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
A N N U A L R E P O R T & F I N A N C I A L S TAT 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 8
C O N T E N T S
Company Information
Chairman’s Statement
Board of Directors and Senior Management
Strategic Report
Directors’ Report
Governance Report
Directors’ Remuneration Report
Independent Auditor’s 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
2
3
4
10
13
19
25
31
38
45
46
47
48
49
50
51
52
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 3
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 (Chairman)
Alexis Sandler (Non-Executive Director)
Peter Redmond (Non-Executive Director)
Principal Bankers
Metro Bank plc
One Southampton Row
London
WC1B 5HA
Registrar
Computershare Investor Services plc
The Pavilions
Bridgewater Road Bristol
BS13 8AE
Company Secretary
Andrew Wright
Registered Office
5 Fleet Place London
EC4M 7RD
Registered Number
08401609 (England and Wales)
Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Independent Auditor
PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
UK Solicitors
Osborne Clarke LLP
One London Wall
London
EC2Y 5EB
US Solicitors
Rubin & Rudman LLP
50 Rowes Wharf
Boston
Massachusetts 02110
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
4
C H A I R M A N ’ S S T A T E M E N T
C H A I R M A N ’ S S T A T E M E N T
I am very pleased to present an update on the Company
for the year ended 31 December 2018.
Hemogenyx is developing two products for the multi-
billion1 bone marrow/hematopoietic stem cell transplant
market. These two products are:
• A CDX bi-specific antibody – a product that could
eliminate relapsed and/or refractory (“R/R”) acute
myeloid leukemia (“AML”), a form of blood cancer, as
well as certain other blood malignancies and replace
chemotherapy and radiation as a means of pre-
transplant conditioning.
• A cell therapy group of products – cell therapies that
address the problem of stem cell donor availability
and issues around relapse or cell rejection after
transplantation. These products use Human Postnatal
Hemogenic Endothelial Cells (“Hu-PHECs”) as a source
of generating cancer-free, patient-matched blood stem
cells for transplantation into the patient.
The products address a large and growing need and
will be sold into a market that is already substantial. If
successfully commercialised, Hemogenyx’s products
could 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,
5
through the lack of suitable cell donors, unable to receive
blood stem cell transplants at present.
the Advanced Hematopoietic Chimera
Additionally,
(“AHC”), the Company’s proprietary humanised mouse
model originally developed to improve the testing of
the Company’s own products in vivo, is generating wide
interest across the bio-pharmaceutical industry as a
platform for disease modelling and drug discovery, and
now forms an additional line of business for the Company.
The Company made two key appointments during the
year. I was appointed Chairman of the Board in April 2018;
my biography may be found on page 11. Prior to that,
in March 2018, H. Michael Shepard, Ph.D., a pioneer in
modern cancer research, was appointed to the Scientific
Advisory Board.
I would like to take this opportunity to remind shareholders
of the progress made during 2018. Overall, advances were
made across the full range of the Company’s activities,
representing a significant step forward.
toward
CDX Antibodies
the submission of an
Progress continues
Investigational New Drug (“IND”) application to the US
Food and Drug Administration or to a UK or European
regulatory agency for the Company’s lead product
candidate, a CDX antibody. Pre-clinical evaluations of
additional clones of CDX antibodies to use in combination
with other blood cancer treatments have progressed well.
In February 2018 the Company announced that its
CDX antibody was found to be capable of targeting the
blood cancer AML in vitro. Since then, the Company has
established a new in vivo model of human AML in its AHC
mice that is being used to test CDX antibodies for their
potential ability to eliminate AML in vivo. If these tests
are successful, the Company may be able to use CDX
antibodies not only to condition patients for bone marrow
transplantation, but also to eliminate R/R AML in patients
who qualify for bone marrow transplantation. The AML
market across seven developed countries (US, France,
Germany, Italy, Spain, the UK, and Japan) is projected to
increase to US$1.5 billion by 2026.2
The Directors consider the expansion of the use of CDX
antibodies to treat AML to be a significant opportunity for
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
6
C H A I R M A N ’ S S T A T E M E N T
the Company that may allow it to substantially increase
revenues from the CDX antibodies when approved for
sale and save more lives.
In May 2018 the Company announced a Development
Agreement (“Agreement”) with a global biopharmaceutical
company for the development of the Company’s CDX
antibodies. The Company is pleased to report that the
development of CDX antibodies under the Agreement
is progressing well, and the Company has initiated
preliminary discussions with the partner regarding a
potential licensing deal.
Under 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
Company’s lead candidate bi-specific CDX antibodies.
This will complement the Company’s own development
work currently being undertaken.
