H E M O G E N Y X P H A R M A C E U T I C A L S P L C
( F O R M E R LY S I L V E R F A L C O N P L C )
A N N U A L R E P O R T & F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
C O N T E N T S
Company Information
Chairman’s Statement
Board of Directors and Senior Management
Strategic Report
Director’s Report
Governance Report
Directors’ Remuneration Report
Independent Auditors’ Report
Statement of Comprehensive Loss
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Financial Statements
1
2
6
9
16
23
29
35
40
41
42
43
44
45
46
47
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
1
Solicitors
Charles Russell Speechlys LLP
5 Fleet Place
London
EC4M 7RD
Principal Bankers
Metro Bank plc
One Southampton Row
London
WC1B 5HA
Registrars
Computershare Investor Services PLC
The Pavillions
Bridgwater Road
Bristol
BS13 8AE
C O M P A N Y I N F O R M A T I O N
Directors
Dr Vladislav Sandler (Chief Executive Officer)
Professor Sir Marc Feldmann (Executive Chairman)
Lawrence Pemble (Chief Operating Officer)
Alexis Sandler (Non-Executive Director)
Peter Redmond (Non-Executive Director)
Dr Robin Campbell (Non-Executive Director)
Company Secretary
Lawrence Pemble
Registered Office
5 Fleet Place
London
EC4M 7RD
Registered Number
8401609 (England and Wales)
Joint Broker
Optiva Securities Limited
2, Mill Street
London
W1S 2AT
Joint Broker
Shard Capital
23rd Floor
20 Fenchurch Street
London
EC3M 3BY
Independent Auditor
PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
2
C H A I R M A N ’ S S T A T E M E N T
treatments, and at the same time address the problem of
finding matching stem cell donors whilst reducing the risk
of blood stem cell rejection after transplantation.
Consequently, shareholders now have exposure to an
important and growing area of treatment for serious
blood diseases, such as leukaemia and myeloma, whose
treatment is currently restricted in use by risk of toxicity.
The two products being developed by Hemogenyx have
the potential to transform, and potentially revolutionise,
the bone marrow or blood stem cell transplant procedure
used to treat the most severe cases of these diseases.
Hemogenyx is developing two products based on a key
finding made by Dr Vladislav Sandler, the Co-Founder
and Chief Executive, for the $8-9 billion bone marrow
/ haematopoietic stem cell transplant market which
could replace chemotherapy and radiation as a means
of pre-transplant conditioning, as well as addressing the
problem of stem cell donor availability and issues around
relapse or cell rejection after transplantation. These two
products are:
I am very pleased to present an update on the Company
for the year ended 31 December 2017. I took over as
Chairman on April 9, 2018, succeeding Dr Robin Campbell.
Silver Falcon listed on the London Stock Exchange on 9
November 2015. Following the evaluation of a number of
acquisition opportunities, it announced on 11 September
2017 an agreement to acquire the entire share capital
of Hemogenyx Pharmaceuticals Limited for £8m (the
“Acquisition”), to be satisfied by the issue of 228,571,428
Consideration Shares at a price of 3.5p per share. The
acquisition constituted a reverse takeover under IFRS2.
• Conditioning product - CDX bi-specific antibodies
which redirect a patient’s own immune cells to eliminate
unwanted blood stem cells preparing a patient for bone
marrow transplantation;
• Cell therapy product - Cell replacement product using
Human Postnatal Hemogenic Endothelial Cells (Hu-
PHEC) to generate cancer-free, patient-matched blood
stem cells after transplant into the patient.
Concurrent with the acquisition the Company raised £2m
(before expenses) through the issue of 57,142,857 New
Ordinary Shares in a Placing and Subscription at a price
of 3.5p per share, as well as offering 1 new share for 2
warrants to qualifying shareholders over 62,021,429 New
Ordinary Shares at 4.0p per share. Silver Falcon formally
changed its name to Hemogenyx Pharmaceuticals Plc.
Hemogenyx Pharmaceuticals Limited is the holding
company for Hemogenyx LLC (“Hemogenyx”), a US
based biotechnology company developing therapies to
transform bone marrow and blood stem cell transplant
procedures. These therapies aim to replace the need for
the imperfect existing methods of preparation of patients
for transplantation, such as chemotherapy and radiation
The products address a large and growing need and
will be sold into a market that is already substantial. If
successful, Hemogenyx’s products will enable a much
wider range of patients to be treated than is presently
the case as the products should be applicable to the very
many patients who are unfit for or, through the lack of
suitable cell donors, unable to receive blood stem cell
transplants at present.
Hemogenyx has, to date, made impressive progress on
the Company’s two products efficiently using its limited
financial resources. With the £1.6million net of expenses
raised during the listing, we expect to take the initial
conditioning product to readiness for clinical trials and to
make significant progress with our cell therapy product.
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3
In addition, we expanded our material transfer agreement
with a major US research university, ensuring the reliable
supply of high-quality human tissues for the development
of our Hu-PHEC cell therapy product.
Post-period end updates
Following the end of the period under review, we
have been able to announce two additional items of
significance, describing research progress. The first
major item was the receipt of our first set of data results
showing that developed by Hemogenyx CDX bi-specific
antibodies are capable of attacking and eliminating
cultured cells of the blood cancer, Acute Myelogenous
Leukemia (AML), tested in vitro.
This is a significant development in the process needed
to develop CDX antibodies to become a universally
available conditioning product for patients undergoing
bone marrow transplants as a treatment for serious blood
diseases.
At the same time, we confirmed the filing of a provisional
patent application relating to our development of a new
type of humanised mice with a chimeric mouse-human
blood system. This can be used to advance product
development, as well as to model several other diseases
and drug discovery applications.
Using these new humanised mice should allow us to
demonstrate that CDX bi-specific antibodies are effective
in the treatment of AML, this time in vivo.
Of particular significance is that this new type of humanised
mice allows us to extend our work to other disease
models and the evaluation of specific drug candidates.
Furthermore, this is of interest to large biopharmaceutical
companies. Thus, in mid-March 2018 we announced a
collaboration with a major US biotechnology company
(with whom we were already working and from whom we
had already received revenue) to use our humanised mice
for this very purpose. The deal is revenue generating for
the Company and is worth up to approximately $250,000
and we believe this has the potential to generate further
income as the collaboration develops.
C H A I R M A N ’ S S T A T E M E N T
Update on Hemogenyx progress
I should take this opportunity to remind shareholders of the
progress made since the reverse takeover and relisting.
Overall the work is progressing successfully toward our
goal of submitting an Investigational New Drug (“IND”)
application to the US Food and Drug Administration for
our CDX antibodies product.
LakePharma, Inc. appointment
In October last year we announced the appointment
of LakePharma, Inc. as our service provider for the
development and manufacturing of our CDX bi-specific
antibodies lead product. LakePharma will work with us
through the product development process, from discovery
to biomanufacturing, as we move toward readiness for
clinical trials. LakePharma, the largest US-based biologics
contract research organisation, is a significant partner
bringing the relevant integrated antibody engineering
and bioproduction expertise we need to advance our
CDX product through the necessary preclinical stages to
be ready to enter the clinic within our planned timetable.
University of Oxford Collaboration
In November last year we confirmed a collaboration with
the University of Oxford to test new means of accelerating
and improving the process by which transplanted blood
stem cells grow and make healthy blood cells, and which
promises to hasten the development of our Hu-PHEC
technology.
Researchers at Hemogenyx will administer certain
biologics from Oxford to stem cells in an attempt to
accelerate and improve the engraftment of hematopoietic
stem and progenitor cells in animal models. Engraftment
is the process by which blood stem cells integrate into
the bone marrow and make healthy blood. If successful,
this approach has the potential to dramatically improve
the efficiency and outcome of bone marrow transplants.
We will then be in a position to test whether this approach
facilitates the conversion of Hu-PHEC into fully functional,
transplantable blood stem cells. Our Hu-PHEC when
developed and successfully tested will generate cancer-
free, patient-matched blood stem cells and are the basis
of our cell therapy product and have the potential, if all
goes according to plan to improve the efficacy of the
bone marrow transplantation therapy.
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017
4
end. I have elected to receive most of my remuneration
in shares and collectively we remain confident that they
should deliver significant shareholder return over the
long term.
As a further sign of confidence, we were pleased to note
that Cornell University, with whom we have an exclusive
licence agreement relating to the patents covering the
method of isolation of post-natal hemogenic endothelial
cells, invented by Dr Sandler, elected to receive part
payment for a sum due in a mixture of new shares and
cash, rather than cash as previously expected.
C H A I R M A N ’ S S T A T E M E N T
Financial Results
During the year the Group made a loss of £2,361,599
(2016: £470,839 loss). The loss in the year includes a
reverse acquisition expense of £1,631,020. As at present,
we remain within budget for the developments of our
products.
Scientific Advisory Board & Board update
I have been Chairman of the Scientific Advisory Board
since September 2017 and have been working with the
Company to widen its expertise and to bring in advisers
that can specifically help given the stage to which the
Company’s product development has advanced.
In March 2018, we were very pleased to welcome Dr
Michael Shepard to our Scientific Advisory Board. Dr
Shepard is a renowned cancer research specialist
and his work led to the discovery and development of
many successful cancer treatments including Herceptin/
trastuzumab, an antibody used to treat breast cancer
patients when he was at Genentech. Sales of Herceptin
last year exceed $6.5 billion worldwide.
Our Scientific Advisory Board, under my Chairmanship
brings together a number of experienced experts with
extensive biotech and large pharma drug development
experience and their calibre is a reflection of the potential
opportunity that our therapies present. Further additions
are under consideration.
Earlier this month I extended my commitment to the
Company and became Executive Chairman, replacing
Robin Campbell, who has become a Non-Executive
Director.
In November, we announced that Timothy Le Druillenec,
Finance Director, stood down as a Director and at the
same time as my appointment to the Board, Adrian
Beeston stood down as a Non-Executive Director. I
again extend my thanks to both Timothy and Adrian for
their contribution to the successful completion of the
Company’s readmission and trading on the main market
of the London Stock Exchange.
The Board have continued
their
confidence in the ongoing success of the business
throughout the period under review and post-period
to demonstrate
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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C H A I R M A N ’ S S T A T E M E N T
Outlook
Our two main planned products are on track and should
if fully developed and brought into use greatly reduce the
dangers of patient conditioning procedures and create a
new form of blood stem cell transplantation that has the
potential to significantly improve the long-term success
of bone marrow transplants and to transform the lives of
patients diagnosed with serious blood diseases.
My fellow Directors and I believe that the Company is
well-advanced on the planned development steps that
were announced at Admission and we look forward to
the next 12 months with confidence.
Prof Sir Marc Feldmann AC, FRS
MB BS, PhD, FRCP, FRCPath, FAA, F Med Sci
Chairman
1 June 2018
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B O A R D O F D I R E C T O R S A N D S E N I O R M A N A G E M E N T
honoured in Australia with the knighthood equivalent, the
Companion of the Order of Australia.
Sir Marc has been at the forefront of promoting effective
scientific-medical-pharmaceucal interactions, he has built
up a huge network of friends and collaborators who meet
regularly in Oxford and they will help Hemogenyx grow
and go clinical.
PROFESSOR SIR MARC FELDMANN
Executive Director & Chairman appointed 9 April 2018
Professor Sir Marc Feldmann is a pre-eminent medically
trained immunologist at the University of Oxford where
he was Head of the Kennedy Institute of Rheumatology
until 2014 and now Emeritus Professor. He trained in
medicine at Melbourne University and then earned a
Ph.D. in Immunology at the Walter & Eliza Hall Institute
with Sir Gus Nossal, before working in London at the
Imperial Cancer Research Fund. Sir Feldmann’s main
research interests are immunoregulation, understanding
mechanisms of autoimmunity and the role of cytokines in
disease, and working out how to fill unmet medical needs.
for
His work in London led to the generation of a new
hypothesis
the mechanism of autoimmunity,
linking upregulated antigen presentation and cytokine
expression. Testing this hypothesis led to the discovery,
with colleague Sir Ravinder Maini, of the pivotal role of
TNFα (Tumor Necrosis Factor alpha) in the pathogenesis
of rheumatoid arthritis. This major discovery has
revolutionised therapy not only of rheumatoid arthritis
but other chronic inflammatory diseases (eg Inflammatory
bowel disease, psoriasis, ankylosing spondylitis), and
helped change the perception of monoclonal antibodies
from niche products to mainstream therapeutics. Anti-
TNF therapeutics are the current leading drug class with
2016 sales exceeding US $36 Billion.
This has led to much scientific recognition, for example
election to the Royal Society and Academy of Medical
Sciences in London, the National Academy of Sciences
USA and the Australian Academy of Science, and multiple
major International prizes: including the Crafoord Prize of
the Royal Swedish Academy of Sciences, the Albert Lasker
Clinical Research Award (NY), the Ernst Schering Prize,
the Paul Janssen Award for Biomedical Research and the
Canada-Gairdner Award. He was also the first recipient
in biology or medicine of the EU/ European Patent office
Inventor of the Year Award in the Lifetime Achievement
category. In addition, Sir Marc has advised more than 20
of the largest pharmaceutical and biotech companies in
the world and has mentored some of the most successful
scientists, many of whom have become senior figures
in the commercial pharmaceutical world. Sir Marc was
knighted in the 2010 Queen’s Birthday Honours, and was
DR. VLADISLAV SANDLER
Chief Executive Officer appointed 4 October 2017
Dr. Vladislav Sandler is the Co-Founder and CEO of
HemoGenyx and a research Assistant Professor at the
State University of New York (SUNY) Downstate. Dr.
Sandler is a widely published stem cell scientist with
decades of experience in scientific research. In particular,
Dr. Sandler has extensive experience developing novel
methods of direct reprogramming of somatic cells into
functional and engraftable hematopoietic stem cells,
as well as developing novel sources of pluri- and multi-
potent cells.
Dr. Sandler has conducted his research in Russia, Israel,
Canada and the United States, including at Children’s
Hospital, Harvard Medical School, the Salk Institute
for Biological Sciences, Harvard University and Albert
Einstein College of Medicine, among others. He also
led a team of scientists at Advanced Cell Technologies,
Inc. and was most recently on the faculty of Weill Cornell
Medical College. While at Cornell, Dr. Sandler made the
significant discovery that the cells that give rise to blood
stem cells during mammalian development continue
to exist after birth, and he developed the method of
isolation of these cells from humans. As a result of this
important work, Dr. Sandler was awarded the inaugural
Daedalus Fund Award for Innovation at Cornell. He went
on to found HemoGenyx in order to further pursue this
significant scientific discovery and his dedication to the
translation of science into clinical practice.
Dr. Sandler has published numerous peer-reviewed
papers, and has received a number of awards and
for his scientific research. Dr. Sandler
fellowships
received his PhD from the University of British Columbia.
He is a member of the International Society for Stem Cell
Research.
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which time she was named one of Southern California’s
Best Young Lawyers by Los Angeles magazine. While at
Fox, Ms. Sandler successfully negotiated hundreds of
major distribution agreements, in addition to advising the
company on important corporate and other legal matters.
Ms. Sandler went on to become the General Counsel
at a Smithsonian affiliate museum in New York City. Ms.
Sandler is currently the Associate General Counsel for a
major New York City cultural institution. She also serves
as the Secretary of the Board of Directors for MoMA PS1,
the contemporary art space.
Ms. Sandler received her AB from Harvard University and
her JD from the UCLA School of Law, and is a member of
the State Bar of New York and the State Bar of California.
PETER REDMOND
Executive Director appointed 4 October 2017
Peter Redmond is a corporate financier with some 30
years’ experience in corporate finance and venture
capital. He has acted on and assisted a wide range of
companies to attain a listing over many years, on the
Unlisted Securities Market, the Full List and AIM, whether
by IPO or in many cases via reversals, across a wide range
of sectors, ranging from technology through financial
services to natural resources and, in recent years has
done so as a director of the companies concerned. He
has been active over many years in corporate rescues
and reconstructions on AIM and in reverse transactions
into a range of investing companies. He was a founder
director of Cleeve Capital plc (now Satellite Solutions
plc) and Mithril Capital plc (now BeHeard Group plc),
both of which were admitted to the Standard List of the
London Stock Exchange, and took a leading role in the
reconstruction and refinancing of of AIM-quoted Kennedy
Investments plc and 3Legs Resources plc (now SalvaRx
plc). Peter is Chairman of AIM-quoted Pires Investments
plc and URA Holdings plc.
LAWRENCE PEMBLE
Chief Operations Officer appointed 4 October 2017
Lawrence Pemble has comprehensive experience in
successfully creating, financing and developing new
businesses. He has led companies and individual projects
from acquisition to growth and has a keen interest in
helping businesses to achieve their potential.
