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Investing in life
changing science
Annual report and accounts 2019
Arix Bioscience plc is a global venture
capital company focused on investing
in and building breakthrough biotech
companies around cutting edge
advances in life sciences.
Our Purpose
To accelerate the transformation of
innovative science into important new
treatments for patients and valuable
assets for investors.
Our Goal
To become one of the best performing
and most trusted biotech venture
capital companies.
Our values and expectations
Our values and expectations are at
the heart of everything we do and
form an important part of our culture.
▸ Integrity
▸ Respect
▸ Collaboration
▸ Discipline
▸ Transparency
▸ Accountability
Front cover image: Arix portfolio company, Artios
Contents
Strategic Report
02 At a Glance
04 Chairman’s Statement
05
Investment Case
06 Chief Executive Officer’s Review
10 Our Stakeholders
12 Market Insight
16
Portfolio Case Study
18 Our Investment Strategy
20 Business Model
22 Our Strategic Objectives
24
Key Performance Indicators
26
Portfolio Review
28 Clinical Pipeline
30 Core Portfolio Companies
36 Discovery Portfolio Spotlight
37
38
40
Patient Impact
Financial Review
Investment Team and
Executive Committee
Valuation of Investments
Risk Management
Sustainability
Performance snapshot
Business highlights
42
43
46
Net Asset Value (NAV)
£202m
2018: £270m
NAV per share*
£1.49
2018: £2.00
Invested in Gross Portfolio*
£36m
2018: £52m
Capital raised by portfolio
companies in 2019
$322m
$1.5bn since inception
Gross Portfolio Value*
Clinical trials across the portfolio
£149m
2018: £175m
26
2018: 23
Corporate Governance
48 Chairman’s Introduction
52
Board of Directors
54
Report of the
Nomination Committee
Report of the Audit and
Risk Committee
56
60 Directors’ Remuneration Report
76 Directors’ Report
Financial Statements
80 Financial Statements
Other information
107 Shareholder Information
108 Glossary
Operational highlights
▸ Continued clinical progress, notably positive data from Aura, Autolus, Amplyx and Imara
and new trial initiations from VelosBio, Harpoon and Pharmaxis
▸ Successful financing rounds completed by three portfolio companies at valuation uplifts
to previous rounds, including fourth Nasdaq listing across the portfolio
▸ Strengthened the investment team and operational experience with renowned industry
executives Christian Schetter and Roberto Iacone
* Alternative Performance Measures, as defined
on page 24
01
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 AT A GL ANCE
Who we are: Arix Bioscience plc is a
global venture capital company focused
on investing in and building breakthrough
biotech companies around cutting edge
advances in life sciences.
We collaborate with experienced entrepreneurs
and provide the capital, expertise and global
networks to help accelerate the science
they have developed into important new
treatments for patients. As a listed company,
we are able to bring this exciting growth phase
of our industry to a broader range of investors.
We are here for two key
reasons. To make a difference
to patients’ lives and to
generate a return for
our investors.
Investment strategy providing resilience through market cycles
Therapeutic
Development stage
7%
19%
63%
11%
29%
71%
Oncology
Immunology
Genetic diseases
Other
Clinical
Pre-clinical
We focus on innovation and partner with
highly experienced entrepreneurs to create
companies that can significantly improve
patients’ lives.
Diverse portfolio
Geographic split
6%
6%
UK
US
33%
55%
Europe
RoW
Global pharmaceutical partners
Pharmaceutical companies are a key
stakeholder for Arix as they seek to get closer
to scientific and medical innovation outside
their own laboratories. The relationships we
have built with our pharmaceutical partners
give us access to deep scientific knowledge,
R&D capabilities, market intelligence and
commercial due diligence. Fosun International,
a large Chinese group with a global foothold,
additionally offers distribution capabilities
across China.
02
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Snapshot of portfolio and cash position
Core portfolio
Our later stage companies
make up 91% of gross
portfolio value. We provide
follow on capital and build
stakes when milestones are
met, reserving funds to back
our winners and minimise risk.
£138m
Cash
When companies are exited,
the capital generated will
be returned to the balance
sheet to reinvest in new
opportunities and support
further growth.
£55m
6%
27%
NAV £202m
e
alu
68%
s s P ortfolio V
o
G r
Other (1)%
Discovery portfolio
Seed investments in promising
life science discoveries.
These companies are startups
in the initial stages of
research and development.
They are higher risk but have
the potential to become core
portfolio companies, when
milestones are met.
£12m
Other
Other Net Assets include
non-portfolio investments and
other balance sheet lines such
as receivables and payables.
(£3m)
(2018: £4m)
Core Portfolio
Autolus
Harpoon
LogicBio
Artios
Imara
Aura
VelosBio
Atox Bio
Amplyx
Iterum
Pharmaxis
Verona
Value,
£m
NAV
%
33.8
28.9
16.3
15.2
10.7
8.3
5.5
5.0
4.9
3.7
3.7
1.6
17%
14%
11%
8%
5%
4%
3%
3%
2%
2%
2%
1%
Discovery Portfolio
11.6
6%
Gross Portfolio
149.2 74%
Read more in our Financial Review on pages 38 to 39
Strong clinical trials pipeline
Collectively our portfolio companies are
running 26 clinical programmes, with
a further 26 in pre-clinical development.
Read more on our Pipeline on pages 28 to 29
Clinical trials
26
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
5
✓
4
✓
✓
17
✓
✓
✓
16
✓
✓
✓
✓
10
Investment case
▸ Clear and focused investment strategy
▸ Diverse portfolio of disruptive biotech companies
▸ Experienced, transatlantic team
▸ Multiple potential value enhancing events
▸ Strong and effective global networks
▸ Flexible, long term capital base
03
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CHAIRMAN ’S STATEMENT
Good underlying progress in
the portfolio with a focus on
unlocking and realising value
for shareholders in 2020
2019 was a year of both progress and challenge
for the Company.
The Arix portfolio now comprises 16 biotech
companies addressing serious unmet medical
need, building on innovative science and led by
successful entrepreneurs in their respective
areas. The portfolio saw positive clinical data
from four of these companies during the year
and three raised additional capital at valuation
uplifts to the prior round. Harpoon was one
of these companies, the fourth in our portfolio
to successfully list and raise capital on Nasdaq.
Our strategic partnerships continue to play
an important role in guiding and supporting
our activities at Arix. We have built a strong
dialog with our pharmaceutical partners
Fosun, Ipsen, Takeda and UCB and benefit
from their expertise as they also gain access
to our pipeline and portfolio of emerging
biotech companies. Our academic partnerships
with Max Planck in Germany and Fred Hutch
in Seattle are also beginning to bear fruit.
Our first company incubated from Max Planck,
Quench Bio, attracted leading new investors
in its well supported Series A funding round
shortly after year-end.
The portfolio is reaching a point where
investors can expect to start to see value
realisations either through the strategic sale
of portfolio companies to pharmaceutical or
larger biotech companies or through the sale of
publicly listed holdings. The executive team will
be focused on this in 2020 as well as attracting
additional investment to the company.
During 2019, the book value of the portfolio
was impacted significantly by Autolus, one
of our listed companies whose stock price
was riding high in the early part of the year
but has come back significantly. However,
we do continue to see good progress in this
company’s clinical programmes.
An additional challenge during the year was
the suspension in June 2019 of the Woodford
Equity Income Fund, our largest shareholder
with a 19.8% holding in Arix. We have been
seeking to achieve an orderly transition of
this holding to long-term supportive investors,
and remove the distraction and consequent
uncertainty that it has had on the share price
in recent months.
In the latter part of 2019 the Board held a
strategy day to review the performance of
the company and the portfolio and to agree
the outline of a three year plan to deliver value
for shareholders. We also reviewed options to
further build the business as value is delivered
over the next three years.
From a governance perspective we have also
started to build a more London centric Board
with the skills and experience to guide the
company through the next few critical years.
In particular, Mark Breuer, who joined as a Non
Executive in 2019 brings broad experience in UK
capital markets and in advising public company
Boards. Naseem Amin, who joined more
recently, brings strong transatlantic industry
experience in clinical development, business
development and venture capital. With the
added industry and financial experience of
Giles Kerr, deep R&D expertise of Trevor Jones
and the successful venture and industry track
record of Art Pappas, the governance is in
place to guide the company to take the actions
needed to deliver value for shareholders.
I would also like to take this opportunity to
thank Franz Humer, James Rawlingson and
Meghan Fitzgerald for their service as Board
members and for their important contributions
in the formative years as we created and
built Arix.
Arix has built a portfolio of companies pursuing
breakthroughs in treating serious diseases
for the benefit of patients. To continue this
important work I look forward to 2020, where
we start to achieve cash realisations to reinvest
in new companies, to attract new investors
and to deliver value for shareholders. I know
Joe Anderson and the team at Arix are up to
the challenge and have a portfolio that can
deliver on this.
Jonathan Peacock
Chairman
9 March 2020
04
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 INVESTMENT CASE
Public market access to
ground-breaking medical innovation.
1 Clear and focused
investment strategy
We are science-led investors focusing on
true innovation in areas of unmet need.
We collaborate with experienced entrepreneurs
to create companies which can dramatically
improve patient outcomes.
2 Diverse portfolio of
disruptive, high growth
potential companies
Balanced portfolio of 16 life science companies,
spanning a range of therapeutic areas,
development stages and geographies,
providing resilience through market cycles.
3 Transatlantic team
with deep scientific
and industry expertise
Multi-disciplinary team with diverse and
complementary backgrounds. Our investment
team have deep scientific expertise and a track
record of value creation.
4 Maturing portfolio
with multiple expected
value catalysts
Our portfolio companies are collectively
running 26 clinical trials, with a further
26 clinical trials in preclinical development.
Over the next 12 months we expect a number
of trials to readout and new trials to initiate.
Arix’s portfolio company, Autolus
5 Strong and effective
global networks
Our global network and transatlantic team
provide us with access to a large pool of
opportunities, wide scientific networks
and a deep understanding of the industries
and markets in which we invest.
6 Flexible, long term
capital base
Our plc balance sheet enables us to take a
longer term view than our non listed peers.
We can provide companies with the flexible,
long term capital they require to become
global leaders in their respective fields.
To see how our investment case works in practice, please see our Business Model on pages 20 to 21
05
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CHIEF EXECUTIVE OFFICER ’S REVIEW
Developing the
long term potential
of the business
Joe Anderson PhD
Chief Executive Officer
We are working closely
with our portfolio
companies to build
realisable value for our
shareholders and see
multiple clinical and
scientific development
milestones in the
year ahead.
We have made good progress since the
IPO in February 2017. The portfolio is now
well-balanced and diverse, with science that
is showing significant promise and products
that have progressed well in clinical trials.
To date, we have invested £138 million in the
Gross Portfolio, which was valued at £154m
by year-end, including £5 million of realisations.
The team at Arix has the right blend of
experience and talent to make the most of
the significant opportunities in the portfolio
on behalf of shareholders.
Despite this, and disappointingly, during 2019,
the results for the period show a 25% decline
in Net Asset Value (NAV) per share (down 51p
06
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 26
clinical trials across
the portfolio
$322m
raised by portfolio
companies in 2019
per share) compared to a positive return of
32% (48p per share) a year earlier. Our results
were particularly impacted by the volatility
of our public stocks, which collectively fell by
38% in 2019, giving up strong gains made in
the prior year. As a result, our reported NAV
at year-end was £202 million (£1.49 per share)
compared to £270 million (£2.00 per share) at
December 2018.
Most of our portfolio companies were small
private companies at the time we first
invested. As we reported last year, progress
has been rapid and four of these have already
made the transition to public companies
following IPOs on the Nasdaq.
An IPO is not necessarily an exit point for us,
but rather a means for the portfolio company
to access additional capital from the public
markets to speed the development of new
products through clinical testing. But the
development of these medicines takes time;
it is a competitive business and clinical trials
in humans, rightly, are highly regulated and set
very high standards for proving efficacy and
safety before approval is achieved for new
products to treat patients. As a result, public
biotech company share prices can be volatile in
the period between their listing and producing
definitive data, as was seen with Arix’s listed
portfolio companies, which made up 44% of
our NAV at the beginning of the year.
Our view is that such fluctuations, although
important to manage to the extent they can
be, are less relevant to true value creation
than is making solid progress with clinical
development. On that count, during 2019
we saw meaningful progress in the clinical
development plans of our portfolio companies
as detailed on page 8. This is key to securing
sustainable uplifts in our NAV and this remains
our top priority.
We have articulated our Group
strategy as well as our investment strategy.
How we performed against
our five strategic goals
For the first time this year and in line with the increasing maturity of the business, we have
articulated our business strategy as well as our investment strategy. Details of progress
against our five strategic priorities is set out below.
1. Maintain a strong pipeline
of opportunities
Our portfolio is now well balanced, thanks
to the expertise, experience and sheer hard
work of our people, the strength of our
global networks, and the value we gain from
industry and academic partners. During the
year, we provided follow-on capital to the
existing portfolio, while also adding two
new companies.
In September, we co-led a €20 million
Series A investment in STipe, a company
seeking to exploit a novel mechanism in
the STING pathway, which is part of the
innate immune response against pathogens.
Our Entrepreneur in Residence, Christian
Schetter, identified the initial opportunity
from academic science at the University
of Aarhus in Denmark, and has since taken
on the Executive Chairman role at STipe.
Earlier in 2019, we also committed $15 million
(£11.4 million) to Imara, a US clinical stage
company developing novel therapeutics to
treat patients suffering from rare inherited
genetic disorders of haemoglobin, including
sickle cell disease and Beta-Thalassemia.
Shortly after the year-end, the progress of
our discovery portfolio company Quench
Bio gave us sufficient confidence to bring
the company out of stealth mode, with
completion of a Series A financing. Co-
founded by Arix with Atlas Venture, Quench
is another good example of our geographical
reach. It draws on science pioneered in
Europe – in this case through the Dortmund
labs of our academic partner Max Planck
in Germany – and incubated in the US.
The company is conducting early stage pre-
clinical research in inflammatory biology, an
area where we see tremendous opportunity.
In addition to investments in new portfolio
companies, we also provided further capital
to existing portfolio companies Aura,
Harpoon and Autolus, which completed
further funding rounds to advance their
clinical pipelines. Notably Harpoon transitioned
to a public company in the period, following
a successful IPO on Nasdaq, raising
$70.7 million in net proceeds.
Read more in the financial review on page 38
2. Maintain a diverse portfolio
Our strategy is broad to ensure resilience
through market cycles. We work hard to
make sure that the portfolio comprises a
healthy mix of opportunities, enabling us
to mitigate risk and deliver greater stability.
In particular, we maintain a constant and
disciplined focus on diversity across three
areas: therapeutic area; geography; and
stage of clinical development.
We have built a balanced portfolio of
16 companies, spanning the UK, US, Europe,
Israel and Australia, from preclinical to late
stage clinical assets and across a range of
therapeutic areas, including immunology,
genetic diseases, oncology and anti-infectives.
3. Ensure effective balance
sheet management
During the year we demonstrated our
commitment to prudent cash management.
On our cost structure, we have made
progress towards creating a leaner
organisation, with Administrative Expenses
17% lower than 2018, despite incurring a
number of one off costs associated with the
organisational changes during the year.
07
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CHIEF EXECUTIVE OFFICER ’S REVIEW CONTINUED
We provide more than just capital when we invest; we
take a seat on the Board and provide hands-on support
to our portfolio companies, complementing their existing
strengths with the market-leading expertise, drive and
experience of our own team.
As is the nature of high risk and potential
high reward science, the year saw a couple
of negatives. These included: disappointing
Phase 3 data from Iterum, which narrowly
missed its primary endpoint by just one patient,
although this setback may be balanced in 2020
by results from two further Phase 3 trials; and
the decision by Boehringer Ingelheim not to
progress studies of the inhibitor acquired
from Pharmaxis in 2015.
Please see the Portfolio Review on pages
26 to 36 for further details of these and other
developments during the year.
5. Deliver long-term capital
growth for shareholders
As well as seeing volatility in our NAV during
2019, we have also seen significant pressure
on the share price of Arix itself. This has been
disappointing, especially as progress in our core
business has, on the whole, been encouraging.
We are looking to address the issues
contributing to this, in the year ahead, including
resolution of the former Woodford holding.
I am encouraged by where the portfolio
is positioned at this stage in our life cycle,
with three years of progress in our investee
companies post our IPO, leading to some
early signs of exit potential that we see ahead.
I am confident that we are on track with our
plans to realise value from the portfolio and
deliver long term, sustainable capital growth
to shareholders.
Joe Anderson PhD
Chief Executive Officer
We also took a greater focus on early stage
investments, which are less cash intensive –
such as those in STipe and Quench. We also
looked for opportunities to harvest cash
from public stocks, as we demonstrated with
Harpoon. Strong progress in Harpoon in 2019,
including a Nasdaq IPO and a licensing option
with AbbVie, allowed us to realise £4.3 million,
at twice the valuation of our average
investment cost. We remain an investor in the
business, retaining almost 90% of our original
stake in the company. Altogether in 2019, we
generated £8.9 million in cash, through the
above-mentioned Harpoon sell down and
further proceeds from our legacy holdings.
We also scaled back our commitment to
BioMotiv, whilst preserving the option to invest
in their pipeline opportunities. Looking forward,
we aim to accelerate cash generation from
investments as we reach towards a state of
permanent capital so that we can finance new
opportunities through realisations from our
more mature investments.
Read more in our Financial Review
on pages 38 to 39
4. Build the value of our
portfolio companies through
hands-on support
We provide more than just capital when we
invest; we take a seat on the board and provide
hands-on support to our portfolio companies,
complementing their existing strengths
with the market-leading expertise, drive and
experience of our own team. This support
includes everything from helping with initial or
subsequent funding, or providing the knowhow
to start a business from scratch, to making
introductions to pharma companies who may
be potential acquirers, and giving expert advice
that can make a deal happen. In between, we
have the skills to set strategies, help design
clinical trials, advise and guide on recruitment
at all levels and use our global networks to
give our portfolio companies the very best
advice and practical help on every aspect of
growing a successful business. This high degree
of involvement does more than support the
development of the company in question
– it also gives us control and insight, thereby
helping mitigate risk.
We have seen significant financial and clinical
progress in our portfolio companies during
the year. Major highlights included: Harpoon
agreeing an option deal with AbbVie, worth
up to $2.3 billion, for its multiple myeloma
programme and discovery platform; Aura
announcing strong data from its Phase 1/2b
trial in ocular melanoma and raising $40 million
in its Series D financing, with a 33% uplift in
value to the Series C; Autolus announcing
strong clinical data from its lead programme
AUTO1 in acute lymphoblastic leukemia; Artios
expanding its pipeline of novel DNA damage
response therapies by in-licensing an inhibitor
from MD Anderson; and Amplyx expanding its
pipeline by in-licensing a Phase 2-ready virus
programme from Novartis, and also reporting
positive Phase 2 data in invasive candidemia.
However, in financial terms, the value of our
Gross Portfolio reduced from £175 million
to £149 million during the year, largely as a
result of a fall in the share price of Autolus.
We continue to see substantial promise with
this company. During the first half of 2020,
Autolus is expecting to initiate a Phase 2
potential pivotal study for its lead programme,
AUTO1, in adult ALL, where there is currently
no approved CAR-T therapy and high unmet
need. Data presented last year suggests
that AUTO1 has the potential to have an
improved efficacy profile and comparable
safety profile to the current standard of care.
Adult ALL is a significant opportunity, with
8,400 new cases diagnosed yearly worldwide
and an addressable patient population of
3,000 patients. We believe this represents
a significant commercial opportunity for the
business. Behind this lead programme, there
are a number of other promising programmes
as detailed later in this report, including AUTO3
for DLBCL where a high unmet need remains,
and where AUTO3 has the potential to be
a true outpatient therapy.
08
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 During 2019, we have had a particular focus on
building start-up companies based on cutting
edge science to balance our portfolio of later
stage companies. Company creation involves
substantial effort from our team, and yields
high ownership of the resulting company
for relatively modest investment of capital.
We have started a programme of bringing
accomplished life science entrepreneurs into
Arix to help us with such work and recently
the first results of this emerged in the shape
of STipe, our new portfolio company, led
by Christian Schetter, Arix Entrepreneur in
Residence. Our investment team has also been
busy helping to build Quench Bio – a company
that emerged from stealth mode shortly
after year-end. We are looking to extend
these efforts in company creation and as part
of this are pleased to have announced the
appointment of Roberto Iacone as our second
Entrepreneur in Residence in March 2020.
The year ahead
We remain focused on driving realisable
value in our portfolio, and in turn our NAV, and
I believe we are well positioned to do so through
2020 and beyond.
We have had a challenging year with our
shareholder structure and volatility in our
public portfolio companies, which in the near
term continues with the emergence of a new
risk in the form of coronavirus, but look ahead
with confidence and see a portfolio that is
maturing and has the potential to deliver
real value.
I am privileged to lead such a talented and
dedicated team, optimistic about the direction
in which our business is heading and confident
in the long-term value Arix can deliver.
Joe Anderson
Chief Executive Officer
Arix’s portfolio company, Autolus
14
clinical data readouts
expected in 2020
16
new trial initiations
expected in 2020
09
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 OUR STAKEHOLDERS
Our stakeholders
The Board sought to understand the views of stakeholders
through its interaction with them during the year and had regard
for their interests in Board discussions and decision-making.
How we engage with our stakeholders
Shareholders
The Board naturally considers its shareholders
to be key stakeholders of the Company and
is focused upon delivering long-term value
for their benefit. This purpose is evident
throughout the Board’s decision making and
is a constant consideration when addressing
the interests of our other stakeholders.
The Company engages with its shareholders on
a regular basis with multiple investor meetings
throughout the year as well as focused
roadshows at the time of our published results.
The results of this investor engagement are
reported to the Board to help inform our
communications and strategy. During 2019,
we were proud to host a very well attended
and received Oncology-focused Capital
Markets Day in the City of London. This gave
our shareholders an opportunity to meet some
of our portfolio companies and hear first-hand
about the progress they have made since our
investments. In addition to such standalone
events, our regular Annual General Meeting
provides an opportunity for all shareholders to
meet and engage with the Board and we very
much welcome and encourage attendance
at this year’s AGM.
Academic
Partners
Access to cutting-edge science is a key part
of the Company’s strategy and is supported
by our relationships with researchers and
academic institutions. The Board plays an
active role in monitoring the Company’s
interaction with these institutions, particularly
those, such as the Fred Hutch Cancer Research
Centre and the Max Plank Institute, with which
the Company has privileged relationships.
The Board is keen to build on the example
of Quench, which was founded with science
from the Max Plank Institute’s Lead Discovery
Centre, by assisting these partners in
commercialising their research into successful
biotech companies which can deliver value for
Arix’s shareholders.
As described below, the Board sought
to understand the views of stakeholders
through its interaction with them during
the year and had regard for their interests
in Board discussions and decision-making.
The Board is satisfied, through the careful
tracking of the outcomes of these discussions
and decisions, that the approach it takes
to stakeholder engagement is effective.
10
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 s172 Companies Act 2006
The Board is cognisant of its duties under s172 of the Companies Act and
has worked throughout the year to promote the success of the Company
for the benefit of its members as a whole. In doing so, it has had regard
to those stakeholders identified under s172, as well as the additional
stakeholders set out here.
Pharmaceutical
Partners
Arix is proud of its strategic relationships
with four leading pharmaceutical companies:
Fosun, Takeda, UCB and Ipsen. These partners
provide Arix with specialist industry insight
and due diligence capabilities, whilst allowing
us to make valuable connections with our
portfolio companies. Throughout the period,
the Company has held regular meetings
with each of our of pharmaceutical partners
with regular reporting to the Board at every
meeting. This has enabled the Board to
monitor and contribute to the evolution of
these relationships, the successful progress
of which was included in the 2019 goals for
the executive management team.
Employees
The Board considers its employees to be a
primary stakeholder of the Company and is
conscious of the regard it has to them under
s172. During the period, the Board has overseen
an evolution of the executive management
team which has resulted in internal progression
for certain employees, whilst strengthening
the Company’s ability to deliver on its strategy.
The Board, and especially the Remuneration
Committee, have also had particular regard
to employees as they reviewed and revised the
Company’s long-term incentive arrangements
as part of its strategy to attract, retain and
motivate employees in order to deliver value
for shareholders. These actions were consistent
with the Board’s commitment to investing in
and responsibility rewarding employees as they
deliver on the Company’s strategy.
Portfolio
Companies
Our portfolio companies are at the heart
of our business as it is their operational
and clinical progress which will ultimately
deliver value for our shareholders. However,
whilst the Board is naturally focused on their
development and what it will mean for the
growth in our NAV, we are also conscious of
the benefit we can bring to those companies
as an engaged and supportive shareholder.
For example, during the year, the Board
reviewed and endorsed our strategy of
appointing directors to the boards of almost
all of our portfolio companies. This allows us
to provide practical help to these companies
as they develop, as well as giving us a clear
understanding of their needs. Due to their
focus on research and development, there is
often a need for further capital and the Board
is pleased that Arix’s Investment Directors
have worked with a number of our portfolio
companies throughout the year to help
structure and support multiple capital raisings
across the portfolio.
11
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 MARKET INSIGHT
Artios Pharma, Cambridge, UK
Exciting, fast-moving
and rich with potential
Life science innovation is transforming
healthcare. Led by a new breed of
entrepreneurial scientists, biotech start-ups
in the US, Europe and elsewhere are moving
from finding treatments for diseases to
creating cures.
Here, we outline the four main drivers
of our sector.
1 A step-change in
scientific discovery
These are positive times for many aspects of
scientific discovery, but particularly for biotech
innovation. It’s not a stretch to compare
today’s fast-moving life sciences environment
to the tech boom and the development of
the internet. Over the last decade, we’ve seen
a step-change in our understanding of the
causes and dynamics of disease at a molecular
level – and this has driven an acceleration in
discovery. For example, the number of new
clinical trials added per year has increased from
fewer than 11,000 in 2006 to over 32,000 new
trials in 2019.
Biotech companies are seizing the
opportunities to create new therapeutic
approaches that have a very real chance
of improving patient outcomes.
12
2 Demographics are
driving demand
More people are living longer than they did 10,
20 or 50 years ago. As populations get older,
there’s an inevitable increase in the prevalence
of chronic diseases. The top three causes of
death – cardiovascular, cancer and neurological
conditions – are all diseases of ageing. In the
US, EU and Japan the number of people aged
over 65 is expected to double from 200 million
to 400 million in the next decade. It’s a
similar story in the emerging markets, where
increased longevity is matched by a growing
middle class able to afford medical care.
In China, Brazil, India and Russia, the average
total number of prescriptions filled per year
has doubled since 2009 and continues to rise.
So demand is increasing, at speed. And it’s
doing so in a long-term defensive sector, where
supply and demand are relatively resilient
to the ups and downs of economic cycles.
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 3 The regulatory
environment is
increasingly favourable
There’s been a significant turnaround in
the approach adopted by regulators – and
nowhere is that more evident than in the US,
the world’s largest market. More products are
now making it through the approvals process,
as scientists have become more effective
at evaluating targets and selecting the
appropriate patients. Instead of one in 15 or
20 products that enter clinical trials ultimately
gaining approval, the number is now closer to
one in six. Back in 2007, only 18 new drugs were
approved by the FDA. In 2018 that number
was 59, a new record, with a further 48 in 2019.
This isn’t serendipity at work – it’s the outcome
of a set of new policies introduced by the FDA
to reduce the time, cost and approval risk for
new drugs in development. Although there’s
been a change in leadership at the FDA
recently, the new commissioner is on record as
saying that he wants the trend towards more
approvals to continue.
4 The route to
exit is clear
We aim to deliver returns by investing in young
companies and positioning them for growth
before potential acquirers emerge. Over the
last decade, the average amount invested
by venture capital companies in biotech
businesses has remained broadly flat at around
$50 million per company. However, the average
total exit value has risen from approximately
$200 million to $561 million in the same period.
So the trend is solidly in the direction of greater
returns on investment. (See figure 1).
As pharmaceutical businesses compete with
each other to secure the rights to what could
be ground-breaking assets, more deals are
being struck at an earlier stage with smaller
and younger companies. Where larger
pharmaceutical companies were once only
seriously interested in products in phase two
or three of clinical trials, they are now acquiring
companies involved in phase one or even those
still working in the pre-clinical stage. In recent
years, companies that were acquired at the
early stages of clinical development, generated
higher return multiples than later stage
companies. (See figure 2).
New drugs approved
by the FDA in 2019
48
Novel drug approvals
originated by smaller
biopharma companies*
63%
Increase in the number
of clinical trials in 2019
32,000
Biotech companies
acquired in 2019
$45bn
Figure 1: Average investment amounts and transaction values
Acquisitions of VC-backed companies – average investment amounts
and transaction values
)
n
o
i
l
l
i
l
m
$
(
s
e
u
a
v
e
g
a
r
e
v
A
900
800
700
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Average total transaction value
Average upfront transaction value
Average invested capital
Completed trade sales of private VC-backed US and European biopharma companies. Only for deals where
respective information was available. Includes transactions of all sizes.
