Investing in life
changing science
Annual report and accounts 2020
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, Twelve Bio. Image supplied by The Faculty of Health Sciences, University of Copenhagen
Image above: Arix portfolio company, Autolus
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Contents
Strategic Report
Business Model
Portfolio Company Case Study
02 At a Glance
04
Investment Proposition
06 Executive Chairman’s Review
12 Market Insight
14
16 Our Investment Strategy
18
20 Our Strategic Objectives
22
Portfolio Company Case Study
24
Key Performance Indicators
26
Portfolio Review
28 Clinical Pipeline
36
Financial Review
40 Key Team Members
44
Risk Management
48 Our Stakeholders
50 Sustainability
Performance snapshot
Business highlights
Net Asset Value (NAV)
£328m
2019: £202m
NAV per share*
242p
2019: 149p
Gross Portfolio net revaluation*
£136m
2019: (£54.1m)
Realised capital
£158m
2019: £4.6m
Capital pool
£174m
2019: £55m
Capital raised by portfolio
companies in 2020
$580m
$2.3bn since inception
Corporate Governance
Executive Chairman’s Introduction
52
56 Board of Directors
58
Report of the
Nomination Committee
60 Report of the Audit and
Risk Committee
64 Directors’ Remuneration Report
78 Directors’ Report
Financial Statements
84
Financial Statements
Other information
108 Shareholder Information
109 Glossary
Operational highlights
▸ First M&A exit achieved, with VelosBio being acquired by Merck for $2.75bn in cash, returning
£139m to Arix, representing a 11.8x multiple and an IRR of 320%
▸ Positive clinical progress from companies including Aura, Amplyx, Autolus, Harpoon, Imara and
Atox Bio
▸ Net operating costs reduced to within 2% of Net Asset Value
* Includes FX
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
01
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
We focus on innovation and partner with
highly experienced entrepreneurs to create
companies that can significantly improve
patients’ lives.
Diverse portfolio
Geographic split
Therapeutic split
Development stage split
36%
64%
UK: 18%
US: 46%
Europe: 27%
RoW: 9%
Oncology: 46%
Immunology: 9%
Genetic diseases: 36%
Anti-infectives: 9%
Clinical: 64%
Preclinical: 36%
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.
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Significant growth in the value of our portfolio
£350m
Cost
Cost: £162m
Value: £314m
Unrealised gain
Realised gain
£300m
£250m
£200m
£150m
£100m
£50m
£0m
NAV per share
242p
Capital Pool
£174m
Dec 2016
Jun 2017
Dec 2017
Jun 2018
Dec 2018
Jun 2019
Dec 2019
Dec 2020
On target to hit 2023 goals
£500m NAV
2 x strategic exits
2 x IPOs
O N
T A R G E T
O N
T A R G E T
O N
T A R G E T
Read more in the Executive Chairman’s review on page 6
IRR in the range of
15-25% per year
Maintain cost base
within 2% of NAV
O N
T A R G E T
O N
T A R G E T
Strong clinical trials pipeline
Collectively our portfolio companies are
running 21 clinical trials, with
a further 20 in preclinical development.
Read more on our Pipeline on pages 28 to 29
Clinical trials
21
Discovery
Preclinical
Phase 1
Phase 2
Pivotal/Phase 3
1
10
10
11
9
One exit achieved
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INVESTMENT PROPOSITION
Public market access to
ground-breaking medical innovation.
1 Large, high-
growth industry
Biotech fundamentals are strong: long term,
sustainable growth drivers, resilience to
economic cycles, attractive M&A environment.
Arix provides unique exposure to a portfolio of
high growth global biotech companies, both
private and public, through a listed vehicle.
Read more in Market Insight on page 12
3 Expertise and
networks
Expert team with deep scientific, commercial
and transactional expertise to drive growth in
portfolio value.
2 High impact and value
creation potential
Diverse portfolio of companies addressing
significant unmet needs in healthcare, with the
potential to deliver breakthrough treatments
to patients.
Multiple anticipated near to mid-term
milestones with the potential to deliver
significant returns, including: new data
readouts, new trials initiations, further
funding rounds and M&A.
Read more in the portfolio review from page 26
4 Active, disciplined
capital management
Initial investments are typically tranched
to pre-agreed milestones supportive of the
original investment thesis.
Arix portfolio company, Autolus
Global networks and transatlantic team
provide access to a large pool of opportunities,
wide scientific networks and a deep
understanding of the industries and markets in
which we invest.
Active management of public portfolio
positions to manage risk and optimise returns.
Transparent valuation policy, valuations adhere
to IPEV Guidelines.
Read more about our team on page 40
Read more in the financial review on page 36
To see how our investment case works in practice, please see our Business Model on page 18
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
PATIENT IMPAC T
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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 £162m into innovative biotech
companies in our Gross Portfolio, which, in turn,
have raised more than $2bn of funding to date.
Multiple jobs been created through Arix and our
portfolio companies, which collectively have
more than 330 employees today.
£162m
deployed into life
sciences since 2016
21
clinical trials across our
portfolio addressing significant
unmet needs in healthcare
330+
number of employees across
Arix portfolio companies
$2.3bn
capital raised by
portfolio companies
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
05
EXECUTIVE CHAIRMAN ’S REVIEW
From promise
to delivery
A transformative year for Arix
Naseem Amin MD
Executive Chairman
This has been a period of outstanding
achievement for our company. We
have begun the journey of turning our
promises to shareholders into delivery
– realising £158m during the year
while at the same time refocusing the
portfolio, restructuring and reducing
our costs and laying the foundation
for the next wave of investments.
The last 12 months have seen Arix’s portfolio
continue to mature, passing a number of key
milestones. We have achieved our first major
exit, underlining the validity of our business
model. We have also increased our Net Asset
Value (NAV) by 62% to £328m, moving us
significantly closer to our year-end 2023 NAV
target of £500m, that we set out in our 2020
interim results. In addition, we recorded a
significant reduction in our share price discount
to NAV, from 29% to 10%, and generated total
shareholder return of 106% during 2020.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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2023 goals
We on target for all five key targets we
announced at our Interim results presentation
in September 2020
£500m NAV
Progress
NAV increased from
£251m to £328m
2 x strategic exits
One exit achieved
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T A R G E T
O N
T A R G E T
2 x IPOs
Several opportunities
under discussion
O N
T A R G E T
IRR in the range of
15-25% per year
Gross Portfolio IRR of
32% from inception
to date
O N
T A R G E T
Maintain cost base
within 2% of NAV
2020 net operating costs
at 2.1% of NAV
2021 on target for 2.0%
or less
O N
T A R G E T
Refocus, reinvigorate, realise
Since our IPO in 2017, the potential of our
portfolio has become increasingly clear.
Our early years were characterised by a strong
pipeline, a diversity of investee companies
and a series of encouraging data readouts
and trials from these investments. However,
with Arix moving towards the mid-point in the
traditional life cycle of a venture capital fund,
2020 was the time to begin turning promise
into reality for our shareholders. That is
precisely what we have achieved – and aim to
continue in 2021 and beyond.
One of my first actions after moving into the
Executive Chairman role in April was to work
with the Board and senior team to refocus and
strengthen the business. At our interim results
presentation in September, we announced the
five targets that will guide Arix through the
next three years – more details are shown in
the panel alongside.
In particular, we pledged to drive run-rate
net operating costs down to £5m by the end
of 2021, and have committed to maintaining
costs at a maximum of 2% of NAV in
subsequent years. I am pleased to report that
despite incurring a number of one-off charges,
2020 net operating costs were reduced to
£6.8m, representing 2.1% of NAV. Run-rate
2021 net operating costs are now within £5m
and we are committed to keeping these within
2% of NAV as the company grows.
We completed a portfolio and strategy
review during the summer, which has led to
us focusing on the companies that we believe
have the highest potential value. We remain
focused on life sciences, investing to ensure
that innovation can meet serious unmet
medical need, unconstrained by geography.
We regard 10-15 companies as the optimum
for our portfolio, with two thirds of our capital
deployed in later stage companies, Series B and
onwards, and the remainder in seed and Series
A investments.
This disciplined approach is enabling us to
concentrate on our active investments to
ensure that we seize all opportunities for
maximising shareholder value in a timely
and efficient manner. We have also evolved
our policy regarding our presence in the
boardrooms of our investee companies and
decided to no longer retain a seat on the
board of a company once it has gone public.
This move gives us the flexibility to optimise
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EXECUTIVE CHAIRMAN ’S REVIEW CONTINUED
The highlight of the year was undoubtedly our
first exit, with VelosBio being acquired by Merck
for $2.75bn in cash in November 2020.
returns where we identify opportunities to
do so, while also enabling us to manage risk
exposure. As always, we continue to focus on
generating superior returns and long-term
capital growth for our shareholders.
We also appointed a new Scientific Advisory
Board during the year, and you can read more
details about how this is contributing to more
effective investment decisions on page 42.
Delivering on our promises
The highlight of the year was undoubtedly our
first M&A exit, with VelosBio being acquired
by Merck for $2.75bn in cash in December
2020. This deal returned $187m (£139m) to our
balance sheet, representing a 11.8x multiple on
our investment in a little over two years since
our initial investment and an IRR of 320%.
This entire gain is expected to be free from
corporation tax. Read more on page 39.
VelosBio was also the first co-investment
with our strategic partner Takeda Ventures,
validating our strategy to form close
partnerships with big pharma companies
in our core areas of interest. VelosBio’s lead
investigational candidate is currently being
evaluated in clinical trials for the treatment of
patients with haematologic malignancies and
solid tumours. Read more on page 22.
In total we realised £158m during 2020, which
puts us in a strong position to continue to
execute our strategy of providing support
and flexible, long-term capital to the most
innovative biotech companies across the globe
that we believe have the potential to deliver
transformative new treatments to patients.
In addition to the VelosBio proceeds, we
realised an additional £19m from the portfolio
over the year, through active management
of our public companies, including £3m
from Imara, £7m from Harpoon and £4m
from LogicBio. Our deep understanding
of the companies we have invested in
allows us to optimise the timing of our
disposals and maximise risk adjusted returns
for shareholders.
During the year our portfolio companies
collectively raised $580m. Notably, Imara
raised $86.5m in a Nasdaq IPO, with our
holding increasing by £12m during the year.
At the same time, we saw positive clinical
progress from companies including Aura,
Amplyx, Autolus, Harpoon, Imara and Atox
1 Adjusted for FX
Bio – the latter reporting good results from
a Phase 3 clinical trial of its immunotherapy
treatment for patients with Necrotising Soft
Tissue Infection, otherwise known as Flesh
Eating Disease.
Over the last 12 months, we invested a total
of £25m into the portfolio, including Imara,
LogicBio and, prior to our exit, VelosBio.
In addition to our venture portfolio, we
took advantage of our ability to invest into
promising public life science companies where
we see potential for superior returns, and
invested in GenSight through a public offering.
The strength of the science in the
companies we invest in was validated by the
announcement of a three-year strategic
research partnership between Artios and
Merck KGaA. The companies will now
collaborate to identify multiple synthetic lethal
targets for precision oncology drug candidates
and we are very excited about the potential
upside that this partnership could ultimately
deliver for our investors.
In 2020 we founded a new portfolio company,
Twelve Bio, which is developing novel
engineered Cas12a nucleases for therapeutic
gene editing. This company originated from the
Novo Nordisk Foundation Centre for Protein
Research at the University of Copenhagen,
based on the world-class scientific research of
Stefano Stella and Guillermo Montoya. Arix is
the sole investor in the company, with a fully
diluted equity stake of 49%. Please see the
case study on page 14 for details of Twelve Bio.
You can find more details on the progress of
our portfolio in the Portfolio Review, which
begins on page 26.
Navigating the challenges of Covid-19
The pandemic has presented huge difficulties
to people and economies worldwide, and I was
delighted to see how well our team stepped
up to the challenges. The safety and wellbeing
of our people is always our first priority,
and we switched to remote working rapidly
and effectively.
Venture capitalists in general and Arix in
particular proved to be remarkably resilient
throughout the year. In the early months, we
worked hard to analyse the potential impact
of the pandemic – reassessing timelines,
identifying those portfolio companies that
needed additional support and adjusting our
plans accordingly. The restrictions inevitably
caused a degree of disruption – particularly in
the areas of clinical trials and research – and
we collaborated closely with companies to
mitigate this impact. As the year progressed,
we continued to evaluate new opportunities,
conducting due diligence remotely and
harnessing the best that technology can offer
in order to build and maintain relationships.
We believe that all our portfolio companies
are well financed and positioned to navigate
through any further delays caused by Covid-19
and to deliver significant growth over the
long term.
The pandemic has shone a positive spotlight
on medical science, with the world recognising
that the only route through it is via the brilliant
work of all those involved in life sciences. Arix is
one of the leading venture capital companies
directly supporting life sciences, and our
investors know that they are investing in the
whole future of mankind. Life sciences excite
and motivate us every single day – and we
are immensely proud to be playing our part in
their development.
An evolving Board
My appointment as Executive Chairman took
effect in April 2020, following changes in
management and the board. To broaden and
strengthen the board, in February 2021 we
were pleased to announce that James Noble
and Axel Wieandt would be joining as Non-
Executive Directors on 1 April. James and Axel
each bring a wealth of experience with them
which will benefit the Company as we shape its
future strategy and success. At the same time,
Mark Breuer will step down from the Board,
leaving with our thanks for his invaluable
contribution over the last two years. In addition
to these Board changes, we were also pleased
to announce the appointment of Giles Kerr
as our Senior Independent Director (SID) as
part of the Board’s ongoing commitment to
strengthening corporate governance.
You can read more about changes to the senior
team in the Q&A on page 10, as well as in my
introduction to the Corporate Governance
Report on page 52.
Looking ahead
Following a strong 2020, our focus in 2021 is
to continue identifying and investing in great
companies across the globe. We plan to expand
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Immediate priorities for 2021:
▸ Expand investment team with senior hires in UK and US
▸ Continue to strengthen corporate governance
Read more on our NAV growth, TSR and capital pool KPIs on page 24
the investment team, with senior hires in the
UK and US, to take advantage of our strong
pipeline of new opportunities. This process is
underway, and we hope to provide an update
in due course. Building on the appointment of a
SID this year, we are committed to continuing
to strengthen corporate governance.
Our portfolio companies are well funded,
supported by top venture capital syndicates
and led by expert management teams.
We expect multiple value catalysts in the
next 12 months in line with our 2023 targets,
including new data readouts, new trials,
further funding rounds, new strategic
partnerships and M&A – all of which have the
potential to significantly increase the value of
our companies.
Our £174m capital pool at the year-end puts
us in a strong position to support the current
portfolio and invest in the next wave of
opportunities. We will continue to seek out and
support a mix of late- and early-stage deals, on
an approximate ratio of 2:1 in order to manage
risk and optimise returns. Arix has the authority
to purchase up to 10% of its ordinary shares
and we will continue to keep use of cash and
the share price discount to NAV under review.
This has been a year of real and transformative
achievement for Arix. We have started to turn
promise into delivery and seen our share price
begin to reflect our strengths and prospects.
I would like to thank shareholders for their
continued support and assure them that,
together, we face the future with confidence.
Naseem Amin MD
Executive Chairman
Arix’s portfolio company, Autolus
£158m
realised in the year
62%
increase in NAV
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EXECUTIVE CHAIRMAN ’S Q& A
Executive Chairman’s Q&A
Building the
team to deliver
shareholder value
Since his appointment as Executive Chairman in April
2020, Naseem Amin has overseen a major restructuring
at Arix – building an expert specialist team with the
skills, experience and resources to maximise value for
shareholders. Here, Naseem explains the thinking behind
some of these changes.
Naseem Amin, MD
Executive Chairman
Why was there a need to evolve the
Arix team?
Make no mistake, the teams at both Board and
executive levels had done a fantastic job over
the previous four years. They had established a
firm that quickly became recognised worldwide
as one of the industry’s leading venture capital
outfits and established a core portfolio that
was showing real promise.
But now is the time for promise to become
reality – the time for us to really deliver
in order to meet the expectations of our
shareholders. I believe that the team we have
now assembled at Arix – together with one
or two new additions that I expect over the
coming months – has the skills, experience and
resources to maximise value.
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Is this an indication of a new strategy?
Not at all. Our strategy and business model
are well-established and proven. We aim to
maintain a strong pipeline of opportunities
and a diverse portfolio, ensure effective
balance sheet management, build the value
of our portfolio companies through hands-on
support and deliver long-term capital growth
for shareholders.
Now, as we reach what is approximately the
mid-point in the 10-year cycle of the average
venture fund, it is time to accelerate our efforts
and to focus more attention on the last of
those strategic priorities – to deliver long-term
capital growth for shareholders.
What were the main changes to the senior
team in 2020?
I cover the changes to the Board in my
statement and also provide more detail in my
introduction to the Governance section.
Regarding the investment team, we were
delighted to welcome Noor Lalani as
Public Investment Director during the year.
Now responsible for managing investment
positions in our public company portfolio, Noor
has over 15 years’ experience in capital markets,
most recently serving as Director at LXM
Group, a London-based investment banking
firm. We were also pleased to see Christian
Schetter move into a Managing Director role.
All these appointments will strengthen our
investment capabilities and drive our plans for
the years ahead.
In 2021 we will be making further additions to
the team. Life sciences is a global industry, and
we will continue to build strong expertise not
only in the UK but also in the US.
How does the new Scientific Advisory Board
(SAB) support the company’s ambitions?
Comprising leading researchers and industry
executives dedicated to improving treatments
for patients, the SAB is a step change for us in
terms of ensuring we benefit from the highest
quality research and advice. The SAB’s role is
to provide specialist insight as our portfolio
matures and new investment opportunities are
evaluated. The SAB members are:
▸ Ruth Atherton, PhD, JD, executive sponsor
of the Bill & Melinda Gates Foundation
Global Access Team.
▸ Andreas Busch, PhD, former Head of
Research & Development and Chief
Scientific Officer at Shire Pharmaceuticals.
▸ Professor Trevor Jones, CBE, FMedSci,
current Arix Non-Executive Director, former
Group R&D director at The Wellcome
Foundation Limited.
▸ Professor KJ Patel, FRS, FMedSci, Director
of the MRC Weatherall Institute of
Molecular Medicine and MRC Molecular
Haematology Unit in Oxford.
The SAB expands our already large industry
network and opens up additional avenues to
identify promising opportunities and trends at
the forefront of science and industry.
How will the VelosBio proceeds be deployed?
This transaction puts us in a strong position to
continue to execute our strategy of providing
support and flexible, long-term capital to
the most innovative biotech companies
across the globe, which we believe have the
potential to deliver transformative new
treatments to patients and superior returns
to our shareholders. Arix has the authority
to purchase up to 13,555,185 ordinary shares
and we will continue to keep use of cash
under review.
“ Life sciences is a
global industry,
and we will
continue to build
strong expertise
not only in the UK
but also in the US.”
Naseem Amin, MD
Executive Chairman
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11
MARKET INSIGHT
Arix portfolio company, Artios, Cambridge, UK
A vibrant sector,
transforming lives
worldwide
1 Covid-19 has underlined
the role of life sciences
Governments across the world have invested
huge sums to support biotech companies in the
search for vaccines to Covid-19. This has shone
a spotlight on life sciences and underlined
their importance, not only to retail investors
but to the future of our planet’s entire
population. Stakeholders view the sector in an
overwhelmingly positive light. It’s regarded as
an increasingly safe haven – respected for its
resilience during pandemics and recessions,
and admired for its focus on long-term
value. With other sectors failing to live up to
expectations, more investor cash is moving into
life sciences, building on the good momentum
established pre-pandemic and laying the
foundations for continued M&A activity.
The coming years are rich with opportunity
for companies in life sciences, as a series
of key drivers combine with the continuing
realities of the pandemic to demonstrate the
enormous value of the sector – to investors,
to economies and ultimately to the health and
wellbeing of every person on our planet.
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2 Scientific discovery
continues at pace
Entrepreneurial scientists have changed the life
science landscape forever. Biotech innovation
is shaping a new understanding of the causes
and dynamics of disease at a molecular level –
and this is driving 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 more than 36,000 new
trials in 2020. New therapeutic approaches
are making new treatments possible and
transforming lives across therapeutic
areas, from oncology and respiratory to
infectious diseases.
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driving demand
The world’s population is growing older and
living longer – and with that trend comes
an inevitable increase in the prevalence of
chronic diseases. Cardiovascular, cancer and
neurological conditions are the biggest killers
on the planet, and all three are 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.
The pattern repeats 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. While economies go through cycles,
demand for treatments increases inexorably –
this is a long-term defensive sector, with great
resilience to other factors.
4 The regulatory
environment is
increasingly favourable
As the global response to Covid-19 has ably
demonstrated, regulators are willing and
capable of acting at speed. Scientists are
now more effective at evaluating targets and
selecting the appropriate patients than ever
before – and this has led to more products
successfully navigating the approvals process,
to the benefit of companies, investors and
patients alike. For example, in 2007 only 18
new drugs were approved by the FDA, the US
approval authority. In 2020, despite severe
challenges from the COVID-19 pandemic, 53
new drugs were approved, the second highest
number in more than 20 years. This increase
in approvals in the world’s largest market
comes on the back on a new set of new
policies introduced by the FDA to reduce the
time, cost and approval risk for new drugs
in development.
Sources: IQVA, Population pyramid, HBM Partners, FDA
Analysis, clinicaltrials.gov
5 The route to
exit is clear
Our role is to invest in young companies,
position them for growth and reap the rewards
for our investors when these bright, successful
companies are acquired, often by Big Pharma.
In the last ten years, 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, demonstrating significant
and increasing returns on investment. There’s
also a trend for pharmaceutical companies
to compete with each other and agree deals
at an earlier stage – and with smaller and
younger companies. In the recent past, larger
pharmaceutical companies focused primarily
on products in phase two or three of clinical
trials. Today, they’re acquiring companies
involved in phase one or even those still working
in the pre-clinical stage. It’s interesting to note
that companies acquired at the early stages
of clinical development often generate higher
return multiples than later stage companies.
