.
The disclosures required by Section 409 of the Companies Act 2006 for associated undertakings are included in Note 11 to the financial statements.
Similarly, those investments which may not have qualified as Associate but fall within the wider scope of significant holdings and so are subject to
Section 409 disclosure acts are also included in Note 11 to the financial statements.
WLSIF is considered neither a subsidiary nor an associate, as detailed in Note 2(a).
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2. Accounting policies continued
c. Adoption of new and revised standards
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2017 reporting periods and
have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.
•
•
•
IFRS 9 – ‘Financial Instruments’ addresses the classification, measurement and derecognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment model for financial assets. The Group have determined that its investments
are held for long periods of time, and are not held for the benefit of any contractual cash flows. On this basis, such investments are classified as
financial assets at Fair Value in Profit and Loss under IFRS 9. This is consistent with the Group’s treatment under IAS39, so there is no change
in treatment and no impact on the financial statements. The Group’s cash and receivable balances are held with the expectation that these will
be realised by collecting the contractual cash flows associated with them. Under IFRS 9, such financial assets are held at Amortised Cost. This
is consistent with the Group’s treatment under IAS 39, so there is no change in treatment and no material impact on the financial statements. To
date, the Group has not impaired any financial instruments, and as such, any possible future impairments would be applied in line with IFRS 9.
The Group will apply the new rules from 1 January 2018.
IFRS 15 – ‘Revenue from contracts with customers’ applies to the recognition of revenue. This will replace IAS 18 which covers contracts
for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised
when control of a good or service transfers to a customer. The Group has assessed its sources of revenue, namely fund management fees, Non-
Executive Director fees receivable, and determined that there will be no change in how each revenue source will be recognised compared to the
existing treatment under IAS18; there will therefore be no impact on the financial statements. The Group will apply the new rules from 1 January
2018.
IFRS 16 – ‘Leases’ This standard replaces the current guidance in IAS 17 – ‘Leases’ and is a far-reaching change in accounting by lessees
in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off
balance sheet). IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all
lease contracts. IFRS 16 includes an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption
can only be applied by lessees. For lessors, the accounting remains substantially unchanged. IFRS 16 provides updated guidance on the
definition of a lease (as well as the guidance on the combination and separation of contracts); under IFRS 16, a contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The standard is effective
for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement. The Group is currently
assessing the impact of IFRS 16.
d. Revenue recognition
Revenue is generated from fund management fees, transaction fees and from Non-Executive Directors’ fees receivable. Fund management fees are
earned as a percentage of fund commitments managed and are recognised in the period in which they arise. Transaction fees are typically earned as
a fixed percentage of funds provided and are recognised at the point of completion of the transaction. Non-Executive Directors’ fees are recognised
on an accruals basis.
e. Foreign currency translation
The assets and liabilities of foreign operations are translated to the Arix Group’s presentational currency (British pounds sterling) at foreign exchange
rates ruling at the period-end date. The revenues and expenses of foreign operations are translated at an average rate for the period where this
rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign
operations are reported as an item of other comprehensive income and accumulated in the translation reserve.
f. Leases
Rents payable under operating leases are charged against income on a straight-line basis over the lease term, even if payments are not made on
such a basis.
g. Exceptional items
Items that are material in size and unusual in nature are disclosed separately to provide a more accurate indication of underlying performance.
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h. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure
that is directly attributable to the acquisition of the asset.
Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets:
Office Equipment
Fixtures and Fittings
Office Furniture
Leasehold Property
Three years
Five years
Five years
Five years
i. Financial Assets
The Arix Group classifies its financial assets as either at fair value through profit or loss or as loans and receivables. The classification depends on the
purpose for which the financial assets have been acquired and is determined on initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current
assets. The Arix Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement
of Financial Position.
Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Arix Group commits to purchase or sell the
asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the
Arix Group has transferred substantially all risks and rewards of ownership.
Equity Investments
Those Group Businesses in the Arix Group that are held with a view to the ultimate realisation of capital gains are recognised as equity investments
within the scope of IAS 39 and are classified as financial assets at fair value through profit or loss. This includes investments in associated
undertakings, as per Note 11. When financial assets are recognised initially they are measured at fair value, plus, in the case of investments not
at fair value through profit or loss, directly attributable transaction costs. They are subsequently remeasured at their fair value if a valuation event
occurs. A valuation event may include technical measures, such as product development phases, financial events, such as further injection of
capital, and sales events, such as product launches.
Fair value hierarchy
The Arix Group classifies financial assets using a fair value hierarchy that reflects the significance of the inputs used in making the related fair value
measurements. The level in the fair value hierarchy, within which a financial asset is classified, is determined on the basis of the lowest level input that
is significant to that asset’s fair value measurement. The fair value hierarchy has the following levels:
Level 1
Level 2
Level 3
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.
The quoted market price used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case
for unlisted equity securities.
Valuation of investments
The fair value of quoted investments is based on bid prices at the period end date.
The fair value of unlisted securities is established initially at cost. Subsequently, the fair value is determined using the International Private Equity and
Venture Capital Valuation Guidelines December 2015 (‘IPEV Guidelines’). The valuation methodology primarily used by the Arix Group is the ‘price of
recent investment’, a ‘milestone analysis’ approach or the net asset value of a direct investment in a fund.