Figure 2: Investment multiples of VC-backed companies acquired: 2015 - 2019
8.2x
i
t
n
e
m
t
s
e
v
n
/
t
n
o
r
f
p
u
e
g
a
r
e
v
A
10.0x
8.0x
6.0x
4.0x
2.0x
P
r
e
-
clinic
a
l
5.0x
5.1x
3.4x
P
h
P
h
P
h
a
s
e 1
a
s
e 2
a
s
e 3
3.2x
N
a
D
p
A
p
r
o
v
e
d
Sources: IQVA, Population pyramid, BMO Capital Markets,
HBM Partners, FDA Analysis
*% of novel drug approvals in 2018.
Completed trade sales of private US and European VC-backed biopharma companies. Stage of lead product at time
of company sale. Investment multiples (upfront/investment) non-weighted. Includes transactions of all sizes.
13
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
MARKET INSIGHT CONTINUED
Arix Q&A
Delivering value
for investors
Arix’s Christian Schetter and Jonathan Tobin discuss the
Arix investment strategy and how it aims to delivers value for
investors, for biotech entrepreneurs and, ultimately, for patients.
Why is biotech currently such an attractive
proposition for venture capitalists?
Christian Schetter (CS): Biotech is at an
inflection point. We’re seeing potential
become reality at ever greater speed, as
innovative scientific discoveries are rapidly
being translated into medicines that have the
potential to transform lives.
Jonathan Tobin (JT): Although the major
pharma companies have the resources to
develop new drugs, most of the record number
of new drugs approved by the FDA in 2018
actually originated in smaller businesses.
That’s because Big Pharma needs to meet the
demand for new medicines by supplementing
their own pipelines with ideas and products
from smaller, innovative biotech companies.
At Arix, we’re playing our part by investing
in and building breakthrough companies like
these – companies that are right on the leading
edge of discovery. And that’s delivering huge
potential opportunity for investors in terms
of the financial returns they can anticipate.
So what makes Arix different?
JT: Firstly, our transatlantic expertise and
experience. While most of our peers are
focused on either Europe or the US, our policy
has always been to be geographically agnostic.
For example, our investment team is spread
across London, New York and Munich – which
means we can simply seek out the best deals,
wherever they may be. We also look to invest
in companies at different stages of maturity.
We’ll consider everything from creating a
new business from scratch right through to
investing in a company working in the later
stages of clinical development.
Jonathan Tobin, Investment Director (right)
and Christian Schetter, Entrepreneur in Residence
14
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CS: I’d add that the relatively small size of
our team is another major advantage. It’s one
thing to have the skills and knowledge to make
the right decisions, but it can be something
else entirely to have the agility to make them
quickly. I’ve spent most of the last two decades
on the other side of the fence, working within
biotech businesses, and I know how well Arix
is respected for its fast thinking and equally
fast action.
How do you decide which companies
to invest in?
CS: During a year, we either approach or are
approached by hundreds of companies and
identifying the real nuggets isn’t an exact
science. We rule out 90% very early on for
a variety of reasons. We have access to a
powerful global network of personal contacts,
including some of the top experts in many
fields. We consult them to assess the science
and, if we get positive feedback, we move into
the due diligence stage.
JT: We look for an innovative scientific
proposition with strong IP (intellectual
property) – one that can support a
differentiated competitive position and meet
unmet need in a substantial market. It’s also
important that there’s a strong team already
in place or capable of being strengthened.
The final piece of the jigsaw is a compelling
route to approval and exit so that we can
deliver value to our investors. It’s a very rigorous
process and, in the end, we decide to invest in
only about one in 86 companies that we see.
Over half the value of your portfolio is
focused on oncology. Why is that?
JT: Just as we source opportunities regardless
of geography or clinical stage, so we look right
across the full range of therapeutic areas.
Right now, there’s a lot of research focus in
oncology – as the industry evolves and new
science emerges, the portfolio is likely to
reflect that.
CS: Yes, there’s a lot of exciting science in
oncology but we’ve also invested heavily in
immunology and genetic diseases, to name
just two other areas. As long as the science is
right, the business case is there and we have
the opportunity to move it forward within a
reasonable timeframe, we’re interested.
It’s clear what your portfolio companies offer
Arix, but what do you give them in return?
JT: Of course, the first thing we provide is
funds from our investors, but there’s a lot more
to it than that. Again, our network is vital.
We give companies access to the best and
brightest minds across a range of disciplines:
finance and service provision as well as IP and
of course science. It’s a partnership. We help
entrepreneurs build their businesses and take
that difficult next step – turning a concept
into a product that can change lives.
CS: We typically take a seat on the board.
This enables us to influence strategy and key
decisions such as when to explore M&A or
partnership opportunities and how to hire the
right people. It also means we can be assured
of transparency and avoid any surprises!
You’re both involved at board level with
one of Arix’s most recent investments.
How is that working out?
CS: The STipe Therapeutics investment is a
good example of how our strengths work in
practice. I originally identified the opportunity
for Arix to become involved with STipe, which
uses a novel aspect of the interferon genes
(STING) pathway to target cancer. This is
a technology that I know well, as it’s similar
in many ways to that which underpinned
Rigontec, a company I led as CEO before it was
acquired by Merck. Arix co-led an €20 million
investment in STipe in September 2019 and
I’m now proud to be Executive Chairman.
JT: Christian headed up the deal from an
operational perspective and I was glad to lead
for the investment side, negotiating with other
investors and the founders and managing legal
issues. There is a huge amount of work that
goes into successfully closing a deal and it is
very much a collaborative approach, not only
within the Arix team, but also with co-investors
and the investee company’s management.
The combination of the founders’ expertise,
Christian’s experience in immunotherapy
and our investment strategy gives us a
great chance to accelerate new treatment
options for cancer patients. STipe has a novel
proposition in an area that’s attracting a great
deal of interest from pharma companies – and
although it’s early days, the signs are positive.
“ Big Pharma needs
to meet the demand
for new medicines by
supplementing their
own pipelines with
ideas and products
from smaller, innovative
biotech companies.”
Jonathan Tobin
Investment Director
“ We have access to a
powerful global network of
personal contacts, including
some of the top experts
in many fields.”
Christian Schetter
Entrepreneur in Residence
15
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 PORTFOLIO CASE STUDY
Portfolio company interview:
Quench Bio Samantha Truex, CEO
Quench Bio
Quench Bio is leveraging new
understandings in the molecular
biology of inflammation to create novel
medicines that treat patients with severe
inflammatory diseases.
Therapeutic area immunology
Stage pre-clinical
Ownership 22%
(fully committed, including
January 2020 commitment)
Value £6.5m at 31 December 2019
Arix Representative
Jonathan Tobin
1. Tell us about your background.
My educational training is in biology and
biomedical engineering and 2020 brings my
25th anniversary of working in the biotech
arena. I spent most of the first two decades
of my career in large biopharma settings,
first consulting to large companies from
consulting firm Health Advances, then
working in corporate development and drug
programme leadership across Chiron, Genzyme
and Biogen. After gaining a wide variety of
transactional, operational and strategic
experiences across several therapeutics areas
and modalities in that time, I moved in 2014
to the entrepreneurial world; I joined Padlock
Therapeutics as Chief Business Officer to
focus on therapies for patients with severe
inflammatory diseases. After the sale of
Padlock to BMS in 2016, I worked with and
advised several companies including the team
building what is now Quench Bio.
2. What is your vision for Quench Bio?
Our overarching goal for Quench Bio is to make
a tangible difference to patients suffering with
severe inflammatory diseases. We have built
a team with deep knowledge of inflammation
and drug discovery and together, we look
to discover innovative therapies that target
inflammation at its core and translate them
into new treatment options for patients.
3. Tell us about the science behind Quench
and the company’s novel approach?
At Quench Bio, our main focus is on a novel
target called gasdermin, which is a type of
protein. As revealed only recently, gasdermin
plays a key role in inflammatory cell death by
forming lytic pores in the membranes of cells,
which causes them to rupture. This explosive
cell death leads to a positive feedback loop
of inflammation that drives a range of severe
diseases when dysregulated and persistent.
We aim to inhibit the pore-forming function of
gasdermin in order to quiet the inflammation.
4. What attracted you to this opportunity?
The science and the team. I have spent a
substantial time in my career focused on
immunology and I am motivated to help
solve challenges of the immune system, to
improve options for patients suffering from
inflammatory diseases. Quench’s approach
to inhibiting Gasdermin, has the potential
for high impact across a broad range of
indications, with few current treatment
options. The founding investors and scientists
are bright, experienced and energetic
entrepreneurs and, importantly, we are all
motivated by the same vision –to deliver
cures to patients The combination of those
foundational factors made it a great fit
for me.
5. Can you tell us about the team
and forming the company?
Scientists at The Max Planck Institute and its
Lead Discovery Center had done substantial
research in innate immunity and gasdermin;
Arix and Atlas worked with Atlas entrepreneur-
in-residence Mark Tebbe (former Lilly, Forma)
and Mike Nolan (former GSK, Wyeth) to form
a scientific plan and seed the company in
April 2018 with Mark and Mike as founding
Chief Technology Officer and Head of Biology,
respectively. I consulted with this impressive
team during the process and joined as CEO in
September 2018. We were then fortunate to
hire Iain Kilty (former Pfizer VP of Preclinical
Inflammation Research) as Chief Scientific
Officer and built the team from there. Wei Li
(former Pfizer, Millennium) leads our gasdermin
biology center of excellence in the lab with a
team of scientists who bring complementary
immunology expertise that they apply to the
challenge of drugging gasdermin.
6. How has Arix supported Quench
in its formation?
Jonathan Tobin from Arix was instrumental
in founding the company. The Arix relationship
with The Lead Discovery Center drove
Jonathan’s interest. When Atlas became
interested in the programme in parallel,
the firms had the wisdom to collaborate on
founding the company. Arix has supported
Quench Bio in every important way from the
time of inception – with founding capital,
important relationships and excellent board-
level involvement.
16
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 7. What challenges have you had to overcome
and what are you most excited about?
Drug discovery is always challenging,
particularly when tackling novel targets.
As with all companies, we have faced and
surmounted many challenges along the
research path, sometimes having to pivot
away from literature findings and assay
designs when the biology does not play out
as expected. The challenge itself is what is
exciting – and surmounting such challenges
brings proprietary know-how that advances
our capabilities to inhibit this novel and
important inflammatory target.
8. How important are the board and
what role do they play?
The board of directors is extremely important
for many reasons. Good governance is the
most foundational reason. The board, including
excellent participation by Jonathan Tobin,
serves as a sounding board and provides
guidance and direction across scientific,
strategic and financial fronts based on the
sum total of their experience. We have an
excellent board with a diversity of experience
sets represented. Jonathan Tobin from Arix
joined Bruce Booth from Atlas, who chairs our
board, as the founding board members, along
with myself and Herbert Waldmann of the
Max Planck Institute. We were very fortunate
to bring on Jo Viney as our independent
board member; she brings enormous depth in
immunology and drug development. With our
recent fundraise, we add a wealth of biotech
and venture experience in Adam Houghton
of AbbVie Ventures and Josh Resnick of
RA Capital.
Our overarching goal for Quench
Bio is to make a tangible difference
to patients suffering with severe
inflammatory diseases.
Samantha Truex
Chief Executive Officer, Quench
17
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 OUR INVESTMENT STR ATEGY
Investing in life
changing science
Our focus
Our approach
Our portfolio falls into two categories: core and discovery
Core portfolio companies
Discovery portfolio companies
Venture growth capital for later
stage companies
Venture capital for early stage companies
These investments are in the early stages
Our core portfolio comprises of investments in
of funding – typically seed or Series A.
companies that are raising additional capital to
Companies within our discovery portfolio are
accelerate their growth – typically Series B and
start-ups in the initial stages of research and
upwards. The majority of our core companies
development. They have made promising life
are clinical stage companies, which have
science discoveries and have secured initial
begun testing their treatments in patients.
funding to test and validate the science.
These companies will typically have at least
These companies are in the “prove” phase
one live clinical trial, in either Phase 1, Phase 2
and are therefore higher risk. We minimise
or Phase 3. We have included two pre-clinical
that risk by investing small amounts early
companies (Artios, LogicBio) that are making
and remain firm believers that de-risking
strong progress towards human trials and have
should be done before a larger amounts of
validating pre-clinical data. These companies
capital are deployed. We reserve funds for
have raised significant capital, supported by
later stage rounds and if key milestones are
a strong syndicate of leading venture investors.
met, these companies have will move into
the core portfolio.
We focus purely on life sciences, with a team
that is highly experienced in this sector. 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 invest in true
innovation and disease areas where we believe,
the most opportunity exists to advance new
treatment options for patients.
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 academic
institutions, 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.
We take a hands on approach when we invest,
either in an operational role and/or through
a board seat. We can help secure funding,
develop business strategy, make connections
and recruit experienced and talented
management teams.
We focus on true innovation and partner with the most experienced
entrepreneurs to create companies that can significantly improve
patients’ lives.
Science first
High impact science, which has the potential
to revolutionise patient outcomes
Source globally
Unconstrained approach: hunt for the best ideas
across the globe
Therapeutics focus
Novel therapeutics with first or best
in class approach
Early to late stage venture
Flexible to the point of entry, guided by the quality
of the opportunity
18
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Our approach
Our portfolio falls into two categories: core and discovery
Core portfolio companies
Venture growth capital for later
stage companies
Our core portfolio comprises of investments in
companies that are raising additional capital to
accelerate their growth – typically Series B and
upwards. The majority of our core companies
are clinical stage companies, which have
begun testing their treatments in patients.
These companies will typically have at least
one live clinical trial, in either Phase 1, Phase 2
or Phase 3. We have included two pre-clinical
companies (Artios, LogicBio) that are making
strong progress towards human trials and have
validating pre-clinical data. These companies
have raised significant capital, supported by
a strong syndicate of leading venture investors.
Discovery portfolio companies
Venture capital for early stage companies
These investments are in the early stages
of funding – typically seed or Series A.
Companies within our discovery portfolio are
start-ups in the initial stages of research and
development. They have made promising life
science discoveries and have secured initial
funding to test and validate the science.
These companies are in the “prove” phase
and are therefore higher risk. We minimise
that risk by investing small amounts early
and remain firm believers that de-risking
should be done before a larger amounts of
capital are deployed. We reserve funds for
later stage rounds and if key milestones are
met, these companies have will move into
the core portfolio.
We focus purely on life sciences, with a team
that is highly experienced in this sector. 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 invest in true
innovation and disease areas where we believe,
the most opportunity exists to advance new
treatment options for patients.
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 academic
institutions, 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.
We take a hands on approach when we invest,
either in an operational role and/or through
a board seat. We can help secure funding,
develop business strategy, make connections
and recruit experienced and talented
management teams.
Types of companies we invest in
New investments are predominantly made into private biotech
companies. However, we do have the flexibility to invest in public
companies, if we believe there is the potential to make significant
investment returns by recapitalising the company.
19
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 BUSINESS MODEL
How we create sustainable value
Our purpose sits at the heart of everything we do:
To accelerate the transformation of
innovative science into important new
treatments for patients and valuable
assets for investors.
Key strengths and resources
Extensive global networks
Our global network and transatlantic team
provide us with access to a large pool of
opportunities, wide scientific networks
and a deep understanding of the industries
and markets in which we invest.
Unrestricted model
Arix is unconstrained by geography,
therapeutic area or investment stage,
providing access to the broadest possible
range of opportunities.
Pharma partnerships
Pharmaceutical companies are a key
stakeholder for Arix as they seek to get closer
to scientific and medical innovation outside
of their own laboratories. Partnerships with
Fosun, Takeda, UCB and Ipsen provide
access to extensive R&D insights and due
diligence capabilities.
Expert teams
Arix has an investment team with significant
scientific and commercial experience,
helping portfolio companies to navigate
potential hurdles in order to mitigate risk.
In addition, the portfolio companies are led
by experienced management teams, often
strengthened by management sourced from
Arix’s own networks.
Balance sheet
Our plc balance sheet enables us to take a
longer-term view. We can provide companies
with the flexible, long term or ‘permanent’
capital they require to grow. At exit, capital
is recycled onto the balance sheet and
reinvested, creating a sustainable model.
20
1. Discover
▸ We source globally and
review hundreds of
companies per year
1
2. Evaluate
▸ Rigorous due diligence
for new and follow
on investments
2
6. Reinvest
▸ Capital is recycled
6
onto the balance sheet
for reinvestment
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 3
3. Invest
▸ Invest in innovation
with a clear commercial
pathway, approximately
1 out of every 90 seen
4. Develop
▸ We take a
4
Board seat and play
an active role to help
our companies grow
5
5. Exit
▸ We take a long term
view and seek to exit
when the optimum
value is reached
Value created and shared
For portfolio companies
▸ Flexible, long term capital
▸ Deep industry and capital
markets expertise
▸ Access to a broad range of
co-investment opportunities
▸ Introduction to potential
acquisition targets
▸ Due diligence and company
building support
Pharma partnerships
▸ Extensive pipeline of opportunities
▸ Deep industry and scientific expertise
For society
▸ We invest in companies that address
serious unmet needs in healthcare
and have the potential to transform
patient outcomes
▸ New company creation and job creation
For shareholders
▸ Investing in a business that has
a meaningful impact on society
▸ A diverse portfolio of opportunities
and exposure to disruptive, high-growth
biotech companies
▸ Financial returns
▸ Balanced portfolio
For employees
▸ Employee engagement
▸ Talent development
▸ Working for a business that helps create
companies which address serious unmet
needs in healthcare
See more on Stakeholders on 10 to 11
21
Underpinned
by our values
▸ Integrity
▸ Respect
▸ Transparency
▸ Discipline
▸ Collaboration
▸ Accountability
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 OUR STR ATEGIC OBJEC TIVES
Our strategy is to invest
in highly innovative biotech
entrepreneurs to create
companies which address
serious unmet needs
in healthcare.
22
Strategic priorities
Performance in 2019
Priorities going forward
Link to KPIs
Maintain a strong
pipeline of investment
opportunities
Maintain a
diverse portfolio
Effective balance
sheet management
Build the value of
portfolio companies
through hands
on support
Deliver long term
capital growth
for shareholders
▸ Reviewed hundreds of global opportunities in 2019,
of which we did deep diligence on 81 and provided
capital to two new companies.
▸ Maintain exposure to quality
life science opportunities across
the globe
321
Global
opportunities
▸ Portfolio of 16 companies, following new investments
in Imara and STipe Therapeutics. Our portfolio spans
US, Europe, Israel and Australia, from preclinical
to late stage clinical assets and across a range of
therapeutic areas, including: immunology, genetic
diseases, oncology and anti-infectives.
16
companies in
our portfolio
▸ Maintain a diverse
portfolio of investments,
unconstrained by geography,
stage of development or
therapeutic area
▸ Started 2020 with a cash balance of £55m, having
invested £36m in our Gross Portfolio, including two
new investments.
▸ Realised £4.3m from sale of shares in Harpoon.
£36m
invested in our
Gross Portfolio
▸ Invest in new opportunities and
support existing holdings, whilst
maintaining price discipline
▸ Evaluate opportunities for
realising value from existing
investments and reinvest in
new opportunities
▸ 13 board seats and 4 observer seats across
the portfolio.
and Pharmaxis.
▸ New trials initiated by Harpoon, VelosBio
▸ Positive clinical trial readouts from Amplyx, Aura,
Autolus and Imara.
▸ Successful additional financing rounds completed
by Harpoon, Aura, Autolus.
▸ Total capital raised by portfolio companies of $322m
during 2019.
▸ Appointed and expanded leading management
teams at STipe, Quench Bio and Artios.
▸ Gross Portfolio value decreased from £175m
to £149m.
$322m
raised by portfolio
▸ Increase value of portfolio
companies through hands-on
support and development,
including support with:
▸ Raising capital
▸ Clinical trial progress
▸ Management search
▸ Business strategy
▸ Developing strategic interest
Gross
Portfolio Value
Pipeline
progression
Gross
Portfolio Value
Pipeline
progression
Net Asset Value
NAV per share
Gross
Portfolio Value
Pipeline
progression
▸ Results for the period show a 25% negative return
on Net Asset Value (NAV) per share (down 51p)
compared to a positive return of 32% (48p per share)
a year earlier.
▸ The portfolio now stands at 16 companies,
collectively running 26 clinical trials. These companies
made important clinical and financial progress in
2019, putting them in a strong position to build
value in the year ahead as they advance towards
key inflection points.
26
clinical trials
provides ‘multiple
shots on goal’
▸ Grow value of our portfolio
and NAV
▸ Realise value from
existing investments
Net Asset Value
NAV per share
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
Strategic priorities
Performance in 2019
Priorities going forward
Link to KPIs
Maintain a strong
pipeline of investment
opportunities
Maintain a
diverse portfolio
Effective balance
sheet management
Build the value of
portfolio companies
through hands
on support
Deliver long term
capital growth
for shareholders
▸ Reviewed hundreds of global opportunities in 2019,
of which we did deep diligence on 81 and provided
capital to two new companies.
321
Global
opportunities
▸ Maintain exposure to quality
life science opportunities across
the globe
▸ Portfolio of 16 companies, following new investments
in Imara and STipe Therapeutics. Our portfolio spans
US, Europe, Israel and Australia, from preclinical
to late stage clinical assets and across a range of
therapeutic areas, including: immunology, genetic
diseases, oncology and anti-infectives.
16
companies in
our portfolio
▸ Maintain a diverse
portfolio of investments,
unconstrained by geography,
stage of development or
therapeutic area
▸ Started 2020 with a cash balance of £55m, having
invested £36m in our Gross Portfolio, including two
new investments.
▸ Realised £4.3m from sale of shares in Harpoon.
£36m
invested in our
Gross Portfolio
▸ Invest in new opportunities and
support existing holdings, whilst
maintaining price discipline
▸ Evaluate opportunities for
realising value from existing
investments and reinvest in
new opportunities
▸ 13 board seats and 4 observer seats across
the portfolio.
▸ New trials initiated by Harpoon, VelosBio
and Pharmaxis.
▸ Positive clinical trial readouts from Amplyx, Aura,
Autolus and Imara.
▸ Successful additional financing rounds completed
by Harpoon, Aura, Autolus.
▸ Total capital raised by portfolio companies of $322m
during 2019.
▸ Appointed and expanded leading management
teams at STipe, Quench Bio and Artios.
▸ Gross Portfolio value decreased from £175m
to £149m.
$322m
raised by portfolio
▸ Increase value of portfolio
companies through hands-on
support and development,
including support with:
▸ Raising capital
▸ Clinical trial progress
▸ Management search
▸ Business strategy
▸ Developing strategic interest
Gross
Portfolio Value
Pipeline
progression
Gross
Portfolio Value
Pipeline
progression
Net Asset Value
NAV per share
Gross
Portfolio Value
Pipeline
progression
▸ Results for the period show a 25% negative return
on Net Asset Value (NAV) per share (down 51p)
compared to a positive return of 32% (48p per share)
a year earlier.
▸ The portfolio now stands at 16 companies,
collectively running 26 clinical trials. These companies
made important clinical and financial progress in
2019, putting them in a strong position to build
value in the year ahead as they advance towards
key inflection points.
26
clinical trials
provides ‘multiple
shots on goal’
▸ Grow value of our portfolio
and NAV
▸ Realise value from
existing investments
Net Asset Value
NAV per share
23
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
KEY PERFORMANCE INDICATORS
KPI
Measured by
Performance in 2019
Links to strategic objectives
Key risks
1
Net Asset
Value (NAV)
Gross Portfolio Value + cash
+ other net assets.
2019
2018
2017
£202m
£270m
£146m
Effective balance sheet management
Deliver long term capital growth
for shareholders
1
2
3
4
5
▸ Net Asset Value decreased to £202m in 2019, due to net negative
revaluations of £54m in the Gross Portfolio.
2
NAV per share*
Net Asset Value divided by
shares outstanding at the
year-end.
2019
2018
2017
£1.49
£1.52
£2.00
Effective balance sheet management
Deliver long term capital growth
for shareholders
1
2
3
4
5
▸ NAV per share decreased by 25%, reflecting downward portfolio
revaluations in 2019.
3
Gross Portfolio
Value (GPV)*
The valuation of investments
in the Core and Discovery
portfolios at year-end.
2019
2018
2017
£54m
£149m
£175m
▸ Gross Portfolio Value has decreased by £26m in 2019. This reflects
the volatility of Arix’s public market holdings in the period.
Maintain a strong pipeline
of investment opportunities
Maintain a diverse portfolio
Build the value of portfolio companies
through hands on support
1
3
5
Number of trials in clinical
development across
all investments.
2019
2018
2017
17
4
5
11
9
4
7
3 1
Phase 1
Phase 2
Phase 3
▸ The pipeline continues to expand, with 26 clinical trials across
the portfolio.
▸ New trials were initiated by Harpoon, VelosBio in the period.
Maintain a strong pipeline
of investment opportunities
Maintain a diverse portfolio
Build the value of portfolio companies
through hands on support
1
4
4
Pipeline
progression
24
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
KPI
1
Net Asset
Value (NAV)
2
3
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
Measured by
Performance in 2019
Links to strategic objectives
Key risks
Gross Portfolio Value + cash
+ other net assets.
£202m
£270m
£146m
Effective balance sheet management
Deliver long term capital growth
for shareholders
1
2
3
4
5
▸ Net Asset Value decreased to £202m in 2019, due to net negative
revaluations of £54m in the Gross Portfolio.
KEY
1
Clinical trial risks
2
3
4
5
Personnel
Macroeconomic conditions
Legislation and regulation
Brexit
* Alternative Performance Measure
Net Asset Value divided by
shares outstanding at the
year-end.
NAV per share*
£1.49
£1.52
£2.00
Effective balance sheet management
Deliver long term capital growth
for shareholders
1
2
3
4
5
▸ NAV per share decreased by 25%, reflecting downward portfolio
revaluations in 2019.
Gross Portfolio
Value (GPV)*
The valuation of investments
in the Core and Discovery
portfolios at year-end.
£149m
£175m
£54m
▸ Gross Portfolio Value has decreased by £26m in 2019. This reflects
the volatility of Arix’s public market holdings in the period.
Maintain a strong pipeline
of investment opportunities
Maintain a diverse portfolio
Build the value of portfolio companies
through hands on support
1
3
5
4
Pipeline
progression
Number of trials in clinical
development across
all investments.
17
4
5
11
9
4
7
3 1
Phase 1
Phase 2
Phase 3
▸ The pipeline continues to expand, with 26 clinical trials across
the portfolio.
▸ New trials were initiated by Harpoon, VelosBio in the period.
Maintain a strong pipeline
of investment opportunities
Maintain a diverse portfolio
Build the value of portfolio companies
through hands on support
1
4
25
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
PORTFOLIO REVIEW
A year of
development progress
Key portfolio companies
Key companies by stage of lead programme
Core companies
Company
Ownership
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
✓
✓
✓
✓
✓
✓
✓
✓
7.3%
6.5%
7.7%
3.0%
11.1%
9.9%
6.5%*
10.4%
11.3%
12.4%
13.0%
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Select Discovery companies
19.8%
22.0%
KEY
In progress
✓
Completed phase
26
* New ownership stake following Autolus’ public offering in January 2020.
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
Key achievements in 2019
$322m
raised by portfolio
companies in the year
3
new clinical trial initiations
5
companies announced positive
Phase 1 and Phase 2 data
2
new companies added
to the portfolio
3
financing rounds
completed at valuation
uplifts to previous rounds
Quench Bio is the first company we have
co-founded and formed from scratch, combining
scientific discoveries from professors in Germany
with entrepreneurs and co-investors in Boston.
During 2019 the portfolio continued to make
good progress, with a number of companies
reaching important clinical milestones and
completing additional financing rounds. As at
31 December 2019, our Gross Portfolio was
valued at £149 million and comprised 17*
companies: 12 core companies and 5 discovery
companies. The companies in our portfolio are
categorised in two stages: Core companies
have made strong development progress
and raised significant capital, supported
by a syndicate of leading venture investors.
Discovery companies are in the early stages
of funding – typically seed and Series A.
These companies are in the “prove” phase
and therefore higher risk. We minimise risk by
investing small amounts early and remain firm
believers that de-risking should be done before
a larger amounts of capital are deployed.
During the period we invested £36 million
into the gross portfolio, including co-leading
investment rounds in two new portfolio
companies Imara and STipe and further
investments into existing portfolio companies
(Aura, Autolus and Harpoon). In aggregate,
our portfolio companies raised $322 million
during the period, putting them in a good
position to execute on their important clinical
development programmes.
Operationally, there was good progress in the
portfolio, with notable highlights including
Harpoon’s licensing deal with AbbVie, positive
data readouts from Autolus, Aura, Amplyx,
Imara and Pharmaxis, along with new trial
initiations from VelosBio, Harpoon and
Pharmaxis. Additionally, Artios and Amplyx
expanded their pipelines acquiring new assets
from MD Anderson and Novartis respectively.
Shortly before year end we sold just over 10%
of our holding in Harpoon at roughly two times
the average cost of investment, following
positive newsflows in the company. We retain
a 10.4% stake in the company and Mark Chin,
Investment Director, continues to serve on the
company’s Board.
Notwithstanding these positive developments,
our Gross Portfolio Value declined from £175m
to £149m, principally due to a reduction in the
share price of our largest quoted company,
Autolus. Despite this, Autolus was still valued
at 1.4 times cost at 31 December 2019,
given our early investment in this company
before it was public (cost £24.6 million, value
£33.8 million). This underlines a key aspect of
our business model: recognising that biotech
is a volatile, high risk sector, we aim to invest
in promising technologies early, at relatively
low valuations and manage a balanced
portfolio. We also take a longer-term view,
recognising that real value is driven by clinical
data and that along the way individual
company valuations can be highly volatile.