New drugs approved
by the FDA in 2020
53
Novel drug approvals
originated by smaller
biopharma companies
72%
Increase in the number
of clinical trials in 2020
36,742
Biotech companies
acquired in 2019
$45bn
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
13
PORTFOLIO COMPANY CASE STUDY
Arix’s Christian Schetter talks about
gene editing and founding new
portfolio company Twelve Bio
Christian Schetter, Arix Managing Director
and Twelve Bio Chairman
TWELVE BIO
Therapeutic area Genetic diseases
Stage Drug discovery
Ownership 49%*
Value £1.4m
Arix representatives
Christian Schetter, PhD (Chairman)
John Cassidy, PhD (NED)
*when all current commitments are invested
1. What is gene editing and why are you
excited about this space?
Gene editing is a method that enables
scientists to make specific changes to
DNA within the cells of a living organism.
Combining this with our rapidly growing
understanding of human biology provides
an opportunity to tackle disease processes
at their origin by targeting the genes
responsible and modifying them via deletion,
disruption, correction or replacement.
Since the Human Genome Project was
completed in 2003 there have been a number
of technological advances in DNA sequencing
and computing that have vastly improved
our understanding of the interplay between
genes and disease. The ability to edit our
genome provides an almost unlimited number
of potential therapeutic applications ranging
from direct correction of mutations in rare
genetic diseases to indirect edits for more
complex and prevalent diseases. Such edits
have the potential to be curative since they
can effect permanent change in the genome.
These advances are leading us into a new era
of transformational therapeutics with the
potential to save and improve the lives of a
wide range of patients.
Despite the rapid progress made with gene
editing approaches, the technology is still
nascent and there are only a handful of
programmes that have reached the clinic.
There remains a huge opportunity for
biotechnology companies with differentiated
technology and the right support to develop it.
2. What are the key challenges that currently
exist when testing and developing gene
editing therapies?
As an emerging technology there is a wide
range of challenges faced by gene editing
companies, but in my view the most critical are:
1) Delivery: In order to achieve the intended
therapeutic effect with a gene editing therapy
it must first be delivered to the nucleus of the
cells that require editing. Outside of the body
(ex vivo) this can be relatively straightforward
since the cells are accessible and can be
handled in ways to facilitate this; however,
there are relatively few diseases (e.g.
blood disorders such as sickle cell disease)
that can be addressed this way. For diseases
affecting organs such as the liver, muscles,
lungs and brain, the machinery must be
delivered in vivo to the right place (and ideally
not to other tissues). Depending on the target
tissue or organ this can be difficult and a lot
of innovation is focused on developing vehicles
(vectors) for this such as optimised viruses (e.g.
AAV) or lipid-based particles.
2) Safety: Because of the potential for long-
lasting and potentially permanent effects
on patients’ DNA, it is important to show
that gene editing therapies are safe. This is
especially important for in vivo applications
where it is more difficult to monitor unintended
consequences. This is why there has been a
big focus on gene editing tools with greater
precision and specificity (i.e. fewer off-
target effects).
3) Intellectual Property (IP): The pace of
discovery and innovation in gene editing has
been extremely aggressive and there has
been a land-grab for the foundational IP
around this. Therefore new entrants to the
field must find an IP niche in which to operate
in order to protect the value they create and
to reduce the costs of sub-licensing from the
early developers.
In the case of Twelve Bio, we were impressed
by the potential of the technology to overcome
these hurdles and to become a differentiated
player in a rapidly growing and exciting space.
3. Can you talk about the process of founding
Twelve Bio?
Twelve Bio is a spinout from the Novo Nordisk
Foundation Centre for Protein Research at
the University of Copenhagen based on the
world-class scientific research of Stefano Stella
and Guillermo Montoya. Arix was introduced
to this opportunity by the Bio-Innovation
Institute, an independent biotech accelerator/
incubator also in Copenhagen, which had
selected Twelve Bio for its competitive
Creation House programme that provides a
fantastic combination of capital, mentorship
and laboratory facilities.
Stefano pitched to the Arix team and we were
impressed by what we saw as an innovative
and differentiated gene editing technology
and a high calibre founding scientific team.
Over the course of several months, we worked
closely with Stefano to refine the business plan
and budget for a Seed round and we were able
to close the investment in September 2020.
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Arix speaks to Stefano Stella,
Academic Founder and Chief
Technology Officer of Twelve Bio
Stefano Stella, PhD, Founder & CTO
1. Can you tell us about your background?
Since the beginning of my career, I have been
fascinated by protein-DNA/RNA interactions.
I used biochemical/biophysical and structural
biology techniques to study how proteins
recognise and cut specific nucleic acid
sequences at the atomic level. Since my PhD
in Italy, my research has taken me around the
world, from the US through France, Spain
and Denmark.
In 2015, my curiosity led me to look into a newly
discovered CRISPR system based on Cas12a
protein. Compared to other CRISPR proteins
such as Cas9, Cas12a uses a unique catalytic
site to cut both strands of the double-stranded
DNA target as well as single-stranded non-
specific DNA and I wanted to understand how
this site is working. So, using a combination of
X-ray crystallography and single-molecule cryo-
electron microscopy and FRET, in collaboration
with the team lead by Guillermo Montoya at
the University of Copenhagen, we obtained
the molecular short movie showing how the
Cas12a recognise, open and cut all the different
DNA filaments. By watching this movie we
noticed that some parts of the Cas12a protein
were changing and we decided to look further
into these regions and we produced variants of
the protein.
Based on the results we obtained with these
Cas12a variants in 2018, I began looking for
possibilities to translate this academic research
into a company that will use our Cas12a
variants to correct specific genetic disorders.
I started Twelve Bio in September 2019 with
Guillermo Montoya and the company became
fully operational in September 2020 when
Arix invested.
2. What is your vision for Twelve Bio?
Twelve Bio will build a gene editing toolbox to
target genetic disorders providing tailored and
safe molecules to help patients suffering from
incurable diseases. Our technology and team
will bring new, innovative and unique solutions
to the in the gene editing field to improve many
patients’ lives.
3. How is Twelve Bio going to differentiate
from other gene editing companies?
At Twelve Bio we focus on CRISPR-Cas12a,
that is a unique CRISPR protein able to target
DNA sequences that are not accessible to other
gene editing tools. We combine this uniqueness
with our ability to manipulate the activities of
Cas12a, switching them on or off as needed.
Furthermore, we use new and innovative
approaches to search for DNA sequences
carrying mutations.
These approaches combined with our
technology allow us to target diseases
that only Twelve Bio can tackle.
4. Can you talk about why you have chosen
to partner with Arix and how they have been
involved since their investment?
I saw a great fit between Twelve Bio and Arix
because right from the first meeting, they
were proactively interested in the technology.
Above all, I saw that we shared the same vision
for the company.
The three months leading to the investment
confirmed my first impression. We further
discussed the science and the strategy during
frequent, fruitful meetings, and we closed the
seed round with a clear idea of the direction
Twelve Bio would take. After the investment, I
now meet every week with Christian Schetter
and John Cassidy discussing all strategic
aspects of the company.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
15
OUR INVESTMENT STR ATEGY
Investing in life
changing science
Our focus
Our approach
How we allocate capital and manage risk
Late stage venture
Early stage venture
To minimise risk we deploy approximately two-
We deploy approximately one-third of our
thirds of capital into later stage companies
capital into early stage companies – typically
– typically Series B and upwards. The majority
seed or Series A. These companies are
of these companies are clinical stage and have
start-ups in the initial stages of research and
begun testing their treatments in patients.
development. They have made promising life
These companies will typically have at least
science discoveries and have secured initial
one live clinical trial, in either Phase 1, Phase
funding to test and validate the science.
2 or Phase 3. These companies have raised
These companies are in the ‘prove’ phase and
significant capital, supported by a strong
are therefore higher risk. We minimise that risk
syndicate of leading venture investors.
by investing small amounts early and remain
firm believers that de-risking should be done
before larger amounts of capital are deployed.
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.
High impact innovation
Invest in breakthrough therapies which have 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
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Our approach
How we allocate capital and manage risk
Late stage venture
To minimise risk we deploy approximately two-
thirds of capital into later stage companies
– typically Series B and upwards. The majority
of these companies are clinical stage and 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. These companies have raised
significant capital, supported by a strong
syndicate of leading venture investors.
Early stage venture
We deploy approximately one-third of our
capital into early stage companies – typically
seed or Series A. These companies 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 larger amounts of capital are deployed.
Arix portfolio company, Artios,
Cambridge, UK
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.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
17
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’s investment team and Scientific
Advisory Board have 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.
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1. Discover
▸ We source globally and
review hundreds of
companies each 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
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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 page 48
Underpinned
by our values
▸ Integrity
▸ Respect
▸ Transparency
▸ Discipline
▸ Collaboration
▸ Accountability
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
ARIXBIOSCIENCE.COM
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19
OUR STR ATEGIC OBJEC TIVES
Arix portfolio company, Artios,
Cambridge, UK
Our goal is to make a tangible
difference to patients’ lives and
generate superior returns for
shareholders, by investing in
innovative biotech companies
addressing areas of unmet
needs in healthcare.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Strategic priorities
Performance in 2020
Priorities going forward
Link to KPIs
Discover
high impact innovation
in areas of unmet need,
with the potential to
deliver transformative
treatments to patients
Develop
and build the value of
these companies through
hands-on support
▸ Founded new portfolio company, Twelve Bio
▸ Provided £25m new capital to portfolio companies
▸ New investment into Euronext listed
GenSight Biologics
£25m
capital deployed
▸ Recycle proceeds from VelosBio
exit into new opportunities
Diverse portfolio
▸ Maintain exposure to quality
life science opportunities across
Active
clinical pipeline
the globe
▸ Portfolio fair value increased by £136m (including FX)
▸ $580m of capital raised by portfolio companies
▸ New clinical trials initiated by Autolus, Aura, Harpoon,
Imara and Amplyx in the period. Additionally, Artios
transitioned to a clinical stage company post
period end
▸ New clinical data from, Aura, Amplyx, Autolus, Atox
Bio, Harpoon and Imara
▸ FDA accepted new drug application submitted by
Atox Bio (review date 30 September 2021)
▸ VelosBio acquired by Merck & Co for $2.75bn
£136m
net increase in
fair value of
portfolio companies
(including FX)
Increase value of portfolio
companies through hands-on
support including:
▸ Raising capital
▸ Clinical development
▸ Management search
▸ Business strategy
▸ Developing strategic interest
NAV growth
Capital pool
Deliver
attractive returns
to shareholders
▸ NAV increased by 62% to £328m (242p per share)
▸ £158m cash realised during the year
▸ Gross portfolio IRR of 32% from inception to date
£158m
capital realised
▸ Share price increased by 106%
▸ Cost base run-rate reduced to 2.1% of NAV in 2020
and run rate now below 2% NAV
▸ Maintain cost base within 2%
of NAV
▸ Targeting IRR 15-25% per year
▸ Continue to grow NAV –
targeting a NAV of £500m
by 2023
NAV growth
TSR
Capital pool
Discover
high impact innovation
in areas of unmet need,
with the potential to
deliver transformative
treatments to patients
Develop
and build the value of
these companies through
hands-on support
Strategic priorities
Performance in 2020
Priorities going forward
Link to KPIs
▸ Founded new portfolio company, Twelve Bio
▸ Provided £25m new capital to portfolio companies
▸ New investment into Euronext listed
GenSight Biologics
£25m
capital deployed
▸ Recycle proceeds from VelosBio
exit into new opportunities
▸ Maintain exposure to quality
life science opportunities across
the globe
Diverse portfolio
Active
clinical pipeline
▸ Portfolio fair value increased by £136m (including FX)
▸ $580m of capital raised by portfolio companies
▸ New clinical trials initiated by Autolus, Aura, Harpoon,
Imara and Amplyx in the period. Additionally, Artios
transitioned to a clinical stage company post
period end
▸ New clinical data from, Aura, Amplyx, Autolus, Atox
£136m
net increase in
fair value of
portfolio companies
(including FX)
Bio, Harpoon and Imara
▸ FDA accepted new drug application submitted by
Atox Bio (review date 30 September 2021)
▸ VelosBio acquired by Merck & Co for $2.75bn
Increase value of portfolio
companies through hands-on
support including:
▸ Raising capital
▸ Clinical development
▸ Management search
▸ Business strategy
▸ Developing strategic interest
NAV growth
Capital pool
Deliver
attractive returns
to shareholders
▸ NAV increased by 62% to £328m (242p per share)
▸ £158m cash realised during the year
▸ Gross portfolio IRR of 32% from inception to date
£158m
capital realised
▸ Share price increased by 106%
▸ Cost base run-rate reduced to 2.1% of NAV in 2020
and run rate now below 2% NAV
▸ Maintain cost base within 2%
of NAV
▸ Targeting IRR 15-25% per year
▸ Continue to grow NAV –
targeting a NAV of £500m
by 2023
NAV growth
TSR
Capital pool
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
21
PORTFOLIO COMPANY CASE STUDY
Our strategy in action
Therapeutic area Oncology
Invested £11.8m
Realised £138.7m
VLS-101, the company’s lead product
candidate, is an antibody-drug
conjugate (ADC) that targets receptor
tyrosine kinase-like orphan receptor 1
(ROR1). ROR1 is a cell-surface protein
that is expressed during embryofetal
development but disappears before birth
and is usually not expressed on normal cells
in children or adults. By targeting ROR1,
VLS- 101 was designed to deliver cancer-
fighting therapeutics selectively to tumour
cells, while sparing normal cells.
Discover
Derisk
▸ Thorough due diligence utilising team
expertise and external networks such as
pharmaceutical partners and KOLs.
▸ Backing a team of serial entrepreneurs,
with enormous experience in oncology
drug development, bringing novel
compounds to the market and realising
value for shareholders.
▸ Invested with global blue chip VC investors
with deep pockets and domain expertise.
▸ We took a hands-on approach through
board representation to support the
company in its early development.
▸ Our initial investments were tranched to
pre-agreed milestones, which supported
our investment thesis.
▸ This investment opportunity was sourced
through our strategic partner Takeda
Ventures, seed investors in VelosBio. Arix co-
led $58m Series A with Sofinnova Ventures
in October 2018, investing £8.4m for an
11.1% stake.
▸ Our investment thesis was threefold.
First, the Velos founders were serial
successful entrepreneurs with a track
record of getting multiple drugs through
clinical development and onto the market.
Their most recent company, Acerta Pharma,
developed the drug Calquence for non-
Hodgkin’s lymphoma, and was acquired
by AstraZeneca for $7bn in 2017. Second,
despite ADCs’ chequered history, we
believed that the accumulation of positive
and negative experiences with different
molecular constructions meant the timing
was right to invest in a novel ADC drug.
Finally, the team had chosen ROR1 as the
target, which made perfect sense for an
ADC approach, and despite investing in the
company when it was still in a very early
preclinical stage, we strongly believed in
its premise.
22
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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Acquired by Merck for
$2.75bn
£139mcash return to Arix;
11.8x return (IRR 320%)
Develop
2019
▸ Proceeds from the Series A financing
allowed the company to initiate its first
clinical study for patients with late-stage
aggressive lymphomas, who had failed on
all other available treatments and would
typically have just weeks to live.
▸ Towards the end of the year the company
saw very encouraging early clinical data in
this trial.
2020
▸ Arix invested a further £3.2m in VelosBio’s
Series B financing, in which the company
raised $137m, supported by some of the
largest and most successful life sciences
investment firms globally. This financing
gave the company a solid shareholder base
to provide multiple strategic options for
patients in the future and the resources
to quickly scale-up their pipeline, including
clinical testing of next-generation ROR1-
targeting ADCs.
▸ Proceeds from the Series B financing
allowed the company to initiate a Phase
2 clinical trial of VLS-101 in patients with
previously treated solid tumours, including
breast cancer, lung cancer, and other
cancers that are believed to express ROR1.
Deliver
▸ On 5 November, Merck (NYSE: MRK)
announced its intention to acquire VelosBio
for $2.75bn, all in cash. The offer VelosBio
received from Merck was compelling for all
its stakeholders. As one of the top forces in
oncology drug development globally, Merck
makes the perfect partner to maximise
the potential benefit of VelosBio’s lead
candidate, VLS-101, for the treatment
of patients with cancer.
▸ The trade sale of VelosBio closed in
December 2020 and generated gross
proceeds of $187.0m (£138.7m) to Arix,
representing a 11.8x return on its original
investment of $15.0m (£11.8m) and an
internal rate of return (IRR) of 320%.
“The strong return on this investment
in approximately two years provides a
very significant increase in our Net Asset
Value moving us significantly closer to our
December 2023 NAV goal of £500m, that
we set out in our 2020 interim results.
This transaction puts us in a strong position
to continue to execute our strategy of
providing support and flexible, long-term
capital to the most innovative biotech
companies across the globe, which we believe
have the potential to deliver transformative
new treatments to patients and superior
returns to our shareholders.”
Naseem Amin
Executive Chairman
Arix portfolio company, Aura,
Cambridge MA, USA
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
23
KEY PERFORMANCE INDICATORS
Financial KPI
Description/rationale
Performance 2020
Links to strategic goals
Link to risks
1
NAV growth*
Includes performance of
portfolio companies and
capital pool.
2020
2019
2018
2017
149p
152p
200p
242p
1
2
3
4
5
6
7
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
▸ DELIVER attractive returns to shareholders
▸ 62% growth in NAV in 2020
Values shown are NAV per share (p), calculated as Net Asset Value, divided by shares in issue
2
Total Shareholder
Return
Measures performance
of delivering value
to shareholders.
2020
2019
(36.0)%
2018
(14.6)%
2017
(5.8)%
105.6%
▸ DELIVER attractive returns to shareholders
1
2
3
4
5
6
7
▸ Share price increased from 106.5p to 219p in 2020
▸ TSR of 106%
3
Capital pool
Maintain sufficient capital
to support growth of
portfolio companies and
take advantage of new
investment opportunities.
£130m
£9m
£35m
Committed
Reserved
Available
▸ £174m of cash and cash equivalents and cash on long-term deposit
Non-financial KPI
Description/rationale
Performance 2020
4
Robust and active
clinical pipeline*
Measures number of clinical
trials across the portfolio,
with the potential to deliver
important new treatments
to patients.
1
10
10
5
Diverse and
broad portfolio*
Measures Arix’s
commitment to invest in
the best opportunities
worldwide, across different
stages of development and
therapeutic areas.
▸ 21 clinical programmes
1
1
4
5
Phase 1
Phase 2
Phase 3
Genetic diseases
Oncology
Immunology
Anti-infectives
▸ 11 companies in Arix’s life sciences portfolio
24
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
▸ DELIVER attractive returns to shareholders
1
2
3
4
5
6
7
Links to strategic goals
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
Link to risks
1
2
7
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
1
2
3
5
7
1
2
3
4
5
NAV growth*
Total Shareholder
Return
Includes performance of
portfolio companies and
capital pool.
Measures performance
of delivering value
to shareholders.
2020
2019
2018
2017
2020
2019
(36.0)%
2018
(14.6)%
2017
(5.8)%
▸ TSR of 106%
▸ Share price increased from 106.5p to 219p in 2020
Capital pool
Maintain sufficient capital
to support growth of
portfolio companies and
take advantage of new
investment opportunities.
£130m
£9m
£35m
Committed
Reserved
Available
Phase 1
Phase 2
Phase 3
Non-financial KPI
Description/rationale
Performance 2020
▸ £174m of cash and cash equivalents and cash on long-term deposit
Robust and active
clinical pipeline*
Diverse and
broad portfolio*
Measures number of clinical
trials across the portfolio,
with the potential to deliver
important new treatments
to patients.
1
10
10
Measures Arix’s
commitment to invest in
the best opportunities
worldwide, across different
stages of development and
therapeutic areas.
▸ 21 clinical programmes
1
1
4
Genetic diseases
Oncology
Immunology
Anti-infectives
5
▸ 11 companies in Arix’s life sciences portfolio
Financial KPI
Description/rationale
Performance 2020
Links to strategic goals
Link to risks
242p
149p
152p
200p
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
▸ DELIVER attractive returns to shareholders
1
2
3
4
5
6
7
▸ 62% growth in NAV in 2020
Values shown are NAV per share (p), calculated as Net Asset Value, divided by shares in issue
105.6%
▸ DELIVER attractive returns to shareholders
1
2
3
4
5
6
7
KEY
1
Covid-19
2
3
4
5
6
7
Clinical trial risks
Unquoted investments
Taxation
Personnel
Macroeconomic conditions
Legislation and Regulation
* Alternative Performance Measure
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
▸ DELIVER attractive returns to shareholders
1
2
3
4
5
6
7
Links to strategic goals
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
▸ DEVELOP and build the value of these
companies through hands-on support
Link to risks
1
2
7
▸ DISCOVER high impact innovation in areas
of unmet need, with the potential to deliver
transformative treatments to patients
1
2
3
5
7
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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Life sciences portfolioKey companies by stage of lead programmePORTFOLIO REVIEWA year of development progressCompanyOwnedValueGPV%*DiscoveryPreclinicalPhase 1Phase 2Phase 36.4%£5.9m4%3.0%£4.7m3%8.0%£22.2m15%7.8%£8.8m6% 6.4%£21.9m14% 8.8%£26.9m18%12.4%£19.0m13%9.1%£16.1m 11% 14.8%£2.0m1%29.9%£1.4m1%KEY Prior to Arix investment Progress since Arix investment* Percentage of Gross Portfolio Value, as defined on page 38** Diagram shows therapeutics companies only; Depixus not includedARIX BIOSCIENCE PLC ANNUAL REPORT 202026 S
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Read more on our clinical pipeline
and portfolio diversification KPIs
on page 24
Our portfolio companies are collectively running 21
clinical trials and conducting 20 pre-clinical studies,
providing Arix with multiple shots on goal for value
creation.