Also, Hemogenyx will grant the global pharmaceutical
company a research licence for anything jointly developed
under the Agreement, as well as an option for an exclusive
worldwide licence to commercially exploit CDX antibodies
or any variants which will be jointly developed. If such
option is not exercised by the global pharmaceutical
company, the Company has the option to license the
jointly developed CDX antibodies or any variants.
Hemogenyx is already benefitting from the Agreement
as its partner has produced good bi-specific antibodies
which appear to be clinical grade, and further discussions
will clarify their intentions. The Directors believe that
either way Hemogenyx will benefit.
The Company is expanding the use of its CDX antibodies
to improve the efficacy of already approved drugs as well
as those still in clinical trials for AML. Hemogenyx’s goal is
to significantly improve the outcomes of treatments using
these drugs without a risk of compromising the standard
of care. The Directors believe that the potential to use
CDX antibodies to improve the performance of existing
drugs without any risk of a negative impact on treatment
outcomes would be very attractive to major pharmaceutical
companies. Consequently, the Company has filed a
provisional patent application covering the composition
matter of additional clones of CDX antibodies and their
combination with a wide class of novel compounds
that are currently undergoing clinical development by
a number of other companies. The purpose is to create
a new paradigm of combination treatment for patients
with AML and possibly other types of blood cancers. The
Company is in exploratory talks with a number of potential
pharmaceutical partners about these opportunities.
The consequences of these developments in the CDX
project are extensive. Hemogenyx expects that it may no
longer need to spend money and use staff resources to
make its own antibodies, because the preferred strategy
now is to work with its partner which has already made a
suitable antibody. With the availability of a new patented
combination therapy strategy, the Directors believe it is
likely that this or potentially other biopharmaceutical
companies will decide to in-license CDX.
Advanced Hematopoietic Chimeras
The Company continues to be encouraged by the interest
generated by its new type of humanised mice – Advanced
Hematopoietic Chimeras or “AHC” – and the potential
application of these mice in disease modelling and drug
discovery. AHC possess a seemingly fully functional
human immune system. This is a crucial advantage that
the Directors believe makes AHC unique in this respect,
to the best of their knowledge, among other types of
currently available humanised mice.
The Company initially developed AHC in order to have an
improved means of testing its own products in vivo but
has now found that the AHC platform is generating much
wider interest across the bio-pharmaceutical industry
and beginning to provide significant immediate levels of
revenue for the Company.
To fully exploit this newly created opportunity, the
Company is forming strategic collaborations with major
bio-pharmaceutical companies to expand the use of AHC
and to open new venues to increase its own product
portfolio.
Subsidiary established to focus on AHC development
To take full advantage of opportunities presented by AHC,
the Company has established a wholly owned subsidiary,
Immugenyx, LLC (“Immugenyx”), which is dedicated to the
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
7
C H A I R M A N ’ S S T A T E M E N T
development and commercialisation of AHC as an in vivo
platform for disease modelling and drug development
and testing. In addition, Immugenyx itself is leveraging
the useful distinguishing properties of AHC to discover
and develop novel treatments for autoimmune diseases.
The value of AHC as an in vivo platform for disease
modelling and drug development, as well as a source
of collaboration project fees for the Company, has been
evidenced not only by two previously announced ongoing
collaborations with major biopharmaceutical companies,
but also by the interest shown by a number of other
biopharmaceutical companies that are currently in talks
with the Company about entering into collaborations. The
Company is looking forward to updating shareholders as
these talks progress.
to increase the convertible note by up to an additional
US$1,000,000. This collaboration represents additional
validation of the potential value of the AHC platform. The
Directors believe that the participation of Orgenesis in
the business development and commercialisation of AHC
may significantly expand and speed up the platform’s
adoption as a standard tool for drug discovery, testing,
and disease modelling by a wide variety of pharmaceutical
and biotechnology companies around the world as well
as providing access to Orgenesis’ marketing resources.
The research collaboration with Rockefeller University,
which focuses on auto-immune disease modelling to
develop new treatments for diseases such as Lupus, is
still in its early stages and continues to progress in line
with the Company’s expectations.
The first announced collaboration with a major US
biotechnology company to use the Company’s AHC as
a tool for drug development and testing has progressed
well and is expected to generate up to US$377,000 in fees
at the conclusion of the current phase of collaboration.
The second announced collaboration with Janssen
Research & Development, LLC (“Janssen”), one of the
Janssen Pharmaceutical Companies of Johnson &
Johnson, is centred on the development of a model of
systemic lupus erythematosus (“SLE”, also known as
Lupus) using AHC. Lupus is a systemic autoimmune
disease wherein patients’ immune systems attack their
own organs including the skin, kidneys, blood cells, brain,
heart and lungs. Lupus is often a life-long disease that
currently has no cure. Establishing a human Lupus model
is very important for understanding the emergence and
development of the disease. In addition, if successful, the
Lupus model will provide the opportunity not only to test
therapeutics that are currently under development, but
also potentially to discover new therapeutic approaches
for treatment of the disease.
review,
the period under
the Company
During
into
also announced that
Immugenyx had entered
Inc.
a collaboration agreement with Orgenesis,
(“Orgenesis”) to further develop and commercialise AHC.