Post period end, we announced the Series
A financing and launch of our Discovery
portfolio company Quench Bio, a business
that we formed in stealth mode with Atlas
Venture in June 2018. This is the first company
we have co-founded and formed from
scratch, combining scientific discoveries from
professors in Germany with entrepreneurs
and co-investors in Boston. It encapsulates
the benefits of Arix’s transatlantic footprint
and culture.
Additionally, in January, Autolus completed
a follow-on financing raising net proceeds
of approximately $72 million and reported
encouraging data in its AUTO3 diffuse large
B-cell lymphoma (DLBCL) programme.
Furthermore, post period end, we exited our
small position in Verona Pharma, taking the
portfolio to 16 companies.
The year ahead will be important for a number
of our portfolio companies as they reach
significant clinical and development milestones
during the year. Our portfolio companies are
collectively running 26 clinical trials, a number
of which are expected to read out over the next
12 months.
* The portfolio reduced to 16 companies post year end
following the sale of Verona Pharma
27
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
CLINICAL PIPELINE
Innovation at all stages of development
Across our
portfolio we now
have 26 studies in
the clinic, focusing
on areas of high
unmet medical need.
Very initial stages of testing and validating
scientific discoveries.
AU-011
Cancers of ocular surface
OPK-546
Retinitis pigmentosa
At this stage, the focus is on researching the
feasibility and safety of a treatment before
commencing clinical trials.
Preclinical
Discovery
ST100
Cancer
LB-101
Hemophilia B
LB-201
A1ATD
LB-301
Crigler Najjar
Nuclease 1
Cancer
Nuclease 2
Cancer
Nuclease 3
Cancer
PolQ CD2
Cancer
TGF-ẞ
Orphan bone disease
AU-011
Choroidal metastasis
AU-012
Primary bladder carcinoma
AU-013
Immuno-oncology
PolQ CD1
Cancer
ATRi ART0380
Cancer
HPN217
Multiple myeloma
HPN328
Small cell lung cancer
LB-001
MMA
AUTO1NG
ALL
AUTO3NG
DLBCL
AUTO5
Peripheral TCL
AUTO6NG
Neuroblastoma
AUTO8
Multiple myeloma
Topical LOX
Anti-fibrotic: scarring
AUTO7
Prostate cancer
KEY
Anti-infectives
immunology
Genetic diseases
Oncology
28
Phase 1
Phase 2
Phase 3
This is the first time a product is tested in
Phase 2 involves further trials testing the
This is the final stage of testing before
humans. The focus at this stage is testing
efficacy and safety and different dosing levels.
registration. Phase 3 trials focus on testing
the effectiveness of the new product compared
to existing treatments or to a placebo.
IMR-687
Sickle cell disease
APX001
Invasive candidemia
AU-011
Choroidal melanoma
AOC3 (BI)
Diabetic retinopathy
SURE 1
Complicated UTI
SURE 2
Complicated UTI
SURE 3
Complicated IAI
ACCUTE
NSTI
REAKT
Acute kidney injury
the side effects and safety.
APX001
Candida auris
APX001
Invasive aspergillosis
VLS-101
Haematological cancers
HPN424
Prostate cancer
HPN536
Ovarian cancer
AUTO1
Adult ALL
AUTO1
Pediatric ALL
AUTO3
DLBCL
AUTO4
Peripheral TCL
AUTO6
Neuroblastoma
APX001
Cryptococcus
MAU868
BKV-associated
hemorrhagic cystitis
MAU868
BKV-associated nephropathy
IMR-687
TDT ẞ-thalassemia
IMR-687
NTDT ẞ-thalassemia
LOXL-2
NASH/fibrosis
Systemic LOX
Anti-fibrotic: cancer
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 scientific discoveries.
OPK-546
Retinitis pigmentosa
ST100
Cancer
LB-101
Hemophilia B
LB-201
A1ATD
LB-301
Crigler Najjar
Nuclease 1
Cancer
Nuclease 2
Cancer
Nuclease 3
Cancer
PolQ CD2
Cancer
TGF-ẞ
Orphan bone disease
AU-011
Cancers of ocular surface
AU-011
Choroidal metastasis
AU-012
Primary bladder carcinoma
AU-013
Immuno-oncology
PolQ CD1
Cancer
ATRi ART0380
Cancer
HPN217
Multiple myeloma
HPN328
Small cell lung cancer
LB-001
MMA
AUTO1NG
ALL
AUTO3NG
DLBCL
AUTO5
Peripheral TCL
AUTO6NG
Neuroblastoma
AUTO8
Multiple myeloma
Topical LOX
Anti-fibrotic: scarring
AUTO7
Prostate cancer
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
Very initial stages of testing and validating
At this stage, the focus is on researching the
feasibility and safety of a treatment before
commencing clinical trials.
This is the first time a product is tested in
humans. The focus at this stage is testing
the side effects and safety.
Phase 2 involves further trials testing the
efficacy and safety and different dosing levels.
This is the final stage of testing before
registration. Phase 3 trials focus on testing
the effectiveness of the new product compared
to existing treatments or to a placebo.
IMR-687
Sickle cell disease
APX001
Invasive candidemia
AU-011
Choroidal melanoma
AOC3 (BI)
Diabetic retinopathy
SURE 1
Complicated UTI
SURE 2
Complicated UTI
SURE 3
Complicated IAI
ACCUTE
NSTI
REAKT
Acute kidney injury
APX001
Candida auris
APX001
Invasive aspergillosis
VLS-101
Haematological cancers
HPN424
Prostate cancer
HPN536
Ovarian cancer
AUTO1
Adult ALL
AUTO1
Pediatric ALL
AUTO3
DLBCL
AUTO4
Peripheral TCL
AUTO6
Neuroblastoma
APX001
Cryptococcus
MAU868
BKV-associated
hemorrhagic cystitis
MAU868
BKV-associated nephropathy
IMR-687
TDT ẞ-thalassemia
IMR-687
NTDT ẞ-thalassemia
LOXL-2
NASH/fibrosis
Systemic LOX
Anti-fibrotic: cancer
29
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORE PORTFOLIO COMPANIES
Harpoon Therapeutics
Harpoon made significant clinical
and strategic progress in 2019;
signing a worldwide licensing deal
with AbbVie, completing a successful
Nasdaq IPO and advancing its
second programme into the clinic.
Expected
milestones in 2020
2
data readouts
2
new trial initiations
Harpoon Therapeutics (NASDAQ: HARP)
Harpoon is a clinical-stage immuno-oncology company developing
a novel class of T cell engagers that unleash the natural power of the
T cells to fight cancer and other diseases.
Focus area Oncology
Value £28.9m (plus £4.3m realised to date)
Cost £19.2m
% of gross portfolio 19%
Remaining commitment £nil
Phase
1
Harpoon’s TriTAC technology is designed to engage T cells
to target and destroy cancer cells.
Harpoon made significant clinical and strategic progress in 2019.
In February the company completed a successful Nasdaq IPO,
raising net proceeds of $70.7 million to advance Harpoon’s pre-
clinical and clinical trials. Notably, the company also announced
an exclusive worldwide option and license transaction with
AbbVie for its multiple myeloma programme and an expansion
of their existing discovery collaboration for up to six additional
targets. These agreements build upon the discovery collaboration
established by the two companies in October 2017. This licensing
deal represents up to $100 million in upfront / near term
milestones and $2.3 billion in potential future payments.
The company initiated a Phase 1/2a clinical trial for HPN536,
a mesothelin-targeting T cell engager, for ovarian cancer and
other mesothelin-expressing solid tumours in April 2019. This is
the second programme that Harpoon has brought into the clinic,
following initiation of a trial in prostate cancer in August 2018.
Harpoon expects to report data from both of these trials in
2020 and advance its multiple myeloma and small cell lung
cancer trials into the clinic.
30
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Autolus Therapeutics (NASDAQ: AUTL)
Imara
Autolus is a clinical biopharmaceutical company developing
next-generation programmed T cell therapies for the treatment
of cancer
Imara is a clinical-stage biotechnology company focused on developing
new medicines to treat patients suffering from rare inherited genetic
disorders of haemoglobin
Focus area Oncology
Value £33.8m
Cost £24.6m
% of gross portfolio 23%
Remaining commitment £nil
Phase
1
Focus area Genetic diseases
Value £10.7m
Cost £9.3m
% of gross portfolio 7%
Remaining commitment £2.1m
Phase
2
During the period we co-led a $63.0 million Series B for new portfolio
company Imara, acquiring a 9.9% stake on a fully diluted basis and
committing to invest $15.0 million (£11.4 million), of which £9.3 million
has been drawn to date.
Imara is developing novel therapeutics for the chronic treatment of sickle
cell disease (SCD) and other haemoglobinopathies. The lead programme,
IMR-687, is designed to be a disease-modifying therapy that acts on both
red and white blood cells with the potential to create better treatment
outcomes for patients. It has a differentiated clinical profile, including a
dual mechanism of action on red and white blood cells, once daily dosing,
clean safety, and potential impact on foetal haemoglobin.
Imara adds a new therapeutic area and expands the breadth of our
portfolio into non-oncology haematology and also adds another later-
stage clinical asset to the portfolio. IMR-687, is at an exciting point in its
clinical development and is currently being evaluated in a Phase 2a study
in sickle cell patients. The company reported encouraging initial safety
and efficacy data in June, which demonstrated that treatment with
IMR-687 in adult patients was generally well tolerated.
Post period end the company announced that it had filed for a proposed
IPO on Nasdaq. Further details will be announced in due course.
Autolus continued to make good clinical and operational progress
during the period. The company presented updated results for its lead
programme AUTO1 in adult ALL, showing an 87% complete response
rate, which compares to a 42% complete response rate for current
standard of care in Adult ALL. There are currently no approved CAR-T
therapies for adult ALL and high unmet need. We are optimistic that
AUTO1 has the potential to have an improved efficacy profile and
comparable safety profile. Adult ALL is a significant opportunity, with
8,400 new cases diagnosed yearly worldwide and an addressable patient
population of 3,000 patients. We believe this represents a significant
commercial opportunity for the business. Behind this lead programme,
there are a number of other promising programmes, including AUTO3
or DLBCL where a high unmet need remains, and where AUTO3 has
the potential to be a true outpatient therapy.
Following completion of its successful IPO in July 2018, the company
conducted a follow-on financing post, raising $108.8 million in
March 2019.
While the Autolus share price has declined during the period, we are
focused on long-term value creation and believe the fundamentals
of the company are strong.
Post period end Autolus reported additional encouraging data in its
AUTO3 DLBCL programme at the EHA conference and expects to report
further data from this programme in the second half of 2020, which will
enable the company to make its decision on further clinical development,
including Phase 2 initiation.
The company additionally, completed a second follow-on financing
raising net proceeds of approximately $72.4 million, which will enable
Autolus to develop its AUTO1 adult ALL programme through its Phase 2
trial and advance its next generation of T cell therapies into the clinic.
Autolus has a large pipeline of programmes, four of which are already
in the clinic. Over the coming year we expect the company to initiate a
number of new trials and report further data in adult ALL and DLBCL.
The business also expects to present data ,for the first time, from its
AUTO4 programme in T Cell Lymphoma, an area of severe unmet need.
31
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORE PORTFOLIO COMPANIES
Artios Pharma
Aura Biosciences
Artios is a leading independent DNA Damage Response (DDR) company
with a strong pipeline of novel cancer therapies in development with
first-in-class potential.
Aura is clinical stage company developing a new class of therapies to
target and destroy cancer cells selectively, while leaving surrounding
tissue unharmed.
Focus area Oncology
Value £15.2m
Cost £13.8m
% of gross portfolio 10%
Remaining commitment £nil
Phase
PC
Focus area Oncology
Value £8.3m
Cost £7.1m
% of gross portfolio 6%
Remaining commitment £nil
Phase
2
Artios made significant progress this year as it advances towards
clinical development.
The company recently in-licenced a new ATR inhibitor, with best-in-
class potential, from MD Anderson and ShangPharma. ART0380 is
under-going IND enabling studies with the hope to establish a superior
safety profile in the clinic than competitor compounds. The new asset
is expected to enter Phase 1 in ATM-deficient tumours by the end 2020.
This significantly broadens and adds further value to the DDR pipeline,
as well as bringing the company a step closer to clinical data.
Artios also continued to make excellent progress with its Pol Theta
programme, with a first development candidate nominated. The first
candidate will be tested for monotherapy and combination efficacy
with PARPi and radiosensitisation and is scheduled to be IND ready by
Q1 2021.
Behind ATR and Pol Theta there is a deep pipeline of inhibitors targeting
key nucleases involved in DNA repair which show synthetic lethality in
different genetic backgrounds.
The company continued to expand its team during 2019, with notable
hires such as Ian Smith (Eli Lilly, AstraZenca) as Chief Medical Officer and
Tania Dimitrova (Pfizer, Bristol-Myers Squibb) as Chief Business Officer.
The company also expanded its clinical development team and its US
presence with a new office in New York.
Aura’s lead programme, 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 and, in about 40% of cases, ocular melanoma metastasizes
to the liver, where it is nearly always fatal.
Aura’s novel technology uses viral nanoparticle conjugates to bind
selectively to unique receptors on cancer cells in the back of the eye.
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.
Aura has been granted Orphan Drug and Fast Track status from the
U.S. Food & Drug Administration (FDA) for its AU-011 programme.
The ongoing Phase 1b/2 study has shown that the drug is well-tolerated,
with clear evidence of tumour control and preservation of visual acuity
at long term follow up, even in high risk patients. The company expects
to initiate a pivotal Phase 3 trial in the second half of 2020.
Aura also continues to make strong operational and financial progress.
The company completed a $40.0 million Series D financing in the period,
in which Arix committed a further $4.5 million (£3.4 million), to increase
our stake to 7.7%. The financing recognised a 33% uplift in the book value
of Arix’s Series C investment in Aura, with Arix’s total interest in Aura
increasing to £8.3 million from £3.9 million on a fully committed basis.
Aura plans to use the proceeds from the Series D financing to support
the late stage clinical development of its lead asset, light-activated
AU-011, for the treatment of primary choroidal melanoma.
32
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 VelosBio
LogicBio Therapeutics (NASDAQ: LOGC)
VelosBio is a privately held, clinical-stage biopharmaceutical company
developing first in class antibody-drug conjugate (ADC) and bispecific
antibodies programmes to treat cancer.
LogicBio is a genome editing company focused on developing medicines
to durably treat rare diseases in pediatric patients with significant unmet
medical needs using GeneRide™, its proprietary technology platform.
Focus area Oncology
Value £5.5m
Cost £5.1m
% of gross portfolio 4%
Remaining commitment £3.3m
Phase
1
Focus area Genetic diseases
Value £16.3m
Cost £10.5m
% of gross portfolio 11%
Remaining commitment £nil
Phase
PC
VelosBio is our ADC company, originally sourced through our
pharmaceutical partner, Takeda Ventures.
Antibody Drug Conjugates (ADCs) are highly potent drugs designed as
a targeted therapy for the treatment of people with cancer. In contrast
to traditional chemotherapeutic drugs, ADCs only target delivery of
“drug payloads” to cancer cells so that healthy cells are less affected.
The company has a highly experienced leadership team, led by Chief
Executive Officer, Dave Johnson, the former CEO of Acerta Pharma,
which developed the approved blood cancer treatment, CALQUENCE
(acalabrutinib), acquired by AstraZeneca for up to $7 billion in 2015.
The company has made rapid clinical progress in 2019, dosing the
first patient in its lead programme VLS-101 for the treatment of
haematological cancers and moving through four dose levels.
Very early data presented at Arix’s 2019 capital markets day, is
encouraging and the company expects to provide further safety
and efficacy data in H2 2020.
Outside its lead programme, the company’s goal is to expand its pipeline
to build novel best-in-class therapeutics for cancer and develop next
generation ADCs and bispecific antibodies (BiAbs) as fast followers
to VLS-101.
LogicBio is initially targeting rare liver disorders where it is critically
important to treat patients early in life, before irreversible damage
occurs. Unlike traditional gene therapy, GeneRide™ harnesses the cell’s
natural DNA repair process to integrate a corrective gene directly into
the patient’s genome. This approach is designed to provide a durable
therapeutic benefit from a single treatment.
During the period, LogicBio was granted orphan and rare paediatric
disease designation by the FDA for its lead product candidate LB-001
for the treatment of methylmalonic acidemia (MMA). The business also
moved into new facilities and expanded its lab space, which will support
the continued growth of its pipeline and team.
Notably, post period end, LogicBio announced a research collaboration
with Takeda, one of our strategic partners, to further develop its
LB-301 programme for the treatment of Crigler-Najjar syndrome.
The collaboration will bring together LogicBio’s propriety platform for
genome editing and Takeda’s expertise in researching and developing
gene therapies.
In February 2020, the FDA placed a clinical hold on the Investigational
New Drug (IND) submission for LB-001 for the treatment of MMA
pending the resolution of certain clinical and non-clinical questions.
The Company submitted the IND in January 2020 to support the
initiation of a Phase 1/2 clinical trial in patients with MMA. LogicBio
plans to work closely with the FDA to resolve these questions as quickly
as possible.
33
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORE PORTFOLIO COMPANIES CONTINUED
Atox Bio
Amplyx
Atox is focused on developing cures for serious, life threatening
conditions in critically ill patients resulting from severe
acute inflammation
Amplyx is a clinical stage company focused on developing innovative
therapies for patients with compromised immune systems, including
cancer and transplant patients and the critically ill.
Focus area Immunology
Focus area Anti-Infectives
Value £5.0m
Cost £6.2m
% of gross portfolio 3%
Remaining commitment £0.2m
Phase
3
Value £4.9m
Cost £4.8m
% of gross portfolio 3%
Remaining commitment £nil
Phase
2
Atox Bio’s lead product, Reltecimod, is a novel peptide
that modulates the body’s severe acute immune response.
It is initially being developed to treat Necrotizing Soft Tissue
Infections (NSTI), also known as “flesh eating bacteria.”
This is a rare, life threatening response to infection that results
in significant tissue destruction and systemic disease leading
to multiple organ dysfunction, failure and death.
During the period the company recently completed enrolment
of the ACCUTE (Reltecimod Clinical Composite endpoint
StUdy in necrotizing soft Tissue InfEctions) study, a phase 3
clinical trial evaluating the efficacy of Reltecimod in patients
with NSTI. Results of the study are expected to be presented
at a medical meeting in the first half of 2020. Previously, the
company completed a phase 2 study of Reltecimod in NSTI,
which demonstrated that patients treated with Reltecimod had
a meaningful improvement across multiple end points.
Reltecimod is also being studied in REAKT (Reltecimod Efficacy
for Acute Kidney Injury Trial), in patients with abdominal sepsis
induced Acute Kidney Injury (SA-AKI).
Reltecimod was granted Fast Track status for both NSTI
and AKI and Orphan Drug designation from the FDA for NSTI
as well as Orphan Medicinal Product designation from the
European Commission for NSTI.
The recovery of patients struggling to overcome cancer, or a lifesaving
transplant, is often put at risk by the very treatments necessary to save
their lives – namely, medicines which suppress the immune system.
Amplyx’s mission is to bring innovative therapies to these vulnerable
patients and keep them on the path to renewed health.
Amplyx made strong progress in 2019, expanding its clinical pipeline
and reporting positive interim Phase 2 data.
During the period the company announced encouraging safety and
efficacy data from 50% of the planned study population enrolled
in its Phase 2 trial of APX001 (fosmanogepix ) for the treatment of
candidemia. These data, which were reviewed by two independent review
committees, showed that fosmanogepix demonstrated a high level of
treatment success. Candidemia is a significant threat in patients who are
critically ill or have compromised immune systems, with mortality among
patients as high as 40%. The currently available antifungal agents are
associated with significant side effects such as liver or kidney damage
and no new classes of antifungal drugs have been approved since 2001.
We believe that fosmanogepix has the potential to become an important
therapy for treating patients with these life-threatening infections.
Additionally, the company expanded its pipeline of innovative therapies,
with a new Phase 2 ready programme (MAU868) for the treatment of
BK virus, licensed from Novartis. BKV disease can lead to devastating
and costly consequences, such as nephropathy, that primarily affects
kidney transplant recipients, and hemorrhagic cystitis that affects
hematopoietic cell transplant recipients. Amplyx expects to initiate
the Phase 2 programme Phase 2 studies for this programme in the
first half of 2020.
34
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Iterum Therapeutics (NASDAQ: ITRM)
Pharmaxis (ASX: PXS)
Iterum is a late stage clinical company aimed at combating the global
crisis of multi-drug resistant pathogens
Pharmaxis is an Australian pharmaceutical research and
development company focussed on inflammation and fibrosis
with a portfolio of products at various stages of development.
Focus area Anti-Infectives
Focus area Immunology
Value £3.7m
Cost £13.0m
% of gross portfolio 2%
Remaining commitment £nil
Phase
3
Value £3.7m
Cost £8.0m
% of gross portfolio 2%
Remaining commitment £nil
Phase
2
During the period Iterum completed enrolment of its three Phase 3
clinical trials of sulopenem (Iterum’s lead compound and novel antibiotic
for the treatment of gram-negative, multi-drug resistant infections)
in complicated and uncomplicated urinary tract infections (UTI) and
complicated intra-abdominal infections (IAI).
In December, the company announced topline Phase 3 results of
sulopenem in the first of these trials in complicated intra-abdominal
infections. The full body of evidence from the trial, known as Sulopenem
for Resistant Enterobacteriaceae (SURE) 3, confirms overall safety
profile and suggests that treatment with sulopenem may result
in clinically important benefits in patients with complicated intra-
abdominal infections, the second leading cause of infection-related
mortality in intensive care units. However, the trial narrowly missed its
primary endpoint of clinical response on Day 28 in the microbiological
MITT (modified intent to treat) population, by just one patient. All the
secondary endpoints met the bar for non-inferiority and will provide,
at a minimum, supportive safety data. Sulopenem clearly showed
activity and the product was well tolerated.
Iterum expects to announce Phase 3 data from its SURE 1 and SURE 2
clinical trials for sulopenem in uncomplicated and complicated UTI
in H1 2020.
During the period Pharmaxis announced positive Phase 1a
results from its systemic LOX inhibitor programme for the
treatment of fibrotic cancer and myelofibrosis. The Phase 1
study commenced in February 2019 and consists of two stages.
In the first single ascending dose stage (phase 1a) the drug was
well tolerated and no safety signals were identified during the
study. Importantly for potential clinical benefit, the data showed
a drug with good pharmacokinetics and a dose related inhibition
of LOX enzymes, with the upper doses causing significant
inhibition for a full 24 hours after a single application. The second
multiple ascending dose stage (phase 1b) commenced in
October and is due to report in H1 2020.
In October, the FDA provided detail advice on the Human Factor
Study design that is needed for Bronchitol approval in the US.
Pharmaxis believes that the FDA review of the Bronchitol NDA
will be completed in mid 2020. Subject to approval, Pharmaxis
will receive a US$10 million milestone on the commercial launch
of Bronchitol in the US, mid to high teen percentage royalties
and will be the exclusive supplier of Bronchitol for the US market.
The company ended 2019 with the disappointing news that
Boehringer Ingelheim (BI) were discontinuing the development
of the AOC3 inhibitor acquired from Pharmaxis in 2015 in
the NASH indication, despite a Phase 2a study that met all
endpoints. While the NASH opportunity is now gone a separate
study in diabetic retinopathy (DR) is underway with phase 2
recruitment completed and a read out due in H2 2020. BI have
emphasised in their discussions with Pharmaxis that the
development track in DR will be assessed separately from NASH
and that the degree of clinical benefit seen in the ongoing phase
2a study will be key in deciding whether to progress further.
35
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DISCOVERY PORTFOLIO SPOTLIGHT
STipe Therapeutics
Quench Bio
STipe Therapeutics is a privately held biotechnology company
with a vision to become a leader in the immune-oncology field,
pioneer therapies using a novel aspect of the stimulator of
interferon genes (STING) Pathway to target cancer.
Quench Bio is a biotechnology company leveraging new
insights into gasdermin biology and innate immunity
to develop medicines for severe inflammatory diseases.
Therapeutic area Oncology
Ownership 19.8% (fully committed)
Cost: £2.0m
Remaining commitment: £2.9m
Value: £1.9m
Phase
PC
In September 2019, we co-led the Series A financing of new
discovery portfolio company STipe Therapeutics; a company
focused on harnessing the innate immune system to battle
cancer. STipe is developing first-in-class drugs targeting
intracellular protein-protein interactions of the STING
Pathway; a major driver of innate immunity, and regulator of
tumorigenesis and autoimmune disorders. The company has
identified and validated compounds that sensitizes the STING
pathway and by this modulates the tumour microenvironment
to support a potent anti-tumoral response.
Dr Christian Schetter, Entrepreneur in Residence at Arix, joined
the company as Executive Chairman and Jonathan Tobin,
Investment Director at Arix, joined STipe’s board of directors.
The combination of this exciting science, the founders’ expertise
and Christian’s experience and leadership in immunotherapy,
gives STipe a great platform on which to launch. We are
looking forward to building this company with our co-investors
and working with the leadership team to accelerate the
development of new treatment options for cancer patients.
Read Christian’s interview on pages 14 to 15
Therapeutic area Immunology
Ownership 22% (fully committed, including
January 2020 commitment)
Cost: £5.3m at 31 December 2019
Remaining capital: £4.6m in January 2020
Value: £6.5m at 31 December 2019
Phase
PC
In January post period end, we announced the Series A financing
and launch of Quench Bio, a company that we created and
seeded with leading early stage life science investor, Atlas
Venture, in June 2018. This is the first company we have
co-founded and formed from scratch, combining scientific
discoveries from professors in Germany with entrepreneurs
and co-investors in Boston. It encapsulates the benefits of
Arix’s transatlantic footprint and culture.
Quench originated from Arix academic partner, the Lead
Discovery Center (LDC), which helps to translate scientific
discoveries from Max Planck Institutes in Germany into drug
discovery projects for partnering with pharma or spin outs.
The science is based on a novel target called gasdermin, which
is a type of protein, which plays a key role in inflammatory cell
death by forming lytic pores in the membranes of cells and
causing them to rupture. This explosive cell death leads to a
positive feedback loop of inflammation that drives a range of
severe diseases when dysregulated and persistent. Quench aims
to inhibit the pore-forming function of gasdermin in order
to dampen the inflammation.
Similar to our other early stage investments going after
scientific white space, Artios and STipe, the investment thesis
was based on the combination of superb science with top quality
entrepreneurial management.
We are very excited about the journey ahead for Quench. It is
a privilege to be involved with setting up a new company with
such high quality investors and entrepreneurs, and we aim for
this to be the first of a number of new companies that Arix
helps create.
Read more from Quench CEO Samantha Truex on pages 16 to 17
36
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 PATIENT IMPAC T
Our core purpose is to help translate scientific
innovation into new medicines for patients.
Through the portfolio companies that we back
and build, we aim to address significant challenges
in healthcare in the areas of oncology, genetic
diseases, immunology and anti-infectives.
At Arix we focus on outcomes beyond financial
performance and through our portfolio
companies we hope to make a tangible
difference to patients’ lives. To date, we
have invested £138m into innovative biotech
companies in our Gross Portfolio, which, in turn,
have raised more than $1.5bn of funding to
date. Multiple jobs been created through Arix
and our portfolio companies, which collectively
have over 730 employees today.
$1.5bn
capital raised by
portfolio companies
26
clinical trials across our
portfolio addressing significant
unmet needs in healthcare
16
portfolio
companies
£138m
deployed into life
sciences since 2016
730+
number of employees across
Arix portfolio companies
37
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 FINANCIAL REVIEW
Arix’s core focus is to invest in and build
breakthrough biotech companies, whilst
maintaining disciplined capital allocation.
2019 has been a year of transition for Arix’s
finances, during which the Group implemented
a leaner structure and lower ongoing cost base.
Arix’s portfolio companies have continued
to progress, although this year’s results are
marked by volatility in the valuation of Arix’s
listed investments, which has led to a reduction
in the Group’s net asset value, and a loss for
the financial year.
At year-end, net asset value totalled
£202.1 million, a reduction of £68.1 million
compared to 2018’s £270.2 million. This was
predominantly driven by a net downward
revaluation of Arix’s investments of
£58.6 million in the year (2018: £51.2 million
positive revaluation).
Arix ended the year with cash and deposits of
£54.6 million (2018: £91.2 million), the reduction
predominantly driven by strong investment
activity, with £39.2 million deployed across both
new and existing portfolio companies; partially
offsetting this, some initial modest realisations
were seen (£8.9 million of proceeds).
Core Portfolio
Arix added one new company to its Core
Portfolio during the year, co-leading
the $63 million Series B investment into
Imara, with a commitment of $15.0 million
(£11.3 million). In the first half of the
year, Harpoon Therapeutics completed
its Nasdaq IPO, in which Arix invested a
further $6.0 million (£4.7 million); and Aura
Biosciences successfully closed a Series
D financing round, at a 33% uplift to the
2017 Series C, when Arix first invested in
the company. Autolus Therapeutics also
completed a follow-on financing, in April 2019,
in which Arix invested a further £3.8 million.