Key achievements in 2020
$580m
raised by portfolio
companies in the year
$2.75bn
acquisition of VelosBio
£158m
value realised from the portfolio
21
clinical trials across the portfolio
with the US Food & Drug Administration
(FDA), which was accepted in December 2020.
The Prescription Drug User Fee Act (PDUFA)
date set by the FDA, which is the goal date for
a decision on the NDA, is 30 September 2021.
Meanwhile, a decision was taken to wind down
our discovery stage company Quench Bio, post
period end. While it is always disappointing
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. (Read
more on page 39).
The year ahead will be important for a number
of our portfolio companies as they reach
important clinical and development milestones
during the year. Our portfolio companies are
collectively running 21 clinical trials, a number
of which are expected to read out over the
next 12 months. There is already significant
value in these companies and with multiple
clinical milestones expected over the next
12-18 months, we see significant growth
potential across this portfolio in the near term.
In addition to clinical milestones, there is
potential for M&A, strategic partnerships and
other financing events across the portfolio
which could significantly increase the value of
our companies, and in turn our NAV.
We continue to see a strong pipeline of
new investment opportunities and are
currently in late stage diligence on a new
investment opportunity.
Overall, the portfolio made good progress
in 2020, with several companies reaching
important clinical milestones and completing
additional financing rounds, as detailed below.
Notably, our oncology portfolio company,
VelosBio, was acquired by Merck & Co for
$2.75bn, marking the first strategic exit
from our portfolio. As one of the top forces in
oncology drug development globally, Merck
makes the perfect partner to maximise the
potential benefit of VelosBio’s lead candidate,
VLS-101, for the treatment of patients
with cancer.
This transaction returned £139 million to our
balance sheet, putting Arix in a strong financial
position to provide support and flexible long-
term capital to innovative biotech companies
and entrepreneurs across the globe.
In addition to the VelosBio proceeds, we
realised a further £19 million during the period,
through active management of our public
holdings, leveraging our deep understanding of
the companies we have invested in to optimise
the timing of our disposals.
During the period we invested £25 million into
the gross portfolio, including the foundation
of a new portfolio company, Twelve Bio and
further investments into existing portfolio
companies. In aggregate, our portfolio
companies raised $580 million during the
period, putting them in a strong position to
execute on their important clinical development
programmes. Notably, Imara raised $86.5m in
a Nasdaq IPO, marking the fifth IPO from our
portfolio since inception.
Operationally, there was good progress in the
portfolio, with notable highlights including
Artios’ strategic collaboration with Merck
KGaA, new data readouts from Atox, Autolus,
Harpoon, Aura, Amplyx and Imara and
new trial initiations from Amplyx, Autolus,
Aura, Harpoon, Imara and, post period end,
Artios. Importantly, Atox Bio reported good
results from a Phase 3 clinical trial of its
immunotherapy treatment for patients with
Necrotizing Soft Tissue Infection, otherwise
known as “Flesh Eating Disease” and
submitted a New Drug Application (NDA)
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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PORTFOLIO REVIEW CONTINUED
Broad and rich clinical pipeline
Across our
portfolio we now
have 21 studies in
the clinic, focusing
on areas of high
unmet medical need.
Programme
Reltecimod
Company
Atox Bio
APX001
Autolus
Amplyx
AUTO1
Indication
Necrotising soft tissue infection
Invasive candidiasis
Adult ALL*
Imara
Imara
Imara
Aura
Aura
Amplyx
Amplyx
Amplyx
Amplyx
Harpoon
Harpoon
Harpoon
Harpoon
Autolus
Autolus
Autolus
Autolus
Artios
IMR-687
Sickle cell disease
IMR-687
TDT (cid:210)-thalassemia^
IMR-687
NTDT (cid:210)-thalassemia^^
AU-011
Choroidal melanoma (IVT**)
AU-011
Choroidal melanoma (SC***)
APX001
Candida auris
APX001
Invasive aspergillosis
MAU868
BKV-associated nephropathy
MAU868
BKV-associated haemorrhagic cystitis
HPN424
Prostate cancer
HPN536
Ovarian and pancreatic cancer
HPN217
Multiple myeloma
HPN328
Small cell lung cancer
AUTO1/22
Paediatric ALL
AUTO3
Diffuse large B cell lymphoma
AUTO4
Peripheral T cell lymphoma
AUTO1
Non-Hodgkin lymphoma
ART0380
Advanced or metastatic solid tumours
Multiple undisclosed preclinical programmes
KEY
Immunology
Oncology
Anti-infectives
Genetic diseases
Stage completed
Stage in progress
Preclinical
At this stage, the focus is on
researching the feasibility and
safety of a treatment before
commencing clinical trials.
Phase 1
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
Phase 2 involves further trials
testing the efficacy and safety
and different dosing levels.
Phase 3
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.
* Acute lymphoblastic leukaemia
** Intravitreal
*** Suprachoroidal
^ Transfusion dependent thalassemia
^^ Non-transfusion dependent thalassemia
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Preclinical
Phase 1
Phase 2
Phase3
Expected next steps in 2021
FDA decision on new drug application
Phase 3 trial start
Phase 1 long-term follow up data
Phase 2b interim data
Phase 2b interim data
Phase 2b interim data
Phase 2 full data report
Phase 2 data
Phase 2 data
Phase 2 data
Phase 2 data
Phase 2 initiation
Phase 1/2a interim data
Phase 1 interim data
Phase 1 interim data
Phase 1 data updates
Phase 1 trial start
Phase 1/2a data Initiate expansion cohort
Phase 1/2a data; Initiate expansion cohort
Phase 1/2a data; Initiate expansion cohort
Phase 1 long-term follow up data; intend to partner
Company
Programme
Indication
Preclinical
Phase 1
Phase 2
Phase3
Expected next steps in 2021
Atox Bio
Amplyx
Autolus
Imara
Imara
Imara
Aura
Aura
Amplyx
Amplyx
Amplyx
Amplyx
Harpoon
Harpoon
Harpoon
Harpoon
Autolus
Autolus
Autolus
Autolus
Artios
Reltecimod
Necrotising soft tissue infection
APX001
Invasive candidiasis
AUTO1
Adult ALL*
IMR-687
Sickle cell disease
IMR-687
TDT (cid:210)-thalassemia^
IMR-687
NTDT (cid:210)-thalassemia^^
AU-011
Choroidal melanoma (IVT**)
AU-011
Choroidal melanoma (SC***)
APX001
Candida auris
APX001
Invasive aspergillosis
MAU868
BKV-associated nephropathy
MAU868
BKV-associated haemorrhagic cystitis
HPN424
Prostate cancer
HPN536
Ovarian and pancreatic cancer
HPN217
Multiple myeloma
HPN328
Small cell lung cancer
AUTO1/22
Paediatric ALL
AUTO3
Diffuse large B cell lymphoma
AUTO4
Peripheral T cell lymphoma
AUTO1
Non-Hodgkin lymphoma
ART0380
Advanced or metastatic solid tumours
FDA decision on new drug application
Phase 3 trial start
Phase 1 long-term follow up data
Phase 2b interim data
Phase 2b interim data
Phase 2b interim data
Phase 2 full data report
Phase 2 data
Phase 2 data
Phase 2 data
Phase 2 data
Phase 2 initiation
Phase 1/2a data Initiate expansion cohort
Phase 1/2a data; Initiate expansion cohort
Phase 1/2a data; Initiate expansion cohort
Phase 1/2a interim data
Phase 1 interim data
Phase 1 long-term follow up data; intend to partner
Phase 1 interim data
Phase 1 data updates
Phase 1 trial start ✓
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PORTFOLIO REVIEW CONTINUED
Clinical
portfolio
Atox Bio
Atox Bio is a late stage clinical company that develops
immunotherapies for critically ill patients.
Harpoon Therapeutics (NASDAQ: HARP)
Harpoon is a clinical-stage immunotherapy company developing a novel
class of T cell engagers that harness the power of the body’s immune
system to treat patients suffering from cancer and other diseases.
Therapeutic area: Immunology
Therapeutic area: Oncology
Value: £5.9m
Cost: £7.4m
% of NAV: 1.8%
Remaining commitment: £nil
Phase
3
During the period, Atox Bio announced results from its Phase 3
clinical trial for patients with Necrotizing Soft Tissue Infection
(NSTI)(‘Flesh Eating Disease’). Results from the trial showed that
Atox Bio’s drug reltecimod had a positive effect on resolution of
organ dysfunction patients with NSTI. Based on these data the
company was able to submit a new drug application (NDA) with
the US Food & Drug Administration (FDA), which was accepted in
December 2020.
The proposed indication is for the treatment of suspected
organ dysfunction or failure in patients with NSTI in conjunction
with surgical debridement, antibiotic therapy and supportive
care. The Prescription Drug User Fee Act (PDUFA) date set by
the FDA, which is the goal date for a decision on the NDA, is
30 September 2021.
NSTI is a potentially life-threatening condition with significant
morbidity and long-term mortality that has no FDA-approved
treatment. The NDA acceptance marks an important step forward
in Atox Bio’s development of reltecimod for patients with NSTI.
This is a major milestone for the company and takes it one step
closer to a potential treatment option for patients with this
debilitating disease.
Value: £37.8m (including £10.9m realised to date)
Cost: £19.3m
% of NAV: 8.2%
Realised: £10.9m
Phase
1
The company continues to make good clinical progress with its TriTAC® T
cell engager pipeline. During the period Harpoon presented encouraging
interim Phase 1 data for its lead programme, HPN424, in patients with
metastatic castration-resistant prostate cancer. At the highest fixed
dose tested to date, one patient out of 7 has experienced a confirmed
partial response with tumour lesion reduction of 43%, and 3 of 7 patients
have had serum PSA declines from baseline, including one patient with a
PSA reduction greater than 50%. Dose escalation continues in the trial
and further data is expected by the in 2021.
During 2020, the company also announced the dosing of the first patient
with HPN217, its third product candidate, in a Phase 1/2 clinical trial
focused on relapsed/refractory multiple myeloma (RRMM). HPN217 is
covered by a global development and option agreement with AbbVie Inc.
and dosing of the first patient in the clinical trial triggered a $50 million
milestone payment, which was received in June. Dose escalation
continues in this trial and in the Phase 1/2a clinical trial for HPN536 as
a treatment for ovarian cancer and other mesothelin-expressing solid
tumours, with initial data readouts and initiation of expansion cohorts
expected in 2021.
Post period end, Harpoon announced that its fourth T cell engager,
HPN328, had entered a Phase 1/2 clinical trial as an investigational
treatment of small cell lung cancer (SCLC) and other tumours associated
with delta like ligand 3 (DLL3) expression.
In addition, Harpoon successfully completely a public offering in January
2021, raising approximately $115 million in gross proceeds.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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Imara (NASDAQ: IMRA)
Autolus (NASDAQ: AUTL)
Imara is developing IMR-687 for the chronic treatment of sickle cell
disease (SCD) and beta-thalassemia.
Autolus is developing next-generation programmed T cell therapies for
the treatment of cancer.
Therapeutic area: Genetic diseases
Therapeutic area: Oncology
Value: £25.4m (including £3.2m realised to date)
Cost: £13.8m
% of NAV: 6.8%
Realised: £3.2m
Phase
2
Value: £21.9m
Cost: £24.6m
% of NAV: 6.7%
Phase
1/2
The company made strong progress during the year, notably completing
a successful Nasdaq IPO raising $86.5 million, in which Arix invested a
further $3.0 million (£2.3 million).
During the period, the company initiated Phase 2b clinical trials of
IMR-687 in both SCD and beta-thalassemia. The FDA granted IMR-687
Orphan, Fast Track and Rare Pediatric Disease designations in patients
with beta-thalassemia and the European Commission granted Orphan
Drug designation for IMR-687 for patients with SCD. IMR-687 has
previously been granted Orphan Drug, Fast Track and Rare Pediatric
Disease designations from the FDA for patients with SCD. In addition,
Imara initiated preclinical studies of IMR-687 in heart failure with
preserved ejection fraction and are currently developing a Phase 2
protocol for potential clinical development in this indication.
In January 2021, Imara reported topline results from its Phase 2a
clinical trial of IMR-687 in adult patients with SCD. The data from
this completed clinical trial demonstrated that IMR-687 was well-
tolerated as a monotherapy and in combination with hydroxyurea,
the current standard of care. As part of the safety analysis, promising
reductions in the rate of vaso-occlusive crises/sickle cell-related pain
crises, were observed in certain monotherapy IMR-687 treated patients
versus placebo.
The company expects to announce interim results from its ongoing Phase
2b clinical trial in SCD and beta-thalassemia in H2 2021 and anticipates
initiating a Phase 1/2 clinical trial of IMR-687 in adolescent patients (12-17
years old) with SCD in the first half of 2021.
Realised: £nil at 31 December 2020 (see page 104)
The company continued to make clinical progress in the period, reporting
encouraging Phase 1 data in its AUTO1 programme in adult Acute
Lymphoblastic Leukemia (ALL), which showed a favourable safety profile
and high level of clinical activity.
Post period end, Autolus took the decision to prioritise the development
of its AUTO1 programme for adult ALL based on the positive data that
the programme has generated to date and the high unmet need in this
indication. The Phase 1b/2 pivotal study for the AUTO1 programme is
under way and the company plans to provide a full data read out from
the study in 2022. Autolus also plan to capitalise on the differentiated
profile of AUTO1 by exploring activity in additional B-cell malignancies,
including Primary CNS Lymphoma (PCNSL) where no adequate
standard of care currently exists.
With the prioritisation of the AUTO1 programme, the company plans
to seek a partner for the AUTO3 programme, its CD19 and CD22 dual
targeting CAR T product candidate being investigated in relapsed/
refractory diffuse large B cell lymphoma (DLBCL), before progressing the
programme into the next phase of development. In addition, through Q1
2021, the company will adjust its workforce and infrastructure footprint,
which will involve an overall reduction in headcount of approximately
20%. The company expects to realise cash savings, on an annualised
basis, of approximately $15 million per annum once the operational
changes are fully implemented.
The company raised gross proceeds of approximately $80m through
a public offering in January 2020 and completed an additional public
offering in February 2021, with gross proceeds of approximately $115m.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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PORTFOLIO REVIEW CONTINUED
Aura Biosciences
Artios Pharma
Aura is a biopharmaceutical company developing a new class of oncology
therapies based on the combination of a viral like particle with high
affinity to tumour cells coupled to a laser-activatable dye.
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.
Therapeutic area: Oncology
Therapeutic area: Oncology
Value: £8.8m
Cost: £7.8m
% of NAV: 2.7%
Phase
2
Value: £19.0m
Cost: £13.8m
% of NAV: 5.8%
Phase
1
Remaining commitment: £0.7m
Remaining commitment: £nil
Aura’s drug binds to malignant tumour cells with high specificity and
once the dye is activated by a short laser treatment there is an acute
tumour cell necrosis.
During the period, Aura presented updated clinical data from its
ongoing Phase 1b/2 clinical trial evaluating the safety and efficacy
of light-activated AU-011, Aura’s lead product candidate for the first
line treatment of primary choroidal melanoma, a rare and aggressive
type of eye cancer. This open-label, multicentre trial is designed to
investigate single and multiple ascending doses of light-activated AU-
011, administered via intravitreal injection, in adult subjects with clinically
diagnosed primary choroidal melanoma. The clinical data presented
during the period shows that AU-011 has a favourable preliminary
safety profile, controls tumour growth rate, and preserves vision in the
vast majority of patients, including those at high risk for vision loss with
tumours close to the fovea and optic nerve. In the Phase 2 part of this
study the company has enrolled patients with documented tumour
growth prior to treatment, constituting the patient population targeted
in a potential future Phase 3 study. The data is currently maturing to
provide support of tumour growth control at 12 months post treatment
in this relevant Phase 3 eligible patient population and the trial continues
to be supportive of further clinical investigation in pivotal studies.
In the second half of 2020, Aura initiated a Phase 2 clinical trial evaluating
suprachoroidal (SC) delivery of AU-011 in patients with choroidal
melanoma. Aura believes that delivering AU-011 into the suprachoroidal
space within the eye, has the potential to maximise bioavailability at
the tumour site and could allow for the treatment of a wider range of
tumour sizes (small to medium size tumours), and therefore, a larger
number of patients. Data from this trial is expected in the second half
of 2021.
It has been a transformational year for Artios with a multi-billion
dollar pharma partnership and its lead compound moving into clinical
development. Artios has continued to advance its world-leading
DDR programmes, announcing the start of its first clinical trial of its
small-molecule ATR inhibitor, ART0380, in patients with advanced or
metastatic solid tumours in February 2021.
Artios has conducted extensive preclinical work to characterise and
differentiate its lead candidates and alongside ART0380, will have
ART4215, a first in class Pol theta inhibitor, in the clinic by end of 2021.
In December 2020, Artios entered into a strategic collaboration with
Merck KGaA, Darmstadt, Germany to identify and develop precision
oncology medicines targeting nucleases. Merck KGaA, Darmstadt,
Germany has the right to opt into exclusive development and
commercialization of compounds on up to eight targets and Artios is to
receive up to US$860 million total milestones per target. The company
has several programs in DDR, identified through its in-house DDR
platform as well as in-licensed from MD Anderson and ShangPharma for
its ATRi program, in order to create next-generation DDR therapies.
The company expanded its US leadership team with the appointment of
Abid Ansari as Chief Financial Officer in January 2021. Abid has 18 years
of finance experience in life science businesses and brings a variety of US
financial experience to Artios, including a background with global public
companies in corporate finance, business development, licensing, and
investor relations.
There were also further additions to Artios’ clinical development team, as
Bryony Harrop joined as Vice President. Bryony has extensive experience
through all stages of drug development in cutting-edge oncology clinical
trials across a broad range of malignancies. She has been working
alongside Dr Gillian Langford and Dr Ian Smith, Chief Medical Officer.
32
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
AmplyxAmplyx is a clinical stage biopharmaceutical company developing innovative therapies for debilitating and life-threatening diseases in patients with compromised immune systems. Therapeutic area: Anti-infectivesPhase2Value: £4.7mCost: £4.8m% of NAV: 1.4%Remaining commitment: £nilDuring the period, Amplyx announced positive topline data following the completion of its Phase 2 clinical trial of fosmanogepix (APX001) as a first-line treatment for patients with invasive fungal infections caused by Candida. The trial met its primary efficacy endpoint, demonstrating a treatment success rate of 80%. Fosmanogepix was well tolerated with no treatment-related serious adverse events or discontinuations and importantly, patients were able to easily transition from intravenous to oral formulations during their treatment. Amplyx announced that the first patient has been dosed in its Phase 2 clinical trial evaluating the efficacy and safety of MAU868 for the treatment of BK viremia in kidney transplant recipients. MAU868 is a novel, human monoclonal antibody that potently neutralises all four major genotypes of BK virus (BKV), for which there are currently no treatment options. Dosing the first patient represents a strong start to this important clinical trial and a key milestone in Amplyx’s development programme, taking the business one step closer to bringing a first-in-class treatment to the vulnerable patients at risk for this devastating transplant complication. The current pandemic has highlighted how devastating infectious diseases can be and reinforces the need for new and novel anti-infective agents capable of combating emerging threats. During these unprecedented times, Amplyx is aware of the challenges being faced by health services and the clinicians at the frontline of delivering healthcare. Despite these challenges, their Phase 2 studies and expanded access programmes remain open and the company expects to report data from a number of studies in 2021.LogicBio Therapeutics (NASDAQ: LOGC)LogicBio Therapeutics is a genome editing company, dedicated to extending the reach of genetic medicine with pioneering targeted delivery platforms.Therapeutic area: Genetic diseasesValue: £19.7m (including £3.6m realised to date)Cost: £12.8m% of NAV: 4.9%Realised: £3.6mIn August, LogicBio announced that the FDA has cleared its IND application for LB-001 for the treatment of methylmalonic acidemia in paediatric patients. This is an important step forward for LogicBio, enabling the company to move LB-001 towards clinical development. The SUNRISE study is a multi-centre, open-label, Phase 1/2 clinical trial designed to assess the safety and tolerability of a single intravenous infusion of LB-001 in paediatric patients with MMA characterised by methylmalonyl-CoA mutase gene (MMUT) mutations. The trial is expected to enrol eight paediatric patients with ages ranging from six months to 12 years, initially starting with three to 12-year-old patients and then adding patients aged six months to 2 years. LogicBio expects to initiate the Phase 1/2 clinical trial in the first half of 2021.In October 2020, the company completed a public offering raising gross proceeds of approximately $48m, supported by new and existing investors, including Arix. LogicBio is also developing a Next Generation Capsid platform for use in gene editing and gene therapies. Data presented has shown that the capsids deliver highly efficient functional transduction of human hepatocytes with improved manufacturability with low levels of pre-existing neutralising antibodies in human samples. Top-tier capsid candidates from this effort demonstrated significant improvements over benchmark AAVs currently in clinical development. LogicBio is developing these highly potent vectors for internal development candidates and potentially for business development collaborations. Pre-clinical portfolioCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION33ARIXBIOSCIENCE.COM ARIX BIOSCIENCE PLC ANNUAL REPORT 2020STRATEGIC REPORT PORTFOLIO REVIEW CONTINUED
Drug Discovery
portfolio
Twelve Bio
STipe Therapeutics
Twelve Bio is a startup technology platform based on CRISPR-
Cas12a variants. They specialise in structural biology and protein
engineering to design superior Cas12a enzymes for gene editing
and diagnostics.
STipe is developing first-in-class drugs that sensitize the STING-
pathway, a major driver of innate immunity, to enable a patient’s
immune system to overcome the immune suppression often observed
within solid tumours.
Therapeutic area: Genetic diseases
Therapeutic area: Oncology
Value: £1.4m
Cost: £1.4m
% of NAV: 0.4%
Value: £2.0m
Cost: £2.0m
% of NAV: 0.6%
Remaining commitment: £2.2m
Remaining commitment: £3.1m
Arix completed a seed investment in Twelve Bio in September 2020,
following several months of discussions with the scientific founders
Stefano Stella and Guillermo Montoya based at the Centre for Protein
Research (CPR) at the University of Copenhagen, Denmark.