Investments made in seed, start-up and early stage companies often have no current and no short-term future earnings or positive cash flows; in
such circumstances, it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and
to make reliable cash flow forecasts. Consequently, the most appropriate approach to determine fair value is a methodology primarily based on the
price of a recent investment.
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2. Accounting policies continued
Where the Arix Group considers that the unadjusted price of investment may no longer be relevant, the Group carries out an enhanced assessment
based on milestone analysis. In applying the milestone analysis approach to investments in companies in early or development stages, the Group
seeks to determine whether there is an indication of change in fair value.
The following factors are considered when calculating the fair value:
• Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value, unless there is objective
observable evidence that the investment has since been impaired;
• Where there has been a recent investment by a third party, the price of that investment will provide a basis of the valuation;
•
If there is no readily ascertainable value or recent transaction, the Arix Group considers alternative IPEV Guidelines methodologies, principally
being discounted cash flows and price-earnings multiples. In these instances, a price to earnings multiple is derived from an equivalent business
that is considered a suitable proxy. An appropriate discount is applied to the price-earnings multiple for risks inherent to early stage businesses;
• Where a fair value cannot be estimated reliably, perhaps because of a lack of either revenue or earnings, the investment is reported at carrying
value, unless there is evidence that the investment has been impaired or there has been a ‘milestone’ event. A milestone event may include
technical measures, such as product development phases and patent approvals, financial measures, such as cash burn rate and profitability
expectations, and market and sales measures, such as testing phases, product launches and market introductions; and
• Where the equity structure in an investment involves different class rights in a sale or liquidity event, the Arix Group takes these different rights into
account when forming a view of the fair value of its investment.
Although the Directors use their best judgement, and cross-reference results of primary valuation models against secondary models in estimating the
fair value of investments, there are inherent limitations in any estimation techniques. Whilst fair value estimates presented herein attempt to present
the amount the Arix Group could realise in a current transaction, the final realisation may be different, as future events will also affect the current
estimates of fair value. The effects of such events on the estimates of fair value, including the ultimate liquidation of investments, could be material to
the financial statements.
This is particularly significant for the Arix Group’s interest in the carried interest vehicle of The Wales Life Sciences Investment Fund. Carried interest
is the fund manager’s share of the fund’s profits, once investors have received a return over a specified hurdle. Underlying companies within the fund
are at an early stage of their lives and are generally held at a value equal to cost until a milestone is reached. This makes the valuation of the carried
interest sensitive to the assumptions used regarding the size and timing of realisations. This information is then used to determine the carried interest
valuation, using a discounted cash flow model; further assumptions are made in this calculation, with the final balance being particularly sensitive to
the choice of discount rate; a liquidity discount is also applied. Any ultimate gain for the Arix Group from this holding may be materially different from
the current fair value.
Treatment of gains and losses arising on fair value
Realised and unrealised gains and losses on financial assets at fair value through profit and loss are included in the Statement of Comprehensive
Income in the period in which they arise.
Recognition of financial assets
Purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Impairment of financial assets
At the end of each reporting period the Group assesses whether there is objective evidence that its loans and other receivables are impaired.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced through the use of an allowance account
and the amount of the loss is recognised in the Statement of Comprehensive Income within administrative expenses. If, in a subsequent period, the
amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,
the reversal of the previously recognised impairment loss is recognised in the Statement of Comprehensive Income within administrative expenses.
Financial assets and liabilities are offset when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle
on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and
must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Arix Group or the counterparty.
Where these conditions are met, the net amount is reported in the Statement of Financial Position.
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j. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, call deposits and bank overdrafts.
k. Goodwill and intangible assets
Intangibles were acquired by the Arix Group as part of the acquisition of Arthurian Life Sciences Limited and Arthurian Life Sciences SPV GP Limited.
It is the policy of the Arix Group to amortise these fair values over the period in which the Arix Group is expected to obtain economic benefit from
the related intangible assets. The excess of consideration transferred over the fair value of net identifiable assets acquired is recorded as goodwill.
If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in the
Statement of Comprehensive Income as a bargain purchase.
l. Share capital
Ordinary Shares and Series C Shares are classified as equity. Equity instruments issued by the Arix Group are recorded at the proceeds received, net
of direct issue costs.
m. Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts
payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).
If not, they are presented as non-current liabilities.
Trade payables are initially recognised at fair value, generally being the invoiced amount and are subsequently measured at amortised cost, using the
effective interest method.
n. Current and deferred taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the
extent that it relates to items recognised directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries
where the Arix Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the balance sheets. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the Statement of Financial Position
date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
o. Share-based payments
The Arix Group operates an equity incentive plan and an executive share option plan in which the Group’s founders also participate. Share options
must be measured at fair value and recognised as an expense in the Statement of Comprehensive Income with a corresponding increase in equity.
The fair value of the option is estimated at the date of grant using the Black-Scholes Model and is charged as an expense in the Statement of
Comprehensive Income over the vesting period. The charge is adjusted each year to reflect the expected and actual level of vesting. Estimation
uncertainty arises with this balance as the calculation incorporates assumptions for share price, exercise price, expected volatility (based on similar
quoted companies), risk-free interest rate and share option term. In addition to management share options, the Group has also provided Founders
Shares, which are classed as a share-based payment. As no service conditions are attached to these shares, the incremental accounting charges
have been recognised immediately.
p. Financial risk management
The Arix Group is exposed to market risk, interest rate risk, credit risk and liquidity risk. The senior management oversees the management of these
risks and ensures that the financial risk taking is governed by appropriate policies and procedures and that financial risks are identified, measured
and managed in accordance with the Arix Group’s policies and risk appetite.