Combining a strong entrepreneurial, corporate finance
and corporate governance background, Lawrence has
lead numerous financing rounds, M&A activities, IPOs
and has held executive roles, up to and including CEO,
for start-up and private equity backed ventures, both in
private and public capacities.
Lawrence is currently COO of American Helium Inc, a
Specialist Resource Company, listed on the TSX Venture
Exchange.
leading front-line operations
Lawrence served for over six years in the Royal Marine
Commandos,
in Sierra
Leone, Somalia, Iraq and Afghanistan. Lawrence is
currently studying Executive education at the University
of Oxfords’ Said Business School.
ALEXIS SANDLER
Non-Executive Director appointed 4 October 2017
Alexis M. Sandler is the co-founder of HemoGenyx, for
which she has served as the Chief Operating Officer. Ms.
Sandler is an attorney specializing in intellectual property,
with almost 15 years of experience representing a range
companies and institutions. Ms. Sandler is especially
skilled at handling diverse interests in day-to-day matters
of organizations, multi-party agreements and long-term
strategic planning.
Ms. Sandler began her legal practice in Los Angeles
at Hogan & Hartson LLP (now Hogan Lovells), where
she specialized in entertainment and media law and
intellectual property. She then worked for several years
at Katten Muchin Rosenman LLP representing studios,
production companies, television networks and other
major media companies in all aspects of entertainment,
media and intellectual property law. For three years, Ms.
Sandler worked as the Director of Business and Legal
Affairs for a division of the Fox Entertainment Group, during
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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B O A R D O F D I R E C T O R S A N D S E N I O R M A N A G E M E N T
DR. ROBIN CAMPBELL
Non-Executive Director appointed 4 October 2017
Robin Campbell, PhD has more than 30 years experience
working with large companies (Shell Research, GSK),
start-ups (Porton International, PafraBio) and in investment
banking (including Credit Suisse, Jefferies). Roles in
industry encompassed R&D,
international strategic
marketing, market access and business development.
is searching out
Currently his specialty
investable
opportunities in the broader life sciences sector, and
helping small companies raise growth capital. Robin
has helped list a number of companies onto the AIM
and international exchanges, advised companies on
secondary fundraisings, private equity raises, M&A and
has a broad reach into institutional and retail investor
networks.
He has a degree in Microbiology from King’s College
London, and a Ph.D. in Immunobiology from Liverpool
University. Dr Campbell currently advises a number of
private and listed businesses in respect to strategic and
financial market opportunities.
Dr. Campbell acted as Chairman from readmission to the
appointment of Sir Marc Feldmann on 9 April 2018.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
9
D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
The Directors present their Strategic Report of
Hemogenyx Pharmaceuticals Plc for the year
ended 31 December 2017.
Introduction
This Strategic Report comprises a number of sections,
namely; the Group’s objectives, the Group’s strategy and
business model, a review of the Group’s business using
key performance indicators, and the principal risks and
uncertainties facing the business.
Objectives
The Group’s objective
is to develop breakthrough
therapies for the treatment of blood diseases. Its aim is
to change the way in which bone marrow/hematopoietic
stem cell transplants are performed and improve their
efficacy.
Strategy and business model
The Group’s long-term strategy is to create a suite of
products to address current problems associated with
bone marrow, or hematopoietic stem cell transplants.
The latter represents an important part of the solution
to treating blood-related diseases (with the opportunity
to improve outcomes through reduced blood stem cell
transplant rejection and relapse) and, if successful,
potentially provides long-term cures for these diseases.
with the relisting including Advisory and Consultancy
Fees, salaries, consulting and professional along with
general administration expenses. These expenses have
been met from the proceeds of the issue of shares.
The Group received other income of £101,138 from a
collaboration with a partner.
Cash flow and cash position
Cash used in operations totalled £452,979 (31 December
2016 - £540,495 )
As at 31 December 2017, the Group had a cash balance of
£1,876,655 (31 December 2016 - £ 87,223).
Key Performance Indicators
The Directors have identified the KPIs below that they
feel are the most vital measurements for the Group to
monitor given its current stage of development. KPIs are
monitored on an annual basis to ensure that the remain
the most important and relevant measure of performance
and progress.
Cash management
The Group strengthened its cash position in October 2017
with a fundraise in conjunction with listing of £1.6 million
net of costs. The cash position at 31 December 2017 was
£1,876,655 (31 December 2016 £87,223).
The Group’s business model aims to advance its therapies
through clinical proof-of-concept, taking them towards a
final stage of development. A goal is the licensing of one
or more of its therapies to partners in return for potential
upfront payments, research funding support, success
milestone and royalty payments.
The Group carefully plans expenditure with rolling cash
flow forecasts and tight financial control. The Group takes
a collaborative cost sharing approach with business
partners and avoids long-term commitments as far as
possible.
Operational review and outlook
The operational review and outlook are set out in the
Chairman’s Statement.
Financial review
The Group incurred a loss for the year to 31 December
2017 of £2,361,599 (31 December 2016 – loss of
£470,839).
In the year to 31 December 2017 the loss mainly arose
from expenses in connection to the deemed share based
payment resulting from the transaction, costs associated
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D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Intellectual property
The Group will focus on developing a new conditioning
treatment and cell
for HSC/BM
transplantation. The Group, or its licensors, has applied
for patents to protect its proprietary technology and future
products, which are in varying stages of development
therapy product
that extend the CDX Patent set out in the provisional
patent application. These claims protect specific
sequences of several high quality clones discovered and
validated by the Group. The claim extension transforms
the original “method” provisional patent application into
a “composition of matter” PCT application.
The success of the Group will depend largely on the
Group’s ability to implement successful drug development
programmes, obtain the required regulatory approvals (in
various territories), protect and exploit its own intellectual
property and know-how, and the intellectual property and
know-how licensed to it, and to generate a cash flow in
accordance with the strategy of the Group. Intellectual
property is protected by the Group through taking a pro-
active approach to filing patents over its products and
technologies, as well as the diligent maintenance and
protection of such patents and licenses.
The Group patent portfolio currently includes:
CDX bi-specific antibodies
in the patent application
The provisional patent application relating to the CDX bi-
specific antibodies is an application filed by Hemogenyx
LLC in the USA on 4 April 2016 (“CDX Patent”). The
invention summarised
is
a method of eliminating hematopoietic stem cells/
hematopoietic progenitors (HSC/HP) in a patient using
bi-specific antibodies specifically binding to a protein
predominantly expressed on the surface of HSC/HP and
to a protein uniquely expressed on a surface of immune
cells. The bound bi-specific antibodies redirect immune
cells to eliminate HSC/HP. The invention relates to the
required conditioning of a patient prior to a BM/HSC
transplant. In this respect, the invention serves two main
purposes:
•
it provides adequate immunosuppression of the patient
and clears sufficient niche space in the bone marrow
for the transplant of HSC. This allows transplanted cells
to engraft in the recipient; and
it could potentially help to eradicate the source of
•
malignancy.
The provisional patent application is converted to a PCT
application and broadened to cover the composition of
matter (in this case, novel sequences of antibodies). On
April 4 2017, a PCT (Patent Cooperation Treaty) application
was filed by Hemogenyx which includes additional claims
The Group is planning to file additional composition
of matter patent applications in relation to the CDX
antibodies product.
Hu-PHEC cell therapy patent
The patent relating to Hu-PHEC is an application filed by
Cornell University (“Cornell Patent”) in several jurisdictions
on 13 November 2014. The invention summarised a method
of isolation and identification of post-natal hemogenic
endothelial cells, as well as the provision of substantially
purified populations of post-natal hemogenic endothelial
cells, compositions of post-natal endothelial cells and
methods to utilize post-natal hemogenic endothelial cells
to regenerate the hematopoietic system in a patient.
Product development
The Group develops therapies to transform bone marrow
and blood stem cell transplant procedures. These
therapies aim to replace the need for existing methods
of preparation of patients for transplantation, such as
chemotherapy and radiation treatments, and at the same
time address the problem of finding matching stem cell
donors whilst reducing the risk of blood stem cell rejection
after transplantation.
The Group’s two key products, CDX antibodies and Hu-
PHEC cell therapy are currently in preclinical development.
The Directors monitor product development through pre-
clinical results. The CDX product has been successfully
evaluated in the Group’s proprietary humanised mouse
model, achieving its proof of concept. Furthermore, we
have achieved a notable demonstration of CDX’s activity
versus AML cells cultured in vitro.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
11
D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Diversity
Hemogenyx is committed to workplace diversity which
includes but is not limited to gender, age, ethnicity and
cultural background.
Hemogenyx’s Diversity Policy defines initiatives which
assist the Company in maintaining and improving the
diversity of its workforce. The table below highlights the
proportion of women engaged by the Group:
Men Women
5
2
5
4
-
1
Organisation as a whole
Executive management team
Board
Board of Advisors
The Group engages the services of a Board of Advisors
who are highly experienced
the clinical
development of treatments and regulatory processes to
commercialization.
in both
Dr Koen van Besien M.D.
CLINICAL ADVISOR
• Professor of Medicine and Director of the Stem Cell
Transplant Program at NYP-Weill Cornell College of
Medicine
• Developed novel methods of transplantation for those
patients who lack matching donors
• >200 publications in peer reviewed journals
• Editor in Chief of the journal, Leukemia and Lymphoma
Dr Mark Pykett V.M.D., Ph.D.
BUSINESS ADVISOR
• President and CEO of Agilis Biopharmaceuticals
• 20+ years’ experience in the pharma industry
• Former CEO of Navidea Biopharmaceuticals
• Former President & COO of Alseres Pharmaceuticals
Dr Jules Mitchel
CLINICAL DEVELOPMENT ADVISOR
• President of Target Health Inc, a CRO
Dr Alexander Tarakhovsky M.D., Ph.D.
SCIENTIFIC ADVISOR
• Established a broad base pharma experience including
three NDA submissions, many FDA discussions
• Professor and Head of Laboratories at The Rockefeller
University
• Expertise in Pharmacokinetics
• An expert and
recognized
thought
leader
in
Dr Boris Shor Ph.D.
BUSINESS DEVELOPMENT ADVISOR
• Executive Director at Immune Pharmaceuticals
• Former group leader at the Oncology Research Unit
of Pfizer
• 15+ years’ experience with biotech start-ups
immunology and epigenetics
H. Michael Shepard, PhD.
SCIENTIFIC ADVISOR
• Led to the discovery and development of many
successful cancer treatments including Herceptin/
trastuzumab - annual sales exceed $6.5 billion
worldwide
• Received Harvard Medical School’s prestigious Warren
Alpert Prize in recognition of contributions to the field
of cancer treatment research
• Founded NewBiotics, Inc., acquired by Kiadis Pharma
• Founded BioLogix acquired by Symphogen
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Annual Report & Financial Statements For the Year Ended 31 December 2017
12
D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Corporate Responsibility
The risk factors are summarised below:
We have defined the scope of our Group’s responsible
business practices as falling within the following key
focus areas:
• Health and Safety – ensuring the safety and well-being
of our staff
• Environment – managing our environmental impact
areas of waste, energy and water
• Employees – supporting our people to develop and
flourish within the business
• Community – positive interaction with the communities
in which we operate
• Ethical Standards – operating to the highest ethical
standards
We remain committed to ensuring these activities
become embedded in how we operate and contribute
towards the success of our business. This includes not
only identifying and managing business risk but exploring
opportunities to add value to the business.
Green House Gas emissions
Given the nature of its activities, there is limited scope
for the Group to have a major impact on environmental
matters. Nevertheless, the Directors are mindful of
their responsibilities in this regard and strive to seek
opportunities where
improvements may be made;
these are generally concentrated in areas of energy
conservation, recycling and waste control.
Principal Risks and Uncertainties
The Group operates in an uncertain environment and
is subject to a number of risk factors. The Directors
have carried out a robust assessment of the principal
risks facing the Group, including those that threaten
its business model, future performance, solvency or
liquidity. They consider the following risk factors are of
particular relevance to the Group’s activities and to any
investment in the Group. It should be noted that the list
is not exhaustive and that other risk factors not presently
known or currently deemed immaterial may apply.
Risks relating to the Group’s business strategy
The Group’s business is relatively undeveloped
The operations of Hemogenyx are at a relatively early
stage and, to date, no commercial sales of its products
have been made. The ability of the Group to achieve
commercialisation is dependent on a number of factors,
many of which are outside of the Group’s control.
Examples of factors outside of the Group’s control are the
impact of Brexit, capital market conditions, FDA approval
and competition.
Business Strategy of the Group
The development of clinical products for new medical
treatments is inherently uncertain, with high failure
rates in clinical studies for both early and late stage
development products and such clinical studies can be
expensive, time-consuming and complicated and there is
no certainty as to the outcome of such studies. Even once
clinical studies have been successfully carried out, later
phase trials may not successfully replicate or improve on
such outcomes.
Staffing and key personnel
The Group is reliant on a number of the key personnel,
in particular Dr Vladislav Sandler who is the co-founder
of Hemogenyx (refer to Corporate Governance Report
for further detail). Whilst the Group has endeavoured to
ensure that it has contractual arrangements which include
non-compete restrictions in place with such persons
to lessen the risk of them ceasing to be involved with
the Group, in the event that the Group was to lose the
services of such individuals, its results could be adversely
affected.
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13
• Delays in securing any regulatory authority, hospital
ethics committee, or institutional review board approval
or approvals necessary to commence a clinical study;
• Delays or failure to recruit a sufficient number of clinical
study participants in accordance with the clinical study
protocol;
• Difficulty or inability to monitor subjects adequately
during or after treatment;
•
Inability to replicate in Phase 3 controlled studies any
safety and efficacy data obtained from controlled
Phase 2a/2b clinical studies;
• Difficulty or inability to secure clinical investigator
compliance to follow the approved clinical study
protocol; and
• Unexpected adverse events or any other safety or
related issues.
Costs to commercialisation
The ability of the Group to bring its products to first
commercial sale will be dependent in part on the overall
costs of manufacturing and the costs involved could be
significant and there is no guarantee that the sale prices
achievable for its products will be viable and sustainable.
Clinical studies and timelines risk
Hemogenyx is currently progressing its CDX and Hu-PHEC
product candidates through preclinical development.
Although encouraging results have been achieved so
far, there can be no certainty that these results can be
reproduced in clinical trials. The monies raised in the
Placing and the Subscription are intended to support
those preclinical development activities.
The development of clinical products for new medical
treatments is inherently uncertain, with high failure
rates in clinical studies for both early- and late-stage
development products. Furthermore, such clinical studies
(Phase 1, Phase 2a/2b, Phase 3) are typically expensive,
complex, can take considerable time to complete and
have uncertain outcomes.
Furthermore, as a result of adverse, undesirable,
unintended or inconclusive results from any testing or
clinical trials (which have yet to be designed), the future
progress, planning and potential treatment outcome of
the products and clinical programmes may be affected,
and may potentially prevent or limit the commercial
use of one, many or all of the Company’s products. In
addition, later phase clinical trials may fail to show the
desired safety and efficacy obtained in earlier studies,
and a successful completion of one stage of clinical
development of an investigational clinical product does
not ensure that subsequent stages of clinical development
will be successful.
Failure can occur at any stage of clinical development and,
as a result, enforced delays to the clinical development
plan could delay or prevent commercialisation of the
Company’s product candidates. Various factors associated
with the potential failure or delay in completing a clinical
programme include, but are not limited to:
• Delays in securing clinical investigators or clinical
study sites;
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
14
D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Research and development risk
The Group operates in the biotechnology and bio-
pharmaceutical development sectors and carries out
complex scientific research. If the research or preclinical
testing or clinical trials of any of Hemogenyx’s product
candidates fail, meaning that these candidates will not
be licensed or marketed, this would result in a complete
absence of revenue from these failed candidates. Positive
results from preclinical and early clinical studies do not
guarantee positive results from clinical trials required to
permit application for regulatory approval. Furthermore,
the Group may discontinue the development of candidates
if results are not positive or unlikely to further its progress
towards a meaningful outcome or collaboration.
Intellectual property (IP) infringement
The Group may be subject to future litigation concerning
its own IP and the IP of others. Adverse judgements in
relation to its IP would likely have negative outcomes for
its results of operations.