STipe has a differentiated approach from other programmes targeting
the STING pathway since it does not rely on direct overstimulation and
therefore has the potential to be a systemically delivered therapy with
broader applications.
Twelve Bio is developing novel gene editing tools based on deep
understanding of the structure of naturally occurring enzymes that
bind and cut DNA. The seed financing has supported the spinning of
the company out from the university and setting up of facilities at the
BioInnovation Institute in Copenhagen, the expansion of the scientific
team and the ongoing generation and characterisation of variants
with enhanced characteristics and profiles compared to natural forms.
Christian Schetter and John Cassidy have joined the Board of
Directors and are providing hands-on operational and strategic
support to the company during this seed phase.
Read Christian and Stefano’s interview on pages 14 to 15
The company continues to benefit from Christian Schetter’s operational
experience via his role as Executive Chairman, and has made a number
of key additions to the team during 2020. The most notable additions
include: 1) Richard Bethell as Chief Development Officer, Richard has
>30 years’ drug development experience and was previously CSO at
Medivir and was in senior R&D positions at Boehringer Ingelheim, Shire,
Pfizer and GSK; 2) Natalie Sacks has joined the board of directors, she is
currently Chief Medical Officer of Harpoon Therapeutics and previously
CMO of Aduro Biotech, which developed STING agonists for immune-
oncology applications; 3) Sonia Quaratino as Chair of the Scientific and
Clinical Advisory Board, who was most recently CMO of Kymab until its
recent acquisition by Sanofi.
In 2020, the company continued to identify and validate compounds that
sensitise the STING pathway and to establish the resources required
to prepare these for development in clinical trials. We remain excited
about the potential of this differentiated approach to deliver important
medicines to patients with a broad range of solid tumours.
34
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Depixus
Depixus is developing technology for the fast, accurate, and inexpensive
extraction of genetic and epigenetic information from single molecules of
DNA and RNA.
Therapeutic area: Genetic diseases
Value: £4.2m
Cost: £2.3m
% of NAV: 1.3%
Remaining commitment: £nil
Depixus has had a productive and busy year and is currently raising new
capital in a Series A financing, which is expected to close in the first half
of 2021.
The financing will be supported by new and existing investors, including
Arix. Proceeds from the Series A will be used to further advance the
company’s MAGNATM technology, which is being developed to decode
valuable new layers of genetic information from DNA, RNA, and protein.
MAGNATM has the potential to be used across a wide range of
applications. Depixus has operations in both Paris and Cambridge, UK.
Arix participated in the company’s previous seed rounds and has helped
to grow it to 30 employees.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
35
FINANCIAL REVIEW – YEAR ENDED 31 DECEMBER 2020
The Group generated a significant profit in the
year, cash reserves have swelled, and we have
seen a significant increase in the Company’s
net asset value
Summary
2020 was a year of substantial progress for
Arix’s finances. We completed the transition to a
leaner structure, with a cost base appropriately
proportioned to the business, and had our first
M&A acquisition of a portfolio company. This has
provided a strong foundation for the business
to continue to progress. The Group generated a
significant profit in the year, cash reserves have
swelled, and we have seen a significant increase
in the Company’s net asset value (NAV) and NAV
per share.
Marcus Karia
Group Finance Director
At year-end, NAV totalled £328.2 million, an
increase of £126.1 million, or 62%, compared
to 2019’s £202.1 million. Profit after tax was
£126.1 million (2019: a loss of £69.9 million),
while cash and deposits rose by 219% to
£174.4 million (2019: £54.6 million), following
net realisations from Arix’s investments of
£132.9 million.
As a business we were able to respond
quickly to the Covid-19 pandemic, closing our
offices and moving to remote working to
safeguard our employees. While there was
inevitably an impact on the portfolio, it has
been less severe than originally anticipated
and has predominantly been in the form of
slightly increased timescales for clinical trials.
The businesses in the Arix portfolio are well
funded, with many of our public companies
taking advantage of growing investor
sentiment in the biotech sector during the
second half of the year by raising further
36
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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2020 highlights
Net Asset Value (NAV)
£328m
2019: £202m
Read more on our NAV growth, TSR and capital
pool KPIs on page 24
Portfolio investment
Arix continued to see positive progress from
its portfolio during the year, with further
investment across several companies.
Following the trend of other Arix portfolio
companies, Imara listed on the Nasdaq in
March 2020. The listing was priced at a 46%
uplift to the company’s Series B funding round,
which Arix had co-led less than a year earlier.
Overall, Arix invested £4.5 million in Imara
during the year, covering the second tranche
of the Series B commitment as well as further
participation at IPO.
A further £6.7 million was invested in VelosBio
in 2020, ahead of its December acquisition;
after funding the $4.4 million (£3.5 million)
second tranche of Arix’s Series A commitment,
VelosBio raised a $137 million Series B round,
attracting a further $4.0 million (£3.2 million)
from Arix.
Quench Bio, a company co-founded by Arix in
2018, closed a $35 million Series A in the year,
to which Arix committed $6 million, of which
$1.2 million (£0.9 million) had been invested
before a decision was taken to wind down the
company in March 2021. Also raising cash was
LogicBio, which gained a further $48 million via
a public offering, with $3.0 million (£2.3 million)
invested by Arix.
There were two additions to the Arix portfolio
in the year, with the contrasting geographies
and stage of development highlighting the
flexibility of Arix’s business model. At the
earliest stage, Arix invested €1.5 million
(£1.4 million) to seed the formation of Twelve
Bio, a Danish genome editing platform
company. At the other end of the development
timeline, Arix invested €5.6 million (£5.1 million)
capital, leaving them well placed to weather
any further business interruptions.
We therefore go into 2021 pleased with the
development Arix has made over the past
year and looking forward to sharing details of
further progress in the portfolio to help reach
our goal of a NAV of up to £500 million by the
end of 2023.
Portfolio revaluations
Having started 2020 at £149.2 million, the
Gross Portfolio generated £147.6 million of
net positive revaluations during the year, an
outstanding result. The vast majority of this,
£134.9 million, arose on VelosBio, first seeing
an upward revaluation after closing its Series
B funding round in July and then a substantial
increase on its acquisition in December.
There were positive movements for
many public assets, with Imara returning
£12.0 million, Harpoon £5.2 million and
LogicBio £1.6 million. These were somewhat
offset by the £10.2 million decrease in the value
of Autolus.
In the private portfolio, positive movements
were seen with Artios (£3.8 million), off the
back of promising clinical development and the
signing of a strategic collaboration with Merck
KGaA; and also with Quench Bio (£0.9 million),
following the closing of the company’s
Series A funding round in January 2020
(although it was disappointing to note that
post-period end, in March 2021, the decision
was taken to wind down Quench Bio after
the company concluded its planned analysis
without success). Arix’s legacy assets and
other interests declined by a net £4.3 million
in aggregate.
Portfolio realisations
The acquisition of VelosBio by Merck for
$2.75 billion in cash was hugely positive for Arix,
returning $187.0 million (£138.7 million) to the
balance sheet, representing a 11.8x return on
$15.0 million capital invested after allowing for
foreign exchange movements, and generating
an IRR of 320%.
The public nature of a number of Arix’s
investments provides opportunities to realise
proceeds based upon a risk-based appraisal
of individual investments, an assessment
which is constantly shifting with the inevitable
volatility that accompanies publicly traded
early-stage biotech investments. This resulted
in Arix trimming its holding in Harpoon by
15% during the year, generating $8.0 million
(£6.6 million), a 2.6x return on blended cost.
Exposure to LogicBio was also reduced by 20%,
with $4.5 million (£3.6 million) recycled to the
balance sheet at a 1.7x return, while 11% of
Arix’s Imara stake was sold at a 2.1x multiple,
returning £3.2 million.
It is worth noting that this risk-based
assessment is not solely focused on selling
down investments. Where share prices
were deemed favourably low in the year,
opportunities for further investment were
taken for the holdings in both Harpoon and
LogicBio, again highlighting the flexibility of the
Arix model.
As the Arix portfolio grew more focused on
core assets during the year, full exits were seen
from Pharmaxis (£3.0 million of proceeds) and
Verona Pharma (£1.5 million), while exposure
to Iterum Therapeutics was reduced to an
immaterial level, returning £1.0 million to Arix.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
37
FINANCIAL REVIEW CONTINUED
FINANCIAL REVIEW CONTINUED
in Euronext Paris-listed GenSight Biologics,
via a public offering and subsequent market
purchases. GenSight is seeking commercial
approval for its product in Europe and the
United States, using gene therapy to treat
vision loss.
Arix continues to expect that the majority
of future investment cash flows, both in and
out, will be in US dollars and as such, does not
consider hedging strategies to be appropriate,
particularly given the uncertainty over the
quantum and timing of these movements.
Foreign exchange
2020 proved to be a volatile year for foreign
exchange, particularly for sterling versus the
US dollar, a key metric for Arix. The rate for one
pound dropped well under $1.25 at the height
of market disruption in the first quarter of the
year, and then rallied to more than $1.36 by the
end of 2020 as the UK reached agreement on
a Brexit trade deal with the European Union.
This resulted in a £11.9 million net negative
impact on portfolio valuations in the year, due
to the majority of Arix’s investments being
denominated in US dollars.
Cash and deposits
The above noted realisations from the portfolio
have provided Arix with a very strong capital
pool to support both the current portfolio
and to acquire significant stakes in promising
new biotech opportunities. At 31 December
2020, cash and deposits totalled £174.4 million,
compared to £54.6 million a year earlier, a
219% increase. At year-end, £9.3 million was
committed to existing portfolio companies.
Counterparty risk is managed by holding cash
with several financial institutions, all of which
have a credit rating of at least F1, according
to Fitch ratings. Returns on cash, while low
in previous years, turned somewhat anaemic
in 2020 as governments cut rates globally to
tackle the Covid-19 pandemic. Arix continues
to target yield where possible, weighed
against the anticipated timing and quantum
of the needs of the portfolio. The Company’s
Treasury Policy is overseen by the Audit and
Risk Committee.
Net operating costs
Following management changes in April
2020, Arix pledged to reduce net operating
costs (revenue and finance income less
administrative expenses excluding depreciation
and amortisation) to a run rate of below
£5.0 million in 2021 (compared to £8.0 million
Investment summary
Investment
Life sciences portfolio
Amplyx
Artios
Atox Bio
Aura
Autolus*
Depixus
Harpoon*
Imara*
LogicBio*
Quench
STipe
Twelve Bio
VelosBio
Healthcare investments
GenSight*
Legacy assets
Value
01 Jan 2020
£m
Investment
in period
£m
Realisations
in period
£m
Capitalisations
in period
£m
Change in
valuation
£m
FX
movement
£m
Value
31 Dec 2020
£m
Fully
diluted
equity
interest
%
Fully
committed.
Not invested
£m
4.9
15.2
5.0
8.3
33.8
2.0
28.9
10.7
16.3
6.5
1.9
–
5.5
–
10.2
–
–
1.2
0.7
–
0.2
0.1
4.5
2.3
0.9
–
1.4
6.7
5.1
1.5
–
–
–
–
–
–
(6.6)
(3.2)
(3.6)
–
–
–
(138.7)
–
(5.4)
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
3.8
(0.1)
–
(10.2)
1.8
5.2
12.0
1.6
0.9
–
–
134.9
2.0
(4.3)
(0.2)
–
(0.3)
(0.2)
(1.7)
0.2
(0.7)
(1.8)
(0.5)
(0.3)
0.1
–
(6.2)
–
(0.3)
3.0%
12.4%
6.4%
7.8%
6.4%
20.7%
8.8%
8.0%
9.1%
25.0%
14.8%
29.9%
–
2.8%
4.7
19.0
5.9
8.8
21.9
4.2
26.9
22.2
16.1
8.0
2.0
1.4
2.2
7.1
1.7
Fully
funded
%
3.0%
12.4%
6.4%
7.9%
6.4%
20.7%
8.8%
8.0%
9.1%
21.7%
19.8%
49.0%
–
2.8%
–
–
–
0.5
–
–
–
–
–
3.5
3.1
2.2
–
9.3
–
9.3
–
9.3
Gross Portfolio
149.2
24.6
(157.5)
0.1
147.6
(11.9)
152.1
Other interests
2.7
–
–
–
(0.4)
–
2.4
Total investments
151.9
24.6
(157.5)
0.1
147.2
(11.9)
154.4
* Publicly listed company
38
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are met. This is a nuanced exemption and is
always dependent on individual investment
fact patterns. For the largest realised gain
arising in the year, the sale of VelosBio, we are
now confident that the entire gain meets the
conditions for SSE and therefore expect it to
be free from corporation tax. This exemption
will also be claimed for the realised gains
arising from Harpoon and LogicBio during
the period.
Where investment gains are unrealised and
are not expected to qualify for SSE, the
anticipated tax due based on the current
valuation of the underlying investment is
reflected in a deferred tax balance.
These factors, combined with the ability to
utilise certain brought forward losses, have
reduced the Group’s tax expense in the year to
£nil (2019: £nil).
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.
Further information is available in Note 2 to the
financial statements on page 93.
Post-Period End
In March 2021, the decision was taken to
wind down Quench Bio, after the company
completed its data analysis and could
not find a suitable path to progression.
While disappointing, this is our approach
to risk management in action, tranching
commitments to minimise capital at risk and
ceasing funding in a prompt and disciplined
manner. For further detail on events after
the reporting date, please see note 24 of the
financial statements.
We continue to be focused on cost
control, and pledge to ensure net
costs remain below 2% of NAV on
an ongoing basis
in 2019), while committing to 2020 net
operating costs to be under £7.0 million.
It is pleasing to report that both commitments
will be met, after a year of targeted
reductions to costs throughout the business.
Net operating costs for 2020 represent 2.1%
of year-end NAV, compared to 4.0% in 2019.
On top of the previously announced headcount
reductions, the greatest savings arise from
reduced office spend. The full effects of this
will be seen once we vacate our Berkeley
Square offices in May of this year and move
to new premises in the West End, on which we
have been able to take advantage of current
market conditions in negotiating competitive
terms, vastly reducing our property spend.
As noted previously, significantly reduced
finance income was generated in the year
(£0.1 million versus £0.8 million in 2019),
predominantly due to cuts in interest rates
across the globe in response to the pandemic,
but also due to the business having a lower
average cash balance throughout the
year. Returns are expected to remain low
throughout 2021.
Fund management fee income of £0.3 million,
received from managing The Wales Life
Sciences Investment Fund, continues to reduce
in line with expectation (2019: £0.5 million) and
is expected to be lower still in 2021.
Other deductions relate to a foreign exchange
loss (£1.6 million) arising predominantly on
cash held in currencies other than sterling,
an intangible impairment (£0.2 million)
and a small share-based payment charge
(£0.1 million).
Based on the current business, 2021 run-rate
net operating costs have been reduced to
below £5.0 million once Berkeley Square is
vacated. This represents 1.5% of December
2020 NAV. The significant cash now available
to Arix to invest means that there will now
be some expansion of net costs beyond
£5.0 million to ensure there is appropriate
strength and resilience in the investment team.
However, we continue to be focused on cost
control, and pledge to ensure net costs remain
below 2% of NAV on an ongoing basis.
Taxation
As a UK operating group, Arix is subject to
UK corporation tax on the majority of its
activities, which can include the gains arising on
investments. However, wherever possible we
aim to take advantage of the UK’s Substantial
Shareholding Exemption (SSE), which exempts
taxable gains or losses arising from the
disposal of shares, where certain conditions
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
39
KEY TEAM MEMBERSKey Investment team Executive teamExperienced and collaborative team with diverse backgrounds, deep scientific knowledge and commercial expertise.Naseem Amin MD Executive ChairmanNaseem joined the Arix Board in December 2019 and later became Executive Chairman in April 2020. He is currently CEO of GMP-Orphan and NED of Bellerophon Therapeutics (Nasdaq: BLPH). He has broad life sciences experience in both the US and Europe, having held senior positions in major healthcare businesses in R&D, business development, marketing and in venture capital. Naseem has been a Venture Partner at Advent Life Sciences, CSO of Smith & Nephew plc and led Business Development at both Biogen and Genzyme Therapeutics, where he initiated and executed several acquisitions and partnerships. Naseem started his career at Baxter Healthcare, holding executive roles in marketing, clinical research and product development. Naseem is a qualified medical doctor, from the University College Medical School, London, and holds an MBA from the Kellogg Graduate School of Management. Christian Schetter PhD Managing DirectorChristian is currently Executive Chairman of Arix portfolio companies, STipe Therapeutics and Twelve Bio, along with Non-Executive Director of Atox Bio, Aura Bioscience and Quench Bio. Prior to Arix 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.Robert Lyne Chief Operating Officer & General CounselMarcus Karia Group Finance DirectorRobert is the Chief Operating Officer, General Counsel and Company Secretary of Arix, responsible for all legal, transactional and regulatory matters at Arix, as well as the day-to-day operations of the business.He began his career as a lawyer at international law firm Bird & Bird LLP in London before moving into listed venture capital, having worked at Touchstone Innovations plc (formerly Imperial Innovations) before joining Arix in 2017. He has broad experience working with venture-backed biotechnology businesses and other venture capital firms across Europe and North America. Robert has completed over 60 venture capital financings in multiple jurisdictions and worked with company boards and investors to execute trade exits, IPOs and complex cross-border transactions. Robert has a BA from the University of Oxford and an LLB from Oxford Brookes University. He sits on the board of Arix Capital Management and holds the regulated entity’s SMF16 and SMF17 functions.Marcus is the Group Finance Director of Arix Bioscience. He works across all aspects of Arix’s operations and oversees finance, portfolio monitoring & analysis and IT.Marcus joined the company soon after its inception in 2016, leading the development of the Group’s operations, as well as supporting Arix through its IPO.Marcus has worked in venture capital and private equity throughout his career. After qualifying as a Chartered Accountant with PricewaterhouseCoopers, he held positions at LDC, the private equity arm of Lloyds Bank, and Bridges Fund Management, a leading impact investor.Marcus 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.ARIX BIOSCIENCE PLC ANNUAL REPORT 202040 S
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John Cassidy PhD
Principal
Tim Xu MD
Investment Associate
John is a Principal in the investment team at
Arix Bioscience and is based in the London
office. John joined the team in 2018 and has
been involved in a number of investments,
including Non-Executive Director at STipe
Therapeutics and Twelve Bio as well as
board observer roles for Imara, Quench Bio
and Depixus.
Prior to Arix, John 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 Pfizer and the Medical Research Council.
John has published research in journals
including PNAS, Nature Communications,
eLife and Journal of Neuroscience.
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.
Tim is a Non-Executive Director at Depixus
and board observer at STipe Therapeutics
and Amplyx Pharmaceuticals, all Arix portfolio
companies. He is also 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.
Noor Lalani
Public Markets Investment Director
Felix Breyer PhD
Investment Analyst
Noor is the Public Markets Investment
Director of Arix Bioscience. He is responsible
for managing investment positions in Arix’s
public company portfolio.
Noor brings over 15 years’ experience in
capital markets, most recently serving as
Director at LXM Group, a London based
Investment Banking firm. Prior to this, Noor
was at JP Morgan Investment Bank, which he
joined in 2004, as an Executive Director in the
Capital Markets Division in London.
Noor holds a first-class degree in Electrical
Engineering and Computing from Imperial
College London and a Master’s Degree
in Mathematics from the University
of Cambridge.
Felix is an Analyst at Arix Bioscience, joining
the investment team in 2021. Prior to Arix,
Felix completed his PhD in Biochemistry
at University College London. His doctoral
research at The Francis Crick Institute was
supported by a Boehringer Ingelheim Fonds
Fellowship and focused on innate immune
pathways underlying infection. Alongside his
PhD, Felix was President of GapSummit
2018, the world’s first intergenerational
biotech leadership forum that connected
industry leaders with the next generation of
biotech pioneers.
Felix holds a First-Class Honours degree
with distinction in Biochemistry from the
University of Dundee and published research
in multiple journals, including the Journal of
Experimental Medicine.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
41
In June 2020, Arix announced the formation of a Scientific Advisory Board (SAB), chaired by Arix Non-Executive Director Professor Trevor Jones, CBE, FMedSci, and comprising leading researchers and industry executives dedicated to improving treatments for patients.These high calibre individuals share Arix’s vision of addressing significant unmet needs in healthcare and provide multi-disciplinary expertise in key areas that are intrinsic to successful drug development and value creation. The SAB also further expands Arix’s already large industry network and opens up additional avenues to identify promising investment opportunities and trends at the forefront of science and industry.KEY TEAM MEMBERS SABProfessor Trevor Jones, CBE, FMedSciChair of SABTrevor joined Arix as Non Executive Director in 2017, at the time of the Company’s IPO, and was appointed as Chair of Arix’s Scientific Advisory Board in June 2020. 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.The SAB is primarily responsible for advising the investment team and Board regarding priority investment decisions. These changes are designed to provide access to specialist insight as Arix’s portfolio matures and new investment opportunities are evaluated. ARIX BIOSCIENCE PLC ANNUAL REPORT 202042 S
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Ruth Atherton, PhD, JD
Member of SAB
Professor Andreas Busch, PhD
Member of SAB
Professor KJ Patel, FRS, FMedSci
Member of SAB
KJ Patel is the Director of the Weatherall
Institute for Molecular Medicine and also the
MRC Molecular Haematology Unit at the
University of Oxford. KJ trained in medicine
in London and spent his research career until
recently at the MRC Laboratory of Molecular
Biology, Cambridge which is one of the premier
research institutes in the world. He was also
Professor for molecular medicine and stem
cell genomics at the University of Cambridge.
His research focuses on the molecular basis
of inherited genomic instability and the role it
plays in the biology of stem cells particularly
those that make blood. He has received
prestigious awards and prizes for his work
and is a Fellow of the Royal Society (FRS),
Fellow of the Academy of Medical Sciences UK
(FMedSci) and also a member of the European
Molecular Biology Organisation (EMBO).