The Board of Directors review and agree the policies for managing each of these risks, which are summarised below:
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2. Accounting policies continued
Market risk
Foreign exchange risk – the Arix Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar and euros. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities
and net investments in foreign operations. The Arix Group has certain investments in foreign operations, whose net assets are exposed to foreign
currency translation risk; at period-end the Arix Group held euro-denominated assets valued at €1.2m; Canadian dollar-denominated assets valued
at C$0.9m; and US dollar-denominated assets valued at $44.2m. The impact of foreign exchange on these holdings is closely monitored.
Price risk – the Arix Group is exposed to equity securities price risk because investments are held at fair value through profit or loss.
The Group’s strategy is to deploy permanent capital into innovative businesses which have unique, high-impact outcomes; Arix believes that such
businesses are less susceptible to macroeconomic cycles. The Group monitors its availability of capital closely, ensuring sufficient balances are
available for the continuing operation of the business throughout the period assessed in the viability statement.
Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates.
The Arix Group’s income is substantially independent of changes in market interest rates. Interest bearing assets include only cash and cash
equivalents, which earn interest at variable rates. The Arix Group has a treasury policy to manage cash and cash equivalents.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Arix Group. The major
classes of financial assets of the Arix Group are cash and cash equivalents (31 December 2017: £74,938k) and trade and other receivables (£960k).
Risk of counterparty default arising on cash and cash equivalents is controlled within a framework of dealing with high-quality institutions.
As at 31 December 2017, 100% of cash and cash equivalents was deposited with institutions that have a credit rating of at least category A+,
according to Fitch ratings.
No counterparty has failed to meet its obligations over the period. The maximum exposure to credit risk is represented by the carrying amount of
each asset. Management does not expect any significant counterparty to fail to meet its obligations.
Liquidity risk
The Arix Group manages liquidity risk by maintaining sufficient cash to enable it to meet its operational requirements. The following table details the
Arix Holdings Group’s remaining contractual maturity for its financial liabilities based on undiscounted contractual payments:
Trade, other payables and accruals
Within
1 year
£’000
3,670
1 to 2
years
£’000
–
2 to 5
years
£’000
–
Over 5
years
£’000
–
Total
£’000
3,670
Capital risk management
The Arix Group manages its capital to ensure that it will be able to continue as a going concern, whilst also maximising the operating potential of
the business. The capital structure of the Arix Group consists of equity attributable to equity holders of the Arix Group, comprising issued capital
and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. The Arix Group is not subject to externally imposed capital
requirements.
3. Revenue
Fund management fee income
Other income
2017
£’000
1,695
162
1,857
2016
£’000
589
46
635
The total revenue for the Arix Group has been derived from its principal activity of sourcing, financing and developing healthcare and life science
businesses globally. All of this revenue relates to trading undertaken in the United Kingdom.
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4. Segmental Information
Information for the purposes of resource allocation and assessment of performance is reported to the Arix Group’s Chief Executive Officer, who is
considered to be the chief operating decision maker, based wholly on the overall activities of the Arix Group. It has therefore been determined that
the Arix Group has only one reportable segment under IFRS 8 (‘Operating Segments’), which is that of sourcing, financing and developing healthcare
and life science businesses globally. The Arix Group’s revenue, results and assets for this one reportable segment can be determined by reference to
the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position.
5. Loss Before Taxation
Negative goodwill on acquisition of Arthurian Life Sciences
Amortisation
Depreciation
Rent
Auditors’ remuneration
Statutory audit services
Fees payable for the audit of the Arix Group accounts
Fees payable for the audit of the accounts of subsidiaries of the Arix Group
Non-audit services
Taxation advisory services
Other assurance and advisory services
Total auditors’ remuneration
6. Administrative Expenses
The administrative expenses charge broken down by nature is as follows:
Employment costs
Recruitment costs
Consultancy fees
Research and development costs
Other expenses
7. Net Finance Income
Bank interest
Bank charges
8. Employee Costs
Employee costs (including Directors) comprise:
Salary and bonus
Social security costs
Pension costs
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2017
£’000
–
(287)
(218)
(598)
152
41
–
187
380
2017
£’000
5,933
255
999
208
3,595
10,990
2017
£’000
1
(16)
(15)
2017
£’000
5,236
541
156
5,933
2016
£’000
3,962
(142)
(138)
(302)
95
43
35
722
895
2016
£’000
6,324
837
1,152
–
1,980
10,293
2016
£’000
36
(10)
26
2016
£’000
5,560
712
52
6,324
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Notes to the Financial Statements
9. Income Tax
Current year tax charge
Current Tax
Deferred tax
Total tax credit
Reconciliation of tax charge
Profit before tax
Expected tax based on 19.25% (2016: 20.00%)
Effects of:
Expenses not deductible for tax purposes
Adjustments in respect of previous periods
Income not taxable
Impact of rate between deferred tax and current tax
Deferred tax not recognised
Total tax credit
Tax creditor
Brought forward
Relating to Acquisition
Relating to Profit and Loss
Carried forward
Recognised deferred tax provisions
Brought forward
Relating to Acquisition
Relating to Profit and Loss
Relating to Other Comprehensive Income
Carried forward
Represented by:
Unutilised tax losses
ACAs
Intangibles
Employee benefits
Investments
Unrecognised deferred tax provisions
Unutilised tax losses
Employee benefits
Other timing differences
2017
£’000
59
(221)
(162)
2016
£’000
–
(692)
(692)
(7,690)
(1,481)
(9,527)
(1,906)
378
59
–
(11)
893
(162)
(31)
–
–
(31)
(280)
–
221
59
–
1,076
5
(374)
374
(1,081)
–
1,868
79
1
1,948
890
–
(792)
187
929
(692)
–
(31)
-
(31)
–
(972)
692
–
(280)
575
5
(398)
118
(580)
(280)
839
–
–
839
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016
(on 7 September 2016). These include reductions to the main rate to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the
balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits
is probable. The Group did not recognise deferred income tax assets of £1,948k in respect of losses amounting to £11,459k, which can be carried
forward against future taxable income.