Environmental and other regulatory requirements
The event of a breach with any environmental or
regulatory requirements may give rise to reputational,
financial or other sanctions against the Group, and
therefore the Board considers these risks seriously and
designs, maintains and reviews its policies and processes
so as to mitigate or avoid these risks. Whilst the Board
has a good record of compliance, there is no assurance
that the Group’s activities will always be compliant.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
15
D I R E C T O R ’ S S T R A T E G I C R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Financing
The Group’s ability to develop its product through to
commercial sale will depend upon the Group’s ability to
obtain financing primarily through a further raising of new
equity capital. Although the Group has been successful in
raising new equity capital there can be no guarantee that
it will be able to do so in the future. The Group may not
be successful in procuring the requisite funds on terms
which are acceptable to it (or at all) and, if such funding
is unavailable, would raise questions over its ability to
further develop its products through to commercialisation.
Further, Shareholders’ holdings of Ordinary Shares may
be materially diluted if debt financing is not available.
Market Conditions
conditions,
including general economic
Market
conditions and their effect on exchange rates, interest
rates and inflations rates, may impact the ultimate value
of the Group regardless of its operating performance. The
Group also faces competition from other organisations,
some of which may have greater resources or be more
established in a particular territory. The Board considers
and reviews all market conditions to try and mitigate any
risks that may arise from these.
Political and Country risk – EU Referendum
The Company is quoted in the United Kingdom (UK) and
operates in the UK and European Union (EU), in addition
to other territories. As a result of the Referendum, the
Company may be subject to the impact of the UK leaving
the EU. As a result, given the ongoing uncertainty
surrounding the situation the Company is monitoring
matters and seeking advice as to how to mitigate the
risks arising.
Approved by the Board on 1 June 2018
..............................................................
Lawrence Pemble
Chief Operating Officer
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16
HSC transplantation-the HuPHEC. Each of these products
holds the potential to revolutionize the way BM/HSC
transplants are being performed, offering solutions that
mitigate the dangers and limitations associated with the
current standard of care.
The Group has one company that is located outside of
the UK. The principal laboratory of the Group is location
in Brooklyn, New York, USA.
Results and Dividends
The Consolidated Statement of Comprehensive Income
set out on page 40 and shows a loss for the year
amounting to £2,361,599 (2016 – loss of £470,83). The
Directors do not propose a dividend in respect of the year
ended 31 December 2017 (31 December 2016: nil).
The Directors present their report with the audited
financial statements of the Group for the year ended 31
December 2017.
The Company’s Ordinary Shares were admitted to listing
on the London Stock Exchange under the name Silver
Falcon PLC, on the Official List pursuant to Chapters 14
of the Listing Rules, which sets out the requirements for
Standard Listings, on 9 November 2015.
On 4 October, 2017 the Company’s shareholders voted
in favour of acquiring the biotechnology company
Hemogenyx Pharmaceuticals Limited, with shares being
readmitted to trading on 5 October 2017 under the name
Hemogenyx Pharmaceuticals PLC.
Principal Activity
The Group’s principal activity of the Group is on the
discovery, development and commercialization of novel
therapies and treatments for blood diseases such
as leukemia and lymphoma. The company’s leading
technologies aim to change the way in which bone
marrow/hematopoietic stem cell (BM/HSC) transplants
are performed and improve their efficacy. HemoGenyx’s
two distinct and complementary products include an
immunotherapy product for patient conditioning-the CDX
bi-specific antibody-and a cell therapy product for BM/
Directors and Directors’ Interests
The Directors who held office during the year were as follows:
Dr Vladislav Sandler
Dr Robin Campbell
Lawrence Pemble
Alexis Sandler
Peter Redmond
Adrian Beeston
Geoffrey Dart
Date Appointed
Date Resigned
4 October 2017
4 October 2017
4 October 2017
4 October 2017
4 October 2017
-
-
-
-
-
4 October 2017
9 April 2018
13 February 2013
4 October 2017
Timothy Le Druillenee
4 October 2017
30 November 2017
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17
to carry on
the Company
The Directors believe that the terms of the Relationship
Agreement enable
its
business independently from the Controlling Parties
and their affiliates, and ensure that all transactions and
relationships between the Company and the Controlling
Parties are, and will be, at arm’s length and on a normal
commercial basis. The Company has and, in so far as it is
aware, the Controlling Parties and their associates have,
complied with the independence provisions set out in the
Relationship Agreement from the date of the agreement,
through the relevant period under review. The ordinary
shares owned by the Controlling Parties rank pari passu
with the other ordinary shares in all respects.
Relationship Agreement
In accordance with Listing Rule 9.8.4(14)R, the Company
has set out below a statement describing the relationship
agreement entered into by the Company with its principal
shareholder.
On 8 September 2017, the Company entered into a
Relationship Agreement with Dr. Vladislav Sandler and
Alexis Sandler (the “Controlling Parties”), which came
into force at the Company’s re-admission. The principal
purpose of the Relationship Agreement is to ensure that
the Company is capable at all times of carrying on its
business independently of the Controlling Parties.
If the Company ceases to be admitted to the Main Market
of the London Stock Exchange, or the Controlling Parties
(together with their associates) cease to hold 20 per cent
or more of the voting rights over the Company’s shares
the Relationship Agreement shall terminate save for
certain specified provisions.
The Relationship Agreement provides that the Controlling
Parties undertake to use all reasonable endeavours to
procure that they and their associates shall:
• conduct all transactions with the Company on an arm’s
length basis and on a normal commercial basis;
• not take any action that would have the effect of
preventing the Company from complying with its
obligations under the Listing Rules or the corporate
governance principles adopted by the Group;
• not propose or procure the proposal of a shareholder
resolution which is intended to, or appears to be
intended to, circumvent the proper application of the
Listing Rules; and
• not take any actions which is intended to, or appears
to be intended to, breach or circumvent the proper
application of the Relationship Agreement, the Listing
Rules or the corporate governance principles adopted
by the Group.
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D I R E C T O R ’ S R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
The Directors of the Company who held office at 31 December 2017 had the following beneficial interest in the Ordinary
shares of the Company at 31 December 2017 according to the register of directors’ interests:
Director
Peter Redmond*
Adrian Beeston**
Dr Vladislav Sandler
Dr Robin Campbell
Alexis Sandler
At 31 December 2017
At 31 December 2016
5,040,714
6,131,969
40,451,210
1,142,857
75,090,685
3,600,000
3,350,000
-
-
-
* Peter Redmond holds these shares through Catalyst Corporate Consultants Ltd of which he is the sole
shareholder.
** 2 million shares are held in the name of M6 Ltd in which Adrian Beeston had a beneficial interest, as at
December 31, 2017
At the date of this report, there have been no changes to the Directors’ beneficial interest in the Ordinary shares of the
Company as disclosed in the table above.
According to the register of directors’ interests, no rights to subscribe for shares in or debentures of Group companies
were granted to any of the directors or their immediate families, or exercised by them, during the financial year except
as indicated below (see Note 18 for detail on option plans):
Date of grant
Dr Robin Campbell
4 Oct 2017
Lawrence Pemble
4 Oct 2017
OPTIONS
Number of
options at
start of year
Options granted
or acquired
during year
Options
lapsed
during year
Number of
options at end
of year
-
-
-
-
3,560,429
3,560,429
3,560,429
3,560,429
-
-
-
-
3,560,429
3,560,429
3,560,429
3,560,429
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Annual Report & Financial Statements For the Year Ended 31 December 2017
19
D I R E C T O R ’ S R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
WARRANTS
Number of
warrants at
start of year
Warrants granted
or acquired
during year
Warrants
lapsed during
year
Number of
warrants at
end of year
Date of grant
Dr Vladislav Sandler
4 Oct 2017
Peter Redmond
-
-
Adrian Beeston
4 Oct 2017
1,000,000
4 Oct 2017
-
1,000,000
4 Oct 2017
2,675,000
4 Oct 2017
-
2,675,000
214,286
214,286
-
942,857
942,857
-
407,143
407,143
-
-
-
-
-
-
-
-
214,286
214,286
1,000,000
942,857
1,942,857
2,675,000
407,143
3,082,143
* 1 million warrants are held in the name of M6 Ltd in which Adrian Beeston has a beneficial interest. Mr Beeston
resigned a director of the Company on 9 April 2018.
Qualifying Third Party Indemnity Provision
At the date of this report, the Company has a third party indemnity policy in place for all Directors.
Substantial shareholders
As at 31 December 2017, the total number of issued Ordinary Shares with voting rights in the Company was 360,051,360.
The Company has been notified of the following interests of 3 per cent or more in its issued share capital as at the date
of approval of this report.
Number of Ordinary
% of
Party Name
Alexis Sandler
Vladislav Sandler
Craig Auringer
Optiva Securities Limited*
Samantha Bauer
HSBC Client Holdings Nominee (UK) Limited
Plum Capital Ltd
43 North LLC
Shares
75,090,685
40,451,210
31,407,913
28,131,723
27,996,487
18,063,805
11,692,863
11,371,429
Share Capital
20.8
11.2
8.7
7.8
7.7
5.0
3.3
3.2
* Optiva Securities Limited holds these shares through JIM Nominees Limited.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
20
D I R E C T O R ’ S R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Of particular significance is that this new type of
humanised mice allows us to extend our work to other
disease models and the evaluation of specific drug
candidates. Furthermore, this is of interest to large
in mid-March
biopharmaceutical companies. Thus,
2018 we announced a collaboration with a major US
biotechnology company (with whom we were already
working and from whom we had already received
revenue) to use our humanised mice for this very purpose.
The deal is revenue generating for the Company and is
worth up to approximately $250,000 and we believe
this has the potential to generate further income as the
collaboration develops.
Further, in early May 2018, we entered into a collaboration
agreement with The Rockefeller University, one of the
world’s foremost research institutions. The collaboration
calls for scientists at Rockefeller to use Hemogenyx’s
new type of humanized mice for autoimmune disease
modelling in an effort to develop new treatments for
autoimmune diseases - specifically Lupus.
signed a
in mid-May, Hemogenyx
Importantly,
development agreement for the CDX Antibodies, with a
leading global pharmaceutical company engaged in the
research, development, manufacture and marketing of
pharmaceutical products. Hemogenyx will receive on
a cost-free basis technical support, access to advanced
methods of discovering, developing and engineering
antibodies, and certain intellectual property which is
expected to assist the successful preclinical development
of the Hemogenyx’s lead candidate bi-specific CDX
antibodies. This will complement the Company’s own
development work currently being undertaken. The
Agreement stipulates certain confidential provisions,
including, at this stage, the pharmaceutical company’s
identity. Hemogenyx believes that the Agreement will
increase the probability of its success in bringing CDX
antibodies to clinical trials and beyond.
Share capital
Details of the issued share capital, together with details of
the movement in issued share capital during the year, are
shown in note 17 to the financial statements.
Financial instruments
Details of the use of the Company’s financial risk
management objectives and policies as well as exposure
to financial risk are contained in the Accounting policies
and note 23 of the financial statements.
Future developments and events subsequent to the
year end
Further details of the Group’s future developments and
events subsequent to the year end are set out in the
Chairman’s statement and Strategic Report.
Corporate Governance
The Corporate Governance report forms part of the
Director’s Report and is disclosed on page 23-28.
Post-period end updates
Following the end of the period under review, we
have been able to announce four additional items of
significance, describing research progress. The first
major item was the receipt of our first set of data results
showing that developed by Hemogenyx CDX bi-specific
antibodies are capable of attacking and eliminating
cultured cells of the blood cancer, Acute Myelogenous
Leukemia (AML), tested in vitro.
This is a significant development in the process needed
to develop CDX antibodies to become a universally
available conditioning product for patients undergoing
bone marrow transplants as a treatment for serious blood
diseases.
At the same time, we confirmed the filing of a provisional
patent application relating to our development of a new
type of humanised mice with a chimeric mouse-human
blood system. This can be used to advance product
development, as well as to model several other diseases
and drug discovery applications.
Using these new humanised mice should allow us to
demonstrate that CDX bi-specific antibodies are effective
in the treatment of AML, this time in vivo.
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Going Concern
together with
The Company’s business activities,
facts likely to affect its future operations and financial
and liquidity positions are set out in the Chairman’s
Statement and Business review. In addition, note 23 to
the financial statements discloses the Company’s capital
risk management policy and note 2 details out further
considerations made by the Director in respect of going
concern.
The Directors having made due and careful enquiry, are
of the opinion that the Company has adequate working
capital to execute its operations over the next 12 months.
The Directors therefore have made an informed judgment,
at the time of approving the financial statements, that
there is a reasonable expectation that the Company has
adequate resources to continue in operational existence
for the foreseeable future. As a result, the Directors have
adopted the going concern basis of accounting in the
preparation of the annual financial statements.
Political donations
The Group made no political donations during the year
(2016: £nil).
Charitable donations
There were no charitable donations made by the Group
in the current or prior year.
Auditors
The auditors, PKF Littlejohn LLP, have expressed their
willingness to continue in office and a resolution to
reappoint them will be proposed at the Annual General
Meeting.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the financial statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
Under Company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
year.
In preparing these financial statements, the Directors are
required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgments and accounting estimates that are
reasonable and prudent;
• State whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and parent company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and parent company and
enable them to ensure that the financial statements
and the Directors’ remuneration report comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and parent company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. They are
also responsible to make a statement that they consider
that the annual report and accounts, taken as a whole,
is fair, balanced, and understandable and provides the
information necessary for the shareholders to assess the
Group and parent company’s position and performance,
business model and strategy.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of the financial statements may differ from
legislation in other jurisdictions.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
22
D I R E C T O R ’ S R E P O R T
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Directors’ responsibility statement pursuant to
disclosure and Transparency Rule.
Each of the Directors, whose names and functions
are listed on page 6 confirm that, to the best of their
knowledge and belief:
• the financial statements prepared in accordance with
IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position
and loss of the Group and parent company; and
• the Annual Report and financial statements, including
the Business review, includes a fair review of the
development and performance of the business and the
position of the Group and parent company, together
with a description of the principal risks and uncertainties
that they face.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant
audit information of which the Company’s auditors are
unaware, and each Director has taken all the steps that
he ought to have taken as a Director in order to make
himself aware of any relevant audit information and to
establish that the Company’s auditors are aware of that
information.
Approved by the Board on 1 June 2018
…………………………………………............
Lawrence Pemble
Chief Operating Officer
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
23
G O V E R N A N C E R E P O R T
Introduction
The Company recognises the importance of, and is
committed to, high standards of Corporate Governance.
The Company has voluntarily applied the main and
supporting principles set out in the UK Code of Corporate
Governance published by the Financial Reporting Council
in 2014 (“the Code”). The Code has been followed
to the extent practicable for a company of its size and
nature. The Code can be found at frc.org.uk/our-work/
publications/Corporate-Governance. The ways in which
the Company has applied the Code are explained below:
• The Code requires that a smaller company should have
at least two Independent Non-Executive Directors. The
Board currently consists of three Executive Directors and
three Non-Executive Directors. The Non-Executive
Directors are interested in either ordinary shares in the
Company, options over ordinary shares
the
in
Company, or both, and cannot
therefore be
considered fully independent under the Code. The
remuneration of the non- executive directors includes
options and this is contrary to D.1.3 of the Code, and
thus the Company is not in full compliance. However,
the Directors consider the present structure and
arrangements to be adequate given the size and stage
of development of the Company, and all are considered
to be independent in character and judgement.
• Directors appointed by the Board are subject to election
by shareholders at the Annual General Meeting of the
Company following their appointment and thereafter
are subject to re- election in accordance with the
Company’s articles of association. The terms and
conditions of appointment of non- executive Directors
will be made available upon written request.
The Board has voluntarily adopted the Model Code for
Directors’ dealings contained in the Listing Rules of the UK
Listing Authority. The Board will be responsible for taking
all proper and reasonable steps to ensure compliance
with the Model Code by the Directors. Compliance with
the Model Code is being undertaken on a voluntary basis
and the FCA will not have the authority to (and will not)
monitor the Company’s voluntary compliance with the
Model Code, nor to impose sanctions in respect of any
failure by the Company to so comply. In addition, the
Company will take all proper and reasonable steps to
ensure compliance by the Founders with the Model Code
for dealings in the Ordinary Shares.
The Company is a small company with a modest resource
base. The Company has a clear mandate to optimise the
allocation of limited resources to support its development
plans. As such, the Company strives to maintain a
balance between conservation of limited resources and
maintaining robust corporate governance practices.
As the Company evolves, the Board is committed to
enhancing the Company’s corporate governance policies
and practices deemed appropriate for the size and
maturity of the organisation.
Set out below are the Company’s corporate governance
practices for the year ended 31 December 2017.
Committees
The Company has established audit, remuneration and
nomination committees.
Audit Committee
The Audit Committee has responsibility for, among other
things, the monitoring of the integrity of the financial
statements of the Company and its Enlarged Group and
the involvement of the Group’s auditors in that process.