Andreas is a member of Arix’s Scientific
Advisory Board. He has extensive R&D and
portfolio leadership experience across a broad
range of therapeutic categories, including
significant expertise in rare and orphan
diseases. He is currently Chief Innovation
Officer at Cylerion Therapeutic, where he is
primarily focused on delivering the greatest
possible patient impact and shareholder value
creation from Cyclerion’s current pipeline of
five sGC stimulator programmes. Prior to
which he served as Head of Research and
Development and Chief Scientific Officer at
Shire and as Head of Drug Discovery and a
member of the Executive Committee at Bayer
Pharma. Prior to that, Andreas was Global
Head of Cardiovascular Research at Hoechst
and Sanofi-Aventis.
Andreas has been a member of several
Supervisory and Scientific Boards, including
the German Cancer Research Center, the
University of Tübingen, the Max-Delbrück-
Center and the Max-Planck-Institute of
Molecular Genetics. He also holds the title of
Extraordinary Professor of Pharmacology
at the Johann Wolfgang Goethe-University
in Frankfurt, Germany. He is the author of
some 400 publications and abstracts, and
received the prestigious Sir Bernard Katz and
Franz Volhard Awards for his work on renal
and cardiac ion channels and transporters.
He received his PhD in Pharmacology
from the Johann Wolfgang Goethe-
University Frankfurt.
Ruth Atherton is an experienced pharma,
biotech and global health professional with
expertise in risk management, governance,
global product development, complex
transactions and intellectual property.
A strategic adviser, recognised for technical
acumen, innovation and culture development,
Ruth is a data driven, impact-focused problem
solver. Her role at the Bill & Melinda Gates
Foundation includes advising the foundation
and the Bill & Melinda Gates Medical Research
Institute, developing pharma and biotech
investments, enabling global R&D and
commercialisation, protecting reputation and
streamlining business processes. Ruth has
extensive international experience and unique
insights on corporate social responsibility. She is
a member of the Global Health Executive team
and the executive sponsor of the foundation’s
Global Access Team which leads intellectual
property strategy and creates affordable
access to the products and developments to
benefit the world’s populations who are most
in need.
Ruth serves as Director and Corporate
Secretary of BIO Ventures for Global Health,
a nonprofit creating alliances among biotech,
pharma and governments to create access
to cancer medicines and neglected tropical
disease innovations. Ruth is the Executive
Director and founder of Raising The Blues, Ltd.,
a public charity that brings interactive musical
opportunities to children with special-needs
and medical needs.
Prior to joining the foundation, Ruth was
Sr. Corporate Counsel at Sanofi supporting
Global Industrial Affairs and Sr. Counsel at
Genzyme Corporation responsible for Global
Manufacturing and Operations. Ruth was
litigation attorney at Fitzpatrick, Cella, Harper
& Scinto in NYC, where she supported biotech
and pharmaceutical litigation. Ruth served
as a founding Advisory Board member of
the UMass Venture Development Center, an
award-winning incubator for emerging hi-tech
and life science companies.
Ruth holds a Ph.D. in Cell and Molecular
Biology from Cornell University and a J.D.
from Fordham School of Law.
ARIXBIOSCIENCE.COM
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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, which sets a strong tone, in line with
best practice corporate governance.
Key committees
The Audit and Risk Committee
oversees the effectiveness of the risk
management processes.
The Remuneration Committee ensures
incentives and reward are balanced and
appropriate for achieving the strategy.
The Nomination Committee addresses the
need for continuing strength at the senior
levels of the Company and is responsible for
succession planning.
Executive management
The management team is responsible for
identifying, assessing and mitigating the
day-to-day operational risks. Emerging risks
are monitored by the management team
with the support of the Board. These risks are
considered in the context of the Company’
business and stakeholders. Where potentially
significant new emerging risks are
identified, these are reported to the Board
for consideration and mitigation. No new
emerging risks have been identified during
the period.
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
advisers are engaged to provide regulatory
compliance support to the board of Arix
Capital Management, Arix Bioscience’s
FCA-regulated fund management subsidiary.
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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
44
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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. As the UK’s withdrawal from the EU has been finalised, risks to the business relating to Brexit have diminished, meaning this is no
longer seen as a key risk area. The Covid-19 pandemic has been an area of significant risk for all businesses during 2020, Arix included, resulting in its
inclusion below. There have been no other changes to Arix’s risk profile during the year, although Arix continues to consider and reflect on emerging risks,
currently with particular regard to cyber security and climate change and their potential impact on the business and its stakeholders.
Area
Risk
Impact
Mitigation
1Covid-19
The Covid-19 pandemic
has had a severe impact
globally, resulting in several
potential impacts on Arix’s
business.
2Clinical trial risks
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.
Arix’s portfolio companies are conducting
ongoing clinical trials in healthcare facilities,
typically requiring the mobility of trial
participants. The pandemic’s restriction on
mobility in certain geographies has resulted
in delays to enrolment and conduct of
clinical trials, which has increased portfolio
companies’ timelines to data readouts.
Delays to trials may result in further funding
needs for portfolio companies and increase
timeframes to the generation of positive
cash flows, negatively impacting Arix’s cash
flow.
Arix’s operations have the potential to be
impacted by the inability of the Company’s
staff to attend Arix’s premises, by sickness
or quarantine requirements.
At the outset of the pandemic, Arix conducted
a detailed review of its portfolio companies and
possible funding requirements, and ensured that
cash was adequately reserved for this.
To date, the required funding of the portfolio has
not been as high as anticipated. Arix’s portfolio
companies were well funded at the start of 2020,
and many have taken advantage of growing
investor sentiment in the biotech sector by raising
further capital.
Arix continues to monitor its portfolio closely and
ensure it is adequately reserving capital for its
portfolio.
In early March 2020, Arix closed its offices and
moved all staff to remote working. Arix has flexible
IT and communications systems in place to allow
staff to continue working efficiently, safely and
securely.
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.
Portfolio companies are usually not revenue-
generating and are typically only funded
through to an anticipated subsequent
clinical milestone. Negative or inconclusive
clinical trial readouts might impact the
portfolio company’s ability to attract
further capital and therefore may be unable
to continue in operation.
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’s commitments to investments are typically
tranched, such that capital is not overly committed
to a company at a single stage, with further funds
only invested once pre-agreed milestones have
been reached.
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.
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RISK MANAGEMENT CONTINUED
Area
Risk
Impact
Mitigation
3Unquoted
investments
Arix’s portfolio comprises
certain investments
which are not listed on a
recognised stock exchange,
making them both harder
to value and more difficult
to liquidate.
There is a risk that
ultimate cash proceeds
from an investment may
be significantly below
an investment’s current
fair value.
Arix may be unable to realise returns on its
unquoted investments at prevailing fair
values. This may result in a reduction in the
carrying value of investments, reducing
Arix’s profitability.
If investments cannot ultimately be realised,
this will reduce Arix’s ability to generate
positive cash flows and reduce Arix’s
ability to continue to fund new investment
opportunities.
4Taxation
5Personnel
Arix aims to generate
significant gains on its
investments, which can
result in potentially large
corporation tax charges.
Where possible, Arix aims
to take advantage of
available exemptions to
reduce its tax liabilities.
There is a risk that tax
authorities challenge the
use of these exemptions.
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.
Where Arix believes it has met the
appropriate qualifying criteria, Arix
claims the UK’s Substantial Shareholding
Exemption which reduces the tax on such
gains and losses to nil.
If the use of this exemption were rejected
by HMRC, this would increase Arix’s tax
liabilities, reducing Arix’s profit after tax.
It would also reduce Arix’s cash reserves,
resulting in fewer funds being available
to fund Arix’s operations and future
investment opportunities.
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 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.
This should therefore improve the likelihood of the
investment being a desirable acquisition target,
and therefore Arix’s investment being monetised.
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.
Arix’s finance team comprises chartered
accountants who are experienced with the tax
treatments and exemptions associated with
venture capital investments.
Arix employs the use of a ‘Big Four’ professional
services firm to assist with all tax disclosures,
returns and regulatory correspondence.
For areas of significant judgement in relation
to tax, Arix seeks further advice from eminent
professionals in the field, such as a Queen’s Counsel
Barrister, to support the tax treatment adopted.
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’s
Remuneration Committee oversees remuneration
for Directors and senior employees.
Arix’s executive team comprises four members
performing active 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.
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Area
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Mitigation
Adverse market conditions
may impact Arix’s
operational model.
6Macroeconomic
conditions
An economic downturn 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.
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 and
Scandinavia. 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.
7Legislation
& 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 and Scandinavia,
protecting the company from the adverse actions
of any one government.
Arix’s corporate team actively monitors changes
to laws and regulation, and where necessary
enlists the advice of relevant experts to consider
any company or portfolio impacts.
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 (particularly any possible negative impacts
from Brexit), and how the availability of capital may be impacted from
the loss of key personnel. The impact of Covid-19 was of particular
import in the year, with the Board strongly focused on potential cash
needs of Arix portfolio companies, as well as any financial impact on
Arix’s own operations.
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.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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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
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 proportionate to
its business and effective.
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. Whilst physical meetings have been
impossible for much of 2020, virtual meetings
have continued to be held throughout the
year. The results of this investor engagement
are reported to the Board to help inform our
communications and strategy.
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 on the progress
of the relationships. They are kept under
constant review to ensure that they are aligned
to the strategic goals of both Arix and the
pharmaceutical partners.
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Statement by the Board in accordance with s172
Companies Act 2006
The Directors of the Board are cognisant of their duties under s172 of
the Companies Act and consider that they have acted in a way they each
considers, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole. In doing so they
have had regard to those stakeholders identified under s172, as well as the
additional stakeholders set out here.
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. 2020 saw further evolution of
the executive management team which saw
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
have implemented 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. Arix is closely involved
with its portfolio companies and the members
of the investment team provide a direct
connection from the Board to the portfolio
companies, ensuring that the Board is regularly
updated on their progress and can support
their development.
Examples of decisions
Investment: The Board has supported the
continued deployment of capital into the
portfolio, including Quench and VelosBio prior
to its exit, and the publicly listed companies
Imara and LogicBio. This continued investment
not only supports our portfolio companies
as they work to deliver new treatments for
patients, but also provides the opportunity for
significant financial returns to shareholders.
Cost reduction: 2020 saw a significant
reduction in the run-rate net operating costs
of the business. In approving these changes,
the Board had particular regard to Arix’s
shareholders but also the interests of its
employees and portfolio companies in building
a sustainable business which can deliver
superior returns over the longer term.
VelosBio: The Board fully supported the
landmark sale of VelosBio which returned
£139m to the Arix balance sheet. In doing so,
it was cognisant of our shareholders, who
benefit from the significant increase in the
NAV of Arix as well as the non-dilutive funding
that the sale provides. The exit was also to the
mutual benefit of our pharmaceutical partner
Takeda with whom we had co-invested in
VelosBio and worked to support the business
through its development. The Board further
considered the impact of the transaction on
VelosBio itself, which has a strong future under
the ownership of a global pharma company
as it works to bring life-changing treatments
to patients.
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SUSTAINABILIT Y
Streamlined Energy
& Carbon Reporting
The section below includes our mandatory Streamlined Energy & Carbon
Reporting requirements. The reporting period is the same as the Group’s
financial year, 1 January 2020 to 31 December 2020.
Organisation boundary and scope
of emissions
We have reported on all of the emission sources
required under the Companies (Directors’
Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations
2018. These sources fall within the Group’s
consolidated financial statement.
An operational control approach has been
used in order to define our organisational
boundary. This is the basis for determining the
Scope 1 and 2 emissions for which the Group
is responsible.
The emissions sources that constitute our
boundary for the year to 31 December
2020 are:
▸ Scope 1: natural gas combustion within
boilers and refrigerant gas losses; and
▸ Scope 2: purchased electricity for our
own use.
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
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▸ 5.11 tonnes of CO2 equivalent (tCO2e)
using a ‘market-based’ emission factor
methodology for Scope 2 emissions.
Total energy use
The total energy use for the Group for FY2020
was 56,337 kWh.
2020
Electricity
(kWh)
Gas
(kWh)
Total
energy use
(kWh)
Energy use
29,006
27,331
56,337
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. The ratios have
been calculated using data from the London
office only, as the New York office was not
open for the full reporting period.
For FY2020, the intensity metrics were
as follows:
Location-based method:
▸ 1.29 tonnes of CO2e per employee
▸ 0.004 tonnes of CO2e per square foot of
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;
▸ application of two 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);
▸ presentation of global annual energy use; and
occupied space
▸ where data was missing, values were
estimated using an extrapolation of
available data or available benchmarks.
Absolute emissions
The total Scope 1 and 2 GHG emissions from
the Group’s operations in the year ending
31 December 2020 were:
▸ 11.80 tonnes of CO2 equivalent (tCO2e)
using a ‘location-based’ emission factor
methodology for Scope 2 emissions; and
Market-based method:
▸ 0.55 tonnes of CO2e per employee
▸ 0.002 tonnes of CO2e per square foot of
occupied space
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.
Efficiency actions undertaken
The London office procures its electricity from
a renewable contract meaning that under the
market-based approach, it is able to report
zero tonnes of carbon for its electricity use.
Less business travel has been taken as a result
of the Covid-19 pandemic and we look forward
to exploring how we can implement video
conferencing when the world re-opens.
Understanding the indirect environmental
impacts of our business activities
The Group’s day-to-day operational activities
have a limited impact on the environment.
We do, however, recognise that the more
significant impact occurs indirectly, through
the investment decisions we make and the
operation of the companies we choose to
invest in. The Group therefore considers
it important to establish and invest in
businesses that comply with existing applicable
environmental, ethical and social legislation.
It is also important that these businesses can
demonstrate that an appropriate strategy is
in place to meet future applicable legislative
and regulatory requirements and that these
businesses can operate to specific industry
standards, striving for best practice.
Our 2020 Strategic Report, from pages 2
to 51, has been reviewed and approved by
the Board.
Naseem Amin
Executive Chairman
8 March 2021
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GHG emissions
Arix Bioscience plc – breakdown of emissions by scope
Scope 11
Scope 22
Scope 23
Total GHG emissions (location-based)
Total GHG emissions (market-based)
2020
Tonnes
CO2e
tCO2e/
emp.4
tCO2e/
sq. ft.5
2020
(market-based)
5.02
5.02
6.77
0.09
11.80
5.11
0.55
0.74
0.00
0.002
0.002
0.00
1.29 0.004
0.002
0.55
2020
(location-based)
5.02
Scope 1
Scope 2
0.09
6.77
Arix Bioscience plc –
Breakdown of emissions by scope
1 Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities. 2019 (left to right): 11.5/0.82/0.002.
2 Scope 2 being electricity (from location-based calculations), heat, steam and cooling purchased for the Group’s own use. 2019 (left to right): 15.0/1.07/0.002.
3 Scope 2 being electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use. 2019 (left to right): 5.6/0.40/0.0007.
4 Employee numbers: 9 (London office only).
5 Occupied office space: 2,844 ft 2 (London office only).
ARIXBIOSCIENCE.COM
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CORPOR ATE GOVERNANCE REPORT
Chairman’s introduction
to corporate governance
Naseem Amin
Executive Chairman
Dear Shareholder,
I am pleased to present this year’s Report
on Corporate Governance. This report
forms part of the Directors’ Report which
follows. Since its listing on the London Stock
Exchange in February of 2017, the Company
has voluntarily applied the UK Corporate
Governance Code (the Code) as an integral
part of its approach to governance. This report
includes a description of how the Company
has applied the Code in the context of the
Company’s governance structures.
As part of the strategic and management
changes announced in April 2020, Dr Joe
Anderson stepped down from the Board and I
assumed the role of Executive Chairman.
At our 2020 AGM in May we saw the departure
of our former Chairman Jonathan Peacock,
and Art Papas who served as a Non-Executive
Director. Together with Dr Joe Anderson, I
would like to thank them all on behalf of the
Board for their contributions to the important
first phase of Arix’s development.
In February 2021, we were pleased to announce
that James Noble and Axel Wieandt will be
joining the Board as Non-Executive Directors
on 1 April. James and Axel each bring a wealth
of experience with them which will benefit the
Company as we shape its future strategy and
success. At the same time, Mark Breuer will
step down from the Board, leaving with our
thanks for his invaluable contribution over the
last two years.
In addition to these Board changes we were
also pleased to announce the appointment of
Giles Kerr as our Senior Independent Director
as part of the Board’s ongoing commitment to
strengthening corporate governance.
Naseem Amin
Executive 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 12 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 roles of Chairman and Chief
Executive are excised by the same individual
as the Board believes that this structure is
currently necessary in order to deliver the
strategic and operational leadership required
by the business in its current phase of growth.
Provision 12 – Following the departure of
Dr Franz Humer from the Board in 2019 the
Board had not appointed a Senior Independent
Director. However, Giles Kerr has agreed to
fulfil this role from February 2021.
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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
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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 48 to 49.
Stakeholder and employee engagement
The Board has actively engaged with
stakeholders, including employees, throughout
the period and has taken their interests into
account when making decisions. Due to the
very low headcount of the Company, it is
possible for the Board to have regular and
direct interaction with a large proportion
of the Company’s employees, many of
whom participate at meetings of the
Board. A full description of the Company’s
engagement with its stakeholders is set out
on pages 48 to 49 with specific description of
engagement with employees on remuneration
on page 65 of the Remuneration Report.
As described on page 63 of the Audit and Risk
Committee Report, the Company has kept
its Whistleblowing Policy and arrangements
under review during 2020.
External relationships
Due to the nature of the Company’s business
it has few suppliers or direct customers;
however, the Board carefully considers the
need to foster its business relationships with
its key stakeholders. Our stakeholders section
on pages 48 to 49 explains how this is achieved
and the impact that this need has had.
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
Board attendance
Naseem Amin
Jonathan Peacock
Professor Trevor Jones
Giles Kerr
Art Pappas
Mark Breuer
Dr Joe Anderson
Board
Audit
Remuneration
Nomination
9/9
3/3
8/9
8/9
3/3
9/9
2/2
–
–
–
4/4
–
4/4
–
1/1
5/5
–
2/2
3/3
–
4/4
4/4
4/4
–
4/4
–
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.
Non-Independent
Independent
Naseem Amin
Mark Breuer
Giles Kerr
Trevor Jones
1
Board independence
3
Read more on the Board of Directors
on pages 56 to 57
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Role of the Chief Executive Officer
The Board currently combines the role of
Chairman and Chief Executive. The Chief
Executive element of this role 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 Management
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.
Naseem Amin
Executive Chairman
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 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 Code governed 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 Executive Chairman any
comments on papers to be considered at the
meeting in advance, to ensure their views are
recorded and taken into account.
The Non-Executive Directors have met without
the Executive Chairman 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
the Executive Chairman 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 four Directors
(including the Executive Chairman), three of
whom are considered to be independent.
Role of the Chairman
The Board currently combines the role of
Chairman and Chief Executive. The Chairman
element of this role 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.
▸ 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.
▸ Chairing the Company’s AGM and all other
formal shareholder meetings.
Role of the Senior Independent Director
Giles Kerr has acted as the Senior Independent
Director (SID) since February 2021. His role
as SID is to act as a sounding board for
the Executive 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 Executive Chairman
present at least once a year, to appraise the
Executive Chairman’s performance, taking
into account the views of any 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 the Executive Chairman or
any Executive Directors or for which such
contact is inappropriate.
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BOARD OF DIREC TORS
Board of Directors
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Naseem Amin
Executive Chairman
Professor Trevor Jones CBE
Non-Executive Director
Giles Kerr
Non-Executive Director
Mark Breuer
Non-Executive Director
Date of appointment
17 December 2019
Committee memberships
▸ Nomination Committee (Chair)
Career history
Naseem joined the Arix Board in December
2019 and later became Executive Chairman in
April 2020. He is currently CEO of GMP-Orphan
and NED of Bellerophon Therapeutics (Nasdaq:
BLPH). He has broad life sciences experience
in both the US and Europe, having held senior
positions in major healthcare businesses in
R&D, business development, marketing and in
venture capital.
Naseem has been a Venture Partner at
Advent Life Sciences, CSO of Smith & Nephew
plc and led Business Development at both
Biogen and Genzyme Therapeutics, where
he initiated and executed several acquisitions
and partnerships. Naseem started his career
at Baxter Healthcare, holding executive
roles in marketing, clinical research and
product development.
Naseem is a qualified medical doctor, from
the University College Medical School, London,
and holds an MBA from the Kellogg Graduate
School of Management.
Date of appointment
8 February 2016
Committee memberships
▸ Remuneration Committee (Chair)
▸ Nomination Committee
Career history
Date of appointment
17 October 2017
Committee memberships
▸ Audit and Risk Committee (Chair)
▸ Nomination Committee
▸ Remuneration Committee
Career history
Date of appointment
25 April 2019
Committee memberships
▸ Audit and Risk Committee
▸ Nomination Committee
▸ Remuneration Committee
Career history
Trevor has led a distinguished career in both the
Giles has over 35 years’ experience in finance
Mark is a highly experienced corporate financier
pharmaceutical and biotech industries, as well
across a broad range of industrial sectors
and has operated at senior levels in the UK and
as in academia. He was Group R&D director at
with a particular focus on life sciences.
abroad. He has worked in investment banking
The Wellcome Foundation Limited, responsible
He was formerly CFO of the University of
for 30 years, and recently retired from a 19-
for the development of AZT, Zovirax, Lamictal,
Oxford and during his tenure he established
year career at JP Morgan in London, where he
Malarone and other medicines.
a successful investment office with £4bn
held the position of Vice Chairman Global M&A
under management and a £650m early-stage
and was a member of the Global Strategic
He was a director of Allergan Inc. (USA) for ten
years, until 2015, and was formerly Director
investment fund.
Advisory Council.