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10. Earnings per Share
On 17 February 2017, the Group issued 48,309,179 ordinary shares as it was admitted to the standard listing segment of the Official List of the
UKLA and to London Stock Exchange plc’s Main Market for listed securities. On 20 March 2017, the Group partially exercised the Over-Allotment
Option available to it following its listing, with a further 6,139,815 shares issued. As at 31 December 2017, the Group had 96,153,090 ordinary
shares in issue.
At the year-end date, 9,822,459 of the ordinary shares were subject to restrictions. These shares are not entitled to vote, attend meetings or to
receive dividends or other distributions. Consequently, restricted shares have been excluded from the calculation of the weighted average number of
shares in issue.
Basic earnings per share is calculated by dividing the loss attributable to equity holders of Arix Bioscience plc by the weighted average number of
enfranchised shares (as adjusted for capital subscription in accordance with the terms of the restrictive share agreement) in issue during the period.
The Arix Group has potentially dilutive ordinary shares, being those share options granted to employees. As the Arix Group has incurred a loss in the
period, the diluted loss per share is the same as the basic earnings per share as the loss has an anti-dilutive effect.
Loss attributable to equity holders of Arix Bioscience plc
Weighted average number of shares in issue
Basic and diluted loss per share
11. Investments
Equity Investments
At 1 January 2017
Additions
Unrealised (loss) / gain on investments
Foreign exchange losses
At 31 December 2017
Year ended
31 Dec 2017
£’000
Period ended
31 Dec 2016
£’000
(8,612)
(8,401)
78,725,677
23,030,546
(0.11)p
(0.36)p
Level 1
- Quoted
Investments
£’000
Level 3
- Unquoted
Investments
£’000
2,020
1,780
(882)
(72)
2,846
15,095
48,459
6,426
(1,495)
68,485
Total
£’000
17,115
50,239
5,544
(1,567)
71,331
Level 3 investments are valued with reference to either price of recent investment (£58.8m, 2016: £10.8m); net asset value (£5.9m, 2016: £nil); or
by discounted cash flow (£3.8m, 2016: £4.3m); the latter used a discount rate of 23%, a discount for marketability (20%) and other assumptions
relating to exit values and exit dates (see Note 2(i) for further details). The sensitivity of the discounted cash flow valuation was considered; a 25%
reduction in the exit assumptions of the underlying assets would result in the £3.8m valuation being reduced to £0.7m.
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Notes to the Financial Statements
11. Investments continued
As permitted by IAS 28 ‘Investment in Associates’ and in accordance with the Arix Group accounting policy, investments are held at fair value even
though the Arix Group may have significant influence over the companies. As at 31 December 2017 the Arix Group is deemed to have significant
influence over the following entities, either due to holding more than 20% of the issued share capital, and/or having a director on the board of the
company:
Company
Artios Pharma Limited
Country of
Incorporation Registered Address
England
% of Issued
Share Capital
Held
14.7%
Net Assets/
(Liabilities)
of Company
£’000
4,965
Profit/(Loss)
of Company
£’000
(2,444)
Date of
Financial
Information
31 Dec 2016
3.7% Not disclosed Not disclosed
N/A
4.9% Not disclosed Not disclosed
28,282
8.6%
N/A
(9,736) 30 Sept 2016
20.7% Not disclosed Not disclosed
8.0% Not disclosed Not disclosed
6.8% Not disclosed Not disclosed
13.3% Not disclosed Not disclosed
26.0% Not disclosed Not disclosed
17.8% Not disclosed Not disclosed
N/A
N/A
N/A
N/A
N/A
N/A
Babraham Hall, Babraham Research
Campus, Cambridge, CB22 3A
8 Pinhas Sapir St, Weizmann Science
Park, Ness Ziona
85 Bolton Street, Cambridge, MA
Forest House, 58 Wood Lane, London,
W12 7RZ
3–5 Impasse Reille, 75014 Paris
4000 Shoreline Court, Suite 250
South San Francisco, CA 94080
Block 2 Floor 3, Harcourt Centre
Harcourt Street, Dublin
815 Perseus Ln, Foster City, CA 94404
20600 Chagrin Boulevard, Suite 210,
Cleveland, OH 44122
1010 Sherbrooke Street West, Suite
408, Montreal, QC H3A 2R7
Atox Bio, Inc
Israel
Aura Biosciences, Inc
Autolus Limited
USA
England
Depixus SAS
Harpoon Therapeutics,
Inc.