Investment pace slowed during the second half
of the year, although milestone investments
were made into Amplyx Pharmaceuticals,
Aura Biosciences and Artios Pharma (the
latter funded in January 2020), in line with
existing commitments.
when a company does not reach its potential,
this highlights Arix’s risk-based approach,
initially committing small amounts of capital
split into milestone-dependent tranches,
meaning cash is preserved when necessary
levels of conviction are not achieved.
The Core Portfolio incurred a net negative
revaluation of £54.6 million during the year,
arising almost exclusively from Arix’s listed
investments. The majority of the impact
was from Autolus Therapeutics, with Arix’s
stake falling by £50.8 million, compared to
a £55.9 million positive revaluation in 2018.
Other notable decreases in the value of listed
stakes were seen with LogicBio Therapeutics
(£7.7 million) and Pharmaxis (£2.6 million).
Arix’s stake in Harpoon Therapeutics increased
in value by £6.1 million in the period, while the
unlisted investments in the Core Portfolio
contributed £1.9 million.
Shortly prior to year-end, with the stock at
all-time highs, Arix realised 11% of its stake in
Harpoon, at two times the average cost of
investment, marking the first modest proceeds
received from the Core Portfolio.
Discovery Portfolio
Arix holds its earliest stage assets in the
Discovery Portfolio. This acts as a development
pool for some of the most promising emerging
areas of biotech, with the companies often in
the initial stages of research and development.
One new company was added to this portfolio
in the year, as Arix co-led the €20 million Series
A financing of STipe Therapeutics, committing
€5.7 million (£4.8 million), for a 19.8% stake.
Meanwhile, a decision was taken to wind
down Mitoconix Bio, in which Arix had invested
£0.8 million. While it is always disappointing
A positive development within the Discovery
Portfolio was Quench Bio, which emerged from
stealth mode shortly after year-end, concluding
its Series A financing. Arix co-founded the
company in 2018, alongside Atlas Venture,
incubating the investment within the Discovery
Portfolio over the past 18 months.
Other Interests
Arix’s Other Interests reflect legacy holdings,
which continue to wind down. Proceeds of
£4.3 million were received during the year,
while net writedowns of £4.5 million were
recognised; at year-end, the remaining
positions total £2.7 million.
Cash Position
Cash and deposits totalled £54.6 million
at year-end, compared to £91.2 million the
previous year. The reduction in the period was
predominantly driven by ongoing deployment
into Arix’s portfolio, with £39.2 million invested.
This was partially offset by the realisation
of a portion of Arix’s Harpoon holding, and
by the wind down of Arix’s Other Interests,
which cumulatively generated £8.8 million
of proceeds during the year.
At year-end, amounts committed to portfolio
companies, upon completion of agreed
milestones, totalled £8.5 million; this excludes
2019’s £4.3 million investment in Artios, the
funds for which were transferred in January
2020. Arix continues to take
38
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 a prudent approach to cash management,
reserving funds for both the anticipated future
requirements of the portfolio and the ongoing
costs of the business, leaving Arix well placed
to continue supporting the existing portfolio.
Consolidated Statement
of Comprehensive Income
The largest component of Arix’s Statement
of Comprehensive Income is the change in
fair value of investments, which reduced by
£58.6 million in the year (2018: increase of
£51.2 million). The significant movements in this
balance are discussed on the previous page.
Throughout 2019, Arix has been transitioning
to a leaner organisational structure and
lower cost base. Significant changes were
made to the management team, with Sir
Christopher Evans and James Rawlingson
departing, and Jonathan Peacock moving
to a Non-Executive role. The previously
announced premises review resulted in the
sub-letting of Arix’s US office and a move to
smaller location. Despite incurring a number
of one-off costs associated with these
changes during 2019, Administrative Expenses
excluding Depreciation and Amortisation were
£1.5 million lower than the previous year, at
£9.3 million. Arix anticipates that these costs
will be below £9.0 million in 2020.
As expected, Revenue decreased to £0.5 million
(2018: £1.3 million), reflecting The Wales
Life Sciences Investment Fund’s reducing
contribution as the fund enters the later
years of its life. Interest income of £0.8 million
(2018: £0.7 million) was earned on Arix’s cash
and deposits.
Other deductions in the period relate to
foreign exchange losses of £4.4 million
(2018: £4.6 million gain), predominantly
arising from Arix’s increasingly US dollar
denominated investment portfolio; a one-off
£0.5 million impairment relating to Arix’s sub-
let US property; a £0.8 million impairment to
intangible assets; and a share based payment
charge of £2.8 million (2018: £3.3 million).
Taxation
Movements in Arix’s tax balance to date have
principally related to deferred tax balances.
Revaluations in Arix’s investments are only
taxable once realised, but a deferred tax
charge is recognised in the same period as an
unrealised revaluation. Where possible, Arix
aims to take advantage of the UK’s Substantial
Shareholding Exemption, which exempts
taxable gains or losses arising from the disposal
of shares, where certain conditions are met.
Valuation Policy
Arix’s investments are valued in accordance
with International Private Equity and Venture
Capital Valuation Guidelines December 2018
(‘IPEV Guidelines’). Quoted investments
are marked-to-market at the period end.
Unquoted investments are valued with
reference to the most recent funding round;
milestones; or by discounted cash flow.
Investment summary
Investment
Core portfolio
Amplyx Pharmaceuticals
Artios Pharma
Atox Bio
Aura Biosciences
Autolus
Harpoon Therapeutics
Imara
Iterum Therapeutics
LogicBio Therapeutics
Pharmaxis
VelosBio
Verona Pharma
Discovery portfolio
Gross portfolio
Other interests
Total Investments
Value
31 December
2018
£m
Investment
in period
£m
Realisations
in period
£m
Change in
valuation
£m
FX
movement
£m
Value
31 December
2019
£m
Fully
diluted
equity
interest
%
Fully
committed.
Not yet
invested
£m
Fully
funded.
Fully diluted
equity
interest
%
3.2
10.9
3.2
3.9
81.5
23.9
–
4.3
24.3
6.4
5.2
2.5
169.3
6.2
175.5
8.5
184.0
1.9
4.3
3.2
3.4
3.8
4.7
9.3
–
–
–
–
–
30.6
5.6
36.2
3.0
39.2
–
–
–
–
–
(4.3)
–
–
–
–
–
–
(4.3)
(0.3)
(4.6)
(4.2)
(8.8)
–
–
(1.2)
1.2
(50.8)
6.1
1.4
(0.6)
(7.7)
(2.6)
0.5
(0.9)
(54.6)
0.5
(54.1)
(4.5)
(58.6)
(0.2)
–
(0.2)
(0.2)
(0.7)
(1.5)
–
–
(0.3)
(0.1)
(0.2)
–
(3.4)
(0.4)
(3.8)
(0.1)
(3.9)
4.9
15.2
5.0
8.3
33.8
28.9
10.7
3.7
16.3
3.7
5.5
1.6
137.6
11.6
149.2
2.7
151.9
3.0%
12.4%
6.4%
7.7%
7.5%
10.4%
9.2%
7.3%
13.0%
11.1%
8.9%
2.5%
3.0%
12.4%
6.5%
7.7%
7.5%
10.4%
9.9%
7.3%
13.0%
11.1%
11.3%
2.5%
–
–
0.2
–
–
–
2.1
–
–
–
3.3
–
5.6
2.9
8.5
–
8.5
39
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 INVESTMENT TEAM AND EXECUTIVE COMMIT TEE
Experienced and collaborative
team with diverse backgrounds,
deep scientific knowledge and
commercial expertise.
Key
Investment Team
Executive Committee
Joe Anderson PhD
CEO and Chair of the Investment Committee
Joe was a partner at Abingworth LLP for
12 years, where he led venture-capital style
investments in public companies. Joe has a
PhD in Biochemistry and extensive board level
experience of building successful life science
companies. He has founded and managed public
equities funds and been a director of Algeta,
Amarin plc, Cytos and Epigenomics AG, and is
currently a director of Autolus Therapeutics.
Joe began his career at the Ciba (now
Novartis) Foundation, before joining 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.
Jonathan Tobin PhD
Investment Director
Mark Chin
Investment Director
Edward Rayner
Investment Director
Jonathan currently sits on the board of Artios
Pharma, Atox Bio, STipe Therapeutics and
Quench Bio. Prior to joining Arix, Jonathan
spent five years at Touchstone Innovations
where he was involved with the formation
and investment in a number of early stage
companies. Jonathan also previously worked
at LifeArc, 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.
Mark currently sits on the board of Harpoon
Therapeutics, Iterum Therapeutics, VelosBio,
Aura Biosciences, Imara and OptiKira.
Mark has over 10 years of experience in the
life sciences industry. 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.
Ed currently sits on the board of Depixus and
Pharmaxis. 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$130bn in funds under management, both in
Sydney, Australia. At AMP Capital, he managed
the growth equity portfolios and launched a
small companies fund.
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.
40
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
Christian Schetter PhD
Entrepreneur in Residence
Roberto Iacone
Entrepreneur in Residence
John Cassidy PhD
Investment Associate
Christian is currently Executive Chairman of
Arix Portfolio company, STipe Therapeutics.
Prior to this he was CEO of Rigontec, a German
Biotech company in the immune oncology
space, which he led to a successful acquisition
in 2017 by MSD for $465m.
Christian was also President and CEO of
Neovii Biotech, previously Fresenius Biotech,
which sold to the Neopharm Group, Israel, to
form Neovii Biotech and positioning it as a
successful standalone business. Before joining
Fresenius, Christian was Senior VP, European
Operations of Coley Pharmaceutical Group,
Inc. and Managing Director of Coley GmbH.
He was part of the leadership team which built
Coley Pharmaceuticals from inception through
multiple financing rounds, a NASDAQ IPO and
finally a trade sale to Pfizer in 2007.
Before entering the life-science industry
Christian performed academic research at the
Max Planck Institute in Germany. He received
his undergraduate degree and PhD from the
University of Cologne and did postdoctoral
research at the Scripps Research Institute
in La Jolla, California.
Roberto has over 15 years’ experience in the
life sciences sector. He is currently serves as
joint Entrepreneur in Residence at Arix and
Takeda, with a focus on sourcing early stage
European investment opportunities that
Arix and Takeda will jointly fund. Prior to this
Roberto was EiR at Versant Ventures where
he was involved in the successful founding
of new companies, including Black Diamond
Therapeutics, where he served as VP Biology.
Previously, Roberto was the Director and
Global Head of the Rare Diseases Research
Division at Roche, where he was employed
for 10 years. During his tenure at Roche, he
was responsible for generating disease area
strategies and advancing several assets
for immunological and neurological disease
from discovery to early clinical development,
which included both large and small molecule
programmes. He obtained his MD/PHD from
the Max Planck Institute and University of
Naples Federico II.
John previously worked at L.E.K.
Consulting LLP, as a Consultant in the Life
Sciences practice, 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 and a PhD in Neuroscience
from University College London sponsored
by the Medical Research Council and Pfizer.
John has published research in journals
including Proceedings of the National
Academy of Sciences (PNAS), Nature
Communications, eLife and Journal of
Neuroscience. John is also a board observer
for Imara, STipe Therapeutics and Quench.
Tim Xu MD
Investment Associate
Robert Lyne
Chief Operating Officer & General Counsel
Marcus Karia
Group Finance Director
Tim joined Arix Bioscience in September
2019. He was previously an Engagement
Manager at McKinsey & Company, where
he advised pharmaceutical, insurance, and
hospital clients on strategy and operations
challenges. He has an MD from the Johns
Hopkins School of Medicine, an MPP from
the University of Cambridge, and a BA in
Neuroscience and Modern European Studies
from Vanderbilt University.
He is a co-founder of Cogentis Therapeutics
(Alzheimer’s disease) and Goldwater Scholar
for his genetics translational research
(obsessive-compulsive disorder). He has over
30 publications on US health policy, including
as lead author in JAMA, JAMA Internal
Medicine, and JAMA Surgery.
Robert has over 10 years’ experience working
with high growth technology companies.
In addition to his role as Chief Operating
Officer, Robert acts as the Company’s General
Counsel and Company Secretary. He began
his career as a lawyer at international law firm
Bird & Bird LLP in London. He has advised on
over 60 venture capital financings in Europe
and North America as well as multiple trade
exits and IPOs, working with both company
boards and investors to execute complex
cross-border transactions. Robert joined
Arix in 2017 from Touchstone Innovations plc
where he worked with a number of venture-
backed biotechnology companies, both private
and public.
Marcus is the Group Finance Director
of Arix Bioscience. He joined the company
soon after inception in 2016 and has led
the development of the Group’s finance
operations, as well as supporting Arix through
its IPO.
After qualifying as a Chartered Accountant
with PricewaterhouseCoopers, Marcus held
positions at LDC, the private equity arm of
Lloyds Bank, and Bridges Fund Management,
a leading impact investor.
He holds a first class degree in Economics
from the University of Nottingham and is
a member of the Institute of Chartered
Accountants in England and Wales.
41
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 VALUATION OF INVESTMENTS
The fair value of the Group’s
investments is determined using
International Private Equity and
Venture Capital Valuation Guidelines
December 2018 (‘IPEV Guidelines’).
The fair value of quoted investments is based
on bid prices at the period end date.
Upon investment, the fair value of unlisted
securities is recognised at cost. Similarly,
following a further funding round with
participation by at least one third party,
the price of the funding round is generally
considered to represent the investment’s fair
value at the transaction date, although the
specific terms and circumstances of each
funding round must always be considered.
Following the transaction date, each
investment is observed for objective evidence
of an increase or impairment in its value.
This reflects the fact that investments made
in seed, start-up and early stage biotech
companies often have no current and no
short-term future revenues 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. As such, the Group carries out
an enhanced assessment based on milestone
analysis, which seeks to determine whether
there is an indication of a change in fair value
based on changes to the company’s prospects.
A milestone event may include, but is not
limited to, technical measures, such as clinical
trial progress; financial measures, such as a
company’s availability of cash; and market
measures, such as licensing agreements
agreed by the company. Indicators of
impairment might include significant delays
to clinical progress, technical complications
or financial difficulties. Often qualitative
milestones provide a directional indication of
the movement of fair value. Calibrating such
milestones may result in a fair value equal to
the transaction value. Any ultimate change
in valuation reflects the assessed impact
of the progress against milestones and the
consequential impact on a potential future
external valuation point, such as a future
funding round or initial public offering.
When forming a view of the fair value of its
investment, the Arix Group takes into account
circumstances where an investment’s equity
structure involves different class rights on a
sale or liquidity event.
The valuation metrics used in these financial
statements are discussed in Note 11.
Although the Directors use their best
judgement, there are inherent limitations in
any valuation 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 realisation
of investments, could be material to the
financial statements.
42
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 RISK MANAGEMENT
The Group monitors a number of principal risks
and uncertainties that may impact 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.
Executive management
The management team is responsible for
identifying, assessing and mitigating the
day-to-day operational risks.
Key committees
The Audit and Risk Committee
oversees the effectiveness of the risk
management processes.
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.
Portfolio Company boards and
independent assurance
The boards of our Portfolio Companies
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, external
advisors are engaged to provide regulatory
compliance support to the Board of Arix
Capital Management, Arix Bioscience’s
FCA-regulated fund management subsidiary.
L
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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
Portfolio company boards
and independent assurance
43
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
RISK MANAGEMENT CONTINUED
Risks and Mitigants
The key risks to Arix have been assessed in light of the current environment; these, along with the steps taken by Arix to manage such risks,
are detailed below.
Area
Risk
Impact
Mitigation
Arix’s portfolio typically
comprises companies
that are engaged in
clinical trials.
There is a risk that the trials
may produce negative or
inconclusive results.
Negative clinical trial read outs may
reduce the value of the portfolio company,
potentially to nil. This would therefore result
in a decrease in Arix’s profitability, and
reduce Arix’s ability to generate positive cash
flows from future realisations.
Inconclusive read outs may both reduce the
value of the portfolio company, impacting
Arix’s profitability, and require further
capital to fund additional trials to seek
further clarity in the results, adversely
impacting Arix’s cash flow.
Arix has an experienced team responsible for
identifying and developing portfolio companies,
resulting in a high standard of due diligence before
the commitment of any capital. 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 portfolio companies and
continues to develop its portfolio across a range of
therapeutic areas. Its diverse portfolio means that
Arix’s financial performance is not overly reliant on
any one business.
1Clinical
trial risks
2Personnel
Arix’s success is predicated
on the quality of its
investment decisions,
which in turn is a product
of the calibre of its
investment team.
There is a risk of Arix being
unable to attract or retain
staff of sufficient calibre.
The financial performance of Arix depends
on its ability to identify and develop
outstanding portfolio companies and,
as such, is reliant on its key personnel.
Loss of key individuals could reduce the
quality of Arix’s investment decision-making
and therefore negatively affect Arix’s
financial performance and future prospects.
Arix’s investment team have strong scientific
backgrounds and are experienced life
sciences investors.
Arix has a market‐appropriate remuneration
scheme for its senior employees. This includes share
incentive schemes, which reward personnel for
long‐term service and performance.
Arix has three management members making
up the Executive Committee performing
active day‐to‐day roles who are able to provide
emergency cover for each other over a short period.
Arix’s Nomination Committee is responsible for
appropriate succession planning.
Arix’s strategy is to deploy capital into innovative
businesses which have unique, high impact
outcomes; Arix believes that such businesses
are less susceptible to macroeconomic cycles.
Arix has funded portfolio companies across
a range of geographies, including the UK, USA,
Europe, Israel and Australia. 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 funds are available for the
investment and operational needs of the business.
Adverse market conditions
may impact Arix’s
operational model.
3Macroeconomic
conditions
An economic downturn, triggered by
macroeconomic factors or a market
shock such as coronavirus may reduce
opportunities for Arix to realise capital
from portfolio companies, affecting cash
flow and financial performance if portfolio
valuations are reduced. The availability
of capital for any external fundraising by
Arix or its portfolio companies may also
be affected.
4Legislation
& regulation
Changes to government
policy or regulation in the
research, healthcare or life
sciences industries could
impact Arix or its portfolio
companies.
A change in government regulation
(for example CFIUS in the United States)
may adversely affect the profitability of
the healthcare and life sciences industry,
resulting in a reduction in the number
of investment opportunities, availability
of external funding or potential exit
opportunities for portfolio companies.
Arix’s portfolio is diversified by geography, with
exposure to the UK, USA, Europe, Israel and
Australia, protecting the Group from the adverse
actions of any one government.
Arix’s corporate team actively monitors changes
to laws and regulation, and where considered
necessary enlists the advice of relevant experts
to consider any company or portfolio impacts.
44
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Area
5Brexit
Risk
Impact
Mitigation
Brexit may have an impact
beyond the risks described
above in terms of by
severity of a downturn or
the nature of the impact.
Specific impacts could include:
▸ a depressed UK capital market that
does not support the raising of capital
for the Group or its UK-based portfolio
companies; or
▸ a reduction in government-funded
research in biotech, leading to reduced
investment opportunities.
Arix has the ability to withstand a depressed capital
market, including but not limited to the ability
to dispose of a portion of its listed investments;
withhold funds that are reserved for the existing
portfolio; or the ability to issue up to 10% of share
capital to a new investor. Arix also closely monitors
available capital and holds cash reserves to cover
future operating costs.
Both Arix’s portfolio and pipeline of future
opportunities has a broad geographic spread,
with limited exposure to the UK capital market
and government policy. As such, its financial
performance is not overly reliant on the UK market.
Viability statement
The Board has assessed the prospects of Arix over a period greater
than 12 months. We have considered a period of three years from the
balance sheet date, as the Board expects the majority of Arix’s current
commitments and new proceeds raised to be committed over the next
three years, and therefore reflects the period over which the Group’s
cash flows are assessed internally.
A robust assessment of the principal risks and their mitigants has been
carried out. The Board assessed Arix’s business model, particularly its
approach to future cash commitments to existing portfolio companies.
Key judgements reflected how future cash requirements may change
from restrictive regulations, and how the availability of capital may be
impacted from the loss of key personnel.
Having initially started with a base case scenario considering Arix’s
finances over the assessment period, the estimated impacts on the
Group’s cash flow, as described above, are modelled, creating a range
of adverse scenarios. An extreme downside case is then considered,
reflecting the estimated cash flow impact of all considered risks
occurring concurrently. Finally, the analysis considers the mitigating
actions the Group could take to reduce the financial impact of the
noted risks.
Based on its review, and the consideration of any changes that had
occurred post year-end, 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 from the date of this report and confirm
that preparing the financial statements on a going concern basis
is appropriate.
45
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 SUSTAINABILIT Y
Sustainability
The section below includes our mandatory reporting of greenhouse gas
emissions. The reporting period is the same as the Group’s financial year.
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 with 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;
46
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 ▸ application of 2 reporting methods, 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 ended
31 December 2019 were:
▸ 26.5 tonnes of CO2 equivalent (tCO2e)
using a ‘location-based’ emission factor
methodology for Scope 2 emissions;
▸ 17.1 tonnes of CO2 equivalent (tCO2e)
using a ‘market-based’ emission factor
methodology for Scope 2 emissions.
This is the third year of reporting for the
Group so we can show a comparison between
FY2019, FY2018 and FY2017. There have been
no major changes to the group’s operations
since 2017. During FY2019, the New York office
moved to much smaller premises. They did
occupy both the old and new offices for
a period of 4 months.
Overall, there has been a drop in total emissions
across both Scopes 1 and 2. There was a large
decrease in Scope 1 emissions due to less gas
use, but there was also a significant decrease
in Scope 2 emissions (both location-based and
market-based).
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.
For FY2019, the intensity metric based on
emissions per square foot of office space
remained at 0.004 tCO2e per ft2 using the
location-based method and decreased from
0.003 tCO2e per ft2 to 0.002 tCO2e per ft2
using the market-based method. The total
emissions reduced but there was a fluctuation
over the year in the total floor area.
For FY2019, the intensity metric based on
emissions per employee increased from
1.86 tCO2e per employee to 1.90 tCO2e per
employee using the location-based method
and decreased from 1.37 tCO2e per employee
to 1.22 tCO2e per employee using the market-
based method. Both the total emissions and
the number of employees has decreased.
Our 2019 Strategic Report, from page
02 to page 47, has been reviewed and
approved by the Board.
Jonathan Peacock
Chairman
9 March 2020
CO2 equivalent emissions
29.8t
Arix Bioscience plc –
Breakdown of emissions by scope
2019
11.5
5.6
Scope 1 Scope 2
2019
11.5
15.0
GHG emissions
Scope 1
Scope 2
Scope 3
Total GHG emissions (Location-based Scope 2)
Total GHG emissions (Market-based Scope 2)
2019
2018
2017
Tonnes
CO2e
tCO2e/
emp.4
tCO2e/
sq. ft.5
Tonnes
CO2e
tCO2e/
emp.4
tCO2e/
sq. ft.5
Tonnes
CO2e
tCO2e/
emp.4
tCO2e/
sq. ft.5
11.5
15.0
5.6
26.5
17.1
0.002
0.82
0.002
1.07
0.40 0.0007
1.90
1.22
0.004
0.002
14.1
15.7
7.9
29.8
22.0
0.88
0.98
0.49
1.86
1.37
0.002
0.002
0.001
0.004
0.003
14.1
18.5
7.0
32.6
21.2
0.88
1.15
0.44
2.04
1.32
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 3 being electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use.
4 Employee numbers: 14 (FY2019), 16 (FY2018) and 16 (FY2017).
5 Occupied office space: 8,239 sq. ft for 4 months; 8,329 sq. ft. for 5 months; 2,934 sq. ft. for 3 months. Arix moved premises in New York but let both premises for 5 months.
47
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORPOR ATE GOVERNANCE REPORT
Chairman’s introduction
to corporate governance
Jonathan Peacock
Chairman
Dear Shareholder,
I am pleased to present this year’s Report on
Corporate Governance. Since its listing on the
London Stock Exchange in February of 2017,
the Company has applied the UK Corporate
Governance Code (the “Code) as an integral
part of its approach to governance. 2019 was
first year of application for the revised Code
that was published in July 2018. This report
includes a description of how the Company
has applied the Code in the context of the
Company’s governance structures.
As described in last year’s report, the early
part of 2019 saw an evolution of the executive
governance of the Company when the Board
confirmed Dr Joe Anderson in the CEO role
and at the same time I stepped into a Non-
Executive Chairman role and Sir Chris Evans
stepped down from the Board.
2019 has also seen change amongst the
non-executive directors of the Board, with
Mark Breuer being welcomed onto the Board
in April 2019 and Naseem Amin joining in
December 2019. Mark’s experience in UK
and international capital markets and on
public company boards, together with
Naseem’s experience in life sciences, corporate
development and venture capital, will be
invaluable in guiding our future.
On behalf of the Board, I would like to thank
Dr Franz Humer, Meghan FitzGerald and
James Rawlingson, who each departed
the Board this year, for their important
contributions to the early development
of Arix.
Jonathan Peacock
Chairman
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.
During the year the Company has applied all
of the main principles of the Code and provides
below explanations of its non-compliance with
the Code provisions:
Provision 5 – The Company operates a lean
business model employing only 15 employees
across Europe and the USA; this scale means
that the Board has not felt it necessary
to designate a Non-Executive Director to
specially engage with the workforce, as the
Board has regular contact with much of the
organisation through both Non-Executive
and Executive Directors.
Provision 9 – The Chairman was
not independent on appointment.
Due to the nature of the strategic objectives
of the Company the Company has a highly
experienced Chairman, Jonathan Peacock.
The Board considers that leadership of this
quality is essential notwithstanding that the
Chairman is not independent under the terms
of the Code.
Provision 10 – On appointment as a
Non-Executive Director, Naseem Amin was
considered to be independent. In coming to
this decision, the Board notes that Naseem
holds a directorship at Bellerophon
Therapeutics, which is chaired by Jonathan
Peacock. Having regard to the other indicators
of independence, all of which Naseem fulfils,
the Board is satisfied that this non-executive
position would not impair his independence
when acting as a non-executive director of
the Company.
48
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Provision 12 – The Board has not appointed
a replacement senior independent director
following the departure of Dr Franz Humer.
The role has only been vacant since December
2019 and the Board expect to appoint a
successor in due course during 2020.
Provision 36 – The Remuneration Committee
has not yet developed a formal policy for
post-employment shareholding requirements.
The Committee believes that the current
Remuneration Policy provides for considerable
alignment between the interests of Executive
Directors and shareholders, including through
the three-year performance period for EIP
awards, the two-year post-vesting holding
period in the EIP and the requirement for
Directors to build a shareholding equivalent
to 200% of basic salary while in employment.
With this in mind, the Committee has chosen
not to go further and introduce post-
employment holding requirements at this
stage, however it will keep this matter under
review in light of ongoing market developments
in this area.
Responsibilities of the Board
Focus
Operation
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
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
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
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
Remuneration
▸ Determining the policy for remuneration of Chairman,
the Executive Directors, Executive Committee (including the
Company Secretary) and senior investment team members
▸ Ensuring that the pension contribution rates for executive
directors, or payments in lieu, are aligned with those
available to the workforce
▸ Ensuring that workforce remuneration and related policies
are taken into account when setting directors’ remuneration
▸ Ensuring that employee engagement has taken place to
explain how executive remuneration aligns with wider
company pay policy
▸ Determining the remuneration of the Non-Executive Directors
▸ Introducing new share incentive plans or major changes
to existing plans
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
49
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORPOR ATE GOVERNANCE REPORT CONTINUED
Board leadership and
company purpose
An effective board
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.
Assessing and monitoring culture
The Board is keen to ensure that the culture of
the Company is aligned to Arix’s purpose, Goal
and Values as set out on the inside front cover.
Individual Board members have regular, direct
contact with the business and are confident
that the culture of the company and its
employees is consistent with what it expects
in order to maintain a high standard of
business conduct and deliver the Company’s
strategy. This is consistent with the Board’s
duties under s172 of the Companies Act as
further described on pages 10 to 11.
Stakeholder and Employee engagement
The Board has actively engaged with
stakeholders, including employees, throughout
the period and has taken their interest
into account when making decisions. A full
description of the Company’s engagement
with its stakeholders is set out on pages 10
to 11 with specific description of engagement
with employees on remuneration on page 61
of the Remuneration Report. As described
on page 59 of the Audit and Risk Committee
Report, the Company keeps its Whistleblowing
Policy and arrangements under review.
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. All Directors
declare any potential conflicts of interest
before their appointment, such that the Board
can consider how to address any pre-existing
potential conflicts before an appointment
is confirmed. 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 attendance
Jonathan Peacock
Dr Joe Anderson
James Rawlingson
Dr Franz Humer
Professor Trevor Jones
Giles Kerr
Art Pappas
Mark Breuer
Meghan FitzGerald
Board
Audit
Remuneration
Nomination
5/5
5/5
3/3
4/5
5/5
5/5
5/5
3/3
4/4
4/4
4/4
1/1
1/1
1/1
4/4
3/3
1/1
Attendance is expressed as the number of scheduled meetings attended out of the number of such meetings possible
or applicable for the Director to attend.
Board independence
5
50
Non-Independent
Independent
Jonathan Peacock
Mark Breuer
2
Joe Anderson
Giles Kerr
Art Pappas
Trevor Jones
Naseem Amin
Read more on the Board of Directors
on pages 52 to 53
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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
on the previous page 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.
Training and development of Board Directors
The Company Secretary regularly provides the
Board with updates on Corporate Governance
and regulatory matters at Board meetings.
A formal and tailored induction is also provided
to Directors on joining the Board. All Directors
have access to the advice of the Company
Secretary who is responsible for advising the
Board on all governance matters.