General of the Association of the British
Through his role on the board of the University
During his career, he has served in numerous
Pharmaceutical Industry (ABPI), served for
of Oxford’s technology transfer company,
client-facing and management roles, delivering
12 years as a member of the UK Government
Oxford University Innovation Ltd., he has
mergers and acquisitions and broader
Regulatory Agency Medicines Commission and
gained considerable experience of establishing
corporate finance advice to both domestic
Chairman of the UK Government Advisory
and growing technology-based companies.
and international clients. Mark currently serves
Group on Genetics Research.
Prior to joining the University of Oxford, he
as a Non-Executive Director and Chairman
was CFO of Amersham plc and during his
Designate of Derwent London plc and is Senior
time at Amersham the share price increased
Independent Director of DCC plc.
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.
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
Paypoint plc and Chair of the audit committees
of Senior plc and Abcam plc. Prior to joining
Amersham plc he was an audit partner with
Arthur Anderson & Co.
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.
Naseem Amin
Executive Chairman
Professor Trevor Jones CBE
Non-Executive Director
Giles Kerr
Non-Executive Director
Mark Breuer
Non-Executive Director
Date of appointment
17 December 2019
Committee memberships
▸ Nomination Committee (Chair)
Career history
Naseem joined the Arix Board in December
2019 and later became Executive Chairman in
April 2020. He is currently CEO of GMP-Orphan
and NED of Bellerophon Therapeutics (Nasdaq:
BLPH). He has broad life sciences experience
in both the US and Europe, having held senior
positions in major healthcare businesses in
R&D, business development, marketing and in
venture capital.
Naseem has been a Venture Partner at
Advent Life Sciences, CSO of Smith & Nephew
plc and led Business Development at both
Biogen and Genzyme Therapeutics, where
he initiated and executed several acquisitions
and partnerships. Naseem started his career
at Baxter Healthcare, holding executive
roles in marketing, clinical research and
product development.
Naseem is a qualified medical doctor, from
the University College Medical School, London,
and holds an MBA from the Kellogg Graduate
School of Management.
Date of appointment
8 February 2016
Committee memberships
▸ Remuneration Committee (Chair)
▸ Nomination Committee
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.
Date of appointment
17 October 2017
Committee memberships
▸ Audit and Risk Committee (Chair)
▸ Nomination Committee
▸ Remuneration Committee
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
Paypoint plc and Chair of the audit committees
of Senior plc and Abcam plc. Prior to joining
Amersham plc he was an audit partner with
Arthur Anderson & Co.
Date of appointment
25 April 2019
Committee memberships
▸ Audit and Risk Committee
▸ Nomination Committee
▸ Remuneration Committee
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 30 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 and Chairman
Designate of Derwent London plc and is Senior
Independent Director 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.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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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 2020.
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.
Naseem Amin
Chairman of the Nomination Committee
Specific duties of the Nomination
Committee include:
Composition
Naseem Amin (Chairman)
Professor Trevor Jones
Giles Kerr
Mark Breuer
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.
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.
▸ Considering the need for succession
planning within the Board and the
Board’s committees.
▸ Setting and managing the process for the
search for new Non-Executive Directors
(NEDs).
Board changes
There were a number of Board changes
during the year as explained in the Corporate
Governance Report. The Nomination
Committee has worked throughout 2020 to
ensure that the Board and its committees
continue to have the necessary balance of skills
and appropriate succession plans in place to
ensure its continued effectiveness.
The Committee has not engaged an
independent external search consultant
during 2020.
In accordance with past practice, and the new
Code, all Directors will be subject to re-election
at each AGM.
Diversity Policy
The Board’s Diversity Policy was reviewed in
2020. 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 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
is satisfied that the Policy is in line with its
strategic priorities, as described on page 22
and is looking to improve the Board’s diversity
with future appointments.
Annual evaluation
The performance of the Board, its
Committees, the Chairman and individual
Directors are evaluated throughout the period.
The Board conducted an internal formal
written performance evaluation in early 2020
which included a number of recommendations
that were acted upon including changes to
the operation of the Board’s committees and
succession planning.
Naseem Amin
Chairman of the Nomination Committee
8 March 2021
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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
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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
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
59
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 2020.
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 24 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
8 March 2021
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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, including conducting a
tender for new appointments
▸ 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 Chairs, 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
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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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 Executive Chairman, the Group Finance
Director and the external audit lead partner.
Activity during the year
Matters discussed during the year 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 going concern and viability assessment of the Company and the Group
▸ Reviewing the external auditor’s audit plan, process and scope
▸ Reviewing the independence of the external auditor
▸ Conducting a tender to recommend to the Board the appointment of a new 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 2020 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 management options, the Executive Incentive Plan and Non-Executive Director awards, 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.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
The policy recognises that certain non-audit
services may not be carried out by the external
auditors (in accordance with the EU Statutory
Audit regime).
During the year ended 31 December 2020,
PwC provided non-audit services in relation to
a financial review (£26,000).
During the year ended 31 December 2020,
BDO provided non-audit services in relation
to reviewing the Group’s Interim financial
statements (£20,500); and performing an
FCA CASS Audit of Arix Capital Management
Limited, a 100% subsidiary of Arix Bioscience
plc (£3,750). The fees paid to BDO for non-
audit services during the year totalled £24,250,
representing 18% 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 November 2020 and it was
considered that they were still appropriate in
their current form.
Giles Kerr
Chairman of the Audit and Risk Committee
8 March 2021
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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. It has 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 November 2020 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. 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
PricewaterhouseCoopers LLP (PwC) was
first appointed as the external auditors of the
Group in December 2016.
In June 2020, the Board announced the
appointment of BDO LLP (BDO) as new
external auditors. BDO was recommended to
the Board for appointment by the Audit and
Risk Committee following a competitive tender
process conducted in accordance with the
Financial Reporting Council’s best practice for
Audit Tenders. The current lead audit partner
for BDO has therefore been in place for less
than one year.
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 2025
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.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
63
DIREC TORS’ REMUNER ATION REPORT
Professor Trevor Jones CBE
Chairman of the Remuneration Committee
Composition
Trevor Jones (Chairman)
Mark Breuer
Giles Kerr
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 2020 Directors’
Remuneration Report.
2020 was a year of significant change and
progress in the business, commencing with a
change to Board leadership and culminating
in the first acquisition of an Arix portfolio
company. This leaves Arix well placed to
continue to build a compelling portfolio of
innovative life science companies.
Board changes
Early 2020 saw a change in leadership of
Arix, with Naseem Amin appointed Executive
Chairman, and Joe Anderson stepping down as
Chief Executive Officer.
In terms of remuneration, Naseem Amin
was appointed on a remuneration package,
reflecting a time commitment from him as a
part-time Executive Chairman, as follows:
▸ Base salary: £200,000
▸ Annual bonus opportunity: 50% of salary
▸ EIP opportunity: 200% of salary
On stepping down as CEO, Joe Anderson
was placed on garden leave for six months,
following which a £250,000 payment in lieu
of notice was made in respect of the final
six months of his twelve month contractual
notice period.
Pay for performance
Consistent with the Remuneration Policy, the
annual bonus scheme for 2020 involved the
assessment of performance against financial,
strategic and personal goals. This included
the use of targets linked to Arix’s financial and
market performance.
In line with performance as reported above,
and as detailed further on page 74 of the
Annual Report and Accounts, a pay-out of
100% of maximum (which equates to 50% of
base salary) was appropriate. Key highlights
for the year included:
▸ Growth in NAV per share from £1.49 to £2.42,
well in excess of the maximum targets.
▸ Growth in the share price from 70p (trailing
average at the time of appointment of the
Executive Chair) to 196p (trailing average to
31 December 2020), representing growth
of 180%.
▸ Exceptional performance against the
strategic and personal goals set at the start
of the year, as described on page 74.
The Committee determined the bonus
outcomes were appropriate in light of
Company performance during the year.
In making its decision, the Committee noted
that Arix had not taken any Government or
shareholding funding as a result of Covid-19.
With regards to performance over the longer
term, awards made under the EIP in 2017,
granted to previous executive directors, were
subject to the achievement of a share price
condition, whereby Arix share price would have
to increase to at least £2.61 by 26 May 2020.
This condition was not met at the testing date,
and as such the award lapsed in full.
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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
Executive Chair and other senior employees.
Arix has a small number of employees and as
a result is not required to publish the ratio of
Executive Chair pay to that of employees more
widely. However, the Committee is confident
that there is considerable alignment between
the structure of the Executive Chair’s pay and
the arrangements in place for other employees.
For example, in 2020 the annual bonus scheme
and the EIP operated in the same way for other
employees as for the Executive Chair.
While the Company does not directly consult
with employees as part of the process of
reviewing executive pay and formulating
the Remuneration Policy, the Committee
receives updates from the Executive Chair
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. In line
with best practice, the Board has adopted
the policy that Executive Directors maintain
their minimum in-employment shareholding
from exercised incentive awards of at least
200% of base salary two years post-cessation
of employment. Such a requirement will be
included in the Remuneration Policy when it is
next considered by shareholders.
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
8 March 2021
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The 2020 AGM
At the 2020 AGM, all resolutions were passed,
although only 71.98% of shareholders voted in
favour of the Directors’ Remuneration Report.
At the time of the AGM, having received a
registered negative vote from one of the
Group’s larger shareholders, the Company
contacted the shareholder to understand
the key challenges underpinning the vote.
Upon engagement, the Company understood
that the principle reason for the vote against
the Directors’ Remuneration Report related
to the remuneration arrangements for the
previous Chief Executive Officer, and it was not
a forward looking issue.
Having considered that the matter was in
relation to a previous executive, who has
ceased employment with the Group, the
Remuneration Committee considered the
matter closed.
On behalf of the Remuneration Committee,
I would like to thank the shareholder for
the feedback.
Implementation of the
Remuneration Policy in 2021
For 2021, the Committee intends to operate
the Remuneration Policy for the Executive
Chair in a similar manner to that which applied
in 2020. 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.
For 2021, the salary of the Executive Chairman
has been increased to £260,000. This reflects
the significantly greater workload of the role
than what was envisaged upon the Executive
Chairman’s appointment. Whilst this greater
workload has been evident throughout
2020, the Committee considered that
no retrospective change to salary would
be appropriate.
The Executive Chair will continue to be
eligible for a bonus for 2021 of up to 50% of
basic salary, payable on the achievement of
specific financial, strategic and personal goals.
The bonus objectives and performance against
them will be disclosed in next year’s Directors’
Remuneration Report.
An award of 200% of salary will be made
under the EIP. In line with the Directors’
Remuneration Policy, a two-year post-vesting
holding period will apply to the EIP award.
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Remuneration snapshot
The following table sets out how the Remuneration Policy will be implemented in 2021.
Topic
Base salary
Benefits
Pension contribution
Description
The basic salary for the Executive Chair for 2021 is set at £260,000
The Executive Chair is eligible to receive private health cover, life assurance, income protection
and a company car or car allowance
The Executive Chair receives pension contributions at a level of 7.5% of basic salary, in line with
the wider workforce
Annual bonus
▸ 50% of salary maximum for the Executive Chair
▸ Bonus for 2021 will be based on a range of challenging financial, strategic and personal
measures aligned with the Company’s KPIs. 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
▸ 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
▸ 200% of salary maximum for the Executive Chair
▸ The current intention is for awards to be based upon share price and NAV growth targets
(in line with the 2020 EIP Award). Reflecting the current external uncertainty, however, at
the time of writing the report, the Remuneration Committee were still in the process of
discussing the performance targets to be attached to the 2021 EIP Award. Details of the
finalised performance measures and targets to be attached to awards will be published as
soon as practicable
▸ Any shares which vest will be subject to a two-year post-vesting holding period
NED Fees
Fees for 2021 will be as follows:
▸ Senior Independent Director: £80,000, for so long as the Board has an a Executive Chair,
with a lower fee expected thereafter
▸ Non-Executive Director: £50,000
▸ Chairs of Audit and Risk, Remuneration and Nomination Committees: £10,000
▸ Chair of Board Investment Committee: £10,000, payable only to Non-Executive Directors
▸ Chair of the Scientific Advisory Board: £10,000
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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.
▸ Avoid creating incentives that will encourage
excessive risk-taking or unsustainable
Company performance.
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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;
and
▸ 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.
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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.
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69
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 67.
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.
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Service agreements and letters of appointment
The Executive Chair’s service agreement is for a rolling term and may be terminated by the Company by giving 12 months’ notice.
Name
Naseem Amin
Date of service agreement
29 July 2020
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 2021 AGM and at each
subsequent AGM.
The details of each Non-Executive Director’s current term are set out below:
Name
Professor Trevor Jones
Giles Kerr
Mark Breuer
Date of appointment
8 February 2016
17 October 2017
25 April 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
Illustrations of the application of the Remuneration Policy
Executive Chair
£’000
£1000K
£800K
£600K
£400K
£200K
£0K
£482K
27%
13%
60%
£287K
100%
£937K
56%
14%
31%
Fixed
On target
Maximum
Fixed
Short Term Incentive
Long Term Incentive
Notes:
The chart above illustrates the potential remuneration payable to the Executive Chair under different performance scenarios. In all three scenarios the fixed pay element is based
on the 2021 basic salary level, pension contribution at the standard rate of 7.5% of salary and benefits provision at a similar level to 2020. 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 25% of the maximum opportunity.
Maximum performance assumes a bonus payment at a level of 50% of salary and EIP vesting at a level of 200% of salary. Maximum including share price growth assumes 50% share
price growth on the EIP element.
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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
2020 and also describes the operation of the Remuneration Committee.
Remuneration Committee
Membership
Professor Trevor Jones is currently the Chairman of the Committee. The other members of the Committee are Mark Breuer and Giles Kerr (both
appointed on 19 May 2020). Naseem Amin stepped down from the Remuneration Committee on appointment as Executive Chair. Art Pappas stepped
down from the Remuneration Committee on 19 May 2020.
The Committee met five times during the year under review. Meeting attendance is shown on page 54.
The Board considers each of the members of the Committee to be independent in accordance with the UK Corporate Governance Code (“the Code”).
The Executive Chair 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 are
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 2020 included:
▸ The outcome with major shareholders on the Remuneration Report presented for shareholder approval at the 2020 AGM, and the reasons for the
votes against the remuneration resolution at the AGM;
▸ The appointment terms for the Executive Chair;
▸ The leaver terms for the previous Chief Executive Officer;
▸ Review of Executive Director and senior manager bonuses and equity incentive awards for 2020;
▸ Pay benchmarking for key roles within the organisation and a review of alternative incentive structures.
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Advisers to the Committee
Following a competitive tender to advise on all aspects of the Directors’ Remuneration Policy and its implementation, Deloitte were appointed as
advisers to the Remuneration Committee on 30 June 2020. Korn Ferry were retained as advisers until the appointment of Deloitte.
The Committee is satisfied that the advice received during the year was objective and independent. Deloitte and Korn Ferry are members of the
Remuneration Consultants Group. Deloitte received fees of £33,700 for its advice during the year (fees charged on a costs incurred basis), with Korn
Ferry receiving fees of £15,180. Deloitte also received fees of £103,536 in the year in connection with the provision of Group tax advice unrelated to the
services provided to the Remuneration Committee.
The Chief Operating Officer and General Counsel, Robert Lyne, acts as Secretary to the Committee, ensuring 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)
Basic salary
Benefits
Annual bonus
LTIP
Pension
Other
Total
Total
fixed pay
Total
variable pay
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Joe Anderson1
Naseem Amin2
379
148
432
–
10
7
23
–
–
2503
100
–
–
–
–
–
28
11
25
–
–
–
–
–
417
266
633
–
417
166
383
–
250
–
100
–
1 Stepped down from the Board on 6 April 2020.
2 Appointed as Executive Chairman of the Board on 6 April 2020. Remuneration shown is his remuneration received as Executive Chairman from 6 April 2020 to 31 December 2020.
3 Served as Executive Director in 2020. The previous CEO committed to deferring 100% of the 2019 net bonus payment into shares in the Company.
▸ 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%.
▸ 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. The Company’s Executive Chair currently holds an executive position as
Director General of GMP-Orphan SA and is a non-executive director at Bellerophon Therapeutics, Inc.
Single Figure Table – Non-Executive Directors (audited)
Fees
Benefits
Pension
Annual bonus
LTIP
Other*
Total
Total
fixed pay
Total
variable pay
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Naseem Amin1
Professor Trevor
Jones
Giles Kerr
Mark Breuer
13
60
60
50
3
50
60
34
Jonathan Peacock
(retired)2
35
92
Art Pappas
(retired)3
26
60
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94
–
–
–
–
–
30
65
107
3
107
3
60
60
80
50
60
99
60
60
80
50
60
99
–
–
–
35
92
34
92
81
26
141
26
141
–
–
–
–
–
–
–
–
–
–
–
–
* 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 2020 figures relate to service as Non-Executive Director until his appointment as Executive Chair on 6 April 2020. His 2020 remuneration in the table above is his remuneration received as Non-
Executive Director from 1 January 2020 to 5 April 2020.
2 Stepped down from the Board on 19 June 2020.
3 Stepped down from the Board on 19 June 2020.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
73
DIREC TORS’ REMUNER ATION REPORT CONTINUED
Annual bonus payout table (audited)
The Executive Chairman was eligible for a bonus of up to 50% of salary, his annual bonus objectives were as follows:
Category
Threshold
Maximum
Actuals
Outcome
Supporting rationale
Growth in NAV per
share (25%)
Growth in share price
(trailing average) (25%)
Personal goals (50%)
9%
17%
(£1.62)
(£1.74)
20%
30%
(£0.84)
(£0.91)
62%
(£2.42)
180%
(£1.96)
▸ Executing cost-
reduction
▸ Organisational
restructuring
▸ Implementation of
strategic changes
▸ Shareholder
engagement
See supporting
rationale
100%
100%
2020 saw a reduction in the net operating
costs of the Company, from £8.0m in 2019
to £6.9m in 2020 with the business on
course to keep costs within 2% of NAV.
Significant changes were implemented
within the organisation in 2020.
These included a significant change in
staffing as well as procedural changes to
the investment approval process.
Strategic changes have been effected with
a new strategy to actively manage public
portfolio companies. This has enabled the
business to optimise its return from these
positions and mitigate downside risk.
Shareholder engagement has increased
with active discussions on topics such
as capital management ,ensuring that
management and Board decisions are
aligned with shareholder interests.
Maximum target was
significantly exceeded
Maximum target was
significantly exceeded
These changes have individually
and collectively had a significant
impact on the business and its
ability to deliver on its strategic
goals.
The very significant cost
reductions have created a more
sustainable business delivering
greater value for shareholders.
Organisational changes have
increased both the efficiency
of the organisation and its
effectiveness in evaluating
investment opportunities.
The strategic changes have
increased the freedom of the
business to manage its public
holdings, optimising the holdings
and returns for the benefit of
shareholders.
Total
100%
The Committee determined that in light of the Company’s performance during the year, the bonus outcomes are appropriate.
LTIPs vesting in the year (audited)
Awards were made to previous executive directors in 2017 under the EIP. As detailed in the table below, the share price performance target was not
met, and as such the awards lapsed in full.
Metric
Share price
Threshold
Target
Maximum
Actual
Level of vesting
8% p.a. growth
20% p.a. growth
30% p.a. growth Decline in share price
0%
Scheme interests awarded in 2020 (audited)
During the year ended 31 December 2020, the following Directors were awarded nil-cost options under the EIP, details of which are summarised below.
Naseem Amin
Date of grant
30/06/2020
Number
awarded
462,428
Award
price £1
0.864
Face
value £
% of
base salary
Vesting date
400,000
200% 01/01/2023
Performance measure
Weighting
Performance period
Performance
% vesting
Compound share price growth
NAV per share growth
60%
40%
1 January 2020
to 31 December 2022
1 January 2020
to 31 December 2022
<7% per annum
7% per annum
0%
25%
>7% < 21% per annum
25%-100%
≥21% per annum
<7% per annum
7% per annum
100%
0%
25%
>7% < 17% per annum
25%-100%
≥17% per annum
100%
1 Starting price based on three month rolling average to the day before the management change (3 April 2020).
74
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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As disclosed in last year’s Remuneration Report, Jonathan Peacock was awarded a conditional share award on 12 March 2020 for the financial year
ending 2019. For administrative reasons the award was not granted during 2019. The award is subject to performance conditions over a three year
assessment period, consistent with the awards made to other Executive Directors in 2019, as detailed on page 70 of the 2019 Annual Report and
Accounts. Treatment of this award following his stepping down from the Board is detailed below.
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.
Jonathan Peacock
Jonathan Peacock stepped down from the Board at the AGM on 4 June 2020. No payment was made in relation to his loss of office.
As disclosed in last year’s Annual Report, the Committee approved the grant of an option to Jonathan Peacock in respect of his executive service
in 2018. For administrative reasons this 2019 Option Award was not made in 2019 but was made on 20 March 2020. The Award of 231,348 options
represented 100% of his executive base salary. As disclosed in last year’s Annual Report, the performance conditions were the same as for the other
Executive Directors disclosed in last year’s Annual Report.
In accordance with the terms of his departure from the role of Executive Chairman on 19 February 2019 (as reported in the Annual Reports for the
years ending 31 December 2018 and 31 December 2019), it had been agreed that:
▸ The 2017 EIP Award, 2018 EIP Award and 2019 Option Award would continue to vest until his departure as a director of the Company. The 2017 EIP
Award lapsed in May 2020 when the performance criteria were not achieved. Each of the 2018 EIP Award and 2019 Option Award have been pro-
rated to the date of his departure from the Board such that 241,532 of the 298,507 options granted under the 2018 EIP Award remain eligible to vest
in accordance with their terms and 110,075 of the 231,348 options granted under the 2019 Option Award remain eligible to vest in accordance with
their terms. These awards will remain subject to performance at the end of the performance period.
▸ All of the 2,484,250 Founder Options had vested by the date of his departure from the Board and remain eligible for exercise until 4 February 2026
at an exercise price of £1.80 per share.