It focuses in particular on compliance with accounting
policies and ensuring that an effective system of external
audit and financial control is maintained, including
considering the scope of the annual audit and the extent
of the non-audit work undertaken by external auditors
and advising on the appointment of external auditors. The
ultimate responsibility for reviewing and approving the
annual report and accounts and the half-yearly reports
remains with the Board. The Audit Committee will meet
at least three times a year at the appropriate times in the
financial reporting and audit cycle.
The members of the Audit Committee are Peter Redmond,
who acts as chairman of the committee and Dr. Robin
Campbell.
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
24
G O V E R N A N C E R E P O R T
The Group’s external auditor is PKF Littlejohn LLP who have served as external auditor for three years. The role of
external auditor last went to tender in 2015. The Audit Committee closely monitors the level of audit and non-audit
services that they provide to the Company and Group.
Having assessed the performance, objectivity and independence of the auditors, the Committee will be recommending
the reappointment of PKF Littlejohn LLP as auditors to the Company at the 2018 Annual General Meeting.
During the year to 31 December 2017 the Audit Committee considered the following key issues in relation to the
Financial Statements:
Issue
Action
Accounting policies
The Committee reviewed and discussed the significant accounting policies
with management and the external auditor and reached the conclusion
that each policy was appropriate to the Group.
Carrying value of investment in
Hemogenyx LLC
Going Concern review
Review of audit and non-audit
services and fees
The Committee reviewed the impairment assessment report prepared by
management and agreed that given the reasonable expectation that the
Group will achieve its milestone targets over the next 18 months that no
impairment to the value of the investment in Hemogenyx LLC was required
as at 31 December 2017.
The Committee considered the ability of the Group to operate as a
Going Concern considering cash flow forecast for the next 12 months
and milestone achievements. It was determined by the Committee that
it was reasonable to expect that the Group has, or will have access to
sufficient funding in order to achieve its 12 month milestone targets and
that it was appropriate for the Financial Statements to be prepared on a
going concern basis.
The external auditor is not engaged by the Group to carry out any non-
audit work in respect of which it might, in the future, be required to express
an audit opinion.
The Committee reviewed the fees charged for the provision of audit and
non-audit services and determined that they were in line with fees charged
to companies of similar size and stage of development.
The Committee considered and was satisfied the external auditor’s
assessment of its own independence.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
25
G O V E R N A N C E R E P O R T
Remuneration Committee
The remuneration committee will review the performance
of the executive directors and make recommendations
to the Board on matters relating to their remuneration
and terms of employment. The committee will also make
recommendations to the Board on proposals for the
granting of share awards and other equity incentives
pursuant to any share award scheme or equity incentive
scheme in operation from time to time. The Remuneration
Committee will meet at least twice a year.
The members of the Remuneration Committee are Dr.
Robin Campbell, who acts as chairman of the committee,
Alexis Sandler and Peter Redmond.
Nomination Committee
The Nomination Committee is responsible for considering
and making recommendations to the Board in respect
of appointments to the Board, the Board committees
and the chairmanship of the Board committees. It is
also responsible for keeping the structure, size and
composition of the Board under regular review, and for
making recommendations to the Board with regard to
any changes necessary, taking into account the skills and
expertise that will be needed on the Board in the future.
The Nomination Committee will meet at least once a year.
The members of the Nomination Committee are Alexis
Sandler, Peter Redmond and Dr. Robin Campbell.
Leadership
The Company is headed by an effective Board which is
collectively responsible for the long-term success of the
Company.
The role of the Board - The Board sets the Company’s
strategy, ensuring that the necessary resources are in
place to achieve the agreed strategic priorities, and
reviews management and financial performance. It is
accountable to shareholders for the creation and delivery
of strong, sustainable financial performance and long-
term shareholder value. To achieve this, the Board directs
and monitors the Company’s affairs within a framework of
controls which enable risk to be assessed and managed
effectively. The Board also has responsibility for setting
the Company’s core values and standards of business
conduct and for ensuring that these, together with the
Company’s obligations to its stakeholders, are widely
understood throughout the Company. The Board has a
formal schedule of matters reserved which is provided
later in this report.
Board Meetings - The core activities of the Board are
carried out in scheduled meetings of the Board. These
meetings are timed to link to key events in the Company’s
corporate calendar and regular reviews of the business
are conducted. Additional meetings and conference calls
are arranged to consider matters which require decisions
outside the scheduled meetings. During the year, the
Board met on 9 occasions.
Outside the scheduled meetings of the Board, the
Directors maintain frequent contact with each other to
discuss any issues of concern they may have relating to
the Company or their areas of responsibility, and to keep
them fully briefed on the Company’s operations.
Matters reserved specifically for the Board - The Board
has a formal schedule of matters reserved that can only
be decided by the Board. The key matters reserved are
the consideration and approval of;
• The Company’s overall strategy;
• Financial statements and dividend policy;
• Management structure including succession planning,
appointments and remuneration; material acquisitions
and disposal, material contracts, major capital
expenditure projects and budgets;
• Capital structure, debt and equity financing and other
matters;
• Risk management and internal controls;
• The Company’s corporate governance and compliance
arrangements; and
• Corporate policies.
Summary of the Board’s work in the year – During the
year, the Board considered all relevant matters within its
remit, but focused in particular on the establishment of the
Company and the identification of a suitable investment
opportunity for the Company to pursue.
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26
G O V E R N A N C E R E P O R T
Number held and entitled
to attend
Number attended
Dr Vladislav Sandler
Professor Sir Marc Feldmann1
Dr Robin Campbell
Lawrence Pemble
Alexis Sandler
Peter Redmond
Adrian Beeston
Geoffrey Dart2
Timothy Le Druillenee3
5
-
5
5
5
9
9
9
4
5
-
5
5
5
9
8
9
4
1 Sir Marc Feldmann was appointed post year end on 9 April 2018
2 Until resignation on 4 October 2017
3 Until resignation on 30 November 2017
The Board is pleased with the high level of attendance and participation of Directors at Board and committee meetings.
The Chairman sets the Board Agenda and ensures adequate time for discussion.
Non-executive Directors - The non-executive Directors bring a broad range of business and commercial experience
to the Company and have a particular responsibility to challenge independently and constructively the performance
of the Executive management (where appointed) and to monitor the performance of the management team in the
delivery of the agreed objectives and targets.
All directors with the exception of the CEO and Marc Feldmann have been appointed for an initial term of 12 months,
which may, subject to satisfactory performance and re-election by shareholders, be extended by mutual agreement.
Other governance matters - All of the Directors are aware that independent professional advice is available to each
Director in order to properly discharge their duties as a Director. In addition, each Director and Board committee has
access to the advice of the Company Secretary.
The Company Secretary - The Company Secretary is Lawrence Pemble. He is responsible for the Board complying
with UK procedures.
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017 Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
27
G O V E R N A N C E R E P O R T
Effectiveness
For the period under review the Board comprised of a
Chief Executive Office, an Executive Chairman, a Chief
Operations Officer and three independent non-executive
Directors. Biographical details of the Board members are
set out on pages 6-8 of this report.
The Directors are of the view that the Board and its
committees consist of Directors with an appropriate
balance of skills, experience, independence and
diverse backgrounds to enable them to discharge their
duties and responsibilities effectively.
Independence - The non-executive Directors bring a
broad range of business and commercial experience
to the Company. The Board considers each of the non-
executive Directors to be independent in character and
judgement.
Appointments - the Board is responsible for reviewing
and the structure, size and composition of the Board and
making recommendations to the board with regards to
any required changes.
Commitments
- All Directors have disclosed any
significant commitments to the Board and confirmed that
they have sufficient time to discharge their duties.
Induction - All new Directors received an induction as
soon as practical on joining the Board.
Conflict of interest - A Director has a duty to avoid a
situation in which he or she has, or can have, a direct or
indirect interest that conflicts, or possibly may conflict with
the interests of the Company. The Board had satisfied
itself that there is no compromise to the independence
of those Directors who have appointments on the Boards
of, or relationships with, companies outside the Company.
The Board requires Directors to declare all appointments
and other situations which could result in a possible
conflict of interest.
Board performance and evaluation – Hemogenyx
Pharmaceuticals Plc has a policy of appraising Board
various
performance annually. Having
approaches to Board appraisal, it has concluded that for a
Company of its current scale, an internal process in which
all Board members submit answers to a questionnaire
reviewed
that considers the functionality of the Board and its
committees is most appropriate at this stage.
Accountability
The Board is committed to providing shareholders with
a clear assessment of the Company’s position and
prospects. This is achieved through this report and as
required other periodic financial and trading statements.
Going concern - The Company’s business activities,
together with factors likely to affect its future operations,
financial position, and liquidity position are set out in
the Chairman’s Statement and the principle risks and
uncertainties sections of the Strategic Report. In addition,
the notes to financial statements discloses the Company’s
financial risk management practices with respect to its
capital structure, liquidity risk, interest rate risk, credit risk,
and other related matters.
The Directors, having made due and careful enquiry, are
of the opinion that the Company has adequate working
capital to execute its operations and has the ability to
access additional financing, if required, over the next 12
months. The Directors, therefore, have made an informed
judgement, at the time of approving financial statements,
that there is a reasonable expectation that the Company
has adequate resources to continue in operational
existence for the foreseeable future. As a result, the
Directors have continued to adopt the going concern
basis of accounting in preparing the annual financial
statements.
Internal controls - The Board of Directors reviews the
effectiveness of the Company’s system of internal controls
in line with the requirement of the Code. The internal
control system is designed to manage the risk of failure
to achieve its business objectives. This covers internal
financial and operational controls, compliances and risk
management. The Company has necessary procedures
in place for the year under review and up to the date of
approval of the Annual Report and financial statements.
The Directors acknowledge their responsibility for the
Company’s system of internal controls and for reviewing
its effectiveness. The Board confirms the need for
an ongoing process for identification, evaluation and
management of significant risks faced by the Company.
The Directors carry out a risk assessment before signing
up to any commitments.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
28
G O V E R N A N C E R E P O R T
Shareholder relations
Communication and dialogue - Open and transparent
communication with shareholders is given high priority
in accordance with regulatory requirements. All Directors
are kept aware of changes in major shareholders in the
Company and are available to meet with shareholders
who have specific interests or concerns. The Company
issues its results promptly to individual shareholders and
also publishes them on the Company’s website. Regular
updates to record news in relation to the Company and
the status of its research and development programmes
are included on the Company’s website. Shareholders
and other interested parties can subscribe to receive
these news updates by email by registering online on the
website free of charge.
Annual General Meeting - At every AGM individual
shareholders are given the opportunity to put questions
to the Chairman and to other members of the Board that
may be present. Notice of the AGM is sent to shareholders
at least 21 working days before the meeting. Details of
proxy votes for and against each resolution, together with
the votes withheld are announced to the London Stock
Exchange and are published on the Company’s website
as soon as practical after the meeting.
……………………………………
Lawrence Pemble
Chief Operating Officer
Date 1 June 2018
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Annual Report & Financial Statements For the Year Ended 31 December 2017
29
D I R E C T O R S ’ R E M U N E R A T I O N R E P O R T
The Company has an established
remuneration
committee. The Committee reviews the scale and
structure of the Directors’ fees, taking into account the
interests of shareholders and the performance of the
Company and directors.
members of the executive management of the
Company are provided with appropriate incentives
to encourage enhanced performance and are, in a fair
and responsible manner, rewarded for their individual
contributions to the success of the Company;
The items included in this report are audited unless
otherwise stated.
Statement of Hemogenyx Pharmaceutical Plc’s policy
on Directors’ remuneration by the Chairman of the
Remuneration Committee
As Chairman of the Remuneration Committee I am
pleased to introduce our first Directors’ Remuneration
Report. One of the Remuneration Committee’s aims is to
provide clear, transparent remuneration reporting for
our shareholders which adheres to the best practice
corporate governance principles that are required for
listed organisations.
The Directors’ Remuneration Policy, which is set out
on pages 29 to 34 of this report, will be submitted to
shareholders for approval at our Annual General Meeting
on 27 June 2018.
A key focus of the Directors’ Remuneration Policy is
to align the interests of the Directors to the long-term
interests of the shareholders and aims to support a
high performance culture with appropriate reward for
superior performance, without creating incentives that
will encourage excessive risk taking or unsustainable
company performance. This is underpinned through the
implementation and operation of incentive plans.
Key Activities of the Remuneration Committee
The key activities of the Remuneration Committee are:
•
•
to determine and agree with the Board the framework
or broad policy for the remuneration of the Company’s
chairman, chief executive, the executive directors,
the company secretary and such other members of the
executive management as it is designated to consider;
in determining such policy, take into account all
factors which it deems necessary including relevant
legal and regulatory requirements, the provisions and
recommendations of the UK Corporate Governance
Code (the “Code”) and associated guidance. The
objective of such policy shall be to ensure that
•
recommend and monitor the level and structure of
remuneration for senior management;
• when setting remuneration policy for directors, review
and have regard to the remuneration trends across the
Company, and review the on-going appropriateness
and relevance of the remuneration policy;
• obtain
reliable,
information
about
up-to-date
remuneration in other companies. To help it fulfil its
obligations the Committee shall have full authority to
appoint remuneration consultants and to commission
or purchase any reports, surveys or information which
it deems necessary, within any budgetary restraints
imposed by the Board;
• be exclusively
responsible
the
selection criteria, selecting, appointing and setting the
terms of reference for any remuneration consultants
who advise the Committee;
for establishing
• approve the design of, and determine targets for,
any performance related pay schemes operated by the
Company and approve the total annual payments
made under such schemes;
•
review the design of all share incentive plans for
approval by the Board and shareholders. For any such
plans, determine each year whether awards will be
made, and if so, the overall amount of such awards,
the individual awards to executive directors, company
secretary and other designated senior executives and
the performance targets to be used;
• ensure that contractual terms on termination, and
any payments made, are fair to the individual, and the
Company, that failure is not rewarded and that the duty
to mitigate loss is fully recognized; and
• oversee any major changes in employee benefits
structures throughout the Company.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
30
D I R E C T O R S ’ R E M U N E R A T I O N R E P O R T
Members
The Remuneration Committee comprises the following independent non-executive directors:
Name
Dr. Robin Campbell
Alexis Sandler
Peter Redmond
Position
Chairman
Member
Member
Date of appointment
5 October 2017
5 October 2017
5 October 2017
Remuneration Components
Other matters
The Company does not currently have any annual or long-
term incentive schemes or any other scheme interests in
place for any of the Directors.
The Company does not have any pension plans for any
of the Directors and does not pay pension amounts in
relation to their remuneration. The Company has not paid
out any excess retirement benefits to any Directors or past
Directors. The Company has not paid any compensation
to past Directors.
Recruitment Policy
Base salary levels will take into account market data for
the relevant role, internal relativities, their individual’s
experience and their current base salary. Where an
individual is recruited at below market norms, they may
be re-aligned over time (e.g. two to three years), subject
to performance in the role. Benefits will generally be in
accordance with the approved policy.
For external and internal appointments, the Board may
agree that the Company will meet certain relocation and/
or incidental expenses as appropriate.
The Company remunerates directors in line with best
market practice in the industry in which it operates. The
components of Director remuneration that are considered
by the Board for the remuneration of directors in future
years are likely to consist of:
• Base salaries
• Pension and other benefits
• Annual bonus
• Share Incentive arrangements
The Executive Directors have each entered into service
agreements with the Company and the Non-executive
directors have entered into letters of appointment with
the Company.
All such contracts impose certain restrictions as regards
the use of confidential information and intellectual
property and each of the Executive Directors’ service
contracts impose restrictive covenants which apply
following the termination of the agreement.
In addition, Dr. Vladislav Sandler has a separate contract
with Hemogenyx LLC effective 1 September 2017
appointing him as CEO and Chief Scientific Officer of
Hemogenyx LLC for a three year term and setting out his
duties in relation to his day-to- day to work in connection
with Hemogenyx’s product candidates. Pursuant to this
contract, Dr Sandler receives $120,000 per annum and
four weeks’ holiday a year. Dr Sandler is also subject to
certain non-compete and non-interference covenants
in the event of its termination (subject to certain limited
exceptions).
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Annual Report & Financial Statements For the Year Ended 31 December 2017
31
D I R E C T O R S ’ R E M U N E R A T I O N R E P O R T
Payment for loss of Office
The Committee will honour Executive Directors’
contractual entitlements. Service contracts do not
contain liquidated damages clauses. If a contract is to be
terminated, the Committee will determine such mitigation
as it considers fair and reasonable in each case. There is
no agreement between the Company and its Executive
Directors or employees, providing for compensation for
loss of office or employment that occurs because of a
takeover bid.