Information and support
An agenda and accompanying detailed papers
are circulated to the Board 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.
Division of Responsibilities
Key Board roles and responsibilities
The Board currently consists of seven Directors
(including the Chairman), five of whom are
considered to be independent.
Role of the Chief Executive Officer
The Chief Executive Officer is primarily
responsible for the running of the Group and
for executing strategy as agreed by the Board.
This involves:
▸ Driving the execution of the strategy
▸ Chairing the Investment Committee
▸ Ensuring implementation of the
Board’s decisions
▸ Ensuring the timely communication of
information to the Board in sufficient detail
to allow it to monitor the performance of
the Group’s business as a whole
▸ Communicating to the Board their own
views and those of the executive team, on
business issues facing the Group such that
the Board may have a full and balanced view
of the issues and factors it should consider
when making decisions
▸ Managing their direct reports and ensuring
that the overall team is motivated
and develops in order to deliver on the
Group’s strategy
▸ Ensuring the effective implementation
of the company’s wider stakeholder
engagement programmes
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.
Jonathan Peacock
Chairman
Role of the Chairman
Jonathan Peacock is the Chairman.
The Chairman is responsible for:
▸ Leading the Board to ensure its
effectiveness on all aspects of its role in
particular, the formulation of strategy
and its alignment with culture, governance
(having regard to best practice); and Board
changes and succession planning.
▸ Establishing a partnership and close
relationship of trust with the Chief
Executive, providing appropriate support
and advice.
▸ Ensuring constructive relations between
executive and non-executive Directors and
between Directors and senior management.
▸ Ensure that new Directors receive a full,
formal and tailored induction on joining
the Board.
▸ Monitoring stakeholder
engagement including employee and
shareholder engagement
▸ Ensuring that the Company Secretary
is effective and supported
▸ Chair the Company’s AGM and all other
formal Shareholder meetings.
Role of the Senior Independent Director
The Board has not yet appointed a
replacement Senior Independent Director (SID)
following the departure of Dr Franz Humer
at the end of the year. The Board expects to
appoint a successor in due course during 2020.
Upon appointment, the SID’s role will be to
act as a sounding board for the Chairman
and serve as an intermediary for the other
Directors when necessary. In order to fulfil
this role:
▸ 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.
51
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 BOARD OF DIREC TORS
Jonathan Peacock
Non-Executive Chairman
Joe Anderson PhD
CEO and Chair of the
Investment Committee
Professor Trevor Jones CBE
Non-Executive Director
Giles Kerr
Arthur Pappas
Mark Breuer
Naseem Amin
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Date of appointment
8 February 2016
Date of appointment
19 February 2019
Date of appointment
8 February 2016
Committee memberships
▸ Nomination Committee
▸ Remuneration Committee (Chair)
Career history
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 Organization
Commission on Intellectual
Property Rights, Innovation and
Public Health. In 2003 he was
awarded the CBE for services to
the pharmaceutical industry.
Career history
Joe has over 30 years’ experience
in the life sciences industry with
a successful track record of
generating investment returns.
He was 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 $2.9 billion), Amarin plc,
Cytos (merged with Kuros) and
Epigenomics AG, and is currently
a director of Autolus Therapeutics.
Joe began his career at the Ciba
(now Novartis) Foundation,
before joining 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 science companies.
Career history
Jonathan has 35 years global
experience in operations, strategy
and business development.
He is the former CFO of Amgen Inc.
and prior to that was the CFO of the
Pharmaceuticals Division of Novartis
AG, 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 November 2016
and is currently the Chairman; he
also sits on the board of Avantor, Inc.
He was formerly a non-executive
director of Kite Pharma until its
acquisition by Gilead Sciences for
$11.9bn in 2017.
Date of appointment
17 October 2017
Date of appointment
12 September 2018
Date of appointment
25 April 2019
Committee memberships
Committee memberships
Committee memberships
▸ Audit and Risk Committee
▸ Nomination Committee (Chair)
▸ Audit and Risk Committee
Date of appointment
17 December 2019
Committee memberships
▸ Nomination Committee
(Chair)
Career history
▸ Remuneration Committee
▸ Nomination Committee
▸ Remuneration Committee
Career history
Career history
Career history
Giles has over 35 years’ experience
Art Pappas has over 30 years
Mark is a highly experienced
in finance across a broad range of
experience as a pharmaceutical and
corporate financier and has
Naseem joined the Arix Board in
December 2019. He brings over
industrial sectors with a particular
biotechnology industry executive,
operated at senior levels in the
25 years of broad life sciences
focus on life sciences. He was
and venture capital investor in life
UK and abroad. He has worked in
experience, having held senior
formerly CFO of the University
science companies. He is the founder
investment banking for thirty years,
positions in major healthcare
of Oxford and during his tenure
and managing partner of Pappas
and recently retired from a 19-year
businesses. Previous roles include
he established a successful
Capital, a leading US venture firm.
career at JP Morgan in London,
Chief Scientific Officer of Smith
investment office with £4bn under
Prior to founding Pappas Capital in
where he held the position of Vice
and Nephew Plc, Senior Vice
management and a £650m early-
1994, Art was an executive member
Chairman Global M&A and was a
President of Business Development
stage investment fund.
of the board of directors of Glaxo
member of the Global Strategic
at Biogen and Vice President of
Holdings plc (NYSE: GLX, now
Advisory Council. During his career,
Business Development and Clinical
GSK), and served as chief executive
he has served in numerous client-
Research at Genzyme. He is
responsible for international
facing and management roles,
currently CEO of GMP-Orphan and
operations, including research,
delivering mergers and acquisitions
a Venture Partner at Advent Life
development and manufacturing.
and broader corporate finance
Sciences. Naseem is a qualified
advice to both domestic and
medical doctor, from the University
international clients. Mark currently
College Medical School, London,
serves as a Non-Executive Director
and an MBA from the Kellogg
on the Board of DCC plc. Mark is a
Graduate School of Management,
fellow of the Institute of Chartered
Northwestern University.
Accountants, having qualified in
1987, and has a B.A. from Vassar
College in the US.
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
Prior to Glaxo, Art held various
senior executive positions with
companies. Prior to joining the
Abbott International, Merrell Dow
University of Oxford, he was CFO
Pharmaceuticals, and the Dow
of Amersham plc and during his
Chemical Company. He previously
time at Amersham the share price
served as Chairman and founding
increased seven-fold. Giles has
CEO of CoLucid Pharmaceuticals
extensive experience as chairman
(acquired by Eli Lilly), and on the
and senior independent director,
boards of Afferent Pharmaceuticals
and as chairman of UK and US
(acquired by Merck), Chimerix,
listed company audit committees.
Quintiles Transnational Corp.
He is currently Chairman of the
(NASDAQ: QTRN, now NASDAQ:
audit committees of Senior plc,
IQV), TYRX (acquired by Medtronic),
Paypoint plc and a member of the
Syntonix Pharmaceuticals (acquired
audit committees of Abcam plc
by Biogen), LEAD Therapeutics
and Adaptimune Therapeutics plc.
(acquired by BioMarin), and Embrex
Prior to joining Amersham plc
(acquired by Pfizer). Art is a member
he was an audit partner with
of the Board of Directors of the
Arthur Anderson & Co.
North Carolina Biotechnology
Center, the Medical University
of South Carolina Foundation
for Research Development, the
Wistar Institute (a National
Cancer Institute centre) and the
Board of Advisors of the Duke
Cancer Institute.
52
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Jonathan Peacock
Non-Executive Chairman
Joe Anderson PhD
CEO and Chair of the
Investment Committee
Professor Trevor Jones CBE
Non-Executive Director
Giles Kerr
Non-Executive Director
Arthur Pappas
Non-Executive Director
Mark Breuer
Non-Executive Director
Naseem Amin
Non-Executive Director
Date of appointment
8 February 2016
Date of appointment
19 February 2019
Date of appointment
8 February 2016
Date of appointment
17 October 2017
Date of appointment
12 September 2018
Date of appointment
25 April 2019
Date of appointment
17 December 2019
Committee memberships
▸ Nomination Committee
▸ Remuneration Committee (Chair)
Committee memberships
▸ Audit and Risk Committee
(Chair)
Committee memberships
▸ Nomination Committee (Chair)
▸ Remuneration Committee
Committee memberships
▸ Audit and Risk Committee
▸ Nomination Committee
Committee memberships
▸ Nomination Committee
▸ Remuneration Committee
Career history
Career history
Career history
Jonathan has 35 years global
Joe has over 30 years’ experience
Trevor has led a distinguished
experience in operations, strategy
in the life sciences industry with
career in both the pharmaceutical
and business development.
a successful track record of
and biotech industries, as well
He is the former CFO of Amgen Inc.
generating investment returns.
as in academia. He was Group
and prior to that was the CFO of the
He was a partner at Abingworth
R&D director at The Wellcome
Pharmaceuticals Division of Novartis
LLP for 12 years, where he led
Foundation Limited, responsible
AG, with global responsibilities
venture-capital style investments
for the development of AZT,
including business development and
in public companies. He has
Zovirax, Lamictal, Malarone
strategy. During Jonathan’s tenure
founded and managed public
and other medicines. He was
as CFO of Amgen, Amgen Inc.’s share
equities funds and been a director
a director of Allergan Inc. (USA)
price increased by approximately
of Algeta (acquired by Bayer
for ten years, until 2015, and
125%. Novartis Pharma AG’s operating
AG for $2.9 billion), Amarin plc,
was formerly Director General
profit increased over 40% during
Cytos (merged with Kuros) and
of the Association of the British
his tenure as CFO of that company.
Epigenomics AG, and is currently
Pharmaceutical Industry
Before joining the pharmaceutical
a director of Autolus Therapeutics.
(ABPI), served for 12 years as a
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
Joe began his career at the Ciba
(now Novartis) Foundation,
before joining The Wellcome
Trust in 1990 where he became
head of the strategy team.
He then moved to the City of
London and New York from 1993
London as a pharmaceuticals
to 1998. He has a Masters degree
analyst at Dresdner Kleinwort
in Economics from the University
Benson before being appointed
of St Andrews in Scotland.
as Head of Global Healthcare and
Jonathan has extensive expertise
Portfolio Manager at First State
in strategy, finance and operations
Investments, Commonwealth
within the biopharma industry.
Bank of Australia, in London.
He has raised over $20bn in new
Joe has a PhD in Biochemistry
capital and has been engaged
and extensive board level
throughout his career in business
experience of building successful
development and mergers and
life science companies.
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 Organization
Commission on Intellectual
Property Rights, Innovation and
Public Health. In 2003 he was
awarded the CBE for services to
the pharmaceutical industry.
acquisitions on both the buy-side and
sell-side globally. Jonathan was the
CEO of NASDAQ-listed Bellerophon
Therapeutics until November 2016
and is currently the Chairman; he
also sits on the board of Avantor, Inc.
He was formerly a non-executive
director of Kite Pharma until its
acquisition by Gilead Sciences for
$11.9bn in 2017.
Career history
Giles has over 35 years’ experience
in finance across a broad range of
industrial sectors with a particular
focus on life sciences. He was
formerly CFO of the University
of Oxford and during his tenure
he established a successful
investment office with £4bn 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 Abcam plc
and Adaptimune Therapeutics plc.
Prior to joining Amersham plc
he was an audit partner with
Arthur Anderson & Co.
Career history
Art Pappas has over 30 years
experience as a pharmaceutical and
biotechnology industry executive,
and venture capital investor in life
science companies. He is the founder
and managing partner of Pappas
Capital, a leading US venture firm.
Prior to founding Pappas Capital in
1994, Art was an executive member
of the board of directors of Glaxo
Holdings plc (NYSE: GLX, now
GSK), and served as chief executive
responsible for international
operations, including research,
development and manufacturing.
Prior to Glaxo, Art held various
senior executive positions with
Abbott International, Merrell Dow
Pharmaceuticals, and the Dow
Chemical Company. He previously
served as Chairman and founding
CEO of CoLucid Pharmaceuticals
(acquired by Eli Lilly), and on the
boards of Afferent Pharmaceuticals
(acquired by Merck), Chimerix,
Quintiles Transnational Corp.
(NASDAQ: QTRN, now NASDAQ:
IQV), TYRX (acquired by Medtronic),
Syntonix Pharmaceuticals (acquired
by Biogen), LEAD Therapeutics
(acquired by BioMarin), and Embrex
(acquired by Pfizer). Art is a member
of the Board of Directors of the
North Carolina Biotechnology
Center, the Medical University
of South Carolina Foundation
for Research Development, the
Wistar Institute (a National
Cancer Institute centre) and the
Board of Advisors of the Duke
Cancer Institute.
Career history
Mark is a highly experienced
corporate financier and has
operated at senior levels in the
UK and abroad. He has worked in
investment banking for thirty years,
and recently retired from a 19-year
career at JP Morgan in London,
where he held the position of Vice
Chairman Global M&A and was a
member of the Global Strategic
Advisory Council. During his career,
he has served in numerous client-
facing and management roles,
delivering mergers and acquisitions
and broader corporate finance
advice to both domestic and
international clients. Mark currently
serves as a Non-Executive Director
on the Board of DCC plc. Mark is a
fellow of the Institute of Chartered
Accountants, having qualified in
1987, and has a B.A. from Vassar
College in the US.
Career history
Naseem joined the Arix Board in
December 2019. He brings over
25 years of broad life sciences
experience, having held senior
positions in major healthcare
businesses. Previous roles include
Chief Scientific Officer of Smith
and Nephew Plc, Senior Vice
President of Business Development
at Biogen and Vice President of
Business Development and Clinical
Research at Genzyme. He is
currently CEO of GMP-Orphan and
a Venture Partner at Advent Life
Sciences. Naseem is a qualified
medical doctor, from the University
College Medical School, London,
and an MBA from the Kellogg
Graduate School of Management,
Northwestern University.
53
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 REPORT OF THE NOMINATION COMMIT TEE
Dear Shareholders,
On behalf of the Board, I am pleased to present
the Nomination Committee report for the year
ended 31 December 2019.
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.
Art Pappas
Chairman of the Nomination Committee
Specific duties of the Nomination
Committee include:
Meetings
The number of meetings of the Nomination
Committee and attendance is set out on
page 50 of the Corporate Governance Report.
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’s work during the
year has included the following matters:
▸ Reviewing the composition of the Board
and the Board’s committees
▸ Reviewing the balance of skills required
by the Board and its committees and the
business as a whole
▸ Setting and managing the process for the
search for new Non-Executive Directors
▸ Recommending for approval new Directors
to be appointed to the Board
Board changes
There were a number of Board changes
during the year as explained in the Corporate
Governance Report. Following the
appointment of Mark Breuer to the Board
in April, the Committee also recommended
his appointment as a member of the Audit
Committee, whilst Naseem Amin was
appointed as a member of the Remuneration
Committee when he joined the Board in
December. The Committee continues to
monitor the membership of the Board’s
Committees to ensure that each Committee
has a suitable balance of skills as well as taking
into consideration the length of service of
the members.
Composition
Art Pappas (Chairman)
Mark Breuer
54
The Committee chose to use an independent
external search consultant, Korn Ferry, for
new Non-Executive Director appointments.
The Committee set the profile and criteria
to be used in the search and is committed to
ensuring that appointments follow formal,
rigorous and transparent process.
In accordance with past practice, and the new
Code, all directors will be subject to re-election
at each AGM.
Diversity Policy
During 2019 the Board adopted a Diversity
Policy. The Policy acknowledges the benefits of
greater diversity, including gender diversity and
states that the Company remains committed
to ensuring that the Company’s directors
bring a wide range of skills, knowledge,
experience, backgrounds and perspectives.
All appointments will, however, continue to
be made on merit against objective criteria, in
the context of the overall balance of skills and
backgrounds that the Board needs to maintain
in order to remain effective. The objectives of
the policy set out the process to be followed
by the Nomination Committee during the
recruitment process in order to ensure that
an appropriately diverse pool of candidates
is considered to enhance the balance of skills
and backgrounds on the Board. The Board’s
use of an external search consultant helps to
ensure that a diverse pipeline of candidates
is considered for new appointments of Non-
Executive Directors which will be made in
accordance with the recently adopted Policy.
The Board is satisfied that the Policy is in line
with its strategic priorities, as described on
page 22.
Annual evaluation
The performance of the Board, it Committees,
the Chairman and individual directors are
evaluated throughout the period. At year-
end, the Board conducted a formal written
performance evaluation which will be
considered by the Board at its first meeting
in 2020 and reported on in next year’s
annual report.
Art Pappas
Chairman of the Nomination Committee
9 March 2020
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Key responsibilities
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
▸ Assist with succession planning,
and keep informed about strategic
and commercial changes affecting
the Company
▸ Satisfy itself that processes
and plans are in place for
succession planning
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
KEY
RESPONSIBILITIES
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 at
each AGM
55
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 REPORT OF THE AUDIT AND RISK COMMIT TEE
Giles Kerr
Chairman of the Audit and Risk Committee
Composition
Giles Kerr (Chairman)
Mark Breuer
Dear Shareholders,
On behalf of the Board, I am pleased to present
the Audit and Risk Committee report for the
year ended 31 December 2019.
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 2.4 of The UK Corporate
Governance Code (the Code) as it applies to
the Company. In line with the Code, the Audit
and Risk Committee as a whole is deemed
to have competence relevant to the sector
in which the Company operates.
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.
The Committee has met four 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
9 March 2020
56
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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.
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
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
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
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
DUTIES AND
RESPONSIBILITIES
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
57
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 REPORT OF THE AUDIT AND RISK COMMIT TEE CONTINUED
Meetings and attendees
The Audit and Risk Committee has met four 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 Group Finance Director and the external audit lead partner.
Activity during the year
The Audit and Risk Committee has met four times during the year. Matters discussed have included:
▸ Reviewing the Committee’s terms of reference and recommending changes to the Board
▸ Reviewing the Company’s internal controls environment
▸ Reviewing the Company’s Whistleblowing Policy
▸ Reviewing the Company’s Treasury Policy for recommendation to the Board
▸ Considering the Group’s policy on the provision of non-audit services by the external auditors
▸ Reviewing the External Auditor’s 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 Accounts 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 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 2019 are set out in the table below:
Significant issues and judgements
How the issues were addressed
Valuation of unquoted
Investments
The Audit and Risk Committee reviewed management’s determination of the valuations of the unquoted investments,
including 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.
Calculation of share-based
payment expense
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.
Presentation of the
Annual Report
The Audit and Risk Committee reviewed management’s presentation of the Annual Report. The Committee noted
that the inputs into, and disclosures and accounting policies included, in the annual report are reviewed by people
with relevant financial experience and knowledge of the business, up to and including the Audit and Risk Committee.
The Committee concluded that management has presented the report in a suitable manner, and that it is fair,
balanced and understandable.
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 43 to 45.
58
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 During the year ended 31 December 2019,
PwC provided non-audit services in relation
to reviewing the Group’s Interim financial
statements (£30k); and performing an FCA
CASS Audit of Arix Capital Management
Limited, a 100% subsidiary of Arix Bioscience
plc. The fees paid to PwC for non-audit
services during the year totalled £36,235,
representing 19% 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 reviews the policy periodically. The Audit
and Risk Committee, on behalf of the
Board, reviewed the Group’s whistleblowing
arrangements in December 2019 and it was
considered that they were still appropriate in
their current form.
Giles Kerr
Chairman of the Audit and Risk Committee
9 March 2020
The Group’s system of internal control
comprises entity-wide high level controls,
controls over business processes and centre
level controls. Policies and procedures are
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. Having discharged 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; and
▸ 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 management within
the Group and questions and challenges
where necessary;
▸ reviews the system of financial and
accounting controls regularly; and
▸ reports to the Board on the risk and control
culture within the Group.
No significant failings or weaknesses
were identified.
Internal audit
The Group does not have an internal audit
function. The Audit and Risk Committee
reviews the need for an internal audit function
at least annually but following the most recent
review in December 2019 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 four years.
Regulations 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 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).
59
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT
Annual Statement by the Chairman
of the Remuneration Committee
Dear Shareholders,
As the Chairman of the Remuneration
Committee (the “Committee”) I am delighted
to introduce our 2019 Directors’ Remuneration
Report. I became Chairman of the Committee
in December following Franz Humer’s
retirement from the Board. I would like to
take this opportunity to thank Franz for his
leadership of the Committee as Arix has
become established as a listed company.
2019 was a year of continued development
in which the business made solid progress
on its internal and strategic goals against a
challenging market backdrop and changes to
the shareholder base. Following an evolution in
senior management, Arix has a reinvigorated
leadership team and is continuing to build
a compelling portfolio of innovative life
science companies.
The Remuneration Committee’s initial focus
during 2019 was on finalising the terms of
the new Directors’ Remuneration Policy
and agreeing new targets to apply for the
2019 Executive Incentive Plan (“EIP”) award.
Full details were included in last year’s
Directors’ Remuneration Report, and the new
Policy received the support of a majority of
shareholders at last year’s AGM.
Later in 2019 the Committee considered a
number of matters, including the likely vesting
outcomes of outstanding EIP awards. After
the year end we met to agree bonus outcomes
in respect of 2019 and among other things
considered the structure of EIP awards to be
made in 2020.
The Committee regularly reviews the
Remuneration Policy and its implementation
in light of company-specific and market-wide
developments. For example, during 2019 the
Committee considered long-term incentive
practices at competitor companies, although
no changes were recommended to Arix’s
existing approach following this exercise. At the
current time, the Committee believes that the
Remuneration Policy is consistent with the key
remuneration principles set out in the 2018
UK Corporate Governance Code. The Policy
is clear, transparent, simple and operates
within clearly defined limits and boundaries.
The incentive schemes provide a link between
strategy, Arix’s high-performance culture and
individual rewards.
Business Performance and
Remuneration Outcomes for 2019
2019 has been a year of transition for Arix,
during which the Company implemented a
leaner structure and lower ongoing cost base.
Arix’s portfolio companies have continued
to progress, although this year’s results are
marked by volatility in the valuation of Arix’s
listed investments, which has led to a reduction
in the company’s net asset value, and a loss
for the financial year.
As in previous years, and consistent with
the Remuneration Policy, the annual bonus
scheme for 2019 involved the assessment of
performance against strategic and operational
goals. This included the use of targets linked
to Arix’s financial and market performance.
The Committee reviewed the level of
performance against the bonus targets set
at the start of the year and determined that
although a number of important goals had
been achieved, other targets were not met.
After also taking into account the overall
shareholder experience in 2019, the Committee
agreed that Joe Anderson, the CEO (and
the only Executive Director), would receive a
bonus at a level of 50% of his maximum bonus
opportunity. This was lower than the outcome
of the formulaic assessment of performance
under the bonus targets set out at the start
of the year. The CEO will use all of the after-tax
proceeds of the bonus to purchase shares in
the Company, to be held for a minimum of
three years. Further details of the specific
bonus targets and the level of performance
achieved can be found on page 70.
No shares vested under the EIP in respect of
2019. The first grant under this three-year plan
was made in 2017, with a performance period
which ends in May 2020. Based on share price
performance from the date of grant to the
date of this report, the Committee does not
expect this award to vest. A final assessment
will be made in May, based on the share price
at that time.
As disclosed in last year’s Directors’
Remuneration Report, awards under the EIP
were granted in 2019 with new performance
targets to be achieved over the three-year
period 2019-21. 60% of the award will vest
based on share price performance, and 40%
on the basis of growth in NAV per share.
To the extent that the awards vest, they
will be subject to a two-year post-vesting
holding period.
Professor Trevor Jones CBE
Chairman of the Remuneration Committee
Composition
Trevor Jones (Chairman)
Art Pappas
Naseem Amin
60
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 The 2019 AGM
The new Directors’ Remuneration Policy was
passed with a 50.26% majority at the AGM in
June 2019. The separate resolution to approve
the 2018 Annual Report on Remuneration
was defeated. This was naturally a matter
of great disappointment for the Committee,
particularly as the Committee Chair had
engaged with all major shareholders, including
those who subsequently voted against, before
the AGM and had not received any objections
to the new Policy. It is understood that the
key driver for these outcomes was opposition
from two of Arix’s largest shareholders
(accounting for approximately 50% of the
shares voted at the AGM) in light of specific
concerns they had with certain decisions
taken by the Board. The vast majority of other
shareholders voted in favour of the Policy,
which the Committee continues to believe sets
an appropriate framework for rewarding Arix’s
Executive Directors.
The higher level of opposition to the Directors’
Remuneration Report reflected additional
concerns raised by other shareholders in
relation to the intended grant of an option
award to the Chairman in 2019, reflecting his
prior service as Executive Chairman, and the
amendments to the terms of the Founder
Options held by the CEO. Both of these
matters were disclosed and explained in last
year’s Directors’ Remuneration Report, and
are considered to be one-off issues which
will not be repeated.
Board Changes
We set out in last year’s report the terms
on which Jonathan Peacock stepped back
from his executive duties, Joe Anderson was
reappointed as CEO and the arrangements
reached in connection with the termination
of Sir Chris Evans as Deputy Chairman.
Later in 2019, the Committee agreed the
appropriate termination arrangements for
Arix’s CFO, James Rawlingson, who left the
Board in October. The Committee exercised
its discretion to make a payment in lieu of
notice equivalent to 12 months’ basic salary to
James. This decision was taken in return for
the waiver by James of any claims against Arix
arising in connection with the termination of
his employment, including bonus for the 2019
financial year, and did not result in the payment
by Arix of any more compensation than would
have been payable had monthly payments
been made over the 12-month notice period.
Implementation of the
Remuneration Policy in 2020
For 2020, the Committee intends to operate
the Remuneration Policy for the CEO in a
similar manner to that which applied in 2019.
This ensures alignment with Arix’s strategy
and provides a reward package which is
appropriate in the context of external market
positioning and internal relativities.
There will be no change to the CEO’s salary
in 2020.
The CEO will be eligible for a bonus for 2020
of up to 100% of basic salary, payable on
the achievement of specific strategic and
operational goals. The bonus objectives and
performance against them will be disclosed in
next year’s Directors’ Remuneration Report.
The Committee intends to make a further EIP
grant to the CEO in 2020 but, at the time of
writing, has not made final decisions on the
size of the award or the specific performance
targets. The current intention is that the award
will be based on similar metrics as chosen for
the 2019 award, namely growth in share price
and net asset value per share. Full details of
the award will be disclosed in the regulatory
announcement at the time the grant is made
and also in next year’s Remuneration Report.
In line with the Directors’ Remuneration Policy,
a two-year post-vesting holding period will
apply to the EIP award.
Alignment of Executive
and Employee Pay
Consistent with best practice and the
2018 UK Corporate Governance Code, the
Remuneration Committee considers pay and
employment conditions across the Company
when reviewing the remuneration of the CEO
and other senior employees.
Arix has a small number of employees and as
a result is not required to publish the ratio of
CEO pay to that of employees more widely.
However, the Committee is confident that
there is considerable alignment between
the structure of the CEO’s pay and the
arrangements in place for other employees.
For example, the annual bonus scheme and
the EIP operate in the same way for other
employees as for the CEO. During 2019, the
Committee also considered information
provided by its external advisers on pay levels
and structures at comparable companies
to Arix.
While the Company does not directly consult
with employees as part of the process of
reviewing executive pay and formulating the
Remuneration Policy, the Committees receives
updates from the CEO on his discussions
and reviews with senior management
and employees.
The UK Corporate Governance Code
In line with its previous practice, although Arix
is not required to adhere to the UK Corporate
Governance Code, the Board feels it is entirely
appropriate to do so. Having considered the
remuneration elements of the 2018 Code,
the Committee believes that Arix remains
fully compliant with the Code provisions,
with the exception of the recommendation
that a formal policy on post-employment
shareholding requirements should be
developed. The Committee believes that
the current Remuneration Policy provides
for considerable alignment between
the interests of Executive Directors and
shareholders, including through the three-
year performance period for EIP awards,
the two-year post-vesting holding period in
the EIP and the requirement for Directors to
build a shareholding equivalent to 200% of
basic salary while in employment. With this
in mind, the Committee has chosen not to
go further and introduce post-employment
holding requirements at this stage. However,
we will keep this matter under review in light of
ongoing market developments in this area.
I hope that you find the information
contained in this report helpful, thoughtful
and clear. The Remuneration Committee
continues to welcome dialogue with
shareholders on remuneration matters and
any questions or feedback you have would be
gratefully received.
At the forthcoming AGM, shareholders will
be asked to approve an advisory resolution
on the contents of the Annual Report on
Remuneration. I hope the Committee
can count on your continued support for
this resolution.
Trevor Jones CBE
Chairman of the Remuneration Committee
9 March 2020
61
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 The 2019 AGM
The new Directors’ Remuneration Policy was
passed with a 50.26% majority at the AGM in
June 2019. The separate resolution to approve
the 2018 Annual Report on Remuneration
was defeated. This was naturally a matter
of great disappointment for the Committee,
particularly as the Committee Chair had
engaged with all major shareholders, including
those who subsequently voted against, before
the AGM and had not received any objections
to the new Policy. It is understood that the
key driver for these outcomes was opposition
from two of Arix’s largest shareholders
(accounting for approximately 50% of the
shares voted at the AGM) in light of specific
concerns they had with certain decisions
taken by the Board. The vast majority of other
shareholders voted in favour of the Policy,
which the Committee continues to believe sets
an appropriate framework for rewarding Arix’s
Executive Directors.