Iterum Therapeutics
Limited
LogicBio Therapeutics,
Inc
OptiKira, LLC
France
USA
Ireland
USA
USA
PreciThera, Inc
Canada
In addition, at 31 December 2017, the Group held the following investments in Group Businesses where it is not considered to have significant
influence:
Country of
Incorporation
Company
Amplyx Pharmaceuticals, Inc USA
USA
BioMotiv, LLC
Israel
Mitoconix Bio Limited
England
Verona Pharma plc
Registered Address
12730 High Bluff Drive, Suite 160, San Diego, CA 92130, USA
20600 Chagrin Boulevard, Suite 210, Cleveland, OH 44122
2 Ilan Ramon St. , 3rd Floor, P.O.Box 4044, Ness Ziona 7403635, Israel
3 More London Riverside, London, SE1 2RE
% of Issued
Share Capital
Held
2.8%
17.8%
2.2%
2.5%
The Arix Group has an interest in one structured entity, The Wales Life Sciences Investment Fund (registered address: Life Sciences Hub Wales, 3
Assembly Square, Britannia Quay, Cardiff, Wales, CF10 4PL). The fund has interests in Welsh life sciences opportunities. A structured entity is an
entity that is structured in such a way that voting or similar rights are not the dominant factor in deciding who controls the entity. The Arix Group is
not deemed to have control over this fund for the reasons disclosed in Note 2(a). The Group’s interest is recognised within Investments, and totals
£9.6m at year-end (2016: £4.3m); the Group’s exposure is limited to the carrying value within Investments. Investments also includes a £2m loan
provided to Simbec-Orion Group Limited during the year.
12. Intangible Assets
Brought forward
Additions
Amortisation
At 31 December 2017
Year Ended
31 Dec 2017
£’000
2,344
Period Ended
31 Dec 2016
£’000
–
–
(287)
2,057
2,486
(142)
2,344
An intangible asset arose on Arix Bioscience plc’s acquisition of ALS, relating to management fees due to Arthurian Life Sciences Limited as a result
of managing The Wales Life Sciences Investment Fund. These fees are amortised over a nine-year period, being the expected remaining life of the
fund at the time of acquisition.
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13. Property, Plant and Equipment
Year ended 31 December 2017
As at 1 January 2017
Exchange translation adjustments
Additions
Depreciation Charge
At 31 December 2017
Period ended 31 December 2016
Cost
Additions
Depreciation Charge
Net Book Value
14. Trade and Other Receivables
Trade receivables
Other receivables
Prepayments
VAT receivable
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
577
(10)
–
(157)
410
44
(1)
–
(9)
34
129
(3)
5
(52)
79
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
682
(105)
577
50
(6)
44
156
(27)
129
Total
£’000
750
(14)
5
(218)
523
Total
£’000
888
(138)
750
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
275
571
306
114
1,266
610
2,099
113
440
3,262
The maximum exposure to credit risk at the reporting date is the carrying value of each asset class listed above. The Arix Group does not hold any
collateral as security.
15. Cash and Cash Equivalents
Cash at bank and in hand
The carrying value of cash and cash equivalents approximates to its fair value.
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
74,938
28,929
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Notes to the Financial Statements
16. Trade and Other Payables
The carrying values of trade and other payables approximates their fair value.
Trade payables
Accruals and other payables
Deferred Income
Current Tax Liabilities
17. Share Capital
Allotted and called up
96,153,090 ordinary shares of £0.00001 each (2016: 100,966,920)
49,671 Series C shares of £1 each (2016: 49,671)
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
544
2,856
–
270
3,670
1,280
4,383
3
125
5,791
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
1
50
1
50
A restructure of the Company’s share capital took place in February 2017, resulting in the conversion of 88,245,473 shares into deferred shares.
A further 754,527 deferred shares were issued; this was followed by a consolidation of the deferred shares, resulting in 89 deferred shares of £1.00
per share.
On 17 February 2017, the Group issued 48,309,179 ordinary shares at a price of £2.07 per share as it was admitted to the standard listing segment
of the Official List of the UKLA and to London Stock Exchange plc’s Main Market for listed securities. On 20 March 2017, the Group partially
exercised the Over-Allotment Option available to it following its listing, with a further 6,139,815 shares issued, at £2.07 per share.
Following the exercise of the over-allotment option a further 166,311 shares were converted into £0.0001 deferred shares. All deferred shares were
subsequently cancelled following the passing of a resolution at the Group’s AGM in June 2017.
On 21 December 2017 the Group issued 62,007 shares to certain Non-Executive Directors. As at 31 December 2017, the Group had 96,153,090
ordinary shares in issue.
At the year-end date, 9,822,459 of the ordinary shares were subject to restrictions. These shares are not entitled to vote, attend meetings or to
receive dividends or other distributions. C shares carry no voting rights and no rights to profits.
18. Share Options
During 2017, share-based payment expenses have been recognised relating to a range of share schemes operated by the Arix Group.