Joe Anderson
Joe Anderson stepped down from the Board on 6 April 2020. He was placed on garden leave for six months from the date of his departure from the
Board. His employment with the Group ceased on 3 October 2020 with a £250,000 payment in lieu of the remaining six months notice due under his
contract of employment. Pursuant to the arrangements disclosed in the Annual Report for the year ending 31 December 2018:
▸ The 2017 EIP Award continued to be eligible for vesting in May 2020 but lapsed when the performance criteria were not achieved.
▸ All of the 3,036,309 Founder Options had vested by the date of his departure from the Board and remain eligible for exercise until 4 February 2026
at an exercise price of £1.62 per share.
▸ Each of the 2018 EIP Award and 2019 EIP Award granted to Joe Anderson lapsed in their entirety following his departure from the Board.
Executive Directors’ shareholdings and share interests (audited)
The interests of the Executive Chairman and CEO in the Company as at 31 December 2020 (or, if earlier, the date of stepping down from the Board)
are shown in the table below. Only the EIP Awards (2018, 2019 and 2020) are subject to performance conditions. The Executive Chair is required to
build a shareholding equivalent to 200% of basic salary. This shareholding requirement was met at the end of the financial year.
No options were exercised during the year.
Joe Anderson4
Naseem Amin5
IPO
Awards1
(vested,
unexercised)
#
2018 EIP
Awards1
(unvested)
#
2019 EIP
Awards1
(unvested)
#
2020 EIP
Awards1
(unvested)
#
Founder
Options2
(vested,
unexercised)
#
362,318
373,134
578,368
–
3,036,309
–
–
–
462,428
–
Shareholding
as % of basic
salary3
239%
264%
Ordinary
Shares held
#
354,310
240,803
1
2
Awards are nil-cost options. The IPO Awards were granted without performance conditions attached. The 2018, 2019 and 2020 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 2018’s Annual Report on Remuneration, the exercise price reduced by 18 pence (i.e. 10% of the original exercise price) each year
for five years that Joe Anderson remained in full-time employment with Arix. The exercise price is now fixed at £1.62 per share. 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, calculated at closing share price on 31 December 2020.
4 Joe Anderson holds 138,889 Ordinary Shares through PAL Trustees Limited, the trustee of his SIPP. His 2018 EIP and 2019 EIP Awards lapsed upon his departure from Arix.
5 Naseem Amin holds 57,803 Ordinary Shares issued pursuant to his appointment as a Non-Executive Director and has an interest in a further 183,000 Ordinary Shares purchased by Davum
Capital Limited, a corporate entity in which he has a majority beneficial interest.
There has been no change in the Executive Directors’ shareholdings since the balance sheet date.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
75
DIREC TORS’ REMUNER ATION REPORT CONTINUED
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
Professor Trevor Jones
Giles Kerr
Art Pappas2
Mark Breuer
Shareholding as at
31 December 2020
926,601
37,312
35,746
47,619
36,630
1 Reflects the position as at the date of his departure from the Board (19 June 2020).
2 Reflects the position as at the date of his departure from the Board (19 June 2020).
Director
Jonathan Peacock
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
1 Awards are conditional share awards.
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.
There has been no change in the Non-Executive Directors’ shareholdings since the balance sheet date.
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
120
100
80
60
40
20
0
December 2016
December 2017
December 2018
December 2019
December 2020
Arix Bioscience
FTSE SmallCap
CEO – historic remuneration information (audited)
Single figure total
Annual variable against maximum opportunity
EIP vesting rates against maximum opportunity
Naseem Amin
2020
£’000
Joe Anderson
2020
£’000
266
100%
N/A
417
0%
N/A
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
76
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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Percentage change in remuneration
Percentage change in 2020 remuneration compared with remuneration in 2019.
Base salary
Annual bonus
Benefits
CEO/Exec Chair
All employees
excluding CEO/
Exec Chair
(66%)
(60%)
(70%)
5%
32%
2%
Comparison of Directors’ and employees’ pay
The table below sets out the percentage change in each Director’s salary/fees, benefits and bonus between the year ended 31 December 2019 and the
year ended 31 December 2020, and the average percentage change in the same remuneration over the same period in respect of the employees of the
Company on a full-time equivalent basis.
The average employee change has been calculated by reference to the median of employee pay. Mark Breuer was appointed in 2019, while Art Pappas
and Jonathan Peacock stepped down from the Board during the year ended 31 December 2020, resulting in large year-on-year changes.
Executive Chair/CEO1
Professor Trevor Jones
Giles Kerr
Mark Breuer2
Jonathan Peacock (retired)2
Art Pappas (retired)2
Employee Group 3
Base salary/
fees
Benefits
Annual
incentive
(66%)
20%
0%
47%
(62%)
(57%)
5%
(70%)
(60%)
N/A
N/A
N/A
N/A
N/A
2%
N/A
N/A
N/A
N/A
N/A
32%
1 Where more than one individual performed the role in the year, the sum of the amounts as disclosed in the single figure of remuneration has been used in accordance with disclosure requirements.
2 Non-executive directors that served for part year – which explains large year-on-year changes.
3 Average employee change has been calculated by reference to the median of employee pay.
Relative importance of spend on pay
Underlying operating profit/(loss)
Dividends/share buybacks
Total Company spend on remuneration
2020
£’000
2019
£’000
126,076
(67,845)
–
5,066
–
5,637
The table above shows the relative importance of total spend on pay in the 2020 and 2019 financial years compared with distributions to shareholders.
The Company did not pay a dividend or undertake a share buyback programme in either 2020 or 2019. Underlying operating profit/(loss) is considered
the most appropriate metric given the current stage of the Group.
Total Group spend on remuneration decreased by 10% 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 and 4 June
2020 respectively are set out below:
Votes for
#
Votes for
%
Votes against
#
Votes against
%
Votes withheld
#
To approve the Directors’ Remuneration Policy (2019 AGM)
To approve the Annual Report on Remuneration
40,079,954
28,565,229
50.26%
39,658,365
71.98%
11,118,962
49.74%
28.02%
5,590
19,227
Only 71.98% of shareholders voted in favour of the Directors’ Remuneration Report. At the time of the AGM, having received a registered negative vote
from one of the Group’s larger shareholders, the Company contacted the shareholder to understand the key challenges underpinning the vote.
Upon engagement, the Company understood that the principal reason for the vote against the Directors’ Remuneration Report related to the
remuneration arrangements for the previous management, and it was not a forward looking issue. Having considered that the matter was in relation
to previous management, the Remuneration Committee considered the matter closed.
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
77
CORPOR ATE GOVERNANCE REPORT
Directors’ Report
For the year ended 31 December 2020
The Directors present their report for the year ended 31 December 2020. 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 51
Financial risk management objectives and policies (including hedging policy and
use of financial instruments)
Notes to the financial statements page 95
Going concern
Statement of Directors’ responsibilities
Diversity Policy
Strategic Report page 47
Page 81
Report of the Nomination Committee page 58
Details of long-term incentive schemes
Note 18 to the financial statements pages 102 to 103
Significant Interests
Waiver of emoluments by a Director
Directors’ Report page 80
Directors’ Remuneration Report pages 64 to 77
Compensation for loss of office arrangements
Directors’ Remuneration Report pages 64 to 77
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 64 to 77
Directors’ Remuneration Report pages 64 to 77
Directors’ Remuneration Report pages 64 to 77
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 64 to 77
The Strategic Report on pages 2 to 51 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.
78
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Directors
The Directors of the Company
who held office during the year are:
Naseem Amin
Professor Trevor Jones
Giles Kerr
Mark Breuer
Joe Anderson
Resigned 6 April 2020
Jonathan Peacock
Resigned 4 June 2020
Arthur Pappas
Resigned 4 June 2020
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.
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.
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Results and dividend
The results for the year ended 31 December
2020 are set out in the Consolidated
Statement of Comprehensive Income on
page 87.
The Board is not recommending a dividend for
the year ended 31 December 2020.
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 2020, the Company’s share
capital consisted of:
▸ 135,609,653 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.
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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 4 June 2020, 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 13,555,185 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 2021.
Directors’ interests
The number of Ordinary Shares of the
Company in which the Directors were
beneficially interested at 31 December 2020, is
set out in the Directors’ Remuneration Report
on pages 75 to 76.
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 themselves 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
Acacia Research Corporation
Fosun International
Takeda Ventures
Christopher Chipperton (including restricted shares)
Ipsen
Christopher Evans (including restricted shares)
UCB
As at 31 December 2020
As at 8 March 2021
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
25,833,311
11,111,111
7,497,583
6,862,823
6,666,666
5,866,039
5,647,679
19.1%
8.2%
5.5%
5.1%
4.9%
4.7%
4.2%
25,833,311
11,111,111
7,497,583
6,862,823
6,666,666
5,291,039
5,647,679
19.1%
8.2%
5.5%
5.1%
4.9%
3.9%
4.2%
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
and give a true and fair view of the assets,
liabilities, financial position and profit and
loss of the group.
▸ The annual report includes a fair review of
the development and performance of the
business and the financial position of the
group and the parent company, together
with a description of the principal risks and
uncertainties that they face.
By order of the Board
Robert Lyne
Company Secretary
8 March 2021
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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
BDO 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 on
19 May 2021 at 10.00 am in central London.
Details of the venue and access will be
announced in the Notice of Annual General
Meeting to be published in due course and
will be subject to applicable Covid-related
regulations and guidance on attendance
at AGMs.
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 accounting standards in
conformity with the requirements of the
Companies Act 2006, international financial
reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in
the European Union and Article 4 of the IAS
Regulation. Under company law the Directors
must not approve the financial statements
unless they are satisfied they give a true and
fair view of the state of affairs of the Group
and the Company and of the profit or loss
of the Group for that period. In preparing
these financial statements, the Directors are
required to:
▸ select suitable accounting policies and then
apply them consistently
▸ make reasonable and prudent judgements
and accounting estimates
▸ state whether IFRS as adopted by the EU
and applicable UK Accounting Standards
have been followed, subject to any material
departures disclosed and explained
in the Group and Company financial
statements respectively
▸ prepare the financial statements on the
going concern basis, unless it is inappropriate
to presume the Company will continue
in business
The Directors are responsible for keeping
adequate accounting records sufficient to
show and explain the Group’s and Company’s
transactions, and to disclose with reasonable
accuracy at any time the financial position of
the Company and the Group and enable them
to ensure that the financial statements and
the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the
IAS Regulation.
They are also responsible for safeguarding the
assets of the Company and the Group and
hence for taking reasonable steps to prevent
and detect fraud and other irregularities.
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 56 to 57, 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.
Directors’ responsibilities pursuant to DTR4
The directors confirm to the best of
their knowledge:
▸ The group financial statements have been
prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006,
international financial reporting standards
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European
Union and Article 4 of the IAS Regulation
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
81
FINANCIAL STATEMENTS
Independent Auditors’ report
to the members of Arix Bioscience plc
Opinion on the financial statements
In our opinion:
▸ the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of
the Group’s profit for the year then ended;
▸ the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
▸ the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union;
▸ the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the Companies Act 2006; and
▸ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Arix Bioscience Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2020 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position,
Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows, Company Statement of Financial Position, Company
Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements
of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s 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. Our audit opinion is consistent with the additional
report to the audit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the board in May 2020 to audit the financial statements for the year
ending 31 December 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is
1 year, covering the year ended 31 December 2020 only. We remain independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that
standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
In evaluating management’s assessment as to the Group and Parent Company’s ability to continue to operate as a going concern, we have reviewed
management’s forecasts covering 12 months from the date of sign off of the financial statements, and beyond over the viability period disclosed in
the Strategic Report. We have considered the appropriateness and accuracy of these forecasts, robustly challenging their inputs, as well as reviewed
management’s stress testing to ascertain the likelihood of the Group and Parent Company not having the ability to meet their obligations as they
fall due.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group or Parent Company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
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Overview
Coverage
Key audit matters
Key audit matters
100%
100%
100%
2020
Valuation of Investments
Share Based Payments
Yes
Yes
Group financial statements as a whole
£4.8m (based on 1.5% of net assets)
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
All UK components in the Group were audited by BDO LLP. The US component was audited to our component materiality by BDO LLP.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our 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) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key audit matter
Valuation of
investments
Refer to page 93
(Accounting policies) and
page 99 (note 11).
There is a high level of estimation uncertainty
involved in determining the valuation of
the unquoted investments in the portfolio.
Investments are also the most significant
balance contributing to the Net Asset Value
(NAV) of the fund, and therefore may be
subject to management bias.
How the scope of our audit addressed the key audit matter
We tested the valuations of a sample of unquoted investments.
For all investments in our sample we:
▸ Considered whether the valuation methodology chosen was in accordance
with accounting standards and was the most appropriate in the
circumstances under the International Private Equity and Venture Capital
(IPEV) Guidelines;
▸ Held meetings with management to understand the recent performance
of the investee companies in the context of their “milestones”, and
corroborated information obtained in these meetings to board papers,
management information and publicly available industry articles, reports
and press releases;
▸ Where a valuation had been amended based on the price of a recent
funding round, obtained associated Sale Purchase Agreements for
the funding round in order to corroborate the price of the round, and
considered whether the funding round had been carried out on an arm’s
length basis;
▸ Where a valuation had been amended based on an investee company
achieving or failing to meet certain key milestones, we challenged the basis
of the change in value and obtained third party evidence to support the
investee companies’ progress against the milestone.
Key observations:
Based on the procedures performed, we found that the audit evidence
obtained supported the valuation of the unquoted investments in the
portfolio.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
83
FINANCIAL STATEMENTS CONTINUED
Independent Auditors’ report
to the members of Arix Bioscience plc continued
Key audit matter
Share Based Payments
Refer to page 95
(Accounting policies) and
page 102 (note 18).
The Group operates a number of share and
incentive based payment schemes. These
are accounted for in accordance with IFRS
2. Recognition of all share based payment
awards in the financial statements is based
on the fair value at date of grant with an
expense recognised in the relevant period
and a corresponding increase in liabilities and
equity.
Given that these schemes take several
forms and can involve complex valuation
methodologies, such as Monte Carlo
simulations, with significant amounts of
estimation uncertainty, there is an inherent
risk that the share based payment charges
could be materially misstated.
How the scope of our audit addressed the key audit matter
Our testing of the share based payment charge incorporated the following
procedures:
▸ Obtained and reviewed a sample of the agreements relating to each share
based payment scheme in place;
▸ Engaged our internal experts to review the valuation of the fair value at
grant of each of the schemes and consider the reasonableness of the
methodology and key inputs applied;
▸ Challenged the judgements surrounding the number of options in each
scheme that would vest based on the likelihood of achieving key market
and non market vesting conditions;
▸ Considered the appropriateness of the accounting for each scheme in the
context of the scheme conditions and IFRS 2.
Key observations
Based on the procedures performed, we concluded that the share based
payment charge for the period was materially appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as
immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
Group financial statements
2020
£m
4.8
Basis for determining materiality
1.5% net assets
Parent Company financial statements
2020
£m
3.0
1.5% net assets
Rationale for the benchmark applied
The nature of the investment portfolio, this
being the most significant balance in the net
asset value of the group at the year end, and the
level of judgement inherent in the valuation
The nature of the parent company as a
holding company and therefore being an asset
based entity.
Performance materiality
3.1
Basis for determining performance materiality 65% materiality
2.0
65% materiality
Component materiality
We set materiality for each component of the Group based on a percentage of between 60% and 90% of Group materiality dependent on the size and
our assessment of the risk of material misstatement of that component. Component materiality ranged from £2.2m to £4.3m. In the audit of each
component, we further applied performance materiality levels of 65% of the component materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £95k. We also agreed to report
differences below this threshold that, in our view, warranted reporting on qualitative grounds.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report and accounts
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. 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 in this regard.
Corporate governance statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the parent company’s compliance with the provisions of the UK Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained during the audit.
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 the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
▸ the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
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.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
▸ adequate accounting records have not been kept by the Parent Company, or returns adequate for
our audit have not been received from branches not visited by us; or
▸ the Parent Company financial statements and the part of the Directors’ remuneration report to
be audited are not in agreement with the accounting records and returns; or
▸ certain disclosures of Directors’ remuneration specified by law are not made; or
▸ we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the Directors 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 Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities 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 auditor’s 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered the
risk of acts by the company and its subsidiaries which were contrary to applicable laws and regulations, including fraud. These included but were not
limited to compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, requirements
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
85
FINANCIAL STATEMENTS CONTINUED
Independent Auditors’ report
to the members of Arix Bioscience plc continued
of PAYE and VAT legislation and IFRS. In respect of management override we have tested a risk based sample of journals back to supporting
documentation and performed extensive procedures over the valuation of the investment portfolio, as discussed above in the Key Audit Matter section.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed 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 are to
become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent
Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Vanessa-Jayne Bradley (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
8 March 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
86
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Consolidated statement
of comprehensive income
For the year ended 31 December 2020
Change in fair value of investments
Revenue
Finance income
Administrative expenses
Share-based payment charge
Foreign exchange loss
Impairment of right-of-use and intangible assets
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Other comprehensive income/(expense)
Exchange differences on translating foreign operations
Taxation
Total comprehensive income/(expense) for the year
Attributable to
Owners of Arix Bioscience plc
Earnings per share
Basic earnings per share (p)
Diluted earnings per share (p)
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Note
11
3
7
6
18
9
9
2020
£’000
2019
£’000
135,297
(62,435)
477
101
(7,763)
(25)
(1,619)
(167)
506
769
(9,709)
(2,790)
(650)
(1,259)
126,301
(75,568)
–
5,883
126,301
(69,685)
(225)
–
(185)
–
126,076
(69,870)
126,076
(69,870)
10
10
96.6
88.6
(53.8)
(53.8)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
87
FINANCIAL STATEMENTS CONTINUED
Consolidated statement
of financial position
As at 31 December 2020
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
Other assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
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
2020
£’000
2019
£’000
11
12
13
15
15
14
16
9
17
154,416
312
49
90
106
154,973
112,085
62,276
1,378
175,739
151,921
688
160
339
366
153,474
54,638
–
1,106
55,744
330,712
209,218
(2,235)
–
(2,235)
(6,154)
–
(6,154)
(268)
(956)
(2,503)
(7,110)
328,209
202,108
188,585
142,044
(2,420)
188,585
15,718
(2,195)
328,209
202,108
The accompanying notes form an integral part of the financial statements. The financial statements on pages 87 to 107 were approved by the
Board of Directors and authorised for issue on 8 March 2021, and were signed on its behalf by
Naseem Amin
Executive Chairman
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Consolidated statement
of changes in equity
For the year 31 December 2020
As at 1 January 2020
Profit for the year
Other comprehensive expense
Share-based payment charge
Acquisition of own shares
Issue of own shares to employees
As at 31 December 2020
Share Capital
and Premium
£’000
188,585
–
–
–
–
–
Other
Equity
£’000
(1,754)
–
–
–
–
Other
Reserves
£’000
(441)
–
(225)
–
–
514
(514)
Retained
Earnings
£’000
15,718
126,301
–
25
–
–
Total
£’000
202,108
126,301
(225)
25
–
–
188,585
(1,240)
(1,180)
142,044
328,209
For the year ended 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
Other
Equity
£’000
(1,211)
–
–
–
(986)
443
(1,754)
Other
Reserves
£’000
782
–
(780)
–
–
(443)
(441)
Retained
Earnings
£’000
82,018
(69,685)
595
2,790
–
–
Total
£’000
270,174
(69,685)
(185)
2,790
(986)
–
15,718
202,108
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FINANCIAL STATEMENTS CONTINUED
Consolidated statement
of cash flows
For the year ended 31 December 2020
Net cash from operating activities
Finance income
Finance expenses
Tax paid
Net cash used 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 (placed on)/from 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 used financing activities
Net increase 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
2020
£’000
(6,833)
101
–
–
2019
£’000
(9,242)
769
–
–
(6,732)
(8,473)
(28,923)
157,528
(7)
(62,276)
66,322
–
–
–
(34,858)
8,791
(6)
60,209
34,136
–
(986)
(986)
59,590
24,677
54,638
(2,143)
112,085
31,009
(1,048)
54,638
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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" or "Arix") 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. The Company is the ultimate parent company into which the results of all subsidiaries are consolidated.
2. Accounting Policies
A. Basis of preparation
The consolidated financial statements of the Arix Group have been prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and prepared in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in 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)), share-based
payments (see Note 2(O) and Note 18) and taxation (see below and Note 9). Sensitivity of the investment portfolio is disclosed in Note 11.
The Group primarily seeks to generate capital gains from its portfolio company investments, which would ordinarily be subject to UK corporation tax.
However, where the Group holds or has held in excess of 10% of the share capital of a portfolio company, and those companies are themselves trading
or preparing to carry on a trade, the Directors continue to believe that these holdings will qualify for the UK’s Substantial Shareholdings Exemption
(“SSE”), which exempts taxable gains or losses from corporation tax. For unrealised gains and losses that are expected to meet the qualifying criteria,
no deferred tax provision will be made in the Group’s financial statements. Where investment gains or losses are unrealised and are not expected to
qualify for SSE, the anticipated tax due based on the current valuation of the underlying investment is reflected in a deferred tax balance, to the extent
that these exceed the Group’s historical operating losses from time to time. SSE has been applied to net realised gains of £127.5 million in the year
(2019: £2.2 million), reducing the tax liability arising on these disposals by £24.2 million (2019: £0.4 million).
The Directors have taken what they consider to be all necessary steps to support the determination that these gains and losses in the Arix portfolio
qualify for SSE, including close collaboration with their appointed tax advisers and further consultation and receipt of written opinion from a Queen's
Counsel Barrister at a leading tax chambers. The Directors believe that successful HMRC challenge of this conclusion is improbable.
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.
In preparing these financial statements, the Directors have concluded that the Company meets the definition of an investment entity as per IFRS 10,
as it has the typical characteristics set out in the standard, including holding more than one investment and having more than one investor which is
not a related party of the entity. The Group’s investment in Twelve Bio is the only investee company which the Group controls and therefore is the only
subsidiary held at FVTPL.
Going concern
The financial information presented within these financial statements has been prepared on a going concern basis as disclosed in the Directors’ Report.