The higher level of opposition to the Directors’
Remuneration Report reflected additional
concerns raised by other shareholders in
relation to the intended grant of an option
award to the Chairman in 2019, reflecting his
prior service as Executive Chairman, and the
amendments to the terms of the Founder
Options held by the CEO. Both of these
matters were disclosed and explained in last
year’s Directors’ Remuneration Report, and
are considered to be one-off issues which
will not be repeated.
Board Changes
We set out in last year’s report the terms
on which Jonathan Peacock stepped back
from his executive duties, Joe Anderson was
reappointed as CEO and the arrangements
reached in connection with the termination
of Sir Chris Evans as Deputy Chairman.
Later in 2019, the Committee agreed the
appropriate termination arrangements for
Arix’s CFO, James Rawlingson, who left the
Board in October. The Committee exercised
its discretion to make a payment in lieu of
notice equivalent to 12 months’ basic salary to
James. This decision was taken in return for
the waiver by James of any claims against Arix
arising in connection with the termination of
his employment, including bonus for the 2019
financial year, and did not result in the payment
by Arix of any more compensation than would
have been payable had monthly payments
been made over the 12-month notice period.
Implementation of the
Remuneration Policy in 2020
For 2020, the Committee intends to operate
the Remuneration Policy for the CEO in a
similar manner to that which applied in 2019.
This ensures alignment with Arix’s strategy
and provides a reward package which is
appropriate in the context of external market
positioning and internal relativities.
There will be no change to the CEO’s salary
in 2020.
The CEO will be eligible for a bonus for 2020
of up to 100% of basic salary, payable on
the achievement of specific strategic and
operational goals. The bonus objectives and
performance against them will be disclosed in
next year’s Directors’ Remuneration Report.
The Committee intends to make a further EIP
grant to the CEO in 2020 but, at the time of
writing, has not made final decisions on the
size of the award or the specific performance
targets. The current intention is that the award
will be based on similar metrics as chosen for
the 2019 award, namely growth in share price
and net asset value per share. Full details of
the award will be disclosed in the regulatory
announcement at the time the grant is made
and also in next year’s Remuneration Report.
In line with the Directors’ Remuneration Policy,
a two-year post-vesting holding period will
apply to the EIP award.
Alignment of Executive
and Employee Pay
Consistent with best practice and the
2018 UK Corporate Governance Code, the
Remuneration Committee considers pay and
employment conditions across the Company
when reviewing the remuneration of the CEO
and other senior employees.
Arix has a small number of employees and as
a result is not required to publish the ratio of
CEO pay to that of employees more widely.
However, the Committee is confident that
there is considerable alignment between
the structure of the CEO’s pay and the
arrangements in place for other employees.
For example, the annual bonus scheme and
the EIP operate in the same way for other
employees as for the CEO. During 2019, the
Committee also considered information
provided by its external advisers on pay levels
and structures at comparable companies
to Arix.
While the Company does not directly consult
with employees as part of the process of
reviewing executive pay and formulating the
Remuneration Policy, the Committees receives
updates from the CEO on his discussions
and reviews with senior management
and employees.
The UK Corporate Governance Code
In line with its previous practice, although Arix
is not required to adhere to the UK Corporate
Governance Code, the Board feels it is entirely
appropriate to do so. Having considered the
remuneration elements of the 2018 Code,
the Committee believes that Arix remains
fully compliant with the Code provisions,
with the exception of the recommendation
that a formal policy on post-employment
shareholding requirements should be
developed. The Committee believes that
the current Remuneration Policy provides
for considerable alignment between
the interests of Executive Directors and
shareholders, including through the three-
year performance period for EIP awards,
the two-year post-vesting holding period in
the EIP and the requirement for Directors to
build a shareholding equivalent to 200% of
basic salary while in employment. With this
in mind, the Committee has chosen not to
go further and introduce post-employment
holding requirements at this stage. However,
we will keep this matter under review in light of
ongoing market developments in this area.
I hope that you find the information
contained in this report helpful, thoughtful
and clear. The Remuneration Committee
continues to welcome dialogue with
shareholders on remuneration matters and
any questions or feedback you have would be
gratefully received.
At the forthcoming AGM, shareholders will
be asked to approve an advisory resolution
on the contents of the Annual Report on
Remuneration. I hope the Committee
can count on your continued support for
this resolution.
Professor Trevor Jones CBE
Chairman of the Remuneration Committee
9 March 2020
61
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT CONTINUED
Remuneration snapshot
Topic
Description
Base salary
Benefits
Pension contribution
Annual bonus
The basic salary for the CEO for 2020 is set at £500,000 (unchanged from 2019)
The CEO is eligible to receive private health cover, life assurance, income protection and
a company car or car allowance
The CEO receives pension contributions at a level of 7.5% of basic salary
▸ 100% of salary maximum for the CEO
▸ Bonus for 2020 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 and invested into shares which must be held
for a period of three years
Long term incentive
▸ For 2020, the Committee intends to grant an award to the CEO but has not yet reached
a final decision on the award size and the specific performance targets
▸ Any awards which vest will be subject to a two-year post-vesting holding period
Shareholding guidelines
200% of salary
62
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 The Remuneration Committee will review
annually the remuneration arrangements
for the Executive Directors, members of the
Executive Committee and senior investment
team members, drawing on trends and
adjustments made to all employees across
the Group and taking into consideration:
▸ Business strategy over the period;
▸ Overall corporate performance;
▸ Market conditions affecting the Company;
▸ The recruitment market;
▸ Changing practice in the markets where
the Company competes for talent; and
▸ Changing views of institutional shareholders
and their representative bodies.
Directors’ Remuneration
Policy (summary)
Introduction
The Directors’ Remuneration Policy was
approved by shareholders at the AGM held
on 3 June 2019 and applies for a period
of three years from the date of approval.
A summary of the Policy is set out on the
following pages. The full Policy is included
within the 2018 Annual Report, available in the
Investor Relations section of Arix’s website,
www.arixbioscience.com.
The table on the following pages sets out
each element of remuneration for Executive
Directors and how it supports the Company’s
short and long-term strategic objectives.
Policy summary
The Remuneration Committee is responsible
for determining the Remuneration Policy for
the Executive Directors, the Chairman and
other senior executives for current and future
years. In setting the policy, the Committee
has sought to ensure that it is sufficiently
flexible to take account of future changes in
the Company’s business environment and in
executive remuneration practices. The policy
is designed around the following key principles:
▸ Alignment with the long-term interests
of shareholders;
▸ Competitive remuneration which is set at
an appropriate level to attract, retain and
motivate executive management of the
quality required to help ensure growth and
success as the Company enters its next
stage of development operating in a listed
company environment;
▸ Strategic alignment, having regard to the
risk appetite of the Company and alignment
to the Company’s long-term strategic goals;
▸ Encourage and support a high performance
culture with appropriate reward for superior
performance; and
▸ Avoid creating incentives that will encourage
excessive risk-taking or unsustainable
Company performance.
63
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT CONTINUED
Remuneration policy table
Element of
Remuneration
How it supports the Company’s
short and long-term strategic objectives
Salary
Provide salaries that support the
Company to acquire and retain the
highly qualified Executive Directors
who are needed to develop and
implement the Group’s strategy.
Benefits
Provides a benefits package in line
with standard market practice to
enable the Group to recruit and
retain Executive Directors with the
experience and expertise to deliver
the Group’s strategy.
Pensions
Provides a pension provision in line
with standard market practice to
enable the Company to recruit and
retain Executive Directors with the
experience and expertise to deliver
the Group’s strategy.
Operation
Opportunity and Performance metrics
An Executive Director’s basic salary is 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 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 Group contributes to defined
contribution (DC) pensions schemes
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 Committee ensures that maximum
salary 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.
The maximum will be set at the cost
of providing the benefits described.
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.
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 Annual Report
on Remuneration the pension contributions
for the Executive Directors within the
above limits. No Executive Directors have
a prospective entitlement to a Defined
Benefit Pension.
64
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Element of
Remuneration
How it supports the Company’s
short and long-term strategic objectives
Operation
Opportunity and Performance metrics
Annual bonus
The bonus plan 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 plan supports the
Company’s objectives allowing the
setting of annual targets based on
the business strategy at the time,
meaning that a wider range of
performance metrics can be used
that are relevant and achievable.
The Board will determine the bonus to be
delivered following the end of the relevant
financial year.
The maximum bonus deliverable under the
plan will not exceed 125% of a participant’s
annual basic salary.
The Committee can require part of any
bonus (up to 50% of the maximum bonus
earned) to be deferred on a post-tax basis
and invested into shares. These shares
must be held for a minimum period,
normally three years.
The Group will set out in the Remuneration
Report in the following financial year the
decisions taken around any requirement
to invest in shares.
The bonus plan includes malus and
clawback provisions which can be used
in certain specific circumstances.
Bonus targets and weightings are set each
year and will take into account the strategic
priorities of the business at the time. The
Group will set out in the Remuneration
Report in the following financial year, the
nature of the targets and their weighting
for the 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.
Percentage of bonus maximum earned
for levels of performance:
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.
Awards are granted annually to Executive
Directors in the form of a conditional share
award or nil cost option.
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 after 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.
With effect from the EIP awards granted
in 2019, a post-vesting holding period will
apply to awards such that any shares
which vest must be held for a further
two-year period.
During this period the shares cannot
be sold (other than as required for
tax purposes).
Threshold: 0%
On target: 50%
Maximum: 100%
Normal maximum value of 225% of salary
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.
The amount payable for threshold
performance is 25% of maximum of the
award.
EIP awards will be subject to the
achievement of challenging performance
conditions set by the Remuneration
Committee prior to each grant.
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.
Minimum
Shareholding
Requirement
The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up and then
subsequently hold a shareholding equivalent to a percentage of basic 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 Committee will determine the relevant shareholding guideline on an annual basis.
65
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Opportunity and Performance metrics
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
business-related expenses incurred by the
Non-Executive Directors and may settle any
tax incurred in relation to these.
DIREC TORS’ REMUNER ATION REPORT CONTINUED
Element of
Remuneration
How it supports the Company’s
short and long-term strategic objectives
Operation
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 Board as a whole is responsible for
setting the remuneration of the Non-
Executive Directors. The Remuneration
Committee is responsible for setting
the pay of the Chairman. Non-Executive
Directors are paid an annual fee and
additional fees for chairmanship
of committees.
Fees are normally paid in cash. In addition,
to create alignment with shareholders
and to cover the duration of their time
on the Board, Non-Executive Directors
may be issued with shares up to the value
of their annual fee at the time of their
appointment. The Company may settle
any tax incurred in relation to these shares.
The shares must be held for the duration
of their period on the Board.
Fees are reviewed annually based in line
with the review policy for the Executive
Directors. With the exception of the
EIP award to the Chairman disclosed
in last year’s Annual Statement from
the Chairman of the Remuneration
Committee, Non-Executive Directors
do not participate in any variable
remuneration arrangements. Non-
Executive Directors may be eligible
for benefits such as use of secretarial
support or other benefits which may be
appropriate for performing their duties.
Performance conditions and target-setting
Performance measures applying to the annual bonus plan and the EIP are chosen by the Remuneration Committee on an annual basis taking into
account the strategic priorities of the business. The chosen measures and the specific targets are designed to be consistent with the policy principles
as set out on page 63. Full details of the performance conditions applying to any year’s awards are set out in the Annual Report on Remuneration.
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.
In addition, the Committee retains the discretion to override the formulaic outcomes of incentive schemes. The purpose of this discretion is to ensure
that the incentive scheme outcomes are consistent with overall Company performance and the experience of shareholders.
Service agreements and letters of appointment
The CEO’s service agreement is for a rolling term and may be terminated by the Company by giving 12 months’ notice.
Name
Joe Anderson
Date of service agreement
26 March 2019
Notice periods by Company
(months)
Notice periods by Director
(months)
12
6
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 2020 AGM and at each
subsequent AGM.
66
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 The details of each Non-Executive Director’s current term are set out below:
Name
Jonathan Peacock
Professor Trevor Jones
Giles Kerr
Art Pappas
Mark Breuer
Naseem Amin
Date of appointment
8 February 2016
8 February 2016
17 October 2017
12 September 2018
25 April 2019
17 December 2019
Initial
contractual
term (full years)
Notice periods
by Company
(months)
Notice periods
by Director
(months)
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
Illustrations of the application of the remuneration policy
CEO
£’000
£3,000K
£2,500K
£2,000K
£1,500K
£1,000K
£500K
£0K
£2,563K
£2,063K
49%
24%
27%
£1,363K
41%
18%
41%
On target
Maximum
£563K
100%
Fixed
Fixed
Annual bonus
LTIP
LTIP value with 50% share price growth
Notes:
The chart above illustrates the potential remuneration payable to the CEO under different performance scenarios. In all three scenarios the fixed pay element is based on the 2020
basic salary level, pension contribution at the standard rate of 7.5% of salary and benefits provision at a broadly similar level to 2019. Minimum performance assumes no bonus
payment and no EIP vesting. On-target performance assumes a bonus payment at a level of 50% of maximum and EIP vesting at a level of 55% of the maximum opportunity.
Maximum performance assumes a bonus payment at a level of 100% of maximum (£500,000) and EIP vesting at a level of 100% of the maximum opportunity. The EIP maximum
opportunity is the level of EIP awards to be made in 2020, i.e. 200% of basic salary. The Remuneration Committee has not yet determined the size of the EIP award to be made
to the CEO in 2020.
The Maximum column has been extended to reflect the potential impact of 50% share price appreciation on the shares which vest.
67
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT CONTINUED
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
2019 and also describes the operation of the Remuneration Committee.
Remuneration Committee
Membership
Franz Humer was Chairman of the Committee until his retirement from the Board on 17 December 2019. He was replaced as Chairman by Professor
Trevor Jones, who has been a member of the Committee since 2016. The other members of the Committee are Art Pappas and Naseem Amin
(appointed to the Committee on 17 December 2019).
The Committee met four times during the year under review. Meeting attendance is shown on page 50.
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.
The Committee’s role includes:
▸ Setting the remuneration policy for all Executive Directors of the Company, the Chairman of the Board and key management (being the Executive
Committee (including the Company Secretary) and 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, 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,
that the duty to mitigate loss is fully recognised and that any payments are consistent with the shareholder-approved remuneration policy.
In carrying out its duties the Remuneration Committee takes into account any legal and regulatory requirements, including the Code and the UK Listing
Rules, as well as good practice guidance issued by investors and investor representative bodies. Determining the fees of the Non- Executive Directors is
a matter for the Board (excluding the Non-Executive Directors).
The Committee believes that its approach to Executive Director remuneration is consistent with the factors set out in Provision 40 of the Code:
▸ Clarity: the Remuneration Policy and its implementation are set out in extensive detail in this report;
▸ Simplicity: Remuneration is based on a mix of fixed and variable pay. Incentives involve an annual bonus scheme based on the achievement of key
corporate objectives, and a long-term plan which rewards the generation of value for shareholders;
▸ Risk: Performance targets for incentive schemes are calibrated carefully to ensure that the ultimate rewards will correspond closely with an
appropriate level of performance. For example, EIP awards will only vest if a certain level of share price and NAV per share growth is achieved;
▸ Predictability: annual participation in the bonus scheme and the EIP is capped (as a percentage of basic salary), and awards cannot exceed these
levels. The ultimate value of any vested EIP award will depend on the share price at the time which cannot be predicted but is simple to calculate;
▸ Proportionality: there is a clear link between the delivery of strategy and individual awards through the annual bonus scheme. The EIP rewards the
successful delivery of long-term outperformance. If there is little or no growth in share price or NAV, awards will not vest; and
▸ Alignment to culture: Arix’s high-performance culture and the awareness within the Company of what ultimately drives shareholder value is
reflected in the incentive schemes operated and the choice of performance metrics.
Key matters considered by the Remuneration Committee
Key issues reviewed and discussed by the Remuneration Committee during 2019 included:
▸ The outcome of consultation with major shareholders on the terms of the remuneration policy presented for shareholder approval at the 2019 AGM,
and the reasons for the votes against the remuneration resolutions at the AGM;
▸ Review of Executive Director and senior manager bonuses and equity incentive awards for 2019;
▸ The remuneration package for Joe Anderson following his reappointment as CEO (as disclosed in last year’s report);
▸ The separation arrangements for Jonathan Peacock’s transition to Non-Executive Chairman;
▸ The termination arrangements for Sir Chris Evans and James Rawlingson; and
▸ Pay benchmarking for key roles within the organisation and a review of alternative incentive structures.
68
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Advisers to the Committee
The Committee appointed Korn Ferry in 2018 following a competitive tender to advise on all aspects of the Directors’ remuneration policy and its
implementation. The Committee is satisfied that the advice received during the year was objective and independent. Korn Ferry is a member of the
Remuneration Consultants Group. Korn Ferry received fees of £91,611 for its advice during the year (fees charged on a costs incurred basis). A separate
practice within Korn Ferry provided recruitment advisory services to the Company during the year.
The Chief Operating Officer and General Counsel, Robert Lyne, acts as Secretary to the Committee, ensures that the Committee fulfils its duties
under its terms of reference and provides regular updates to the Committee on relevant regulatory developments in the UK. He is not present when
matters relating to his own remuneration are discussed.
Single Figure Table – Executive Directors (audited)
Jonathan Peacock1
Sir Chris Evans2
Joe Anderson3
James Rawlingson4
Basic salary
Benefits
Annual bonus
LTIP
Pension
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
Other
2018
£’000
2019
£’000
Total
2018
£’000
49
32
432
222
400
250
333
270
8
1
23
10
14
15
25
22
–
–
250
–
300
–
250
203
–
–
–
–
–
–
–
–
6
1
32
16
22
18
25
20
–
–
100
454
–
–
–
–
63
134
737
248
736
737
633
515
1 2019 figures relate to service as an Executive Director up to 19 February 2019; details of his separation agreement are disclosed on page 71. Payments for service as Non-Executive Chairman
are included in the separate table below.
2 Stepped down from the Board on 19 February 2019 although retained on a consultancy basis until 26 June 2019, payments for which are included within “Other”. Figures in the table above
reflect service as a Director only. Details of his severance arrangements are disclosed on page 71.
3 Stepped down from the Board on 4 September 2018 and employed by the Company as Chief Investment Officer for the remainder of 2018. Reappointed as CEO and as a Director on
19 February 2019. Figures reflect service as a Director only for both 2018 and 2019.
4 Stepped down from the Board and left the Company on 2 October 2019. He did not receive any bonus in respect of 2019. Details of his severance arrangements are disclosed on page 71.
▸ Basic salary: amount earned for the year.
▸ 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 in the year: 7.5% or, in the case of Jonathan Peacock, 6.0% Company contributions to 401(k) plan
▸ Annual Bonus: see separate section below for explanation of determination of bonus amounts.
▸ 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 current Executive Director are: Joe Anderson (Autolus Therapeutics plc, Nasdaq-listed).
Single Figure Table – Non-Executive Directors (audited)
Jonathan Peacock1
Professor Trevor Jones
Giles Kerr
Art Pappas
Mark Breuer2
Naseem Amin3
Franz Humer (retired)4
Meghan FitzGerald (retired)5
David U’Prichard (retired)6
Lord John Hutton (retired)7
Fees
Benefits
Pension
Annual bonus
LTIP
Other*
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
92
50
60
60
34
3
86
13
–
–
–
58
60
20
–
–
118
58
45
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81
65
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
92
50
60
141
99
3
86
13
–
–
Total
2018
£’000
–
58
60
20
–
–
118
58
45
24
* Other amounts relate to additional one-off share awards made to Non-Executive Directors in connection with their appointment, as set out in the Directors’ Remuneration Policy.
1 2019 figures relate to service as Non-Executive Chairman from 19 February 2019. Payments for service as Executive Chairman prior to this date are included in the separate table above.
2 Appointed to the Board on 25 April 2019.
3 Appointed to the Board on 17 December 2019.
4 Stepped down from the Board on 17 December 2019.
5 Stepped down from the Board on 1 April 2019.
6 Stepped down from the Board on 12 September 2018.
7 Stepped down from the Board on 31 May 2018.
69
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT CONTINUED
Annual Bonus Payout Table (audited)
For the CEO, the annual bonus objective outcomes were as follows (certain outcomes not listed due to commercial sensitivity):
Weighting
Performance Outcome
Bonus Outcome
Rationale
30%
17.5%
formations
▸ Achieved: 10+ catalysts
▸ Partially Achieved: 2 new company
Category
Portfolio companies
▸ Demonstrate positive portfolio company
catalysts
▸ New company investments
▸ Increase in NAV
Capital markets
▸ Maintain analyst “Buy” ratings and initiate
new analysts
▸ Successful Capital Markets Day (CMD)
30%
▸ Reduce share price discount to NAV
▸ Raise additional capital through exits or
fresh cash
Operations
▸ Identify cost savings
▸ Build and maintain high-performing team
20%
▸ Manage net operating costs to within 3%
of NAV
Strategy
▸ Deliver on strategic partnership goals
▸ Create 5-year vision and strategy
▸ Develop additional plans to unlock value
▸ Not achieved: decline in NAV
▸ Achieved: ratings maintained
▸ Achieved: well received CMD
15%
▸ Not achieved: discount not reduced
▸ Not achieved: some proceeds raised
in portfolio
▸ Achieved: material savings
implemented
17.5%
▸ Achieved: team strengthened
▸ Partially Achieved: costs lowered but
> 3% of NAV
▸ Achieved: strong relationships with
partners
20%
20%
▸ Achieved: evolution of business
model agreed with board
▸ Achieved: wider plans developed
Total
70%
The Committee reviewed the level of performance against the bonus targets set at the start of the year and determined that although a number
of important goals had been achieved, other targets were not met. After also taking into account the overall shareholder experience in 2019, the
Committee agreed that Joe Anderson, the CEO (and the only Executive Director), would receive a bonus at a level of 50% of his maximum bonus
opportunity. This was lower than the outcome of the formulaic assessment of performance under the bonus targets set out at the start of the year.
The CEO will use all of the after-tax proceeds of the bonus to purchase shares in the Company, to be held for a minimum of three years.
LTIPs Vesting in the Year (audited)
During 2019, IPO Awards, awarded under the EIP, vested; Joe Anderson’s award has not yet been exercised. The first grant of performance-related
LTIP options awarded under the EIP was made in 2017 and is not eligible to vest until 2020, subject to the achievement of the performance conditions.
Scheme Interests Awarded in 2019 (audited)
During the year ended 31 December 2019, the following Directors were awarded nil-cost options under the EIP, details of which are summarised below.
Joe Anderson
James Rawlingson
Date of Grant
09/05/2019
09/05/2019
Number
Awarded
578,368
234,239
Award
Price £
1.7290
1.7290
Face
Value £
% of
Base Salary
Vesting Date
1,000,000
405,000
200% 01/01/2022
150% 01/01/2022
Performance Measure
Weighting
Performance Period
Performance
% Vesting
Compound share price growth
NAV per share growth
70
60%
40%
1 January 2019
to 31 December 2021
1 January 2019
to 31 December 2021
<7% per annum
7% per annum
≥15% per annum
<7% per annum
7% per annum
≥15% per annum
0%
25%
100%
0%
25%
100%
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 The market share price used to determine the size of awards was £1.7290, being the 30-day trading average prior to the start of the
performance period.
As disclosed in the Annual Statement from the Chairman of the Remuneration Committee in last year’s Annual Report, the Committee intended
to make an EIP award to the Chairman, Jonathan Peacock, during 2019 in consideration for his service as an Executive Director during 2018.
For administrative reasons, this award was not granted during 2019 and the Committee intends to grant the award as soon as possible in 2020
following the publication of the annual results for 2019. The number of shares over which the award is to be granted, and the terms of the award will
not be affected by the delay in grant. The performance conditions and performance period will be the same as for the other Directors, as set out above.
Payments for Loss of Office/Payments to Past Directors (audited)
During the year, certain payments were made to directors in relation to their loss of office. No payments in this capacity were made to Franz Humer
and Meghan FitzGerald.
Jonathan Peacock
On 19 February 2019 Jonathan Peacock moved from the role of Executive Chairman to Non-Executive Chairman. The following arrangements
(disclosed in last year’s Annual Report on Remuneration) were agreed in connection with his termination as an Executive Director:
▸ He received a payment of £200,000 in respect of the termination of his executive service agreement.
▸ His 2017 EIP Award and 2018 EIP Award were pro-rated as at 19 February 2019 and will be eligible to vest in May 2020 and May 2021 respectively,
subject to the Company having achieved the relevant performance conditions. The remaining 2017 EIP Award and 2018 EIP Awards will continue
to vest in accordance with their terms.
▸ His unvested Founder Options will continue to vest for the duration of his service as a Director. Similar to the treatment agreed for the Founder
Options held by Joe Anderson when he became CIO in 2018 (as disclosed last year), all Founder Options which vest will be exercisable up to
February 2026. This is in recognition of his ongoing involvement with Arix. As at 8 February 2020, all Founder Options have now vested.
Sir Chris Evans
Sir Chris Evans stepped down from the Board on 19 February 2019. The following arrangements (disclosed in last year’s Annual Report on
Remuneration) were agreed in connection with his termination:
▸ He received a payment in lieu of notice of £250,000, equivalent to 12 months’ basic salary.
▸ His outstanding IPO Awards, which had a vesting date of 22 February 2019, vested in full, taking into account the notional 12-month notice period
in Sir Chris’s contract. The IPO Awards do not have performance conditions attached.
▸ The final tranche of the Founder Incentive Shares held by Sir Chris and Ectoplasm Limited which had a vesting date of 8 February 2020 were
deemed to have vested in full, taking into account the notional 12-month notice period in Sir Chris’s contract. All of the Founder Incentive Shares are
released subject to the payment of a fee of £1.80 per Founder Incentive Share. It was agreed as part of the termination discussions that Sir Chris
and Ectoplasm will now have until 8 February 2026 to pay this fee. The Founder Incentive Shares were created in 2016 prior to Arix’s IPO and are
a legacy arrangement for the purposes of the Directors’ remuneration policy.
▸ The Board agreed to retain the services of Sir Chris as a consultant to the Company. Until April 2019 Sir Chris continued to receive his prior
consultancy fee of £20,000 per month. After this time he was engaged by the Company on a lower fee of £4,166 per month (equivalent to £50,000
per annum). This consultancy arrangement ended on 26 June 2019, at which point a payment was made to cover the three-month notice period set
out in the consultancy agreement.
James Rawlingson
On 2 October 2019 James Rawlingson stepped down from the Board and left the Company. The following arrangements were agreed in connection
with his termination:
▸ He received a payment in lieu of notice of £278,100, equivalent to 12 months’ basic salary. This approach was agreed by the Committee in return
for the waiver by James of any claims against Arix arising in connection with the termination of his employment.
▸ No annual bonus was payable in respect of 2019.
▸ The EIP awards granted in 2017, 2018 and 2019 remain outstanding and the Committee retains the discretion to determine whether or not these
awards will be eligible to vest at the time of vesting of each award. Each award remains subject to the performance conditions set at the time of
grant and, in the event of any vesting, the awards will be reduced on a pro rata basis to reflect the shortened period between the grant of the award
and the termination of employment.
71
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 DIREC TORS’ REMUNER ATION REPORT CONTINUED
Executive Directors’ Shareholdings and Share Interests (audited)
The interests of the CEO (the only Executive Director) in the Company as at 31 December 2019 are shown in the table below. Only the EIP Awards
(2017, 2018 and 2019) are subject to performance conditions. The CEO is required to build a shareholding equivalent to 200% of basic salary (£1.0m).
No options were exercised during the year.
Ordinary
Shares Held
#
IPO
Awards1
(vested,
unexercised)
#
2017 EIP
Awards1
(unvested)
#
2018 EIP
Awards1
(unvested)
#
2019 EIP
Awards1
(unvested)
#
Founder
Options2
(vested,
unexercised)
#
Founder
Options2
(unvested,
unexercised)
#
Shareholding as
% of Basic
Salary3
Joe Anderson4
354,310
362,318
569,619
373,134
578,368
2,846,540
189,769
116%
1
2
Awards are nil-cost options. The IPO Awards were granted without performance conditions attached. The 2017, 2018 and 2019 EIP Awards include performance conditions which must be met
prior to vesting. Details of the specific performance targets in place for each grant are included in the relevant year’s Annual Report on Remuneration.
The Founder Options were granted in 2016 prior to Arix’s IPO and are a legacy arrangement for the purposes of the Directors’ Remuneration Policy. The Founder Options were granted with
an exercise price of £1.80 per Founder Option. As disclosed in last year’s Annual Report on Remuneration, the exercise price reduces by 18 pence (i.e. 10% of the original exercise price) each year
for five years while Joe Anderson remains in full-time employment with Arix. None of the Founder Options were granted with performance conditions attached.
3 Reflects value of ordinary shares plus net of tax value of IPO awards, which are vested but unexercised nil-cost options.
4 Joe Anderson holds 138,889 Ordinary Shares through PAL Trustees Limited, the trustee of his SIPP.
There has been no change in the Executive Directors’ Shareholdings since the balance sheet date other than in respect of the unvested Founder
Options held by Joe Anderson which have now fully vested as at 8 February 2020.
The table below includes details of the shareholdings of former Executive Directors who stepped down from the Board during 2019, as at the date
of their departure from the Board. Shares held by Jonathan Peacock are shown below.
No options were exercised during the year.