Executive Share Option Plan
Arix Group operates an Executive Share Option Plan, in which two Directors participate. Options were granted on 8 February 2016 with an exercise
price of £1.80 per ordinary share. The number of ordinary shares subject to the options totals 5,520,559. The options vest in four equal proportions
on 8 February of 2017, 2018, 2019 and 2020. The options may not be exercised after the tenth anniversary of the grant date and it will lapse on
that date if it has not lapsed or been exercised in full before then. All options vest at the end of the vesting period relating to that option or on the
occurrence of a contingent event; these include a change of control or cessation of employment in accordance with “good leaver” provisions.
No options have been exercised to date. In the year ended 31 December 2017, a share-based payment charge of £985k was recognised in relation
to the Executive Share Option Plan, calculated using the Black–Scholes model. Assumptions used in the model relating to the risk free interest rate
and expected volatility were unchanged from those used in the prior period.
Restricted shares with identical terms, including a £1.80 price for the lifting of restrictions, were offered to the founders of the Company, totalling
5,080,582 shares. In the year ended 31 December 2017, a share-based payment charge of £606k was recognised in relation to these Founder
Incentive Shares, calculated using the Black–Scholes model. Assumptions used in the model relating to the risk free interest rate and expected
volatility were unchanged from those used in the prior period.
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18. Share Options continued
Executive Incentive Plan
Arix Group operates an Executive Incentive Plan for Executive Directors and certain employees of the Company.
IPO Award
In February 2017, the Executive Directors and certain employees were awarded one-off nil cost options or conditional awards in recognition of their
contribution to the Company’s initial public offering. The options were granted on 22 February 2017; all options vest after two years, on 22 February
2019. Options are conditional upon remaining in employment with the Arix Group during the vesting period. In the year ended 31 December 2017,
a share-based payment charge of £1,261k was recognised in relation to the IPO Awards. The charge was calculated as the total number of options
granted, at the IPO share price of £2.07, recognised across the two-year vesting period.
Employee Share Plan
In May 2017, the Executive Directors and certain employees were awarded options or conditional awards which, in case of options will become
exercisable and in the case of the conditional share awards, will vest on the third anniversary of their grant, on 26 May 2020, subject to performance
criteria. This requires the share price to have grown by a set percentage over the assessment period, with the quantum of shares vesting dependent
on the level of share price growth. In the year ended 31 December 2017, a share-based payment charge of £259k was recognised in relation to the
Employee Share Plan. The charge was calculated using a Monte Carlo simulation model, using the following assumptions:
Share price at grant
Risk free interest rate
Time to vesting
Expected volatility
£1.975
0.12%
3 years
44%
Non-Executive Director Awards
During the year, each of the Non-Executive Directors received a fee equal to their annual fees under their respective letters of appointment, satisfied
by the issue and allotment of Ordinary Shares. In the year ended 31 December 2017, a share-based payment charge of £470k was recognised in
relation to these awards, calculated as the market value of the award on the grant date.
Pursuant to their respective letters of appointment, the Non-Executive Directors agreed that 50% of their fees will be satisfied by the issue of the
Ordinary Shares. Shares are expected to be awarded in June 2018 for the year to 30 June 2018; as such, a share-based payment charge of £73k
has been recognised in relation to the share award accrued for the period from 1 July 2017 to 31 December 2017.
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Stock code: ARIX.Larixbioscience.comFinancial Statements Notes to the Financial Statements
19. Notes to the Statement of Cash Flows
Loss before income tax
Adjustments for:
Change in fair value of investments
Exceptional gain
Foreign exchange loss/(gain)
Share-based payment charge
Depreciation and Amortisation
Finance income
Changes in Working Capital
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in Operations
20. Financial Commitments
Operating Leases
At 31 December 2017, operating leases represent short-term leases for office space.
Future aggregate minimum lease payments under non-cancellable operating lease agreements are as follows:
No later than one year
Later than one year but no later than five years
Later than five years
Year Ended
31 Dec 2017
£’000
Period Ended
31 Dec 2016
£’000
(7,690)
(9,527)
(5,544)
–
432
3,654
506
(1)
1,996
(2,121)
(8,768)
(1,354)
(3,962)
(97)
4,712
278
(36)
(3,262)
5,791
(7,457)
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
637
1,492
–
2,129
673
2,208
–
2,881
The Group also has amounts committed to Group Businesses but not yet invested; at 31 December 2017 these totalled £28,606k (2016: £12,016k).
21. Financial Instruments
Financial Assets
The Arix Group has other receivables and cash that derive directly from its operations. Financial assets at fair value through profit or loss are
measured as either Level 1 or Level 3 under the fair value hierarchy, as described in Note 2i and disclosed in Note 11.
Financial Assets at Fair Value Through Profit or Loss
Equity investments
Loans and Receivables
Other receivables (excluding prepayments)
Cash and cash equivalents
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
71,331
17,115
846
74,938
2,709
28,929
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or
to historical information about counterparty default rates. The Arix Group’s cash and cash equivalents are deposited with A+ rated institutions.
Investments and other receivables do not have a credit rating. However, the Group does not believe these to be past due nor impaired.
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21. Financial Instruments continued
Financial Liabilities
The Arix Group’s principal financial liabilities comprise trade and other payables. The primary purpose of these financial liabilities is to finance the
operations.
Trade, Other Payables and Accruals (excluding non-financial liabilities)
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
3,670
5,791
22. Guarantees
The Company has provided a rent deposit guarantee in respect of its US office for an amount of $261,657, (£193,946), unchanged from 2016.