The Committee reserves the right to make additional
payments where such payments are made in good
faith in discharge of an existing legal obligation (or by
way of damages for breach of such an obligation); or by
way of settlement or compromise of any claim arising in
connection with the termination of an Executive Director’s
office or employment.
Service Agreements and letters of appointment
The Executive Directors’ service agreements are for an initial term of twelve months and may be terminated by the
Company or the Executive Director by giving 3 months’ notice.
Name
Date of service
agreement
Notice period by
Company (months)
Notice period by
Director (months)
Dr. Vladislav Sandler
4 October 2017
Lawrence Pemble
4 October 2017
3
3
3
3
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 one year 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 any Annual General Meeting at which the Non-Executive Directors stand for re-election.
The details of each Non-Executive Director’s current term are set out below:
Name
Date of
service agreement
Current
term
(years)
Notice period
by Company
(months)
Notice period
by Director
(months)
Date of
resignation
Dr Robin Campbell
4 October 2017
Alexis Sandler
4 October 2017
Peter Redmond
4 October 2017
Adrian Beeston
4 October 2017
Lawrence Pemble
5 September 2015
1
1
1
1
1
3
3
3
3
3
3
3
3
3
3
-
-
-
9 April 2018
4 October 2017
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Annual Report & Financial Statements For the Year Ended 31 December 2017
32
E X E C U T I V E D I R E C T O R S ’ R E M U N E R A T I O N
The table below sets out the remuneration received by each Executive Director for the years ended 31 December 2017
and 2016. Dr. Vladislav Sandler was the highest paid Director:
Executive Directors
Dr. Vladislav Sandler
Lawrence Pemble
Geoffrey Dart
Total
Basic salary
2017
£’000
Taxable
benefits
2017 £’000
Pension
2017
£’000
Annual Bonus
2017
£’000
Total
2017
£’000
79
10
-
89
42
-
-
-
-
7
-
7
-
-
35
35
79
17
35
131
* Mr Dart received a success fee upon completion of the acquisition satisfied by the issue of 1,000,000 shares at an
issue price of 3.5 pence.
Executive Directors
Basic salary
2016
£’000
Taxable
benefits
2016 £’000
Pension
2016
£’000
Annual Bonus
2016
£’000
Total
2016
£’000
Geoffrey Dart
Total
-
-
-
-
-
-
-
-
-
-
Prior to completion of the acquisition no Company Directors received any remuneration.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
33
N O N - E X E C U T I V E D I R E C T O R S ’ R E M U N E R A T I O N
The table below sets out the remuneration received by each Non-Executive Director during the years ended 31
December 2017 and 2016:
Non-Executive Directors
2017
£’000
Share based
payments 2017
£’000
Other*
2017
£’000
Total
2017
£’000
Dr Robin Campbell
Alexis Sandler
Peter Redmond
Adrian Beeston
Tim Le Druillenec
Total
11
-
9
2
9
31
7
-
-
-
-
7
-
-
35
35
-
70
18
-
9
2
9
38
* Messrs Redmond and Beeston received a success fee upon completion of the acquisition satisfied by the issue of
1,000,000 shares each at an issue price of 3.5 pence.
Non-Executive Directors
Peter Redmond
Adrian Beeston
Total
2016
£’000
-
-
-
Share based
payments 2016
£’000
Other*
2016
£’000
-
-
-
-
-
-
Total
2016
£’000
-
-
-
Prior to completion of the acquisition no Company Directors received any remuneration.
Relative importance of spend on pay
The table below illustrates the year-on-year change in total remuneration compared to distributions to shareholders
and loss before tax for the financial years ended 31 December 2017 and 2016:
Distributions to
shareholders
£
Total
employee pay
£
Operational
cash outflow
£
Year ended 31 December 2017
Year ended 31 December 2016
Percentage change
44
-
N/A
246,919
129,400
90.8
441,368
278,133
58.7
Total employee pay includes wages and salaries, social security costs, pension healthcare cost, 401K scheme cost
and share-based payments for employees in continuing operations. Further details on Employee remuneration are
provided in note 8.
Operational cash outflow has been shown in the table above as cash flow monitoring and forecasting in an important
consideration for the Remuneration Committee and Board of Directors when determining cash based remuneration
for directors and employees.
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
34
D I R E C T O R S ’ R E M U N E R A T I O N R E P O R TR T
Historical Share Price Performance Comparison
The table below compares the share price performance (based on a notional investment of £100) of Hemogenyx
Plc against the FTSE SmallCap and FTSE Techmark Mediscience for the period November 2015 to December 2017
calculated on a month end spot basis. The FTSE SmallCap is been chosen to provide a wider market comparator
constituting companies of an appropriate size and the FTSE Techmark Mediscience chosen due to sector relevance :
Investment Performance Comparison
130.00
97.50
65.00
32.50
NOV 15 FEB-16 MAY-16 AUG-16 NOV-16 FEB-17 MAY-17 AUG-17 DEC-17
HEMO
FTSE small cap
FTSE Techmark Mediscience
Hemogenyx Plc was listed in November 2015 (under the name Silver Falcon Plc) and therefore no historical share price
data exists prior to this period, there was also no data between December 2015 and October 2017 pending completion
of a transaction.
It is for these reasons that the historical investment performance is not reflective of the current Group.
Consideration of shareholder views
The Board considers shareholder feedback received and
guidance from shareholder bodies. This feedback, plus
any additional feedback received from time to time, is
considered as part of the Company’s annual policy on
remuneration.
Approved on behalf of the Board of Directors.
………………………
Dr Robin Campbell
Director & Remuneration Committee Chairman
Date: 1 June 2018
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
35
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
t o t h e M e m b e r s o f H e m o g e n y x P h a r m a c e u t i c a l s P l c
Opinion
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 are independent of the group and 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. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a
basis for our opinion.
We have audited the financial statements of Hemogenyx
Pharmaceuticals Plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December
2017 which comprise the Consolidated Statement of
Comprehensive Loss, the Group and Parent Company
Statements of Financial Position, the Group and Parent
Company Statements of Changes in Equity, the Group
and Parent Company Statements of Cash Flows 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 Financial Reporting
Standards (IFRSs) as adopted by the European Union
and as regards the parent company financial statements,
as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone, other than the company
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
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 2017 and of the group’s and parent
company’s loss for the year then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006; and, as regards the group financial
statements, Article 4 of the IAS Regulation.
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36
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
t o t h e M e m b e r s o f H e m o g e n y x P h a r m a c e u t i c a l s P l c
Conclusions relating to going concern
We have nothing to report in respect of the following
information in the annual report, in relation to which the
ISAs (UK) require us to report to you whether we have
anything material to add or draw attention to:
• the disclosures in the annual report set out on page 12
that describe the principal risks and explain how they
are being managed or mitigated;
• the directors’ confirmation set out on page 12 in
the annual report that they have carried out a robust
assessment of the principal risks facing the group,
including those that would threaten its business model,
future performance, solvency or liquidity;
• the directors’ statement set out on page 21 in
the financial statements about whether the directors
considered it appropriate to adopt the going concern
basis of accounting
the financial
statements and the directors’ identification of any
material uncertainties to the group and the parent
company’s ability to continue to do so over a period of
at least twelve months from the date of approval of the
financial statements;
in preparing
• whether the directors’ statement relating to going
concern required under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent with
our knowledge obtained in the audit; or
• the directors’ explanation set out on page 21 in
the annual report as to how they have assessed
the prospects of the group, over what period they
have done so and why they consider that period to be
appropriate, and their statement as to whether they
have a reasonable expectation that the group will
be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our application of materiality
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect
of misstatements on our audit and on the financial
statements. For the purposes of determining whether the
financial statements are free from material misstatement,
we define materiality as the magnitude of misstatement
that makes it probable that the economic decisions of a
reasonably knowledgeable person, relying on the financial
statements, would be changed or influenced. We also
determine a level of performance materiality which we
use to assess the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
materiality for the financial statements as a whole. When
establishing our overall audit strategy, we determined a
magnitude of uncorrected misstatements that we judged
would be material for the financial statements as a whole.
We determined materiality for the Group to be £100,000.
We agreed with the Board that all audit differences in
excess of £5,000, as well as differences below that
threshold that, in our view, warranted reporting.
An Overview of the Scope of our audit
The Group includes the listed Parent Company and the
US based subsidiary. We tailored the scope of our audit to
ensure that we performed enough work to be able to give
an opinion on the financial statements as a whole, taking
into account the structure of the Group and the Company,
the accounting processes and controls, and the industry
in which they operate. Our audit covered 100 % of the
Group’s loss for the year and 100 % of the Group’s net
assets.
All entities in the Group were audited by a single
engagement team, we did not rely on the work of any
component auditors.
As part of our planning we assessed the risk of material
misstatement including those that required significant
auditor consideration at the component and group level.
Procedures were then performed to address the risk
identified and for the most significant assessed risks of
material misstatement, the procedures performed are
outlined above in the key audit matters section of this
report.
Key audit matters
Key audit matters are those matters that,
in our
professional judgment, 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) 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.
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017
37
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
t o t h e M e m b e r s o f H e m o g e n y x P h a r m a c e u t i c a l s P l c
Key Audit Matter
How the scope of our audit responded to the key audit
matter
Investments in Subsidiary
-
Key Audit Matter
Investment - £8m (note 15)
Loan - £595k (note 14)
The investment in Hemogenyx Pharaceuticals
LLC following the reverse acquisition is the
only material asset, including its loan, and
represents approximately 83% of the parent
Company’s total assets.
How the scope of our audit responded to the key audit
matter
We undertook several audit procedures which included:
the
accounting
supporting
• Agreeing
documentation and undertaking a review of the acquisition
agreement and the admission document issued to investors
during the listing.
entries
from
• Reviewing the directors’ assessment of the carrying value and
their conclusions thereof.
• Our review also included an assessment where we compared
the value of the subsidiary’s carrying value plus related party
receivables against the market capitalisation of the Group as
Hemogenyx Pharmaceuticals PLC contains all the Group’s
operations.
• We also reviewed board minutes for any indications of changes
in investments held by the Parent Company.
Our results: we found the carrying value of the investments in
the subsidiary and the loan provided to the subsidiary recorded
in the Parent Company’s financial statements to be materially
acceptable.
Carrying Value of Intangible Asset (note 12)
The carrying value of
Intangible Asset
recorded in the subsidiary’s books of £257k
is the other key risk area as these items will
ultimately result in the main source of income
for Group.
This asset mainly derives from an exclusive
licence agreement signed in January 2015,
where the Company purchased the patent
rights surrounding the two main products
it is working on for $347,500. The directors
concluded that no impairment was required
at this stage and amortisation will commence
once the two products are ready for marketing.
Our audit procedures included:
Confirmation that the cost of intangibles is correctly recorded by
agreeing the price to the supporting documentation.
• Review of the directors’ assessment on the intangible assets
carrying value and challenging of the underlying assumptions.
• Review of the events after the year end which could indicate
that the carrying value of the intangibles is overstated.
Our results: we found the carrying value of the intangible
asset recorded in the consolidated financial statements to be
materially acceptable.
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017 Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
38
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
t o t h e M e m b e r s o f H e m o g e n y x P h a r m a c e u t i c a l s P l c
Other information
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are
responsible for the other information. Our opinion on
the group and parent company 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.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether there is a material
misstatement in the financial statements or a material
misstatement of the other information. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard
to our responsibility to specifically address the following
items in the other information and to report as uncorrected
material misstatements of the other information where we
conclude that those items meet the following conditions:
• Fair, balanced and understandable set out on page
22 - the statement given by the directors that they
consider the annual report and financial statements
taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the group’s performance, business model
inconsistent with our
is materially
and strategy,
knowledge obtained in the audit; or
• Audit committee reporting set out on page 23 - the
section describing the work of the audit committee
does not appropriately address matters communicated
by us to the audit committee / the explanation as to why
the annual report does not include a section describing
is materially
the audit committee
the work of
inconsistent with our knowledge obtained in the audit;
or
• Directors’ statement of compliance with the UK
Corporate Governance Code set out on page 23 the
parts of the directors’ statement required under the
Listing Rules relating to the company’s compliance
with the UK Corporate Governance Code containing
provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the
UK Corporate Governance Code.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion the part of the directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements;
• the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
group and the parent company and their environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following
matters 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
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
39
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
t o t h e M e m b e r s o f H e m o g e n y x P h a r m a c e u t i c a l s P l c
Matters on which we are required to report by
exception (Continued)
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all
explanations we require for our audit.
the
information and
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, which is included in the directors’ report, the
directors are responsible for the preparation of the group
and parent company 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 group and parent company 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.
responsibilities
further description of our
A
for
the audit of
located
the financial statements
the Financial Reporting Council’s website at:
on
h t t p : / / w w w.f r c . o r g . u k / a u d i t o r s r e s p o n s i b i l i t i e s .
This description forms part of our auditor’s report.
is
Other matters which we are required to address
We were appointed by the directors on 28 February
2018 to audit the financial statements for the year ending
31 December 2017. Our total uninterrupted period of
engagement is 3 years, covering the periods ending 28
February 2015 to 31 December 2017.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the group or the parent
company and we remain independent of the group and
the parent company in conducting our audit.
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the financial statements from our sector experience and
through discussions with the directors. We considered the
extent of compliance with those laws and regulations as
part of our procedures on the related financial statement
items.
We communicated
laws and regulations
throughout our audit team and remained alert to any
indications of non-compliance throughout the audit.
identified
As with any audit, there remained a higher risk of non-
detection irregularities, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls.
Our audit opinion is consistent with the additional report
to the audit committee.
Zahir Khaki (Senior Statutory Auditor)
for and on behalf of PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
Date 1 June 2018
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
40
Consolidated Statement of Comprehensive Loss
Continuing Operations
Note
Revenue
Administrative Expenses
Depreciation Expense
Operating Loss
Other income
Finance Costs
Reverse acquisition expense
Loss before Taxation
Tax Credit
6
12
7
4
10
Year Ended 31
December 2017
Unaudited Year
Ended 31 December
2016
-
-
837,060
33,614
447,151
11,870
(870,674)
(459,022)
101,138
(10,741)
(11,817)
(1,631,020)
-
(2,411,297)
(470,839)
49.698
-
Loss for the year attributable to equity owners
(2,361,599)
(470,839)
Items that will be reclkassified subsequently to profit
or loss:
Translation of foreign operations
Other Comprehensive income for the year
Total comprehensive income/(loss) to the year
attributable to the equity owners
(36,652)
(36,652)
26,526
26,526
(2,398,251)
(417,787)
Basic and diluted (per share)
11
(0.01)
(0.00)
The notes to the financial statements form an integral part of these financial statements.
00748_HemoGenyx_Financials_140518-v5.indd 40
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
41
Statement of Financial Position Group
Note
Year Ended 31
December 2017
Unaudited
Year Ended
31 December 2016
Unaudited
Year Ended
31 December 2015
Assets
Non-current assets
Property, plant and equipment
Intangible asset
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and Liabilities
Equity attributable to shareholders
Paid-in Capital
Called up share capital
Share premium
Other reserves
Reverse asset acquisition reserve
Foreign currency translation reserve
Retained Earnings
Total Equity
Liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Current borrowings
Total Current Liabilities
12
13
16
17
18
19
4
21
21
21
191,578
257,525
449,103
175,797
281,577
457,374
-
234,771
234,771
69,784
1,876,655
1,946,439
162,059
87,223
249,282
41,295
47,390
88,685
2,395,542
706,656
323,456
3,600,514
7,341,056
369,147
(6,157,894)
(13,984)
(3,006,982)
2,131,857
1,010,849
255,935
-
-
-
22,668
(645,383)
388,134
-
-
-
(3,858)
(174,544)
77,533
-
-
263,346
263,346
229,704
229,704
263,685
-
263,685
16,687
38,489
55,176
5,240
10,979
16,219
Total Liabilities
263,685
318,522
245,923
Total equity and liabilities
2,395,542
706,656
323,456
The notes to the financial statements form an integral part of these financial statements.
This report was approved by the board and authorised
for issue on 1 June 2018 and signed on its behalf by:
……………………….......................................