Director
Sir Chris Evans2
James Rawlingson3
1 Awards are nil-cost options.
Ordinary
Shares Held
#
7,316,039
37,484
IPO
Awards1
(vested)
#
295,893
163,043
2017 EIP
Awards1
(unvested)
#
2018 EIP
Awards1
(unvested)
#
2019 EIP
Awards1
(unvested)
#
Shareholding as
% of Basic
Salary3
–
–
–
205,062
201,492
234,239
3,183%
47%
2
3
Share position for Sir Chris Evans stated as at 19 February 2019, the date he stepped down from the Board. As at 19 February 2019, Sir Chris Evans held 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. 3,048,350 of the Ordinary Shares held by Sir Chris Evans and Ectoplasm Limited are Founder Incentive Shares. These were created in 2016 prior
to Arix’s IPO and are a legacy agreement for the purposes of the Directors’ remuneration policy. The Founder Incentive Shares are released subject to the payment of a fee of £1.80 per Founder
Incentive Share (payable up to 8 February 2026).
Share position for James Rawlingson stated as at 2 October 2019, the date he stepped down from the Board. As noted above, the EIP awards granted in 2017, 2018 and 2019 remain
outstanding and the Committee retains the discretion to determine whether or not these awards will be eligible to vest at the time of vesting of each award. Each award remains subject to the
performance conditions set at the time of grant and, in the event of any vesting, the awards will be reduced on a pro rata basis to reflect the shortened period between the grant of the award
and the termination of employment.
Non-Executive Directors’ Shareholdings (audited)
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
Jonathan Peacock1
Franz Humer2
Professor Trevor Jones
Meghan FitzGerald2
Giles Kerr
Art Pappas
Mark Breuer
Naseem Amin
Shareholding as at
31 December 2019
926,601
74,503
37,312
35,545
35,746
47,619
36,630
–
1 Please see table below for further information on Jonathan Peacock’s shareholdings. Jonathan Peacock served as an Executive Director until 19 February 2019.
2 The stated shareholdings for Franz Humer and Meghan FitzGerald reflect the position as at the date of their departure from the Board (17 December 2019 and 1 April 2019 respectively).
72
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Director
Jonathan Peacock
1 Awards are conditional share awards.
Ordinary
Shares Held
#
926,601
C Shares
Held
#
49,671
IPO
Awards2
#
2017 EIP
Awards1
(unvested)
#
2018 EIP
Awards1
(unvested)
#
Founder
Options
(vested,
unexercised)
#
Founder
Options
(unvested,
unexercised)
#
–
379,746
298,507
2,328,985
155,265
2 The IPO Awards vested during 2019 and the relevant shares are now included within the number of Ordinary Shares held as set out above.
As set out on page 71, and as disclosed last year, the Committee intended to make an EIP award to the Chairman, Jonathan Peacock, during 2019
in consideration for his service as an Executive Director during 2018. For administrative reasons, this award was not granted during 2019 and the
Committee intends to grant the award as soon as possible in 2020 following the publication of the annual results for 2019. The terms of the award
will not be affected by the delay in grant and the performance conditions and performance period will be the same as for the awards granted to the
Executive Directors in 2019.
There has been no change in the Non-Executive Directors’ Shareholdings since the balance sheet date other than in respect of the unvested Founder
Options held by Jonathan Peacock which have now fully vested as at 8 February 2020.
Comparison of Overall Performance and Pay
The graph below shows the value of £100 invested in the Company’s shares since listing in February 2017 compared to the FTSE SmallCap index.
Although Arix is not a member of the FTSE SmallCap index, the index has been chosen as a broad equity market index, the constituents of which
include companies of a similar size and scale to Arix.
Total Shareholder Return
Source: Datastream (Thomson Reuters)
)
d
e
s
a
b
e
R
(
)
£
(
e
u
a
V
l
140
130
120
110
100
90
80
70
60
50
16/02/2017
31/12/2017
31/12/2018
31/12/2019
Arix Bioscience
FTSE SmallCap
CEO – Historic Remuneration Information (audited)
Single Figure Total
Annual Variable against maximum opportunity
EIP vesting rates against maximum opportunity
2019
£’000
737
50%
N/A
2018
£’000
633
75%
N/A
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 four periods of data are included above, all of which relate to Joe Anderson.
No shares have yet vested under the EIP (the first awards were granted in 2017, with performance measured until May 2020).
73
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
DIREC TORS’ REMUNER ATION REPORT CONTINUED
Percentage Change in Remuneration of CEO (audited)
Percentage change in 2019 remuneration compared with remuneration in 2018.
Base Salary
Annual Bonus
Benefits
All employees
excluding CEO
12%
(7%)
0%
CEO
0%
0%
0%
CEO: reflects the percentage change in the single figure amounts for basic contracted salary, annual bonus and benefits, assuming a full 12 months of service in both 2018 and 2019. Employees:
changes in salaries and bonuses consider all employees who completed a full year of service in each year
Relative Importance of Spend on Pay
Underlying operating profit/(loss)
Dividends/share buybacks
Total company spend on remuneration
2019
£’000
2018
£’000
(67,845)
40,803
–
5,637
–
6,537
The table above shows the relative importance of total spend on pay in the 2019 and 2018 financial years compared with distributions to shareholders.
The Company did not pay a dividend or undertake a share buyback programme in either 2019 or 2018. Underlying operating profit/(loss) is considered
the most appropriate metric given the current stage of the Group.
Total Group spend on remuneration decreased by 14% compared to the previous year.
Statement of Voting on Remuneration
The results of the voting on the Directors’ Remuneration Policy and the Annual Report on Remuneration at the AGM held on 3 June 2019 are set
out below:
To approve the Directors’ Remuneration Policy
To approve the Annual Report on Remuneration
Votes for
#
Votes for
%
Votes against
#
Votes against
%
Votes withheld
#
40,079,954
23,179,050
50.26%
39,658,365
32.41%
48,338,181
49.74%
67.59%
5,590
8,226,678
The Board was naturally disappointed that these resolutions received substantial levels of opposition. A key reason for these outcomes was that two of
Arix’s largest shareholders voted against both resolutions in light of specific concerns they had with certain decisions taken by the Board. The holdings
of these two shareholders were equivalent to approximately 50% of the shares voted at the AGM, giving them considerable influence over the
final result.
The Board further concluded that, with the exception of these two shareholders, the vast majority of other investors voted in favour of the Directors’
Remuneration Policy. As disclosed in the 2018 Annual Report, the new Policy, which was the subject of a consultation exercise with major shareholders
prior to being finalised, incorporates a number of features to align it with corporate governance best practice and Arix’s strategic objectives. The Policy
– a summary of which is included on pages 63 to 66 of this Annual Report – sets an appropriate framework for rewarding Arix’s Directors and the Board
believes it remains fit for purpose at the current time.
As noted above, a larger number of shareholders voted against the Annual Report on Remuneration at the AGM. The Board understands that, in
addition to the opposition from the two investors mentioned above, a number of other shareholders had concerns with some other remuneration
matters. These included the intended grant of an award under the Executive Incentive Plan to the Chairman in 2019 and the amendments to the terms
of the Founder Options held by the CEO. An explanation for the Remuneration Committee’s decisions in respect of these issues was included in the
2018 Directors’ Remuneration Report. The Board considers that they were both one-off matters which will not be repeated.
The Board continues to welcome engagement with shareholders on remuneration matters and invites any further feedback on the Remuneration
Policy and its implementation, as detailed in this year’s Annual Report on Remuneration.
74
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Implementation of Remuneration Policy for 2020 for Executive Directors
Base Salary
The salary for the CEO has not been increased for 2020 and remains at £500,000.
Benefits and Pension
No changes are proposed to benefits or pension arrangements in 2020.
Annual Bonus
The operation of the bonus plan for 2020 will be consistent with the framework detailed in the Policy section of this report. The maximum opportunity
for the year ending 31 December 2020 will be 100% of salary for the CEO. The Remuneration Committee can require up to 50% of the bonus to be
deferred and invested in shares.
Proposed target levels have been set to be challenging relative to the 2020 business plan and the performance conditions comprise of a range
of strategic and operational measures aligned to the long-term growth of the Group. Specific targets will not be disclosed upfront 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 Committee intends to make an EIP grant to the CEO in 2020 but, at the time of writing, has not made final decisions on the size of the award or
the specific performance targets. The current intention is that the award will be based on similar metrics as chosen for the 2019 award, namely growth
in share price and net asset value per share. Full details of the award will be disclosed in the regulatory announcement at the time the grant is made
and also in next year’s Remuneration Report.
Any shares which vest will be subject to a two-year post-vesting holding period.
Malus and Clawback
As set out in the Directors’ Remuneration Policy, the rules of the Company’s incentive schemes include malus and clawback provisions. These will
continue to apply for 2020 bonuses and EIP awards made in 2020. The provisions apply in the following specific circumstances:
▸ 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 was based on error, or inaccurate or misleading information;
▸ the discovery that any information used to determine cash or share awards was based on error, or inaccurate or misleading information;
▸ action or conduct of a participant which amounts to fraud or gross misconduct;
▸ corporate failure; 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.
Implementation of Remuneration Policy for 2020 for Non-Executive Directors
The table below includes details of the fees to be paid to the Non-Executive Directors for 2020.
Base Fees
Non-Executive Chairman
Senior Independent Director
Non-Executive Director
Additional Fees
Audit Committee Chair
Remuneration Committee Chair
Nomination Committee Chair
2020
£’000
100
80
50
10
10
10
75
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 CORPOR ATE GOVERNANCE REPORT
Directors’ report
For the year ended 31 December 2019
The Directors present their report for the year ended 31 December 2019. Additional information which is incorporated by reference into this
Directors’ Report, including information required in accordance with the Companies Act 2006, can be found as follows:
Disclosure
Important events affecting the Company since the year-end, likely future business
developments and research and development activities
Location
Strategic Report pages 2 to 47
Financial risk management objectives and policies (including hedging policy and use
of financial instruments)
Notes to the financial statements page 94
Going concern
Statement of Directors’ responsibilities
Diversity Policy
Details of long-term incentive schemes
Significant Interests
Waiver of emoluments by a Director
Compensation for loss of office arrangements
Strategic Report page 45
Page 79
Report of the Nomination Committee page 54
Note 18 to the financial statements pages 101 to 102
Directors’ Report page 78
Directors’ Remuneration Report pages 60 to 75
Directors’ Remuneration Report pages 60 to 75
For the purposes of LR 9.8.4CR, the information required to be disclosed by LR 9.8.4R can be found in the following locations:
Disclosure
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash in relation to major subsidiary
undertakings
Parent participation in a placing by a listed subsidiary
Contract of significance in which a director is interested
Contract of significance with a controlling shareholder
Provision of services by a controlling shareholder
Shareholder waiver of dividends
Shareholder waiver of future dividends
Agreements with controlling shareholder
Location
Not applicable
Not applicable
Directors’ Remuneration Report pages 60 to 75
Directors’ Remuneration Report pages 60 to 75
Directors’ Remuneration Report pages 60 to 75
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Compensation for loss of office arrangements
Directors’ Remuneration Report pages 60 to 75
The Strategic Report on pages 2 to 47 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.
76
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Directors
The Directors of the Company
who held office during the year are:
Jonathan Peacock
Joe Anderson*
Art Pappas
Professor Trevor Jones
Giles Kerr
Naseem Amin
Appointed 17 December 2019
Mark Breuer
Appointed 25 April 2019
Dr Franz Humer
Resigned 17 December 2019
Professor Sir Christopher Evans
Resigned 19 February 2019
James Rawlingson
Resigned 2 October 2019
Meghan FitzGerald
Resigned 1 April 2019
* Resigned 4 September 2018,
re-appointed 19 February 2019
KEY
Non-independent
Independent
Past Directors
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 a lock-up deed dated
15 August 2018, Christopher Chipperton
agreed following a sale of Ordinary Shares
not to offer sell, pledge or otherwise dispose
of any further Ordinary Shares held by him
until 15 August 2019 (subject to usual and
customary exceptions, for example when
the Company has given consent to any
such transfer). Christopher Chipperton
further agreed that any disposals made
in the 12 months after 15 August 2019
would be effected through the Company’s
broker to ensure an orderly market in the
Ordinary Shares.
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.
Results and Dividend
The results for the year ended 31 December
2019 are set out in the Consolidated
Statement of Comprehensive Income on
page 86.
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 portfolio companies.
Accordingly, the Board is not recommending a
dividend for the year ended 31 December 2019.
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 2019, the Company’s share
capital consisted of:
▸ 135,551,850 Ordinary Shares of £0.00001
each (99.96% of total share capital by
number, 2.66% by nominal value)
▸ 49,671 C Shares of £1.00 each (0.04% of
total share capital by number, 97.34% by
nominal value)
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.
77
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
CORPOR ATE GOVERNANCE REPORT CONTINUED
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 3 June 2019, 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 13,546,760 of its Ordinary shares.
The Company has not repurchased any of its
Ordinary shares under this authority, which is
due to expire on the earlier of the date of this
year’s AGM or 30 June 2020.
Directors’ interests
The number of Ordinary Shares of the
Company in which the Directors were
beneficially interested at 31 December 2019, is
set out in the Directors’ Remuneration Report
on page 72.
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.
Political donations
The Group 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
Each Director has taken all the steps that
they ought to have taken as a director
in order to make themself aware of any
relevant audit information and to establish
that the company’s auditors are aware of
that information. The auditors have been
provided with:
▸ Access to all information of which the
directors are aware that is relevant to the
preparation of the financial statements
such as records, documentation and
other matters;
▸ Additional information that has been
requested for the purpose of the audit; and
▸ Unrestricted access to persons within
the Group from whom it was determined
necessary to obtain audit evidence.
Significant interests
The table below shows the interests in shares notified to the Company in accordance with the Disclosure Guidance and Transparency Rules:
Name of Shareholder
Link Fund Solutions
Fosun International
Ruffer
Takeda Ventures
Christopher Chipperton (including restricted shares)
Ipsen
Christopher Evans (including restricted shares)
UCB
Wicklow Family Office
As at 31 December 2019
As at 6 March 2020
Number of Ordinary
Shares of 0.001 pence
each held
Percentage of total
voting rights held
Number of Ordinary
Shares of 0.001 pence
each held
Percentage of total
voting rights held
26,819,617
11,111,111
8,180,878
7,497,583
6,942,823
6,666,666
6,368,539
5,647,679
4,607,999
19.8%
8.2%
6.0%
5.5%
5.2%
4.9%
4.7%
4.2%
3.4%
26,819,617
11,111,111
8,180,878
7,497,583
6,942,823
6,666,666
6,368,539
5,647,679
4,607,999
19.8%
8.2%
6.0%
5.5%
5.2%
4.9%
4.7%
4.2%
3.4%
78
ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 So far as each Director is aware, there is
no relevant audit information of which the
auditors are unaware.
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 19 May 2020 at 10.30am.
The Notice of Annual General Meeting is
contained in a separate letter from the
Chairman accompanying this report.
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:
▸ 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.
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 52 to 53, 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.
▸ select suitable accounting policies and then
By order of the Board
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
Robert Lyne
Company Secretary
9 March 2020
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CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Independent Auditors’ report
to the members of Arix Bioscience plc
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 2019 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 International Financial Reporting Standards (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 2019; 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 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 of the financial statements and Page 59 of the Report of the Audit and Risk Committee, we have provided
no non-audit services to the Group or the Company in the period from 1 January 2019 to 31 December 2019.
Our audit approach
Overview
Reporting obligation
Outcome
▸ Overall Group materiality: £2.02 million (2018: £2.70 million), based on 1% of net assets.
▸ Overall Company materiality: £1.91 million (2018: £2.31 million), based on 1% of net assets and capped at 95% of Group
Materiality
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 the
industry in which the Group operates.
▸ We audited the Company and four significant subsidiaries of the Group which together make up 116% of the loss before
tax and 100% of the net assets. The four significant subsidiaries subject to audit were Arix Bioscience Holdings Limited,
Arix Capital Management Limited, Arthurian Life Sciences SPV GP Limited and ALS SPV Limited, and these were subject
to audit as they represent a significant portion of the Group income, loss before tax or net assets. In addition, we have
performed specified audit procedures over Arix Bioscience Inc., which made a loss and is in a net liabilities position.
Group
scoping
Key audit
matters
▸ Valuation of unquoted investments (Group)
▸ Share-based payments expense (Group and Company)
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.
80
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and its industry, we identified that the principal risks of non-compliance with laws and regulations related to
the UK regulatory principles such as those governed by the Financial Conduct Authority. We reviewed the financial statement disclosures to underlying
supporting documentation, review of correspondence with, and reports to the regulators, review of correspondence with legal advisors, enquiries of
management, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and UK tax
legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls) and determined that the principal risks were related to posting inaccurate journal entries to increase the value of assets, and
management bias in accounting estimates such as the valuation of unquoted investments. Audit procedures performed by the Group engagement
team included:
▸ Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
▸ Understanding and evaluation of management’s controls designed to prevent and detect irregularities;
▸ Reading key correspondence with regulatory authorities and legal advisers in so far as it related to non-compliance with laws and regulations
and fraud;
▸ Reviewing relevant meeting minutes, including those of the Board of Directors and the Audit and Risk Committee;
▸ Designing audit procedures to incorporate unpredictability around the nature, timing and extent of our testing of personal expenses;
▸ Reviewing tax returns submitted by the Group;
▸ Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to the valuation
of unquoted investments (see related key audit matter below); and
▸ Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or posted by senior management.
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. Also, 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.
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.
Key audit matter
How our audit addressed the key audit matter
Valuation of unquoted investments (Group)
Refer to page 92 (Accounting Policies), pages 98 to
99 (notes) and page 58 (Report of the Audit and Risk
Committee).
The fair value of unquoted investments is £64.08
million as at 31 December 2019. 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
a ‘calibration to the price of a recent investment’ or a
‘milestone analysis’. The calibration to the most recent
funding transaction approach refers to looking back at
the last external investment in the investee company
equity that would give an indication of fair value and
calibrating the value based on events subsequent to
that transaction to the year end. The milestone analysis
approach refers to monitoring the fair value of the
investment 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.
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 specific procedures:
▸ Held meetings with management, including the investment directors, to understand
the performance of each investee company in relation to its plan/milestones and the
rationale for the valuation methodology applied (including any assumptions being used).
▸ Obtained supporting financial information, such as purchase agreements, funding
drawdown requests or bank statements showing the pricing and cash movement for
transactions that occurred.
▸ Obtained board papers from the investee companies and corroborated these with
discussions held with management, further substantiated through independent research,
for example, press releases and online reports, to identify any other corroborating or
potentially conflicting information.
▸ Challenged management assumptions regarding discretionary changes in fair value,
focusing on the risk profile of ongoing trials and future funding rounds.
▸ Circularised share confirmation letters to the unquoted portfolio companies and tied
through the capitalisation tables for each investment based on their responses.
We found that management’s valuation of unquoted investments, in particular the
assumptions used, were supported by the audit evidence obtained.
81
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Independent Auditors’ report
to the members of Arix Bioscience plc continued
Key audit matter
How our audit addressed the key audit matter
Share-based payments expense
(Group and Company)
In testing the share based payment expense, we performed the following testing to address
the risks identified for each type of share based payment transaction:
Refer to page 94 (Accounting Policies), pages 101
to 102 (notes) and page 58 (Report of the Audit and
Risk Committee).
▸ 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.
The share-based payment expense is determined to
be an area of focus given the assumptions used by
management, estimates 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 charged is not completely
recognised. The share-based payment expense
amounted to £2.79 million for the year.
▸ 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 (such as the 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 yield of the Group’s shares, the forfeiture rates of the share
options, the leaver rate and performance conditions.
▸ Assessed the treatment of the scheme leavers in the year including their status as
either good or bad leavers based on the original grant documents and the results of any
Remuneration Committee meetings for the future treatment of the shares.
▸ Assessed whether all disclosures required by IFRS 2 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.
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.
We have held a number of early planning discussions with those charged with governance and with management 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 four significant subsidiaries of the
Group, which together account for 116% of the loss before tax, and 100% of the net assets. This together with the 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 four significant subsidiaries
subject to audit were Arix Capital Management Limited, Arix Bioscience Holdings Limited, Arthurian Life Science SPV GP Limited, ALS SPV Limited.
In addition to this we performed specified procedures over Arix Bioscience, Inc., which holds certain Group investments, which is a specific risk and is
part of the key audit matter on valuation of unquoted investments.
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.
82
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£2.02 million (2018: £2.70 million).
£1.91 million (2018: £2.31 million).
Group financial statements
Company financial statements
How we determined it
1% of net assets.
1% of net assets capped at 95% of the Group materiality.
Rationale for
benchmark applied
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 businesses such as the Group, which invests in
other businesses for capital appreciation.
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 businesses 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 between £1.91 million and £0.01 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 £100,000 (Group
audit) (2018: £135,000) and £95,000 (Company audit) (2018: £115,000) 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:
Reporting obligation
Outcome
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.
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.
For example, the terms of the United Kingdom’s withdrawal from the European Union are
not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade,
customers, suppliers and the wider economy.
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 Report, 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).
83
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Independent Auditors’ report
to the members of Arix Bioscience plc continued
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 2019 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 Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Report (on pages 48 to 79)
about internal controls and risk management systems in relation to financial reporting processes and 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 Report (on pages 48 to 79)
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 44 to 45 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 45 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’ 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 79, 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 56 to 59 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)
84
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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, 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
▸ 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 four years,
covering the years ended 31 December 2016 to 31 December 2019.
Other voluntary reporting
Going concern
The Directors have requested that we review the statement on page 45 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 44 to 45 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
9 March 2020
85
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Consolidated statement
of comprehensive income
For the year ended 31 December 2019
Change in fair value of investments
Revenue
Administrative expenses
Operating (loss)/profit
Net finance income
Foreign exchange (losses)/gains
Impairment of right-of-use and intangible assets
Share-based payment charge
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Other comprehensive (expense)/income
Exchange differences on translating foreign operations
Taxation
Total comprehensive (expense)/income for the year
Attributable to
Owners of Arix Bioscience plc
Earnings per share
Basic earnings per share (p)
Diluted earnings per share (p)
Note
11
3
6
7
18
9
9
2019
£’000
(58,642)
506
2018
£’000
51,173
1,328
(9,709)
(11,698)
(67,845)
40,803
769
(4,443)
(1,259)
(2,790)
(75,568)
5,883
(69,685)
(185)
–
(69,870)
708
4,583
–
(3,333)
42,761
(5,883)
36,878
1,269
–
38,147
(69,870)
38,147
10
10
(53.8)
(53.8)
32.1
29.7
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
86
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Consolidated statement
of financial position
As at 31 December 2019
ASSETS
Non-current assets
Investments held at fair value
Intangible assets
Property, plant and equipment
Right of use asset
Investment property
Current assets
Cash and cash equivalents
Cash on long-term deposit
Trade and other receivables
Right of use asset
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Lease liability
Deferred tax liability
Non-Current Liabilities
Lease Liability
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital and share premium
Retained earnings
Other reserves
TOTAL EQUITY
Note
2019
£’000
2018
£’000
11
12
13
15
15
14
16
9
151,921
183,981
688
160
249
366
1,770
313
–
–
153,384
186,064
54,638
–
1,106
90
31,009
60,209
2,174
–
55,834
93,392
209,218
279,456
(6,154)
(685)
–
(6,839)
(3,399)
–
(5,883)
(9,282)
(271)
–
(7,110)
(9,282)
202,108
270,174
17
188,585
15,718
(2,195)
188,585
82,018
(429)
202,108
270,174
The accompanying notes form an integral part of the financial statements. The financial statements on pages 86 to 106 were approved by the
Board of Directors and authorised for issue on 9 March 2020, and were signed on its behalf by
Joe Anderson
Chief Executive Officer
87
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Consolidated statement
of changes in equity
For the year 31 December 2019
As at 1 January 2019
Loss for the year
Other comprehensive (expense)/income
Share-based payment charge
Acquisition of own shares
Issue of own shares to employees
As at 31 December 2019
Share Capital
and Premium
£’000
188,585
–
–
–
–
–
188,585
For the year ended 31 December 2018
As at 1 January 2018
Profit for the year
Other comprehensive income
Contributions of equity, net of transaction costs and tax
Share-based payment charge
Acquisition of own shares
Issue of own shares to employees
As at 31 December 2018
Share Capital
and Premium
£’000
105,125
–
–
83,460
–
–
–
188,585
Other
Equity
£’000
(1,211)
–
–
–
(986)
443
(1,754)
Other
Equity
£’000
–
–
–
–
–
(1,211)
–
(1,211)
Other
Reserves
£’000
782
–
(780)
–
–
(443)
(441)
Other
Reserves
£’000
(768)
–
1,550
–
–
–
–
Retained
Earnings
£’000
82,018
(69,685)
595
2,790
–
–
Total
£’000
270,174
(69,685)
(185)
2,790
(986)
–
15,718
202,108
Retained
Earnings
£’000
42,088
36,878
(281)
–
3,333
–
–
Total
£’000
146,445
36,878
1,269
83,460
3,333
(1,211)
–
782
82,018
270,174
88
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Consolidated statement
of cash flows
For the year ended 31 December 2019
Net cash from operating activities
Finance income
Finance expenses
Tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of equity investments
Disposal of equity and loan investments
Purchase of property, plant and equipment
Net cash received from/(placed on) long-term deposit
Net cash from investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Purchase of own shares by Employee Benefit Trust
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Effect of exchange rate changes
Cash and cash equivalents at end of year
Note
19
2019
£’000
2018
£’000
(9,242)
(11,018)
769
–
–
–
(12)
(28)
(8,473)
(11,058)
(34,858)
(55,228)
8,791
(6)
60,209
34,136
–
(2)
(60,209)
(115,439)
–
(986)
(986)
83,460
(1,211)
82,249
24,677
(44,248)
31,009
(1,048)
54,638
74,938
319
31,009
89
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements
1. General Information
The principal activity of Arix Bioscience plc (the ‘Company’) and its subsidiaries (together the ‘Arix Group’ or ‘the Group’) is to invest in and build
breakthrough biotech companies around cutting edge advances in life sciences.
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 Arix Capital Management 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.
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
Country of Incorporation Registered Address
Ownership
Arix Bioscience Holdings Limited
England and Wales
20 Berkeley Square, London, W1J 6EQ
Arix Bioscience, Inc
United States
214 West 29th Street, 2nd Floor, New York NY 10001
Arix Capital Management Limited
England and Wales
Sophia House, 28 Cathedral Road, Cardiff, CF11 9LJ
Arthurian Life Sciences GP Limited
Scotland
16 Charlotte Square, Edinburgh, EH2 4DF
ALS SPV Limited
England and Wales
20 Berkeley Square, London, W1J 6EQ
Arthurian Life Sciences SPV GP Limited
England and Wales
Sophia House, 28 Cathedral Road, Cardiff, CF11 9LJ
Arix Bioscience plc Employee Benefit Trust
Jersey
26 New Street, St Helier, Jersey, JE2 3RA
Arthurian Life Sciences Carried Interest Partner LP Scotland
16 Charlotte Square, Edinburgh, EH2 4DF
Arix Bioscience Pty Limited*
Australia
Level 27, AMP Centre, 50 Bridge Street, Sydney NSW 2000
100%
100%
100%
100%
100%
100%
100%
100%
100%
All companies are involved in investing in and building breakthrough biotech companies around cutting edge advances in life sciences, other than Arix
Capital Management and 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.
*Arix Bioscience Pty Limited, a dormant company, was deregistered on 8 January 2020.
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.
90
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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, at fair value through profit or loss and accounted for in accordance with IFRS 9 Financial Instruments. 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 an 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).
C. Adoption of new and revised standards
Certain new accounting standards and interpretations have been applied by the Group from 1 January 2019. The Group’s assessment of the impact
of these new standards and interpretations is set out below.
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 Leases retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are
therefore recognised in the opening balance sheet on 1 January 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the
principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments. Right of use assets were measured at
the amount equal to the lease liability. There were no onerous lease contracts that would have required an adjustment to the right of use assets at the
date of initial application, although one right of use asset has subsequently been impaired, in line with IFRS 16.
Assessment for Impairment and Resulting Investment Property
The Group has assessed its right of use assets for impairment, in line with IAS 36 Impairment of Assets. During the year, the Group vacated its New
York office at 250 West 55th Street, and has sub-let that space. The right of use asset at 250 West 55th Street has therefore been impaired to its
fair value, being the expected proceeds to the Group from sub-letting. As the property no longer contributes to the Group’s core business and is able
to produce its own independent cash flows it is considered its own cash generating unit, and is therefore required to be classified as an investment
property in line with IAS 40 Investment Property. The property is held at its fair value, being the expected proceeds to the Group from sub-letting.
D. Revenue recognition
Revenue is generated from fund management fees, and from Non-Executive Directors’ fees. Fund management fees are earned as a percentage of
funds managed and are recognised in the period in which these services are provided. Non-Executive Directors’ fees are recognised on an accruals basis.
E. Foreign currency translation
The assets and liabilities of foreign operations are translated to 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
As explained in Note 2(c) above, the Group has changed its accounting policy for leases. Until 31 December 2018, leases of the Group’s premises were
classified as operating leases. Rents payable under operating leases were charged against income on a straight-line basis over the lease term, even if
payments were 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.
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
91
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019
Notes to the financial statements continued
2. Accounting Policies continued
I. Financial assets
The Arix Group classifies its financial assets as either at fair value through profit or loss or amortised cost. The classification depends on the purpose
for which the financial assets have been acquired and is determined on initial recognition.