23. Exceptional Gain in Prior Period
On 20 June 2016, the Arix Group acquired the whole of the issued share capital of both Arthurian Life Sciences Limited and Arthurian Life Sciences
SPV GP Limited, for a total cash consideration of £891k.
The fair value of the shares acquired of Arthurian Life Sciences Limited was determined to be £5,855k, calculated on the basis of:
(i) income multiples relating to the management fees due to Arthurian Life Sciences Limited as a result of managing The Wales Life Sciences
Investment Fund; and
(ii) Current day valuation of The Wales Life Sciences Investment Fund and the excess value due to Arthurian Life Sciences Limited as a result of its
carried interest arrangement. This was discounted to reflect liquidity risk.
Adjusted for deferred tax of £1,002k, negative goodwill credited to profit and loss totalled £3,962k.
24. Related Party Transactions
Consultancy fees plus expenses amounting to £280,165 (inclusive of VAT) (2016: £1,146,000) were payable to Merlin Scientific LLP during the
period, a partnership controlled by Sir Chris Evans, a Director and substantial shareholder of the Company. At 31 December 2017, £841 (inclusive of
VAT) (2016: £882,000) was owed to Merlin Scientific LLP by the Company.
At 31 December 2017, Excalibur Fund Managers Limited, a business which Sir Chris Evans, a Director and substantial shareholder of the Company,
is the ultimate controlling paty, owed Arthurian Life Sciences Limited £174,000 relating to overpayment of fund management fees (31 December
2016: £174,000).
Consultancy fees amounting to £313,147 (inclusive of VAT) were payable to Martin Walton, a Director of Arthurian Life Sciences Limited until 13
October 2017. At 31 December 2017, no amounts were due to Martin Walton (31 December 2016: £nil).
David U’Prichard, a Non-Executive Director of the Company, provides consulting services and administrative support to BioMotiv LLC a company in
which the Group holds an interest. The consulting services and administrative support are provided through Druid Consulting LLC, a firm controlled
by David U’Prichard. During the year ended 31 December 2017, Druid Consulting LLC received a total of $330,679 from BioMotiv LLC (2016:
$247,195).
Key management comprises solely the Directors of the Arix Group, the emoluments of which are disclosed in the Directors’ Remuneration Report.
25. Events After the Reporting Date
On 20 March 2018, the Company raised approximately £87 million in a capital raising, from both new and existing investors. A total of 38,610,928
new Ordinary Shares were issued at a price of £2.25 per share. At the date of publication, the number of Ordinary Shares that the Company has in
issue was 134,764,018.
On 16 February 2018, a further $4,689k (£3,393k) was invested in Iterum Therapeutics Limited. The Arix Group’s fully diluted shareholding in the
company now stands at 8.4%.
On 28 February 2018, a further €286k (£254k) was invested in Depixus SAS, in line with existing commitments; the Arix Group’s fully diluted
shareholding in the company now stands at 18.6%.
On 28 March 2018, a further $2,500k (£1,764k) was invested in BioMotiv, LLC; the Arix Group’s fully diluted shareholding in the company remains at
17.8%.
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Company Statement of Financial Position
As at 31 December 2017
ASSETS
Non-Current Assets
Investments in subsidiary undertakings
Intangible assets
Property, plant and equipment
Amounts due from subsidiary undertakings
Current Assets
Cash and cash equivalents
Trade and other receivables
Deferred tax asset
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital and share premium
Loss for the period
Other components of retained earnings
TOTAL EQUITY
Note
2017
£’000
2016
£’000
2
4
3
891
–
–
77,221
78,112
72,574
423
–
891
–
–
16,357
17,248
28,771
1,940
–
72,997
30,711
151,109
47,959
(1,468)
(1,468)
(1,468)
(57)
(57)
(57)
149,641
47,902
105,125
(6,989)
51,505
149,641
51
(6,828)
54,679
47,902
149,641
47,902
96
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017
Company Statement of Changes in Equity
As at 31 December 2017
Share
Capital
£'000
Share
Premium
£'000
Translation
Reserve
£'000
Retained
Earnings
£'000
As at 1 January 2017
Loss for the period
Other comprehensive income
Contributions of equity, net of transaction costs and tax
Share-based payment charge
As at 31 December 2017
51
–
–
–
–
–
–
–
105,074
–
51
105,074
–
–
–
–
–
–
At Incorporation
Loss for the period
Other comprehensive income
Contributions of equity, net of transaction costs and tax
Share capital reorganisation
Share-based payment charge
As at 31 December 2016
Share
Capital
£'000
Share
Premium
£'000
Translation
Reserve
£'000
–
–
–
51
–
–
51
–
–
–
49,967
(49,967)
–
–
–
–
–
–
–
–
–
47,851
(6,989)
–
–
3,654
44,516
Retained
Earnings
£'000
–
(6,828)
–
–
49,967
4,712
47,851
Total
£'000
47,851
(6,989)
–
105,074
3,654
149,641
Total
£'000
–
(6,828)
–
50,018
–
4,712
47,902
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Stock code: ARIX.Larixbioscience.comFinancial Statements
Notes to the Company Financial Statements
1. Accounting Policies
These financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
(‘FRS 101’). The amendments to FRS 101 (2014/15 Cycle) issued in July 2015 have been applied.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial
Reporting Standards as adopted by the EU (‘Adopted IFRSs’), but makes amendments where necessary in order to comply with the Companies Act
2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
Under section s408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures: a
Statement of Cash Flows and related notes; disclosures in respect of transactions with wholly owned subsidiaries; disclosures in respect of
capital management; the effects of new but not yet effective IFRSs; and disclosures of transactions with a management entity that provides key
management personnel services to the Company.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available
in respect of the following disclosures: IFRS 2 Share Based Payments; certain disclosures required by IFRS 13 Fair Value Measurement; and the
disclosures required by IFRS 7 Financial Instrument Disclosures.