Lawrence Pemble
Chief Operating Officer
00748_HemoGenyx_Financials_140518-v5.indd 41
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42
Statement of Financial Position Company
Note
Year Ended 31
December 2017
Year Ended 31
December 2016
Assets
Non-current assets
Loan to subsidiaries
Investment in subsidiary
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and Liabilities
Equity attributable to shareholders
Paid-in Capital
Called up share capital
Share premium
Other reserves
Retained Earnings
Total Equity
Liabilities
Current liabilities
Trade and other payables
Total Current Liabilities
Total Liabilities
14
15
16
17
18
19
21
594,435
8,000,000
8,594,435
-
-
-
66,013
1,748,337
1,814,350
1,680
1,045,723
1,047,403
10,408,785
1,047,403
3,600,514
7,341,056
369,147
(1,165,532)
10,145,185
669,000
841,243
-
(606,522)
903,708
263,600
263,600
143,695
143,695
263,600
143,695
Total equity and liabilities
10,408,785
1,047,403
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals Plc has used the exemption grated under s408 of the Companies Act 2006 that allows
for the non-disclosure of the Income Statement of the parent company. The after tax loss attributable to Hemogenyx
Pharmaceuticals Plc for the year ended 31 December 2017 was £558,997 (2016: £519,898).
This report was approved by the board and authorised
for issue on 1 June 2018 and signed on its behalf by:
……………………….......................................
Lawrence Pemble
Chief Operating Officer
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017 Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
43
Statement of Changes in Equity Group
Called up
Share
Capital
Share
Premium
Other
reserves
Reverse
acquisition
reserve
Foreign
currency
translation
reserve
Retained
losses
Total
Equity
-
-
-
-
-
-
-
-
-
-
As at 1 January 2016
255,935
Loss in year
Other Comprehensive
Income
Total comprehensive
income for the period
-
-
-
Issue of share capital
754,914
As at 31 December 2016
1,010,849
-
-
-
(1,010,849)
669,000
841,243
2,285,714
5,714,286
30,000
75,000
571,429
1,428,571
(495,316)
44,371
110,927
Loss in year
Other Comprehensive
Income
Total comprehensive
income for the year
Transfer to reverse
acquisition reserve
Recognition of
Hemogenyx PLC equity
at reverse acquisition
Issue of shares for
acquisition of subsidiary
Issue of shares to directors
for services
Issue of shares - share
subscription
Share issue costs
Issue of shares for debt
settlement
Issue of options
Issue of warrants
-
-
-
35,492
(333,655)
333,655
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,858)
(174,544)
77,533
(470,839)
(470,839)
26,526
-
26,526
26,526
(470,839)
(444,313)
754,914
22,668
(645,383)
388,134
-
(2,361,599)
(2,361,599)
(36,652)
(36,652)
-
(36,652)
(2,361,599)
(2,398,251)
1,010,849
831,257
(8,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,341,500
-
105,000
2,000,000
(495,316)
155,298
35,492
-
As at 31 December 2017
3,600,514
7,341,056
369,147
(6,157,894)
(13,984)
(3,006,982)
2,131,857
The notes to the financial statements form an integral part of these financial statements.
00748_HemoGenyx_Financials_140518-v5.indd 43
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
44
Statement of Changes in Equity Company
Called up
Share
Capital
Share
Premium
Other
reserves
Retained
earnings/(loss)
Total Equity
As at 1 January 2016
649,000
781,243
Loss in period
Other Comprehensive Income
Total comprehensive income for the
period
Issue of share capital net of share issue
costs
-
-
-
-
-
-
20,000
60,000
As at 31 December 2016
669,000
841,243
Loss in year
Other Comprehensive Income
Total comprehensive income for the year
Issue of shares for acquisition of
subsidiary
-
-
-
-
-
-
2,285,714
5,714,286
Issue of shares to directors for services
30,000
75,000
Issue of shares - share subscription
571,429
1,428,571
Share issue costs
-
(495,316)
Issue of shares for debt settlement
44,371
110,927
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issue of options
Issue of warrants
-
-
-
35,492
(333,655)
333,655
(86,637)
1,343,606
(519,898)
(519,898)
-
-
(519,898)
(519,898)
-
80,000
(606,535)
903,708
(558,997)
(558,997)
-
-
(558,997)
(558,997)
-
-
-
-
-
-
-
8,000,000
105,000
2,000,000
(495,316)
155,298
35,492
-
As at 31 December 2017
3,600,514
7,341,056
369,147
(1,165,532)
10,145,185
The notes to the financial statements form an integral part of these financial statements.
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45
Statement of Cash Flows Group
Note
Year Ended 31
December 2017
Unaudited Year
Ended 31 December
2016
Cash flows generated from operating activities
Loss before income tax
Depreciation
Other Non cash items interest/professional fees (shares issued)
Interest income
Interest expense
Reverse Acquisition Expense
Share based payments
Working capital changes applicable to pre-acquisition retained
earnings
Change in trade and other payables
Change in trade and other receivables
Change in prepayments
12
4
19
(2,361,599)
(470,839)
33,614
105,000
(732)
11,473
1,631,020
35,492
(1,145)
7,637
86,260
-
11,870
60,358
(217)
12,035
-
-
-
9,507
(163,209)
-
Net cash outflow used in operating activities
(452,980)
(540,495)
Cash flows generated from financing activities
Proceeds from issuance of equity securities
Share issue costs
Repayment of loans and borrowings
Other current liabilities acquired at acquisition
Net cash flow generated from financing activities
Cash flows generated from investing activities
Interest income
Interest paid
Cash acquired on acquisition
Purchase of property, plant & equipment
Net cash flow generated from investing activities
Net increase in cash and cash equivalent
Effect of exchange rates on cash
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Major non-cash transactions
21
4
2,000,000
(383,871)
(154,422)
(245,000)
754,914
-
-
-
1,216,707
754,914
732
(1,011)
1,098,640
(64,257)
1,034,104
1,797,831
(8,399)
87,223
1,876,655
217
-
-
(188,785)
(188,568)
25,851
13,982
47,390
87,223
On the 11 November 2016 2,000,000 new Ordinary Shares of £0.01 nominal value were issued at a premium of £0.03
per share to M6 Limited as settlement for a fee of £80,000 for online marketing services.
The notes to the financial statements form an integral part of these financial statements.
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Hemogenyx Pharmaceuticals PlcAnnual Report & Financial Statements For the Year Ended 31 December 2017 Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
46
Statement of Cash Flows Company
Note
Year Ended 31
December 2017
Year Ended 31
December 2016
Cash flows generated from operating activities
Loss before income tax
Other Non cash items interest/professional fees (shares issued)
Foreign exchange (gain) loss
Interest income
Share based payments
Change in trade and other payables
Change in trade and other receivables
(558,997)
(519,898)
105,000
19,176
(1,166)
35,492
23,459
(64,332)
80,000
-
-
-
132,265
29,487
19
Net cash outflow used in operating activities
(441,368)
(278,146)
Cash flows generated from financing activities
Proceeds from issuance of equity securities
Share issue costs
2,000,000
(383,871)
-
-
Net cash flow generated from financing activities
1,616,129
-
Cash flows generated from investing activities
Interest income
Loan to related parties
Net cash flow generated from investing activities
1,166
(473,313)
(472,147)
-
-
-
Net increase in cash and cash equivalent
702,614
(278,146)
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
1,045,723
1,748,337
1,323,869
1,045,723
Major non-cash transactions
On the 11 November 2016 2,000,000 new Ordinary Shares of £0.01 nominal value were issued at a premium of £0.03
per share to M6 Limited as settlement for a fee of £80,000 for online marketing services.
The notes to the financial statements form an integral part of these financial statements.
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
47
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
1. General Information
The Group’s business is preclinical-stage biotechnology focused on the discovery, development and
commercialization of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell (BM/
HSC) transplants for blood diseases, including leukaemia, lymphoma and bone marrow failure. The products under
development are designed to address a range of problems that occur with current standard of care treatments.
The Company’s registered office is located at 5 Fleet Place, London EC4M 7RD, and is listed on the London Stock
Exchange.
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
and IFRS Interpretations Committee (IFRS IC) interpretations as adopted for use by the European Union, and the
Companies Act 2006. The financial statements have been prepared under the historical cost convention.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of Hemogenyx Plc and its subsidiaries as at
31 December 2017. The financial statements of the subsidiaries are prepared for the same reporting period as the
parent company, using consistent accounting policies.
All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group
transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases. Please refer to note 4 for information on the
consolidation of Hemogenyx Pahraceuticals LLC.
Hemogenyx Plc has used the exemption grated under s408 of the Companies Act 2006 that allows for the non-
dislosure of the Income Statement of the parent company. The after tax loss attributable to Hemogenyx Plc for the
year ended 31 December 2017 was £558,997 (2016: £519,898).
Research and development expenditure
(i) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge
and understanding, is expensed in profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and
processes. Development expenditures are capitalised only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, and the Company
intends to, and has sufficient resources to, complete development and to use or sell the asset. No development
costs have been capitalised to date.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
(ii) Clinical trial expenses
Clinical trial expenses are a component of the Company’s research and development costs. These expenses include
fees paid to contract research organizations, clinical sites, and other organizations who conduct development
activities on the Company’s behalf. The amount of clinical trial expenses recognized in a period related to clinical
agreements are based on estimates of the work performed using an accrual basis of accounting. These estimates
incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience with similar
contracts.
(iii) Government grants
Government grants relate to financial grants from governments, public authorities, and similar local, national or
international bodies. These are recognised when there is a reasonable assurance that the Company will comply with
the conditions attaching to them, and that the grant will be received. Government grants relating to research and
development are off-set against the relevant costs.
Intangibles
Research and development
Research expenditure is written off as incurred. Development costs are capitalised only if the expenditure can be
measured reliably, the product or process is technically and commercially feasible, future economic benefits are
probable, the Group intends to and has sufficient resources to complete development and to use or sell the asset,
and it is able to measure reliably the expenditure attributable to the intangible asset during its development.
The Group’s view is that capitalised assets have a finite useful life and to that extent they should be amortised over
their respective unexpired periods with provision made for impairment when required. Assets capitalised are not
amortised until the associated product is available for use or sale. Amortisation is calculated using the straight-line
method to allocate the costs of development over the estimated useful economic lives. Estimated useful economic
life is assessed by reference to the remaining patent life and may be adjusted after taking into consideration product
and market characteristics such as fundamental building blocks and product life cycle specific to the category of
expenditure.
Intellectual property (IP)
IP assets (comprising patents, know-how, copyright and licences) acquired by the Group as a result of a business
combination are initially recognised at fair value or as a purchase at cost, and are capitalised.
Internally generated IP costs are written off as incurred except where IAS 38 criteria, as described in research and
development above, would require such costs to be capitalised.
The Group’s view is that capitalised IP assets have a finite useful life and to that extent they should be amortised over
their respective unexpired periods with provision made for impairment when required. Capitalised IP assets are not
amortised until the Group is generating an economic return from the underlying asset and as such no amortisation
has been incurred to date as the products to which they relate are not ready to be sold on the open market. When
the trials are completed and the products attain the necessary accreditation and clearance from the regulators, the
Group will assess the estimated useful economic like and the IP will be amortised using the straight line method over
their estimated useful economic lives.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
Fixed assets
All property, plant and equipment is stated at historical cost less accumulated depreciation or impairment value.
Cost includes the original purchase price and expenditure that is directly attributable to the acquisition of the items
to bring the asset to its working condition. Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful economic life. Assets held under finance leases, if
any, are depreciated over their expected useful economic life on the same basis as owned assets, or where shorter,
the lease term. Assets are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount may not be recoverable.
Computer equipment
Laboratory equipment
33%
20% - 50%
Straight line
Straight line
The following rates are used:
Impairment of non-financial assets
The Group is required to review, at least annually, whether there are indications (events or changes in circumstances)
that non-financial assets have suffered impairment and that the carrying amount may exceed the recoverable
amount. If there are indications of impairment then an impairment review is undertaken. An impairment charge is
recognised within operating costs for the amount by which the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs to sell and the value-in-use. In the event that
an intangible asset will no longer be used, for example, when a patent is abandoned, the balance of unamortised
expenditure is written off.
Impairment reviews require the estimation of the recoverable amount based on value-in-use calculations. Non-
financial assets relate typically to investments in related parties and in-process development and patents, and
require broader assumptions than for developed technology. Key assumptions taken into consideration relate to
technological, market and financial risks and include the chance of product launch taking into account the stage of
development of the asset, the scale of milestone and royalty payments, overall market opportunities, market size and
competitor activity, revenue projections, estimated useful lives of assets (such as patents), contractual relationships
anddiscount rates to determine present values of cash flows.
Investments
Equity investments in subsidiaries are held at cost, less any provision for impairment. As there is no quoted price in
an active market, fair value cannot be reliably measured.
Going Concern
The preparation of financial statements requires an assessment on the validity of the going concern assumption.
The Directors have reviewed projections for a period of at least 12 months from the date of approval of the financial
statements. The financial statements have been prepared on the going concern basis. The Group’s forecasts and
projections, taking account of reasonably possible changes in trading performance, show that the Group should be
able to operate within the level of its current available working capital and working capital facilities for the next 12
months. Therefore the Directors consider the going concern basis appropriate.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
Financial Instruments
Financial assets and liabilities are recognised in the Company’s statement of financial position when the Company
becomes a party to the contractual provisions of the instrument. The Company currently does not use derivative
financial instruments to manage or hedge financial exposures or liabilities.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for maturities greater than 12 months after the end
of the reporting period. These are classified as non-current assets. The Company’s loans and receivables comprise
Trade and Other Receivables and Cash and Cash Equivalents in the Statement of Financial Position.
Trade and Other Receivables and Payables
Trade and other receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the
business if longer), they are classified as current assets. If not they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value, and subsequently measured at amortised cost using
the effective interest method, less provision for impairment.
Other liabilities measured at amortised cost are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. The liabilities 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.
The liabilities are recognised initially at fair value, and subsequently measured at amortised cost using the effective
interest method.
Impairment of Financial assets
The Company and Group assesses at each reporting date whether a financial asset is impaired an will recognise the
impairment loss immediately through the consolidated statement of comprehensive loss.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
Foreign currencies
Functional and presentation currency
The Company’s presentation currency is the British Pound Sterling (“£”). The functional currency for the Company,
being the currency of the primary economic environment in which the Company operates, is the British Pound
Sterling. The individual financial statements of each of the Company’s wholly owned subsidiaries are prepared in the
currency of the primary economic environment in which it operates (its functional currency).
The Hemogenyx LLC financial statements have been translated in to Pound Sterling in accordance with IAS 21
The Effects of Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated
using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that
approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign
exchange differences on translation of Hemogenyx LLC are recognized in other comprehensive income (loss).
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in profit and loss.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.
The Group operates an equity-settled share option plan to certain shareholders. The fair value of the service received
in exchange for the grant of options and warrants is recognised as an expense. Equity-settled share based payments
are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair
value determined at the grant date of equity-settled share-based payment is expensed on a graded vesting basis
over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect
of non-market based vesting conditions.
Fair value is measured by use of the Black-Scholes model. The expected life used in the models has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
On addition the Group issues equity-settled share-based payments to the directors and senior management
(“Employee Share Options”) and to its corporate finance advisers for assistance in raising private equity (“Non-
employee Share Options”). Equity-settled share-based payments are measured at fair value at the date of grant
for Employee Share Options and the date of service for Non-employee Share Options. The fair value determined
at the grant date or service date, as applicable, of the equity-settled share-based payments is expensed, with a
corresponding credit to equity, on a straight-line basis over the vesting period, based on the Group’s estimate of
shares that will eventually vest. At each subsequent reporting date the Group calculates the estimated cumulative
charge for each award having regard to any change in the number of options that are expected to vest and the
expired portion of the vesting period. The change in this cumulative charge since the last reporting date is expensed
with a corresponding credit being made to equity. Once an option vests, no further adjustment is made to the
aggregate amount expensed.
The fair value is calculated using the Black Scholes method for both Employee and Non-employee Share Options as
management views the Black Scholes method as providing the most reliable measure of valuation. The expected
life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability
exercise restrictions and behavioural considerations. The market price used in the model is the issue price of Company
shares at the last placement of shares immediately preceding the calculation date. The fair values calculated are
inherently subjective and uncertain due to the assumptions made and the limitation of the calculations used.
Share Capital
Ordinary Shares are classified as equity. Equity instruments issued by the Hemogenyx Group are recorded at the
proceeds received, net of direct issue costs.
Cash
Cash consist of cash bank deposit balances.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
Taxation
Current Tax
The charge for current taxation is based on the results for the year as adjusted for items that are non-assessable or
disallowed. It is calculated using rates that have been enacted, or substantially enacted, by the balance sheet date.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
relevant taxation authorities.