Amortised cost assets 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, which 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 investments 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 IFRS 9 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 initially recognised they are measured at fair value. They are subsequently remeasured at their fair value if a
valuation event occurs.
Valuation of investments
The fair value of the Group’s investments is determined using International Private Equity and Venture Capital Valuation Guidelines December 2018
(‘IPEV Guidelines’), which comply with IFRS.
The fair value of quoted investments is based on bid prices at the period end date.
Upon investment, the fair value of unlisted securities is recognised at cost. Similarly, following a further funding round with participation by at least one
third party, the price of the funding round is generally considered to represent the investment’s fair value at the transaction date, although the specific
terms and circumstances of each funding round must always be considered.
Following the transaction date, each investment is observed for objective evidence of an increase or impairment in its value. This reflects the fact that
investments made in seed, start-up and early stage biotech companies often have no current and no short-term future revenues 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. As such, the Group carries out an enhanced assessment based on milestone analysis, which seeks to determine
whether there is an indication of a change in fair value based on changes to the company’s prospects. A milestone event may include, but is not limited
to, technical measures, such as clinical trial progress; financial measures, such as a company’s availability of cash; and market measures, such as
licensing agreements agreed by the company. Indicators of impairment might include significant delays to clinical progress, technical complications or
financial difficulties. Often qualitative milestones provide a directional indication of the movement of fair value. Calibrating such milestones may result
in a fair value equal to the transaction value. Any ultimate change in valuation reflects the assessed impact of the progress against milestones and the
consequential impact on a potential future external valuation point, such as a future funding round or initial public offering.
When forming a view of the fair value of its investment, the Arix Group takes into account circumstances where an investment’s equity structure
involves different class rights on a sale or liquidity event.
The valuation metrics used in these financial statements are discussed in Note 11.
Although the Directors use their best judgement, there are inherent limitations in any valuation 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 realisation of
investments, could be material to the financial statements.
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.
92
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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. The Group’s
financial assets that are subject to IFRS 9’s expected credit loss model are its loans and receivables, cash and cash equivalents and cash on long term
deposit. The identified impairment loss is considered immaterial.
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.
J. Cash and cash equivalents and Cash on long-term deposit
Cash and cash equivalents comprise cash at bank and in hand, call deposits and bank overdrafts. Cash on long-term deposit comprises cash held on
term deposit for a period of at least three months.
K. Goodwill and intangible assets
Intangibles were acquired by the Arix Group as part of the acquisition of Arix Capital Management 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. The asset is assessed for impairment periodically and marked down appropriately if an indication of
impairment is noted.
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.
Own shares represent shares of Arix Bioscience plc that are held by an employee share trust for the purpose of fulfilling obligations in respect of various
employee share plans. Own shares are treated as a deduction from equity until the shares are cancelled, reissued or disposed of. When they vest, they
are transferred from own shares to retained earnings at their weighted average cost.
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 year comprises 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 on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
balance sheets, using the liability method. 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.
93
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements continued
2. Accounting Policies continued
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 a Black-Scholes Model or Monte Carlo simulation and is charged as an expense in the
Statement of Comprehensive Income over the vesting period. Where relevant, 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. Further detail on Share-based Payments is available in Note 18.
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:
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 whose net assets are exposed to foreign currency translation risk;
at period-end the Arix Group held US dollar-denominated assets valued at $126.5m; euro-denominated assets valued at €4.7m; Canadian dollar-
denominated assets valued at C$0.2m; and Australian dollar-denominated assets valued at A$7.0m. A 10% appreciation in each currency would
have a £9.4m negative impact on Arix’s Income Statement; a 10% depreciation would have a £11.5m positive impact on Arix’s income statement.
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 long term capital into innovative companies which have novel, high-impact outcomes; Arix believes that such
companies are less susceptible to macroeconomic cycles. The Group monitors the availability of its 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. In the year ended
31 December 2019, a 10% change in underlying interest rates would have impacted Arix’s Finance Income by £71k.
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 (£54.6m (2018: £31.0m)); cash on long-term deposit (£nil (2018: £60.2m)); and
trade and other receivables (£1.1m (2018: £2.2m)).
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 2019, 100% of cash and cash equivalents and cash on long-term deposit 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
Group’s remaining contractual maturity for its financial liabilities based on undiscounted contractual payments:
Trade, Other Payables and Accruals (excluding non-financial liabilities)
Within one year
£’000
6,154
Total
£’000
6,154
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.
94
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 3. Revenue
Fund management fee income
Other income
2019
£’000
480
26
506
2018
£’000
866
462
1,328
The total revenue for the Arix Group has been derived from its principal activity of investing in and building breakthrough biotech companies around
cutting edge advances in life sciences. All of this revenue relates to trading undertaken in the United Kingdom.
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. Although Arix makes investments globally,
these are considered by one Investment Committee and reported internally as a single portfolio. 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)/Profit Before Taxation
Amortisation
Depreciation
Impairment of right of use asset
Impairment of intangible asset
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
Other assurance and advisory services
Total auditors’ remuneration
2019
£’000
(287)
(159)
(464)
(795)
141
48
36
225
2018
£’000
(287)
(216)
–
–
135
40
195
370
Non-audit services in the year relate to the Arix Bioscience plc interim review (£30k) and an FCA Client Asset Report (£6k) (2018: capital raise £150k;
remuneration advice £10k; interim review £29k; FCA Client Asset Report £6k).
6. Administrative Expenses
The administrative expenses charge broken down by nature is as follows:
Employment costs
Recruitment costs
Consultancy fees
Other expenses
2019
£’000
5,637
147
320
3,605
9,709
2018
£’000
6,537
563
512
4,086
11,698
95
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements continued
7. Net Finance Income/(Expenses)
Bank interest
Bank charges
8. Employee Costs
Employee costs (including Directors) comprise:
Salary and bonus
Social security costs
Pension and benefits costs
2019
£’000
769
–
769
2019
£’000
4,808
532
297
5,637
2018
£’000
720
(12)
708
2018
£’000
5,651
580
306
6,537
96
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 9. Income Tax
Current year tax charge
Current tax
Deferred tax – current year
Deferred tax – effect of change in tax rates
Adjustment in respect of previous periods
Total tax (credit)/charge
Reconciliation of tax charge
(Loss)/profit before tax
Expected tax based on 19.00% (2018: 19.00%)
Effects of:
Expenses not deductible for tax purposes
Adjustment in respect of previous periods
Income not taxable
Impact of rate between deferred tax and current tax
Recognition of items previously not recognised
Net gains/(losses)
Employee share options
Deferred tax not recognised
Total tax (credit)/charge
Recognised deferred tax provisions
Brought forward
Relating to Profit and loss
Relating to Other comprehensive income
Carried forward
Represented by:
Unutilised tax losses
ACAs
Intangibles
Employee benefits
Investments
Other timing differences
Unrecognised deferred tax provisions
Unutilised tax losses
Priority profit share outstanding
Other timing differences
2019
£’000
–
(5,760)
687
(810)
(5,883)
(75,568)
(14,358)
12,120
(810)
(9,808)
693
–
(6)
116
6,170
2018
£’000
–
6,665
(782)
–
5,883
42,761
8,124
3,101
–
(2,926)
(777)
(2,646)
–
23
984
(5,883)
5,883
5,883
(5,883)
–
–
(8)
–
276
(276)
9
(1)
–
(5,263)
69
(299)
(5,493)
–
5,883
–
5,883
(2,835)
(17)
325
(373)
8,784
(1)
5,883
(996)
–
–
(996)
Following changes to the UK's long term corporation tax rate, deferred tax balances have been calculated using a rate of 19% (2018: 17%).
97
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements continued
10. (Loss)/Earnings per Share
On 4 January 2019, the Group issued 114,358 ordinary shares, in relation to certain share awards. On 1 May 2019, 530,000 shares were issued, in
relation to certain share awards. On 2 July 2019, 84,249 shares were issued, in relation to certain share awards. As at 31 December 2019, the Group had
135,551,850 ordinary shares in issue (2018: 134,823,243).
At the year-end date, 5,080,582 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 profit 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.
No adjustment has been made to the basic loss per share in the year ended 31 December 2019, as the exercise of share options would have the effect
of reducing the loss per ordinary share, and therefore is not dilutive. Potentially dilutive ordinary shares relate to contingently issuable shares arising
under the Group’s Executive Incentive Plan.
(Loss)/profit attributable to equity holders of Arix Bioscience plc
Weighted average number of shares in issue for the purposes of basic earnings per share
Weighted average number of shares in issue for the purposes of diluted earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
11. Investments
Equity Investments
At 1 January 2019
Additions
Disposals
Transfers
Unrealised (loss)/gain on investments
Foreign exchange losses
At 31 December 2019
As at
31 December
2019
£’000
As at
31 December
2018
£’000
(69,870)
38,147
129,948,773
118,787,412
129,948,773
128,521,402
(53.8p)
(53.8p)
32.1p
29.7p
Level 1 –
Quoted
Investments
£’000
Level 3 –
Unquoted
Investments
£’000
118,982
8,485
(4,277)
23,131
(56,475)
(2,002)
87,844
64,999
30,681
(4,514)
(23,131)
(2,167)
(1,791)
Total
£’000
183,981
39,166
(8,791)
–
(58,642)
(3,793)
64,077
151,921
Transfers from Level 3 to Level 1 reflects companies which have listed during the year. Level 3 investments are valued with reference to either the most
recent funding round (£37.6m, 2018: £33.4m); net asset value (£1.4m, 2018: £4.5m); market-based write-up (£22.7m, 2018: £23.8m); discretionary
write-down (£2.4m, 2018: £3.2m); or by discounted cash flow (£nil, 2018: £nil). See Note 2(I) for further details on the valuation of Level 3 investments.
98
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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. Significant influence is determined to exist when the Group holds more
than 20% of the holding or when less than 20% is held but in combination with a certain level of board representation is deemed to be able to exert
significant influence. As at 31 December 2019, the Arix Group is deemed to have significant influence over the following entities:
Company
Country of
Incorporation
Registered Address
% of Issued
Share,Capital
Held
Net Assets/
(Liabilities)
of Company
Profit/(Loss)
of Company
Date of Financial
Information
Depixus SAS (EUR)
France
3-5 Impasse Reille, 75014 Paris
20.7%
1,948
(1,439)
31 December 2017
Quench Bio, Inc (USD)
USA
400 Technology Square,
Cambridge, MA 02139
STipe Therapeutics Aps (EUR) Denmark
Lyngsievvej 18, 8230 Abyhoj
32.4%
14.8%
N/A
N/A
N/A Not publicly available
N/A Not publicly available
In addition, at 31 December 2019, the Group held the following investments in companies where it is not considered to have significant influence:
Company
Amplyx Pharmaceuticals, Inc.
Artios Pharma Limited
Atox Bio, Inc.
Aura Biosciences, Inc.
Autolus Therapeutics plc
Harpoon Therapeutics, Inc.
Imara, Inc.
Iterum Therapeutics Limited
LogicBio Therapeutics, Inc.
OptiKira, LLC
Pharmaxis Limited
PreciThera, Inc
VelosBio, Inc.
Verona Pharma plc
Board Seat?
Observer
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
N
% of Issued
Share Capital
Held
3.0%
12.4%
6.4%
7.7%
7.5%
10.4%
9.2%
7.3%
13.0%
13.3%
11.1%
13.9%
8.9%
2.5%
The Arix Group has an interest in one structured entity, The Wales Life Sciences Investment Fund (registered address: Sophia House, 28 Cathedral
Road, Cardiff, Wales, CF11 9LJ). 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 both Investments and Receivables, and totals £1.7m at year-end
(2018: £5.5m); the Group’s exposure is limited to the carrying value within Investments and Receivables.
99
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements continued
12. Intangible Assets
Brought forward
Amortisation
Impairment in period
Year Ended
31 December
2019
Year Ended
31 December
2018
1,770
(287)
(795)
688
2,057
(287)
–
1,770
An intangible asset arose on Arix Bioscience plc’s acquisition of Arthurian Life Sciences entities, relating to management fees due to Arix Capital
Management Limited as a result of managing The Wales Life Sciences Investment Fund. These fees are amortised over the remaining life of the fund.
The expected fees to be received over the remaining life of the fund have been reduced, resulting in an impairment to the asset in the period.
13. Property, Plant and Equipment
Year ended 31 December 2019
As at 1 January 2019
Exchange translation adjustments
Additions
Depreciation charge
At 31 December 2019
Year ended 31 December 2018
As at 1 January 2018
Exchange translation adjustments
Additions
Depreciation charge
At 31 December 2018
14. Trade and Other Receivables
Trade receivables
Prepayments
VAT receivable
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
258
–
–
(120)
138
25
–
–
(10)
15
30
–
6
(29)
7
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
410
2
–
(154)
258
34
1
–
(10)
25
79
1
2
(52)
30
Total
£’000
313
–
6
(159)
160
Total
£’000
523
4
2
(216)
313
As at
31 December
2019
£’000
As at
31 December
2018
£’000
771
264
71
1,106
1,734
359
81
2,174
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 and Cash on Long-Term Deposit
Cash at bank and in hand
Cash on long-term deposit
The carrying value of cash and cash equivalents and cash on long-term deposit approximates to its fair value.
As at
31 December
2019
£’000
As at
31 December
2018
£’000
54,638
–
31,009
60,209
100
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 16. Trade and Other Payables
The carrying values of trade and other payables approximates their fair value.
Trade payables
Accruals and other payables
17. Share Capital
Allotted and called up
135,551,850 ordinary shares of £0.00001 each (2018: 134,823,243 shares)
49,671 Series C shares of £1 each (2018: 49,671 shares)
As at
31 December
2019
£’000
As at
31 December
2018
£’000
123
6,031
6,154
228
3,171
3,399
As at
31 December
2019
£’000
As at
31 December
2018
£’000
1
50
1
50
On 4 January 2019, the Group issued 114,358 ordinary shares, in relation to certain share awards. On 1 May 2019, 530,000 shares were issued, in
relation to certain share awards. On 2 July 2019, 84,249 shares were issued, in relation to certain share awards. As at 31 December 2019, the Group had
135,551,850 ordinary shares in issue (2018: 134,823,243).
At the year-end date, 5,080,582 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. There are no Treasury Shares in issue.
18. Share Options
During 2019, share-based payment expenses have been recognised relating to a range of share schemes operated by the Arix Group.
Executive Incentive Plan 2017
Executive Incentive Plan 2018
Executive Incentive Plan 2019
2017 IPO Award
Executive Share Option Plan
Founder Incentive Shares
Non-Executive Director Awards
Year Ended
31 December
2019
£’000
Year Ended
31 December
2018
£’000
430
883
448
213
567
179
70
2,790
430
427
–
1,470
582
348
76
3,333
Executive Incentive Plan
The Arix Group operates an Executive Incentive Plan for Executive Directors and certain employees of the Company.
In May 2017, the Executive Directors and certain employees were awarded options or conditional awards which, in case of options will become
exercisable at nil cost and in the case of the conditional share awards, will vest at nil cost 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; 1,486,747 options were unvested at year-end (2018: 1,486,747). In the year ended
31 December 2019, a share-based payment charge of £430k (2018: £430k) was recognised in relation to the Executive Incentive Plan.
In May 2018, the Executive Directors and certain employees were awarded options or conditional awards which, in case of options, will become
exercisable at nil cost and, in the case of the conditional share awards, will vest at nil cost on the third anniversary of their grant, on 17 May 2021, 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; 2,290,499 options were unvested at year-end (2018: 2,290,499). In the year ended 31 December
2019, a share-based payment charge of £883k (2018: £427k) was recognised in relation to the Executive Incentive Plan.
101
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Notes to the financial statements continued
18. Share Options continued
In May 2019, the Executive Directors and certain employees were awarded options or conditional awards which, in case of options, will become
exercisable at nil cost and, in the case of the conditional share awards, will vest at nil cost at the end of the three year performance period, subject to
performance criteria. This requires the share price to have grown by a set percentage over the assessment period, on 1 January 2022, with the quantum
of shares vesting dependent on both the level of share price growth and the level of net asset value growth; 2,524,661 were issued in the period, all of
which are unvested at year-end. In the year ended 31 December 2019, a share-based payment charge of £448k (2018: £nil) was recognised in relation
to the Executive Incentive Plan. The charge relating to net asset value growth was calculated based upon the share price at grant of £1.5750, and the
assessed likelihood of vesting. The charge relating to share price growth was calculated using a Monte Carlo simulation model, using assumptions
relating to share price at grant (£1.5750); risk free interest rate (0.72%); time to vesting (3 years); and expected volatility based on comparable listed
investments (39.6%).
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 vested after two years, on 22 February
2019. 1,409,166 options were unvested at the start of the period; all vested, of which 439,799 were exercised at nil cost; 969,367 were unexercised at
year-end. In the year ended 31 December 2019, a share-based payment charge of £213k (2018: £1,470k) 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.
Executive Share Option Plan and Founder Incentive Shares
At the Arix Group’s inception, an Executive Share Option Plan was in operation, in which two Directors participated. Options were granted on
8 February 2016 with an original exercise price of £1.80 per ordinary share. This was subsequently amended for one Director, with the exercise price
reducing by £0.18 per annum for a five year period from February 2019 to February 2024. The number of ordinary shares subject to the options totals
5,520,559. The options vested 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 2019, a share-based payment charge of £567k (2018: £582k) 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. As these relate to a former Director, no longer employed by Arix, the full remaining share based payment charge of £179k was
recognised in the year ended 31 December 2019 (2018: £348k). The charge was 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.
Non-Executive Director Awards
Pursuant to their respective letters of appointment, certain Non-Executive Directors received a one-off share award during the year; a share based
payment charge of £70k (2018: £76k) was recognised during the period.
19. Net Cash From Operating Activities
(Loss)/profit before income tax
Adjustments for:
Change in fair value of investments
Foreign exchange losses/(gains)
Share-based payment charge
Depreciation and amortisation
Impairment of assets
Finance income
Changes in working capital
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Cash used in operations
102
Year Ended
31 December
2019
£’000
Year Ended
31 December
2018
£’000
(75,568)
42,761
58,642
4,443
2,790
446
1,259
(769)
1,068
(1,553)
(9,242)
(51,173)
(4,583)
3,333
503
–
(708)
(908)
(243)
(11,018)
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 20. Financial Commitments
The Group has amounts committed to portfolio companies but not yet invested; at 31 December 2019 these totalled £8.5m (2018: £21.0m).
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 2(i) and disclosed in Note 11.
Financial assets at fair value through profit or loss
Equity investments
Loans and receivables
Other receivables (excluding prepayments)
Long-term cash on deposit
Cash and cash equivalents
Year Ended
31 December
2019
£’000
Year Ended
31 December
2018
£’000
151,921
183,981
771
–
54,638
1,734
60,209
31,009
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.
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)
Year Ended
31 December
2019
£’000
Year Ended
31 December
2018
£’000
6,154
3,399
22. Guarantees
The Company has provided a rent deposit guarantee in respect of its former US office, now classified as an Investment Property, for an amount of
$261,657, (£198,456), unchanged from 2018.
23. Related Party Transactions
Consultancy fees plus expenses amounting to £130,262 (inclusive of VAT) (2018: £544,336) were payable to Merlin Scientific LLP during the period,
a partnership controlled by Sir Chris Evans, a former Director and substantial shareholder of the Company. All contractual arrangements with Merlin
Scientific LLP have ceased. At 31 December 2019, £nil (inclusive of VAT) (2018: £nil) was owed to Merlin Scientific LLP by the Company.
During the period, key management has comprised Executive Directors, whose remuneration is disclosed in the Directors Remuneration Report; and
other members of the Executive Committee. These other members received short-term employee benefits of £371,834 in the year, relating to the
period in which they were fulfilling key management responsibilities (2018: £nil).
24. Events After the Reporting Date
On 22 January 2020, a further $1.9m (£1.5m) was invested in Iterum Therapeutics plc. The Arix Group’s investment was in the form of convertible loan
notes and royalty-linked senior subordinated notes.
On 24 January 2020, the Arix Group participated in the Quench Bio, Inc. Series A financing. Arix’s aggregate commitment to the company now totals
over $12.5m, and the Group retains a stake in the company of over 20%.
On 27 January 2020, Autolus Therapeutics plc closed a public offering. The Arix Group did not participate; its stake in the company now totals 6.5%.
On 5 February 2020, the Arix Group completed the sale of its direct holding in Verona Pharma plc. Proceeds of £1.5m were received, in line with the
investment’s valuation as at 31 December 2019.
On 25 February 2020, a further $2.7m (£2.1m) was invested in Imara, Inc., in line with existing commitments. The Group’s fully diluted stake in the
company now totals 9.9%.
103
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Company statement
of financial position
As at 31 December 2019
ASSETS
Non-current assets
Investments in subsidiary undertakings
Amounts due from subsidiary undertakings
Current assets
Cash and cash equivalents
Cash on long-term deposit
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
Retained earnings
Other reserves
TOTAL EQUITY
104
Note
2019
£’000
2018
£’000
2
4
3
3
891
157,061
157,952
49,953
–
103
–
50,056
208,008
891
139,849
140,740
30,587
60,209
261
373
91,430
232,170
(647)
(728)
(647)
(728)
207,361
231,442
188,585
(25,885)
46,858
(2,197)
188,585
(3,782)
47,850
(1,211)
207,361
231,442
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Company statement
of changes in equity
For the year ended 31 December 2019
As at 1 January 2019
Loss for the year
Share-based payment charge
Acquisition of own shares
Issue of own shares to employees
As at 31 December 2019
As at 1 January 2018
Loss for the year
Contributions of equity, net of transaction costs and tax
Share-based payment charge
Acquisition of own shares
As at 31 December 2018
Share Capital
and Premium
£’000
188,585
–
–
–
–
188,585
Other
Equity
£’000
(1,211)
–
–
(986)
443
(1,754)
Other
Reserves
£’000
–
–
–
–
(443)
(443)
Retained
Earnings
£’000
44,068
Total
£’000
231,442
(25,885)
(25,885)
2,790
–
–
2,790
(986)
–
20,973
207,361
Share Capital
and Premium
£’000
Other
Equity
£’000
Other
Reserves
£’000
105,125
–
83,460
–
–
188,585
–
–
–
–
(1,211)
(1,211)
–
–
–
–
–
–
Retained
Earnings
£’000
44,516
(3,782)
–
3,334
–
Total
£’000
149,641
(3,782)
83,460
3,334
(1,211)
44,068
231,442
105
CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 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’).
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 408 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:
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 non-current fixed assets.
2. Non-Current Fixed Assets
Opening balance
Additions
Disposals
At 31 December
The Company’s subsidiary undertakings are detailed in Note 2(b) to the Group financial statements.
3. Cash and Cash Equivalents and Cash on Long-Term Deposit
Cash at bank and in hand
Cash on long-term deposit
The carrying value of cash and cash equivalents and cash on long-term deposit approximates to its fair value.
4. Amounts Due from Subsidiary Undertakings
Opening balance
Net additions during the year
Impairments during the year
At 31 December
2019
£’000
891
–
–
891
2018
£’000
891
–
–
891
As at
31 December
2019
£’000
As at
31 December
2018
£’000
49,953
–
30,587
60,209
As at
31 December
2019
£’000
As at
31 December
2018
£’000
139,849
35,612
(18,400)
77,221
62,628
–
157,061
139,849
The amounts due from subsidiary undertakings are interest free, repayable on demand and unsecured. Arix Bioscience plc currently has no intention
to request repayment of any amounts due.
An impairment of £18.4m (2018: £nil) has been recognised relating to the Company’s outstanding amount due from Arix Bioscience, Inc., a 100%
subsidiary of the Company; this is because there is sufficient uncertainty regarding the recoverability of the balance.
106
FINANCIAL STATEMENTSARIX BIOSCIENCE PLC ANNUAL REPORT 2019 OTHER INFORMATION
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.
Directors
Jonathan Peacock
Joe Anderson, PhD
Professor Trevor Jones CBE
Giles Kerr
Mark Breuer
Art Pappas
Naseem Amin
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
BN99 6DA
United Kingdom
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CORPORATE GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Glossary
aALL/pALL
Adult/paediatric acute lymphocytic leukaemia
– a cancer of the bone marrow and blood in
which the body makes abnormal white blood
cells (lymphocytes).
Acute Kidney Injury (AKI)
Sudden episode of kidney failure or damage
following a specific insult (e.g., infection,
chemicals). AKI results in a buildup of waste
products in blood, which can be toxic if not
resolved within days.
BKV
BK virus; a common polyomavirus that does
not typically lead to symptoms in healthy
individuals. BKV infections may become
problematic in immunocompromised patients
(e.g., patients receiving immunosuppressive
therapy after organ transplant).
BKV-associated hemorrhagic cystitis
BKV infection can result in inflammation and
bleeding from the bladder in patients receiving
bone marrow transplants.
BKV-associated nephropathy
BKV infection can cause kidney dysfunction
in patients receiving kidney transplants due to
immunosuppressive therapy to prevent kidney
rejection. Unmanaged nephropathy may lead
to rejection of the transplanted organ.
Candida Auris
A species of yeast (a type of fungus) that
is typically found on skin, but in some
circumstances it can become “invasive”
and lead to life-threatening blood-stream
infections. This happens most frequently in
immunocompromised patients, such as those
receiving immunosuppressive therapy post-
bone marrow transplant.
Complicated IAI
Complicated intra-abdominal infection;
a difficult to treat infection of the
abdomen cavity.
Core Portfolio
Arix’s core portfolio comprises investments in
companies that are raising additional capital
to accelerate their growth – typically Series
B and upwards. These companies have raised
significant capital, supported by a strong
syndicate of leading venture investors, and
have reached validating milestones.
Cryptococcus
A genus of yeast (fungus) including
Cryptococcus neoformans, which
can cause opportunistic infections
in immunosuppressed individuals.
Diabetic retinopathy
A complication of diabetes caused by high
blood sugar levels damaging the back of
the eye (retina) that can lead to blindness.
Discovery Portfolio
These investments are in the early stages of
funding – typically seed and Series A. They have
made promising life science discoveries and
have secured initial funding to test and validate
the science. These companies are in the “prove”
phase, but have the potential to move to the
core portfolio when milestones are met.
DLBCL
Diffuse large B-cell lymphoma – an
aggressive type of blood cancer that can
arise in lymph nodes (glands) or outside
of the lymphatic system.
Gross Portfolio
Arix’s Core Portfolio plus Arix’s
Discovery Portfolio.
Haematology
The branch of medicine concerned with the
study of the cause, prognosis, treatment,
and prevention of diseases related to blood.
Invasive Aspergillosis/Candidiasis
A life-threatening fungal infection that
has invaded the bloodstream of an
immunocompromised patient.
Myeloma
A type of blood cancer arising from plasma
cells found in the bone marrow.
NASH
Non-Alcoholic SteatoHepatitis; a chronic
progressive liver disease caused by
accumulation of fat and subsequent
inflammation and fibrosis, primarily
associated with high fat and sugar intake.
Net Asset Value (NAV)
A company’s assets less its liabilities.
Net Asset Value per share
A company’s net asset value divided by
the number of shares in issue.
Neuroblastoma
A cancer that develops from immature nerve
cells found in several areas of the body, and
most commonly arises in and around the
adrenal glands on top of the kidneys.
NSTI
Necrotizing Soft Tissue Infections; serious
bacterial infections that cause inflammation
and damage to the soft tissue layers
underneath the surface of the skin.
Ocular melanoma
A type of cancer arising in the pigmented cells
of the eye (e.g., the iris).
Phase 1
A clinical study testing a therapy in humans
(healthy volunteers or in some cases in
patients) for the first time to establish the
safety of a range of doses.
Phase 2
A clinical study testing a therapy in patients
to establish the safety and efficacy of one
or more doses. Intended to provide “Proof of
Concept” and to influence design of one or
more Phase 3 studies.
Phase 3
A clinical study testing a therapy in a larger
group of patients (vs. Phase 2) to establish
efficacy and safety with statistical significance
in order to support registration and approval by
a regulatory agency (e.g., FDA, EMA).
Preclinical
Testing of drug in non-human subjects,
to gather efficacy, toxicity and
pharmacokinetic information.
SCD
Sickle Cell Disease – an inherited health
condition that affects the red blood cells.
Solid Tumour
A cancer comprising solid tissue (i.e. not
a blood cancer).
T Cell Lymphoma
A type of blood cancer arising from a type
of white blood cell (T cells).
T Cell
A type of lymphocyte white blood cell, which
forms part of the immune system and
develops from stem cells in the bone marrow.
TriTAC
Tri-specific T cell Activating Construct –
Harpoon’s approach for targeted penetration
and destruction of solid tumours and
haematologic malignancies.
UTI
Urinary tract infection.
ẞ-thalassemia NTDT/TDT
Non-transfusion-dependent thalassemia
– a rare inherited disease that reduces
the production of healthy haemoglobin.
Severe patients often require frequent blood
transfusions to ensure they have enough
functional red blood cells (TDT Transfusion
Dependent Thalassemia). Patients with
less severe mutations may not require
regular transfusions (NTDT Non-Transfusion
Dependent Thalassemia).
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OTHER INFORMATIONARIX BIOSCIENCE PLC ANNUAL REPORT 2019 Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
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20 Berkeley Square
London W1J 6EQ
United Kingdom
+44 (0)20 7290 1050
info@arixbioscience.com