The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next financial statements. The accounting policies
set out below have been applied consistently. Where relevant, the accounting policies of the Arix Group have been applied to the Company.
Investments in Subsidiary Undertakings
Unlisted investments are held at cost less any provision for impairment.
Amounts Due from Subsidiary Undertakings
All amounts due from subsidiary undertakings are initially recognised at fair value and subsequently measured at amortised cost. Amounts provided
to subsidiaries are intended for use on a continuing basis in the Company’s activities, with no intention of their settlement in the foreseeable future;
as such, they are presented as fixed assets.
2. Investments in Subsidiary Undertakings
2017
£’000
891
–
–
–
891
2016
£’000
–
891
–
–
891
As at
31 Dec 2017
£’000
As at
31 Dec 2016
£’000
72,574
28,771
2017
£’000
16,357
60,864
–
2016
£’000
–
16,357
–
77,221
16,357
At 1 January 2017
Additions
Impairments
Disposals
At 31 December 2017
The Company’s subsidiary undertakings are detailed in Note 2(b) to the Group financial statements.
3. Cash and Cash Equivalents
Cash at bank and in hand
The carrying value of cash and cash equivalents approximates to its fair value.
4. Amounts Due from Subsidiary Undertakings
Opening balance
Additions during the period
Repayments during the period
At 31 December 2017
The amounts due from subsidiary undertakings are interest free, repayable on demand and unsecured.
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Shareholder Information
Warning about unsolicited
approaches to shareholders
and ‘Boiler Room’ scams
In recent years, many companies have become
aware that their shareholders have received
unsolicited phone calls or correspondence
concerning investment matters. These are
typically from overseas based ‘brokers’ who
target UK shareholders, offering to sell them
what often turn out to be worthless or high risk
shares in UK investments. These operations
are commonly known as ‘boiler rooms’.
These ‘brokers’ can be very persistent and
persuasive. Arix Bioscience plc shareholders
are advised to be extremely wary of such
approaches and are advised to only deal with
firms authorised by the FCA. You can check
whether an enquirer is properly authorised and
report scam approaches by contacting the
FCA on www.fca.org.uk/scams (where you can
also review the latest scams) or by calling the
FCA Consumer Helpline: 0800 111 6768.
If you have already paid money to share
fraudsters then contact Action Fraud on
0300 123 2040
Registrar
The Company’s register of shareholders
is maintained by our Registrar, Equiniti
Limited. All enquiries regarding shareholder
administration, including lost share
certificates or changes of address, should be
communicated in writing or by calling 0371
384 2030 for callers from the UK (lines are
open 8.30am to 5.30pm Mondays to Fridays,
excluding Bank Holidays in England and
Wales) or +44 (0)121 415 7047 for callers from
outside the UK.
Shareholders can also view and manage
their shareholdings online by registering at
www.shareview.co.uk/myportfolio.
Forward-looking Statements
This Annual Report has been prepared for,
and only for, the members of Arix Bioscience
plc (‘the Company’) as a body, and for no
other persons. The Company, its Directors,
employees, agents or advisers do not accept
or assume responsibility to any other person
to whom this document is shown or into
whose hands it may come and any such
responsibility or liability is expressly disclaimed.
By their nature, the statements concerning
the risks and uncertainties facing the Group
in this Annual Report involve uncertainty since
future events and circumstances can cause
results and developments to differ materially
from those anticipated. The forward-looking
statements reflect knowledge and information
available at the date of preparation of this
Annual Report and the Company undertakes
no obligation to update these forward-looking
statements. Nothing in this Annual Report
should be construed as a profit forecast.
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99
Stock code: ARIX.Larixbioscience.comFinancial Statements Shareholder notes
100
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ARIX BIOSCIENCE PLCarixbioscience.comAnnual Report and Financial Statements 2017 Advisers
Directors, Secretary,
Registered Office
Directors
Jonathan Peacock
Joe Anderson, PhD
Professor Sir Chris Evans, PhD, OBE
James Rawlingson
Franz Humer
David U’Prichard
The Right Hon. Lord Hutton of Furness, PC
Professor Trevor Jones CBE
Meghan FitzGerald
Giles Kerr
Company Secretary
Robert Lyne
Registered Office
20 Berkeley Square
London
W1J 6EQ
United Kingdom
Company Number
09777975
Legal advisers
Brown Rudnick LLP
8 Clifford Street
London
W1S 2LQ
United Kingdom
One Financial Center
Boston
MA 02111
United States
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
United Kingdom
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
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20 Berkeley Square
London W1J 6EQ
United Kingdom
Tel: +44 (0)20 7290 1050
Email: info@arixbioscience.com
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