Deferred Tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither accounting nor
taxable profit or loss;
• in respect of taxable temporary differences associated with investment in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected
to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively
enacted at the statement of financial position date.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred
income tax assets and liabilities are offset, only if a legally enforcement right exists to set off current tax assets
against current tax liabilities, the deferred income taxes related to the same taxation authority and that authority
permits the Company to make a single net payment.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity.
Otherwise income tax is recognised in the statement of comprehensive income.
Segmental Reporting
The Group’s operations are located throughout in New York, USA with the head office located in the United Kingdom.
The main assets of the Group, cash and cash equivalents, are held in United Kingdom and adequate amounts are
transferred to the USA operating business on a quarterly basis on approval from the board.
The Group currently has one reportable segment - biotechnology company focused on the discovery, development
and commercialization of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell
(BM/HSC) transplants for blood disease.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
2. Summary of Significant Accounting Policies (Continued)
New Accounting Standards and Interpretations in issue but not applied in the Financial Statements
i)
New standards, amendments and Interpretations in issue but not yet effective or not (and in some cases have
not yet been adopted by the EU):
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial
statements are listed below. The Company intend to adopt these standards, if applicable, when they become
effective. These are summarised below:
• IFRS 9 – ‘Financial Instruments’ This standard replaces IAS 39. It includes requirements on the classification and
measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the
current incurred loss impairment model. The standard is effective for annual periods beginning on or after 1 January
2018.
The Group does not expect the adoption of IFRS 9 will result in a material change to the carrying values and
classification of financial assets and liabilities.
• IFRS 15 - ‘Revenue from contracts with customers’ This standard deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, timing and uncertainty
of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer
obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good
or service.
The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard
is effective for annual periods beginning on or after 1 January 2018. The Group does not expect that the adoption of
IFRS 15 will result in a change to the accounting policy as the performance obligation and timing of recognition are
consistent with those identified under IAS 18.
• IFRS 16 - ‘Leases’ This standard replaces the current guidance in IAS 17 – ‘Leases’ and is a far-reaching change in
accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance
lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 requires lessees to recognise a lease
liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts.
IFRS 16 includes an optional exemption for certain short-term leases and leases of low-value assets; however, this
exemption can only be applied by lessees. For lessors, the accounting remains substantially unchanged. IFRS 16
provides updated guidance on the definition of a lease (as well as the guidance on the combination and separation
of contracts); under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration.
The standard is effective for annual periods beginning on or after 1 January 2019. The Group is currently assessing
the impact of IFRS 16.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements in conformity with International Financial Reporting Standards requires
the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process
of applying the Company’s accounting policies.
Estimates and judgements are continually evaluated, and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
The principal areas in which judgement is applied are as follows:
Warrants to be issued pursuant to IPO
Under terms of the share placement completed pursuant to the IPO there were a maximum of 62,021,429 warrants
eligible to be issued eligible participants. As at 31 December 2017 43,627,283 warrants had been issued to eligible
IPO participants who had been identified. A total of 18,394,146 warrants potentially are still to be issued however
it is not known if or when these warrants will be issued as the identity of the holders is not known. The Group has
not brought the value of the unissued warrants to account as at 31 December, 2017 as it can not be reasonably
ascertained if these outstanding warrants will ever be issued. The 18,394,146 warrants have a value of £112,274.
Management has determined that a discount of 40% reasonable to allow for the probabilty of the identity of the
warrant holders remaining unknown. After applying this discount a value £67,364 has not been brought to account
in the Statement of Financial Position due to uncertainty.
Valuation of stock options
Management uses the Black Scholes model to value the share options. The model requires use of assumptions
regarding volatility, risk free interest rate and a calculation of the value of the option at the time of the grant. Please
see note 18 for details.
Intangible assets impairment
When there is an indicator of a significant and permanent reduction in the value of intangible assets, an impairment
review is carried out. The impairment analysis is principally based on estimated discounted future cash flows. The
determination of the assumptions is subjective and requires the exercise of considerable judgement. Any changes
in key assumptions about the outcome of research and development activity, probability of technical and regulatory
success, amount and timing of projected future cash flow or changes in market conditions could materially affect
whether an impairment exists.
4. Reverse acquisition and LSE listing
On 4 October 2017, the Company acquired the entire issued share capital of Hemogenyx LLC, a private company
incorporated in the United States, by way of a share for share exchange.
Although the transaction resulted in Hemogenyx LLC becoming a wholly owned subsidiary of the Company, the
transaction constitutes a reverse acquisition in as much as the shareholders of Hemogenyx LLC own a substantial
majority of the outstanding ordinary shares of the Company and 2 out of 6 members of the Board of Directors of the
Company are Hemogenyx LLC shareholders and management.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
56
N O T E S T O T H E F I N A N C I A L S T A T E M E N T
4. Reverse acquisition and LSE listing (Continued)
In substance, the shareholders of Hemogenyx LLC acquired a controlling interest in the Company and the transaction
has therefore been accounted for as a reverse acquisition. As the Company previously discontinued its investment
activities and was engaged in acquiring Hemogenyx LLC and raising equity financing to provide the required funding
for the operations of the acquisition and re-listing on the main market of the LSE, it did not meet the definition of a
business according to the definition in IFRS 3. Accordingly, this reverse acquisition does not constitute a business
combination and was accounted for in accordance with IFRS 2 Share-based payment and IFRIC guidance, with the
difference between the equity value given up by the Hemogenyx LLC shareholders and the share of the fair value of
net assets gained by the Hemogenyx LLC shareholders charged to the statement of comprehensive income as the
cost of acquiring a main market LSE quoted listing.
Following the completion of the transaction the Company changed its name to Hemogenyx Pharmaceuticals Plc.
In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a
continuation of the consolidated financial statements of Hemogenyx LLC and include:
The assets and liabilities of Hemogenyx LLC at their pre-acquisition carrying amounts and the results for both periods;
a. The assets and liabilities of Hemogenyx LLC at their pre-acquisition carrying amounts and the results for both
periods; and
b. The assets and liabilities of the Company as at 31 December 2017 and it’s results from 5 October 2017 to 31
December 2017,
On 4 October 2017, the Company issued 228,571,428 shares for all 21,923,076 shares of Homogenyx LLC.
On 4 October 2017, the quoted share price of Homogenyx plc was £0.035 and therefore this valued the investment
in Hemogenyx LLC at £8,000,000.
Because the legal subsidiary, Hemogenyx LLC, was treated as the accounting acquirer and the legal Parent Company,
Silver Falcon plc, was treated as the accounting subsidiary, the fair value of the shares deemed to have been issued
by Hemogenyx LLC was calculated at £2,341,500 based on an assessment of the purchase consideration for an
100% holding in Hemogenyx Plc.
The fair value of net assets of Silver Falcon plc was as follows:
Cash and cash equivalents
Other assets
Liabilities
Net assets
£
1,098,640
60,641
(448,800)
710,480
The difference between the deemed cost and the fair value of the net assets acquired of £1,631,020 has been
expensed in accordance with IFRS 2, Share based payments, reflecting the economic cost to the Hemogenyx LLC
shareholders of acquiring a quoted entity.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
4. Reverse acquisition and LSE listing (Continued)
The reverse acquisition reserve that arose from the reverse takeover is made up as follows:
As at start of year
Pre-acquisition losses of Hemogenyx PLC1
Hemogenyx LLC issued capital at acquisition2
Investment in Hemogenyx LLC3
Reverse acquisition expense4
As at end of year
Year Ended 31 December
2017
£
-
799,763
1,010,849
(8,000,000)
1,631,020
(6,157,894)
The movements on the Reverse acquisition reserve are as follows:
1) These consolidated financial statements present the legal capital structure of the Company. However,
under reverse acquisition accounting rules, the Company was not acquired until 4 October 2017 and therefore
the entry above is required to eliminate the initial retained losses of the Company.
2) Hemogenyx LLC had issued share capital of equivalent to £1,010,849 as at 4 October 2017. As these
financial statements present the capital structure of the parent entity, the issue of equity by Hemogenyx LLC
has been recorded in this reserve.
3) The Company issued 228,571,428 shares at £0.35 each, totaling £8,000,000 for the entire issued capital of
Hemogenyx LLC. The above entry is required to eliminate the balance sheet impact of this transaction.
4) The reverse acquisition accounting is described in detail in note 4. The entry above represents the difference
between the value of the equity issued by the Company, and the deemed consideration given by Hemogenyx
LLC to acquire the Company .
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5. Segment Information
The Group has one reportable segment, the development of breakthrough therapies for the treatment of blood
diseases, and administrative functions in the United Kingdom.
The following tables present expenditure and certain asset information regarding the Group’s geographical segments
for the year ended 31 December 2017:
Revenue
SEGMENT ASSETS
United Kingdom
- Non-current
- Current
United States
- Non-current
- Current
Total
- Non-current
- Current
CAPITAL EXPENDITURE
United Kingdom
United States
6. Expenses by nature
Laboratory expenses
Consumable equipment and supplies
Contractors & consultants
Transaction completion success fees
Travel
Staff Costs
Insurance
Other
Operating lease expense
Legal and professional fees
Foreien exchange loss / (gain)
Total Administrative Expenses
Year Ended 31
December 2017
Year Ended 31
December 2016
£
-
£
-
1,814,350
1,047,416
449,103
132,089
449,103
1,946,439
-
64,257
64,257
457,374
249,282
457,374
249,282
-
188,785
188,785
Group
Group
Year Ended 31
December 2017
Year Ended 31
December 2016
£
14,046
£
1,619
64,287
65,236
59,876
105,000
23,942
-
19,494
5,871
319,119
13,820
22,521
22,188
166,902
201,626
10,975
22,000
20,934
94,949
29,807
-
837,060
447,152
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
7. Other income
Other income of £101,138 during the year to 31 December 2017 (2016: nil) relates to funds received from a third party
under a research collaboration programme.
8. Employees
Wages and salaries
Social security
Share options
Pension contributions
Group
Group
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
Year Ended 31
December 2017
Year Ended 31
December 2016
£
£
£
269,265
12,811
35,492
1,551
319,119
200,002
-
-
1,624
201,626
41,325
2,634
35,492
-
79,451
£
-
-
-
-
-
Average number of people (including executive Directors) employed:
Group
Group
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
Year Ended 31
December 2017
Year Ended 31
December 2016
£
3
1
4
£
2
1
3
£
-
3
3
£
-
3
3
Research & development
Administration
9. Auditors’ remuneration
Fees payable to the Company auditor:
Audit of the financial statements of the Group and Company
Services relating to corporate finance transactions
Group
Group
Year Ended 31
December 2017
Year Ended 31
December 2016
£
35,000
37,995
72,995
£
-
-
-
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
10. Income tax
Current Tax:
Corporation tax on loss for the year
New York City Biotech tax credit - prior years
Deferred Tax
Tax on loss on ordinary activities
Group
Group
Year Ended 31
December 2017
Year Ended 31
December 2016
£
-
49,698
-
49,698
£
-
-
-
-
Loss on ordinary activities before tax
(2,411,297)
(519,898)
Analysis of charge in the year:
Loss on ordinary activities multiplied by weighted average tax
rate for the group of 25.69% (2016: 0%)
Disallowed items
Timing differences
Tax losses carried forward
Current Tax charge
(619,558)
398,630
(7,466)
(228,394)
-
-
-
-
-
-
Weighted average tax rate is calculated by reference to the tax rates effective in each of the jurisdicitons. The tax
rates effective at 31 December 2017 are 19% and 34% in the UK and the USA respectively. Prior to the acquisition in
October 2017, Hemogenyx LLC was registered as a partnership which is not taxed under the corporation tax regime,
as such weighted average tax rate for 2016 is nil.
The Group has accumulated tax losses arising in the UK of approximately £140,000 (Dec 2016: £295,198) that should
be available, under current legislation, to be carried forward against future profits. No deferred tax asset has been
recognised against these losses. The Group has tax losses carried forward in the US of £396,416 available under
current rules until 2037. No deferred tax asset has been recognised against these losses.
11. Earnings per share
The calculation of the Basic and fully diluted earnings per share is calculated by dividing the loss for the year from
continuing operations of £2,361,599 (2016: £470,839) for the Group by the weighted average number of ordinary
shares in issue during the year of 260,270,699 (2016: 145,166,853).
The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows:
- Prior to the reverse takeover, the number of shares is based on Hemogenyx LLC, adjusted using the share
exchange ratio arising on the reverse takeover; and
- From the date of the reverse takeover, the number of share is based on the Company.
Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2017 and 2016,
there is no dilutive effect from the subsisting share options.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
12. Property, Plant and Equipment
Group
Costs
Balance, December 31, 2015
Additions
Balance, December 31, 2016
Additions
Foreign exchange movement
Balance, December 31, 2017
Accumulated depreciation and impairment losses
Balance, December 31 2015
Depreciation
Foreign exchange movement
Balance, December 31, 2016
Depreciation
Foreign exchange movement
Balance, December 31, 2017
Carrying amounts
Carrying value at December 31, 2015
Carrying value December 31, 2016
Carrying value December 31, 2017
61
Property, plant
& equipment
£
188,785
188,785
64,257
(17,344)
235,698
11,870
1,117
12,987
33,614
(2,482)
44,120
-
175,797
191,578
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Hemogenyx Pharmaceuticals Plc
Annual Report & Financial Statements For the Year Ended 31 December 2017
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
13. Intangible Assets
On 15 January 2015, the Company entered into an Exclusive License Agreement with Cornell University to grant
to the Company patent rights to patent PCT/US14/65469 entitled “Post-Natal Hematopoietic Endothelial Cells and
Their Isolation and Use” and rights to any product or method deriving therefrom.
The Company paid Cornell University $347,500, consisting of cash payments of $22,500 and a convertible promissory
note in the amount of $325,000.
Cost
31 December 2015
Exchange movements
31 December 2016
Exchange movements
December 31, 2017
Itellectual Property
£
234,771
46,806
281,577
(24,052)
257,525
The carrying value of intangible assets is reviewed for indications of impairment whenever events or changes in
circumstances indicate that the carrying value may exceed the recoverable amount. The products to which they
relate are not ready to be sold on the open market. When the trials are completed and the products attain the
necessary accreditation and clearance from the regulators, the Group will assess the estimated useful economic like
and the IP will be amortised using the straight line method over their estimated useful economic lives. The directors
are of the view that no impairment is required as the test results to date have been very positive and these products
are now being moved on the clinical trial phase. Accordingly, the directors continue to believe that the products will
eventually attain the necessary accreditation and clearance from the regulators and so no impairment has been
considered necessary.
Amortisation will be charged to operating costs in the Statement of Comprehensive Income when the Group achieves
product sales.
14. Loan to subsidiary
Loan to Hemogenyx LLC
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
£
594,435
594,435
£
-
Hemogenyx Pharmaceuticals PLC has made cumulative loans to Hemogenyx LLC of US$802,121 (£594,435) as at 31
December 2017. The loan is interest free and will be repaid when Hemogenyx LLC’s operational cash flow allows.
Management has undertaken an impairment assessment of the loan as at 31 December 2017 and has determined
that that there was no impairment required. The interest rate and impairment assessment are reviewed on an annual
basis.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
15. Investments in subsidiary
Name
Address of the
registered office
Nature of business
Nature of business
Proportion of ordinary shares
held directly by parent (%)
Hemogenyx
Pharaceuticals LLC
9 East Lookerman Street,
Suite 3A, Dover, Kent,
Delaware, USA, 19901
Biomedical sciences
100
16. Trade and other receivables
Group
Group
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
Year Ended 31
December 2017
Year Ended 31
December 2016
£
£
£
£
VAT receivable
Other receivables
Prepayments
64,784
-
61,013
-
-
162,059
-
180
5,000
-
5,000
1,500
Total trade and other receivables
69,784
162,059
66,013
1,680
There are no material differences between the fair value of trade and other receivables and their carrying value at
the year end.
No receivables were past due or impaired at the year end.