The Directors have made an assessment of going concern taking into account the Group’s current performance and outlook, which considered the risks
the business is exposed to, including the ongoing Covid-19 pandemic and the legislative impact of the UK’s withdrawal from the European Union and
concluded that no material uncertainty exists around the Company or the Group’s ability to continue as a going concern.
B. Basis of consolidation
Subsidiaries
The Directors have concluded that the Group has all the elements of control as prescribed by IFRS 10 “Consolidated Financial Statements” in relation
to all its subsidiaries and that the Company satisfies three essential criteria to be regarded as an investment entity as defined in IFRS 10, IFRS 12
“Disclosure of Interests in other entities” and IAS 27 “Consolidated and Separate Financial Statements”. The three essential criteria are such that
the entity must: obtain funds from more than one investor for the purpose of providing these investors with professional investment management
services; commit to its investors that its business purpose is to invest its funds solely for returns from capital appreciation, investment income or both;
and measure and evaluate the performance.
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FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
2. Accounting Policies continued
Subsidiaries are therefore measured at Fair Value through profit or loss in accordance with IFRS 13 “Fair Value measurement” and IFRS 9
“Financial Instruments”.
Notwithstanding this, IFRS 10 requires subsidiaries that provide services that relate to the investment entity’s investment activities to be consolidated.
Accordingly, the financial statements consolidate the results of the entities listed in the table 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
82 Nassau Street, PMB 725, New York, NY 10038
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
100%
100%
100%
100%
100%
100%
100%
100%
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. 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.
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.
The below subsidiary is measured at Fair Value through profit or loss:
Entity
Twelve Bio ApS
Country of Incorporation
Registered Address
Denmark
Ole Maaloes Vej 3, 2200 Copenhagen, Denmark
Ownership
29.9%
The Group considers the above entity to be under its control as employees of the Group hold two of Twelve Bio’s four director seats, including the
position of chairman, who has the deciding vote in any tied board vote. The Group has the right to variable returns from its investment and has the
power to affect these returns through its position on the board.
Associates
The Group has taken the exemption permitted by IAS 28 “Investments in Associates and Joint Ventures” and IFRS 11 “Joint Arrangements” for entities
similar to investment entities and measures its investments in associates and joint ventures at fair value. The Directors consider an 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 (as detailed in Note 2(A)) nor an associate, as the Group does not have a 20-50% interest in the entity nor
considered to have significant influence.
C. Adoption of new and revised standards
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have
not been early adopted by the Group. These standards are not expected to have a material impact on the Group in the current or future reporting
periods or on foreseeable future transactions.
D. Revenue recognition
Revenue is generated from fund management fees, and from board adviser fees. Fund management fees are earned as a percentage of funds
managed and are recognised in the period in which these services are provided. Board adviser fees are recognised on an accruals basis.
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2. Accounting Policies continued
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. Foreign exchange movements on
Investments held at fair value are reported within Change in fair value of investments on the face of the Consolidated Statement of Comprehensive
Income. This is a presentational change in 2020, these movements having previously been presented within foreign exchange movements on the
face of the Consolidated Statement of Comprehensive Income. The prior year comparatives have been updated to reflect the presentation change,
with £3,793k reclassified. Foreign exchange differences arising from other items are disclosed separately on face of the Consolidated Statement of
Comprehensive Income.
F. Leases
A lease liability is recognised representing the present value of the remaining lease payments and a related right of use asset. Right of use assets
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.
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
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, and investment subsidiaries. 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 paid by the external investor 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.
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FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
2. Accounting Policies continued
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.
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 and call deposits. 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.
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2. Accounting Policies continued
N. Current and deferred taxation
The tax expense for the year comprises current tax and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent
that it relates to items recognised directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries
where the Arix Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is recognised 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.
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. Other reserves
Other reserves relate to a Translation Reserve, for foreign exchange differences which arise on the translation of foreign operations; and a reserve
relating to the issue of shares by the Company’s Employee Benefit Trust upon vesting of employee share schemes.
Q. 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 $163.4m and euro-denominated assets valued at €16.3m. A 10% appreciation
in each currency would have a £14.9m negative impact on Arix’s Income Statement; a 10% depreciation would have a £12.2m 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
and cash on long-term deposit, which earn interest at variable rates. The Arix Group has a treasury policy to manage cash and cash equivalents and
cash on long-term deposit. In the year ended 31 December 2020, a 10% change in underlying interest rates would have impacted Arix’s finance income
by £10k (2019: £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 (£112m (2019: £54.6m)); cash on long-term deposit (£62m (2019: £nil)); and trade
and other receivables (£1.4m (2019: £1.1m)).
Risk of counterparty default arising on cash and cash equivalents is controlled within a framework of dealing with high quality institutions.
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FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
2. Accounting Policies continued
As at 31 December 2020, 100% of cash and cash equivalents and cash on long-term deposit was deposited with institutions that have a short-term
credit rating of at least F1, 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
2,235
Total
£’000
2,235
Capital risk management
The Arix Group manages its capital to ensure that it will be able to continue as a going concern, whilst also maximising the operating potential of
the business. The capital structure of the Arix Group consists of equity attributable to equity holders of the Arix Group, comprising issued capital
and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. The Arix Group is not subject to externally imposed
capital requirements.
3. Revenue
Fund management fee income
Other income
2020
£’000
346
131
477
2019
£’000
480
26
506
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 Executive Chairman, 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. The geographic split of the portfolio is shown on page 2.
5. Profit/(Loss) 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
2020
£’000
(217)
(116)
–
(159)
92
41
25
158
2019
£’000
(287)
(159)
(464)
(795)
141
48
36
225
Non-audit services in the year relate to the Arix Bioscience plc interim review (£20k) and an FCA Client Asset Report (£4k) (2019: interim review £30k;
FCA Client Asset Report £6k).
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
6. Administrative Expenses
The administrative expenses charge broken down by nature is as follows:
Employment costs
Recruitment costs
Consultancy fees
Other expenses
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
Employee costs excluding share-based payments
Share-based payments (Note 18)
2020
£’000
5,066
46
54
2,597
7,763
2020
£’000
101
–
101
2020
£’000
4,445
418
203
5,066
25
5,091
2019
£’000
5,637
147
320
3,605
9,709
2019
£’000
769
–
769
2019
£’000
4,808
532
297
5,637
2,790
8,427
The average number of employees during the year was 14 (2019: 16) (investment team: 6 (2019: 8); non-investment team: 8 (2019: 8)).
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G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
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H
E
R
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F
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A
T
I
O
N
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FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
9. Income Tax continued
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
Profit/(loss) before tax
Expected tax based on 19.00% (2019: 19.00%)
Effects of:
Expenses not deductible for tax purposes
Adjustment in respect of previous periods
Income not taxable
Tax rate changes
Net gains/(losses)
Employee share options
Deferred tax not recognised
Total tax (credit)/charge
Recognised deferred tax provisions
Brought forward
Adjustments in respect of prior year
Relating to profit and loss
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
2020
£’000
2019
£’000
–
207
(185)
(22)
–
–
(5,760)
687
(810)
(5,883)
126,301
23,997
(75,568)
(14,358)
2,489
(185)
(26,706)
(22)
–
(789)
1,216
–
–
(185)
185
–
(925)
–
–
–
926
(1)
–
(6,443)
95
(1,179)
(7,527)
12,120
(810)
(9,808)
693
(6)
116
6,170
(5,883)
5,883
–
(5,883)
–
(8)
–
276
(276)
9
(1)
–
(5,263)
69
(299)
(5,493)
Deferred tax balances have been calculated using a rate of 19% (2019: 19%). The Group is subject to UK corporation tax on the majority of its activities,
which can include gains arising on investments. However, where possible the Group aims to take advantage of the UK’s Substantial Shareholding
Exemption (“SSE”), which exempts taxable gains or losses arising from the disposal of shares, where certain conditions are met. The Directors continue
to believe that the application of SSE to the tax computation remains appropriate.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
10. Earnings/(Loss) per Share
On 6 July 2020, the Group issued 57,803 ordinary shares, in relation to certain share awards. As at 31 December 2020 the Group had 135,609,653
ordinary shares in issue (2019: 135,551,850).
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.
Potentially dilutive ordinary shares include options and conditional share awards issued under the Company's long term incentive plans. At the year end
date, the weighted average number of shares in relation to: (i) options and conditional share awards was 6,760,409; and (ii) ordinary shares subject
to restrictions was 5,080,582. Restricted ordinary shares are not entitled to vote, attend meetings or to receive dividends or other distributions.
Consequently, they have been excluded from the calculation of the weighted average number of shares in issue.
Profit/(loss) 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 earnings/(loss) per share
Diluted earnings/(loss) per share
11. Investments
Equity investments – 2020
At 1 January 2020
Additions
Disposals
Transfers
Capitalisations
Change in fair value
Foreign exchange losses
At 31 December 2020
As at
31 December
2020
£’000
As at
31 December
2019
£’000
126,076
(69,870)
130,499,853
129,948,773
142,340,844
129,948,773
96.6p
88.6p
(53.8p)
(53.8p)
Level 1 –
Quoted
Investments
£’000
Level 3 –
Unquoted
Investments
£’000
87,844
13,487
64,077
11,127
Total
£’000
151,921
24,614
(18,821)
(138,707)
(157,528)
11,707
112
7,278
(5,895)
95,712
(11,707)
–
139,903
(5,989)
–
112
147,181
(11,884)
58,704
154,416
Transfers from Level 3 to Level 1 reflects companies which have listed during the year, the only company being Imara, Inc in 2020. Level 3 investments
are valued with reference to either the most recent funding round (£22.9m, 2019: £37.6); net asset value (£1.1m, 2019: £1.4m); market-based write-up
(£31.2m, 2019: £22.7m); discretionary write-down (£1.3m, 2019: £2.4m) or deferred consideration (£2.2m, 2019: £nil). See Note 2(I) for further details
on the valuation of Level 3 investments.
The Group's milestone valuation approach cannot be readily sensitised and therefore the Group has not disclosed sensitivity analysis for Level 3 inputs.
A 10% movement in the share price of Level 1 inputs would resulting a £9.5m (2019: £8.7m) movement in the investment portfolio value.
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G
O
V
E
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N
A
N
C
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F
I
N
A
N
C
I
A
L
S
T
A
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E
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N
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N
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O
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A
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I
O
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Equity investments – 2019
At 1 January 2019
Additions
Disposals
Transfers
Capitalisations
Change in fair value
Foreign exchange losses
At 31 December 2019
Level 1 –
Quoted
Investments
£’000
118,982
8,485
(4,277)
23,131
–
(56,475)
(2,002)
87,844
Level 3 –
Unquoted
Investments
£’000
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
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FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
11. Investments continued
As permitted by IAS 28 ‘Investment in Associates’ and in accordance with the Arix Group accounting policy, investments are held at fair value even
though the Arix Group may have significant influence over the companies. 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 2020, 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%
€2,431k
€(1,486)k
31 December 2018
Quench Bio, Inc (USD)
USA
400 Technology Square,
Cambridge, MA 02139
STipe Therapeutics Aps (EUR) Denmark
Lyngsievvej 18, 8230 Abyhoj
25.0%
14.8%
N/A
N/A
N/A Not publicly available
N/A Not publicly available
In addition, at 31 December 2020, 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.
GenSight Biologics SA
Imara, Inc.
Iterum Therapeutics Limited
LogicBio Therapeutics, Inc.
OptiKira, LLC
PreciThera, Inc
Board Seat?
Observer
Y
Y
Y
N
N
N
N
N
N
N
N
% of Issued
Share Capital
Held
3.0%
12.4%
6.4%
7.8%
6.4%
8.8%
2.8%
8.0%
1.6%
12.2%
11.8%
13.6%
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 £1.1m (2019: £1.4m).
12. Intangible Assets
Brought forward
Amortisation
Impairment in period
Year Ended
31 December
2020
Year Ended
31 December
2019
688
(217)
(159)
312
1,770
(287)
(795)
688
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. At the date of acquisition, the fees for the remaining life of
the fund were calculated and then 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 year.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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O
V
E
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N
A
N
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F
I
N
A
N
C
I
A
L
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T
A
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E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
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M
A
T
I
O
N
13. Property, Plant and Equipment
Year ended 31 December 2020
As at 1 January 2020
Additions
Disposals
Depreciation charge
At 31 December 2020
Year ended 31 December 2019
As at 1 January 2019
Additions
Depreciation charge
At 31 December 2019
14. Other Assets
Trade receivables
Prepayments
VAT receivable
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
138
–
–
(102)
36
15
–
–
(10)
5
7
7
(2)
(4)
8
Fixtures and
Fittings
£’000
Leasehold
Improvements
£’000
Office
Equipment
£’000
258
–
(120)
138
25
–
(10)
15
30
6
(29)
7
Total
£’000
160
7
(2)
(116)
49
Total
£’000
313
6
(159)
160
As at
31 December
2020
£’000
As at
31 December
2019
£’000
1,130
236
12
1,378
771
264
71
1,106
Trade and other receivables are recognised at amortised cost in accordance with IFRS 9, which includes the requirement to calculate expected credit
losses. The maximum exposure to credit risk at the reporting date is the carrying value of each asset class listed above and the fair value is akin to book
value. 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.
16. Trade and Other Payables
The carrying values of trade and other payables approximates their fair value.
Trade payables
Accruals and other payables
As at
31 December
2020
£’000
As at
31 December
2019
£’000
112,085
62,276
174,361
54,638
-
54,638
As at
31 December
2020
£’000
As at
31 December
2019
£’000
3
2,232
2,235
123
6,031
6,154
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101
FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
17. Share Capital and Share Premium
Allotted and called up
135,609,653 Ordinary Shares of £0.00001 each (2019: 135,551,850 shares)
49,671 Series C Shares of £1 each (2019: 49,671 shares)
Share Premium
As at
31 December
2020
£’000
As at
31 December
2019
£’000
1
50
1
50
188,534
188,534
On 6 July 2020, the Group issued 57,803 Ordinary Shares, in relation to certain share awards. As at 31 December 2020, the Group had 135,609,653
Ordinary Shares in issue (2019: 135,551,850).
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 2020, share-based payment (credits)/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
Executive Incentive Plan 2020
2017 IPO Award
Executive Share Option Plan
Founder Incentive Shares
Non-Executive Director Awards
Year Ended
31 December
2020
£’000
Year Ended
31 December
2019
£’000
173
(415)
(143)
334
–
26
–
50
25
430
883
448
–
213
567
179
70
2,790
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 would become
exercisable at nil cost and in the case of the conditional share awards, would vest at nil cost on the third anniversary of their grant, on 26 May 2020,
subject to performance criteria. This required 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; all options lapsed during the year due to performance conditions not being met (2019:
unvested 1,486,747). In the year ended 31 December 2020, a share-based payment charge of £173k (2019: £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; 769,515 options were unvested at year-end (2019: 2,290,499) due to 1,520,984 awards relating to
leavers lapsing. In the year ended 31 December 2020, a share-based payment credit of £415k (2019: charge of £883k) was recognised in relation to the
Executive Incentive Plan.
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 net asset value and the share price to have grown by a set percentage over the assessment period to 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; 679,581 were
unvested at year-end (2019: unvested 2,524,661) due to 1,845,080 awards relating to leavers lapsing. In the year ended 31 December 2020, a share-
based payment credit of £143k (2019: charge of £448k) was recognised in relation to the Executive Incentive Plan.
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ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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P
O
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A
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G
O
V
E
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N
A
N
C
E
F
I
N
A
N
C
I
A
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A
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M
E
N
T
S
O
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H
E
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I
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O
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A
T
I
O
N
18. Share Options continued
In June 2020, 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 net asset value and the share price to have grown by a set percentage over the assessment period to 1 January
2023, with the quantum of shares vesting dependent on both the level of share price growth and the level of net asset value growth; 3,414,241 were
issued in the period, all of which are unvested at year-end. In the year ended 31 December 2020, a share-based payment charge of £334k (2019: £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 £0.865, and the assessed likelihood of vesting (2020: 100%). The charge relating to share price growth was calculated using a Monte Carlo
simulation model, using assumptions relating to share price at grant (£0.865); risk free interest rate (-0.08%); time to vesting (2 years and 6 months);
and expected volatility based on comparable listed investments 23.8%).
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. 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 2020, a share-based payment charge of £26k (2019: £567k) 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. A charge of £nil was recognised in the year ended 31 December 2020 (2019: £179k). 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 £50k (2019: £70k) was recognised during the period.
19. Net Cash From Operating Activities
Profit/(loss) before income tax
Adjustments for:
Change in fair value of investments
Foreign exchange losses
Share-based payment charge
Depreciation and amortisation
Impairment of assets
Finance income
Changes in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash used in operations
Year Ended
31 December
2020
£’000
Year Ended
31 December
2019
£’000
126,301
(75,568)
(135,297)
62,435
1,619
25
335
167
(101)
(272)
390
(6,833)
650
2,790
446
1,259
(769)
1,068
(1,553)
(9,242)
20. Financial Commitments
The Group has amounts committed to portfolio companies but not yet invested; at 31 December 2020 these totalled £9.3m (2019: £8.5m).
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103
FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements continued
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 and loan note investments
Other receivables (excluding prepayments)
Long-term cash on deposit
Cash and cash equivalents
As at
31 December
2020
£’000
As at
31 December
2019
£’000
154,416
1,130
62,276
112,085
151,921
771
–
54,638
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 F1 or above 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)
Lease liability
As at
31 December
2020
£’000
As at
31 December
2019
£’000
2,235
268
6,154
956
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, (£196,088), unchanged from 2019.
23. Related Party Transactions
During the period, key management has comprised Executive Directors, whose remuneration is disclosed in the Directors’ Remuneration Report; and
other members of the executive team. These other members received short-term employee benefits of £760,010 in the year (2019: £371,834, relating
to the period in which they were fulfilling key management responsibilities).
24. Events After the Reporting Date
In January 2021, $5.5m (£4.0m) was realised from Imara, Inc. Arix's stake in the company now totals 5.8%.
On 11 January 2021, Harpoon Therapeutics, Inc. closed a public offering raising $115m. Arix did not participate; its stake in the company now totals
6.9%.
On 12 February 2021, Autolus Therapeutics plc closed a public offering raising $115m. Arix did not participate. Post-period end, Arix realised $16.4m
(£11.7m) from Autolus Therapeutics plc. Its stake in the company now totals 1.6%.
On 24 February 2021, Arix invested a further €2.7m (£2.4m) in Depixus; its stake in the company now totals 21.4%.
In March 2021, Quench Bio opted to wind down after concluding its research activities. Arix anticipates receiving proceeds of $0.5m-$1.0m upon
conclusion of the wind down.
On 5 March 2021, Arix invested its remaining $0.7m (£0.5m) commitment in Aura Biosciences; its stake in the company now totals 7.9%.
Following market purchases since 31 December 2020, Arix's stake in GenSight Biologics now totals 4.4%.
In March 2021, it was announced that the United Kingdom's main rate of corporation tax will rise from 19% to 25% from April 2023. As this rate has not
been substantively enacted at the balance sheet date, deferred tax balances in these financial statements continue to be measured at 19%.
104
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
Company statement
of financial position
As at 31 December 2020
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
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
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
Note
2020
£’000
2019
£’000
2
4
3
3
891
29,927
30,818
110,581
62,276
38
891
157,061
157,952
49,953
–
103
172,895
50,056
203,713
208,008
(475)
(647)
(475)
(647)
203,238
207,361
188,585
(4,148)
20,998
(2,197)
188,585
(25,885)
46,858
(2,197)
203,238
207,361
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
105
FINANCIAL STATEMENTS CONTINUED
Company statement
of changes in equity
For the year ended 31 December 2020
As at 1 January 2020
Loss for the year
Share-based payment charge
Acquisition of own shares
Issue of own shares to employees
As at 31 December 2020
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
Share Capital
and Premium
£’000
188,585
–
–
–
–
Other
Equity
£’000
(1,754)
–
–
–
514
188,585
(1,240)
Share Capital
and Premium
£’000
188,585
–
–
–
–
188,585
Other
Equity
£’000
(1,211)
–
–
(986)
443
(1,754)
Other
Reserves
£’000
(443)
–
–
–
(514)
(957)
Other
Reserves
£’000
–
–
–
–
(443)
(443)
Retained
Earnings
£’000
20,973
(4,148)
25
–
–
Total
£’000
207,361
(4,148)
25
–
–
16,850
203,238
Retained
Earnings
£’000
44,068
(25,885)
2,790
–
–
Total
£’000
231,442
(25,885)
2,790
(986)
–
20,973
207,361
106
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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 in conformity with the requirements of the Companies Act 2006 and prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Company 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 (repayment)/additions during the year
Impairments during the year
At 31 December
2020
£’000
891
–
–
891
2019
£’000
891
–
–
891
As at
31 December
2020
£’000
As at
31 December
2019
£’000
110,581
62,276
49,953
–
As at
31 December
2020
£’000
As at
31 December
2019
£’000
157,061
(127,134)
139,849
35,612
–
(18,400)
29,927
157,061
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
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 £nil (2019: £18.4m) has been recognised in the year relating to the Company’s outstanding amount due from Arix Bioscience, Inc., a
100% subsidiary of the Company.
5. Employees
The average number of employees during the year was one (2019: two).
ARIXBIOSCIENCE.COM
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
107
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
Naseem Amin
Professor Trevor Jones CBE
Giles Kerr
Mark Breuer
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
BDO LLP
55 Baker Street
London
W1U 7EU
United Kingdom
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
BN99 6DA
United Kingdom
108
ARIX BIOSCIENCE PLC ANNUAL REPORT 2020
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
Necrotising 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
Consultancy, design and production
www.luminous.co.uk
less severe mutations may not require
regular transfusions (NTDT Non-Transfusion
Dependent Thalassemia).
Design and production
www.luminous.co.uk
20 Berkeley Square
London W1J 6EQ
United Kingdom
+44 (0)20 7290 1050
info@arixbioscience.com