17. Called up share capital
Group
Class A shares
Number
Class B shares
Number
Ordinary
shares Number
£
As at 31 December 2015
Issue of shares to retain contractual ownership
percentage 19 February 2016
12,657,692
496,154
-
-
-
255,935
-
-
Issue of shares for cash various dates
-
8,769,230
As at 31 December 2016
13,153,846
8,769,230
(13,153,846)
(8,769,230)
-
-
-
754,914
1,010,849
(1,010,849)
Transfer of LLC paid up capital to Reverse
Acquisition Reserve 4 Oct 2017
Issued capital of PLC at acquisition 4 Oct 2017
Issue of shares for acquisition of subsidiary 4
Oct 2017
Issue of shares to directors 4 Oct 2017
Issue of shares for cash 4 Oct 2017
Issue of shares for debt settlement 20 Oct 2017
As at 31 December 2017
-
-
-
-
-
-
-
-
-
-
-
-
66,900,000
669,000
228,571,428
2,285,714
3,000,000
57,142,857
4,437,075
30,000
571,429
44,371
360,051,358
3,600,514
The issued capital of the Group for the period 1 January 2015 to 4 October 2017 is that of Hemogenyx LLC. Upon
completion of the acquisition the share capital of Hemogenyx LLC was transferred to the Reverse acquisition reserve
(see note 4) and the share capital of Hemogenyx PLC was brought to account.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
17. Called up share capital
Company
As at 1 January 2016
Issue of shares 11 November 2016
As at 31 December 2016
Issue of shares for acquisition of subsidiary 4 Oct 2017
Issue of shares to directors 4 Oct 2017
Issue of shares for cash 4 Oct 2017
Issue of shares for debt settlement 20 Oct 2017
As at 31 December 2017
18. Share Premium
Group & Company
As at 31 December 2016
Issued capital of PLC at acquisition 4 Oct 2017
Issue of shares for acquisition of subsidiary 4 Oct 2017
Issue of shares to directors 4 Oct 2017
Issue of shares for cash 4 Oct 2017
Issue of shares for debt settlement 20 Oct 2017
Value of warrants issued in connection with share placements
Share issue costs
As at 31 December 2017
Number of
shares
£
64,900,000
649,000
2,000,000
20,000
66,900,000
669,000
228,571,426
2,285,714
3,000,000
57,142,857
4,437,075
30,000
571,429
44,371
360,051,358
3,600,514
£
-
841,243
5,714,286
75,000
1,428,571
110,927
(333,655)
(495,316)
7,341,056
The issued share capital of Hemogenyx LLC did not have a share premium component.
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19. Other Reserve
Share Options
Group & Company
As at start of year
Charge for the year - employees
Fair value of warrants issued in connection with share placement
As at end of year
Group
Group
Year Ended 31
December 2017
Year Ended 31
December 2016
£
-
35,492
333,655
369,147
£
-
-
-
-
The expense recognised for employee and non-employee services during the year is shown in the following table:
Group & Company
Expense arising from equity-settled share-based payment transactions
Total expense arising from share-based payment transactions
Year Ended 31
December 2017
Year Ended 31
December 2016
£
35,492
1,666,512
£
-
-
Employee Plan
Under the Employee Plan (“EMP”) share options are granted to directors and employees at the complete discretion
of the Company. The fair value of the options is determined by the Company at the date of the grant. scribe for
Ordinary Shares on each of the following events/dates:
(i)
(ii)
(iii) On the date falling twelve (12) months after Admission; and
(iv) On the date falling twenty four (24) months after Admission
Admission to the LSE (“Admission”);
On the date falling six (6) months after Admission;
On the provision that the option holder remains an employee of the Group.
Options granted to all other option holders vest in equal tranches of 12.5% every three months from 4 January, 2018,
until fully vested.
The fair value of the options is determined using the Black Scholes method as stated in Note 2. The contractual life
of each option granted is two years. There are no cash settlement alternatives.
Options are settled when the Company receives a notice of exercise and cash proceeds from the optionholder equal
to the aggregate exercise price of the options being exercised.
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Annual Report & Financial Statements For the Year Ended 31 December 2017
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
19. Other Reserve (Continued)
Non-Employee Plan
Under the Non-Employee Plan (“NEMP”) share options are granted to non-employees at the complete discretion of
the Company. The exercise price of the options is determined by the Company at the date of the grant. The options
vest at the date of the grant.
The fair value of the options is determined using the Black Scholes method as stated in Note 2 and not the value
of services provided as this is deemed the most appropriate method of valuation. In all cases non-employee option
holders received cash remuneration in consideration for services rendered in accordance with agreed letters of
engagement. The contractual life of each option granted ranges from two to five years. There are no cash settlement
alternatives. Volatility was determined by calculating the volatility for three similar listed companies and applying the
average of the four volatilities calculated.
Options are settled when the Company receives a notice of exercise and cash proceeds from the option holder
equal to the aggregate exercise price of the options being exercised.
A schedule of options granted is below:
Employees, including directors*
Members of the Scientific Advisory Board
Total
Number options
9,257,111
16,021,927
25,279,038
*Details of options held by individual directors are disclosed in the Directors’ Report.
Group & Company
2017
Number
2017
WAEP pence
2016
Number
2016
WAEP pence
Outstanding at the beginning of the year
Granted during the year
Outstanding at end of year
Exercisable at end of year
£
-
25,279,038
25,279,038
1,780,214
£
-
£
-
£
-
3.5
-
-
3.5
3.5
-
-
-
-
The weighted average remaining contractual life for the share options outstanding as at 31 December 2017 is 3.89
years (2016: n/a). The weighted average fair value of options granted during the year was 0.01 pence (2016: n/a). The
exercise price for options outstanding at the end of the year was 3.5 pence (2016: n/a).
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
19. Other reserves (Continued)
The following table lists the inputs to the models used for the two plans for the years ended 31 December 2017
and 31 December 2016:
Expected volatility %
Risk-free interest rate %
Expected life of options (years)
WAEP1 - pence
Expected dividend yield
2017 (EMP)
39.56
0.472
2
3.5
-
Model used
Black Scholes
Warrants
The share placement that completed on 4 October 2017 with the issue of 57,142,857 shares at £0.035 carried 1 for 2
warrants for qualifying shareholders over 62,021,429 new ordinary shares at £0.04 per share. In order to qualify for
these warrants the shareholder must have retained the shares for a period of 60 days after admission.
As at 31 December 2017 43,627,283 warrants had been issued to eligible IPO participants who had been identified.
A total of 18,394,146 warrants potentially are still to be issued however it is not known if or when these warrants will
be issued as the identity of the holders is not known. The 18,394,146 warrants have a value of £112,274 and applying
a reasonable discount of 40% to allow for the proabilty of the identity of the warrant holders remaining unknown, an
adjusted value £67,364 has not been brought to account in the Statement of Financial Position due to uncertainty.
The following table lists the inputs to the models used for the two plans for the years ended 31 December 2017:
Expected volatility %
Risk-free interest rate %
Expected life of options (years)
WAEP1 - pence
Expected dividend yield
2017 (NEMP)
39.56
0.472
2
4.0
-
Model used
Black Scholes
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
20. Capital and Reserves
The nature and purpose of equity and reserves are as follows:
Share capital comprises the nominal value of the ordinary issued share capital of the Company.
Share Premium represents consideration less nominal value of issued shares and costs directly attributable to the
issue of new shares.
Other reserves represents the value of options in connection with share based payments, and warrants connected
withshare placements, issued by the Company.
Reverse asset acquisition reserve is the reserve created in accordance with the acquisition of Hemogenyx
Pharmaceuticals LLC on 5 October, 2017 in accordance with IFRS 2.
Foreign currency translation reserve is used to recognise the exchange differences arising on translation of the
assets and liabilities of foreign branches and subsidiaries with functional currencies other than Pounds Sterling, as
well as the revalutaion of intercompany loans.
Retained earnings represent the cumulative retained losses of the Company at the reporting date.
21 . Non-current and current liabilities
Group
Group
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
Year Ended 31
December 2017
Year Ended 31
December 2016
£
£
£
£
Trade and other payables
7,333
16,687
7,247
143,695
Accruals and deferred income
256,353
-
256,353
-
Loan note interest
-
26,335
-
-
Loan notes
Total liabilities
-
275,500
-
-
263,685
318,522
263,600
143,695
Current liabilities
263,685
55,176
263,600
143,695
Non-current liabilities
-
263,346
-
-
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T
Loan Notes
On 15 January 2015 Hemogenyx LLC issued a USD$325,000 unsecured convertible promissory note to Cornell
University in partial payment of the license fee with that University. The promissory note bore interest at 5% per
annum with the interest payable annually in arrears. The maturity date is the earlier of (1) after the Company receives
a bona fide equity investment of not less than $5 million, (2) 14 January 2020, or (3) a change in control of the
Company. The note was convertible into membership units at a price equal to the price obtained in the above-
mentioned bona fide equity investment.
Post completion of the acquisition of Hemogenyx Pharmaceuticals LLC the loan note and accrued interest were
repaid in full via a cash payment of £154,422 (USD$199,866.68) and the issue of 4,008,504 ordinary shares at 3.5
pence each in Hemogenyx Pharmaceuticals PLC with a value totalling £140,297.64 (USD$186,175).
The loan note and interest were fully repaid by 31 December 2017.
A schedule of movements in the loan note is set out in the table below:
Balance 1 January 2016
Interest expense
Foreign exchange loss
Balance 31 December 2016
Interest expense
Repayment in cash
Repayment in equity issue
Foreign exchange gain
Balance 31 December 2017
£
240,683
11,817
49,335
301,835
10,741
(154,422)
(140,298)
(17,856)
-
22. Related party disclosures
With effect from 11 November 2015, M6 Limited (“M6”) entered into an agreement to provide web development,
online marketing, mobile application development and marketing, content production, advertising, public relations,
and lead generation services to the Company for a fee of £80,000. The Company has agreed with M6 to issue
2,000,000 Ordinary Shares at the Placing Price at Admission in settlement of monies owed to M6. As at 11 November
2016, 2,000,000 Ordinary Shares were issued to M6 as payment for their services; further details of this transaction
are disclosed in note 8. Adrian Beeston, a director of the Company, is also a director of M6 and holds c.17 per cent.
of the issued ordinary share capital of M6 Limited.
During the year, the Company paid £20,239 (2015: £3,000) to Dukemount Capital Plc in respect of rent. As at the
31 December, 2017 there were no amounts owed to Dukemount in respect of rent (2016: £1,500). Peter Redmond
resigned as a director of Dukemount Capital on 26 April 2017.
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23. Financial instruments
The Group’s financial instruments consist of cash, amounts receivable, accounts payable and accrued liabilities and
deferred payment.
Fair value of financial assets and liabilities
Fair values have been determined for measurement and/or disclosure purposes based on the following methods.
When applicable, further information about the assumptions made in determining fair values is disclosed in the notes
specific to that asset or liability.
The carrying amount for cash, accounts receivable, and accounts payable and accrued liabilities on the statement
of financial position approximate their fair value because of the limited term of these instruments. The fair value of
deferred payment approximates its fair value. The investment is carried at cost as it is not traded on an active market.
Fair value hierarchy
Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3
based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities; and
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
The Group did not have any financial instruments in Level 1, 2 and 3.
Financial risk management objectives and policies
The Company has exposure to the following risks from its use of financial instruments
• Credit risk
• Liquidity and funding risk
• Market risk
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23. Financial instruments (Continued)
The following table sets out the categories of financial instruments held by the Company as at the year ended 31
December 2017 and period ended 31 December 2016:
Group
Group
Company
Company
Year Ended 31
December 2017
Year Ended 31
December 2016
Year Ended 31
December 2017
Year Ended 31
December 2016
£
£
£
£
64,784
162,059
61,013
180
Assets
Trade and other receivables,
except prepayments
Cash and cash equivalents
1,876,655
87,223
1,748,337
1,045,736
1,941,439
249,282
1,809,350
1,045,916
Liabilities
Trade and other payables
(263,685)
(16,688)
(263,600)
(143,695)
Loan Notes & interest
-
(301,835)
-
-
(263,685)
(318,523)
(263,600)
(143,695)
Group
1 January
2017
Cash flows
Non-cash changes
31 December
2017
Share
repayment
Foreign
exchange
movements
Interest
charge
Long-term
borrowings
Short-term
borrowings
275,500
(154,422)
(140,297)
7,746
11,473
26,335
(26,335)
-
-
-
Total
301,835
(180,757)
(140,297)
7,746
11,473
-
-
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23. Financial instruments (Continued)
a) Credit risk
The Group had receivables of £nil owing from customers (31 December 2016: £1,680).
All bank deposits are held with Financial Institutions with a minimum credit rating of AAA.
b) Liquidity and funding risk
The Group regularly reviews its major funding positions to ensure that it has adequate financial resources in meeting
its financial obligations. The Group takes liquidity risk into consideration when deciding its sources of funds. The
principle liquidity risk facing the business is the risk of going concern which has been discussed in Note 2.
c) Market risk
Interest rate risk
The Company has floating rate financial assets in the form of deposit accounts with major banking institutions;
however, it is not currently subjected to any other interest rate risk.
Based on cash balances as above as at the statement of financial position date, a rise in interest rates of 1% would
not have a material impact on the profit and loss of the Company and such is not disclosed.
In relation to sensitivity analysis, there was no material difference to disclosures made on financial assets and
liabilities.
Foreign currency risk
The Group operates internationally and has monetary assets and liabilities in currencies other than the functional
currency of the operating company involved.
The Group seeks to manage its exposure to this risk by ensuring that where possible, the majority of expenditure and
cash of individual subsidiaries within the Group are denominated in the same currency as the functional currency of
that subsidiary.
The Group has not entered into any derivative instruments to manage foreign exchange fluctuations.
The following table shows a currency of net monetary assets and liabilities by functional currency of the underlying
companies:
Currency of net monetary
assets/(liabilities)
Pound Sterling £
US Dollars £
Total £
Functional Currency
Pound Sterling
US Dollars
Total
1,489,737
-
1,489,737
-
132,003
132,003
1,489,737
132,003
1,621,740
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23. Financial instruments (Continued)
Capital risk management
The Group defines capital as the total equity of the Company. The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
Fair value of financial assets and liabilities
There are no material differences between the fair value of the Group’s financial assets and liabilities and their
carrying values in the financial statements.
24. Commitments
Operating lease
The Group has office leasing commitments.
The total of future minimum lease payments under non-cancellable operating leases for each of the following
periods:
not later than 1 year
later than 1 year and not later than 5 years
not later than 5 years
Total Operating lease commitments
Group
2017 £
8,671
-
-
8,671
2016 £
4,286
-
-
4,286
License
Milestone and royalty payments that may become due under the license agreement are dependent on, among other
factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome
and timing of which are uncertain.
The Group’s future payments contingent upon meeting certain development, regulatory and commercialisation
milestones total to £1,434,000. Upon commencement of commercial production, the Group will pay a royalty between
2 to 5% on all net sales. In addition the Group pays an annual license maintenance fee of up to £55,000 until the
commercial sales are achieved.
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25. Ultimate Controlling Party
The Directors have determined that there is no controlling party as no individual shareholder holds a controlling
interest in the Company.
26. Subsequent events
On 26 February, 2018 the Company announced:
- The first set of data results showing that developed by Hemogenyx CDX bi-specific antibodies are capable of
attacking and eliminating cultured cells of the blood cancer, Acute Myelogenous Leukemia (AML), tested in vitro. This
is a significant development in the process needed to develop CDX antibodies to become a universally available
conditioning product for patients undergoing bone marrow transplants as a treatment for serious blood diseases.
- Confirmed the filing of a provisional patent application relating to the development of a new type of humanised
mice with a chimeric mouse-human blood system. This can be used to advance product development, as well as to
model several other diseases and drug discovery applications.
Using these new humanised mice should allow the Company to demonstrate that CDX bi-specific antibodies are
effective in the treatment of AML, this time in vivo. Of particular significance is that this new type of humanised mice
allows Hemogenyx to extend its work to other disease models and the evaluation of specific drug candidates, which
is of interest to large biopharmaceutical companies.
On 13 March, 2018 the Company announced a collaboration with a major US biotechnology company in a deal worth
up to approximately $250,000. The collaboration was facilitated by the filing of the provisional patent application
under which the humanized mice can be used for disease modelling and drug development.
On 8 May, 2018 the Company announced a collaboration with The Rockelfeller University (“Rockerfeller”) which calls
for scientists at Rockerfeller to use Hemogenyx’s new type of humanized mice for autoimmune disease modelling in
an effort to develop new treatments for autoimmune diseases, specifically Lupus.
On 14 May, 2018 the Company announced the signing of a development agreement with a leading global
pharmaceutical company engaged in the research, development, manufacture and marketing of pharmaceutical
products.
Under the Development Agreement (the “Agreement”), Hemogenyx will receive on a cost-free basis technical
support, access to advanced methods of discovering, developing and engineering antibodies, and certain intellectual
property which is expected to assist the successful preclinical development of the Hemogenyx’s lead candidate bi-
specific CDX antibodies which will complement the Company’s own development work currently being undertaken.
The Company believes that the Agreement will increase the probability of its success in bringing CDX antibodies to
clinical trials and beyond.
27. Copies of the Annual Report
Copies of the annual report will be available on the Company’s website at www.hemogenyx.com and from the
Company’s registered office, 5 Fleet Place London EC4M 7RD.
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