Orgenesis is advancing to Immugenyx a convertible note
of not less than US$1,000,000 that can be converted
into shares of Immugenyx at a price per share based on
a pre-money valuation of US$8,000,000 with an option
The collaborations above and the interest currently being
shown by other potential collaborators reinforce the
additional value that AHC can potentially unlock.
Hu-PHEC Products
The Company has in recent months focused its attention
on the CDX antibody product candidate but has also
taken clear steps to bring forward its Human Postnatal
Hemogenic Endothelial Cell (“Hu-PHEC”) based suite of
product candidates.
To that end, because the technical requirements are
different and costly, the Company has established a wholly
owned subsidiary, Hemogenyx-Cell SPRL (“Hemogenyx-
Cell”), and has entered into a collaboration agreement
with Orgenesis to further develop and commercialise its
Hu-PHEC technology. Hemogenyx-Cell will engage in the
preclinical development of the Hu-PHEC technology, and
as a Belgian company may be eligible for financial support
from the Belgian government in the form of matching
grants.
Hu-PHEC is a cell replacement product candidate that is
being developed by the Company to generate cancer-free,
patient-matched blood stem cells after transplantation into
the patient. Orgenesis is advancing to Hemogenyx-Cell a
convertible note of not less than US$1,000,000 that can
be converted into shares of Hemogenyx-Cell at a price per
share based on a pre-money valuation of US$12,000,000
with an option to increase the convertible note by up to an
additional US$1,000,000. The Directors believe that this
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
8
C H A I R M A N ’ S S T A T E M E N T
collaboration is especially important for the Company as
it has the potential to accelerate development of its Hu-
PHEC product candidate without reducing progress on
other projects.
Post Period End Updates
Following the end of the period under review, the
Company has continued to make progress in a number
of areas and can highlight to shareholders the following
developments:
trastuzumab, an antibody used to treat breast cancer
patients when he was at Genentech. Sales of Herceptin in
2015 exceeded US$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.
The Company’s Belgian subsidiary, Hemogenyx-Cell
SPRL, was incorporated on 9 April 2019. Hemogenyx-Cell
is progressing preclinical development of the Hu-PHEC
technology and has lodged an application for a matched
funding grant with the Belgian government.
The Company is pleased to report that it has reviewed and
extended its licence agreement with Cornell University,
the patent-holder of the Hu-PHEC technology.
In April I was appointed Chairman of the Board of Directors,
and at the same time as my appointment to the Board
Adrian Beeston stood down as a Non-Executive Director.
In November we announced that Andrew Wright was
appointed as Financial Controller and Company Secretary
in a non-Board position, and Lawrence Pemble, Chief
Operating Officer, stood down as a Director. In January
2019 Dr Robin Campbell, my predecessor as Chairman,
also stood down.
The Company, leveraging its collaboration with Janssen
Pharmaceuticals (a Johnson & Johnson pharmaceutical
company), has initiated a programme of discovery and
development of a suite of novel treatments for Systemic
Lupus Erythematosus (SLE or Lupus). The Company
is developing a cell-based approach to treat Lupus. In
parallel, it is engaged in seeking novel druggable targets
using its proprietary discovery platform that combines
an AHC-based human Lupus model and single cell
sequencing.
Financial Results
During the year the Group made a loss of £1,477,532
(2017: £2,361,599 loss).
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
including Herceptin/
successful cancer
treatments
I again extend my thanks to Adrian, Lawrence and Robin
for their contributions to the Company.
The Board has continued to demonstrate its confidence
in the ongoing success of the business throughout the
period under review and post-period 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.
Conclusion
The Company has made progress in widening its suite
of products (e.g. its collaborations pertaining to AHC)
and their potential applications (e.g. the application of
CDX antibodies to treat AML) and providing important
partnerships and finance for all of its product suites. The
Directors believe that this investment in the diversification
of the Company’s product suites and their application to
additional disease markets reduces business risk and
maximises overall potential shareholder value.
Overall the Board is very pleased with the progress being
made, in particular the unlocking of opportunities for CDX
antibodies, as well as the potential value that can be
created through the Company’s new type of humanised
mice.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 9
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, reduce the dangers
of patient conditioning procedures and create a new form
of blood stem cell transplantation. This new treatment
paradigm has the potential to significantly improve the
long-term success of bone marrow transplants and to
extend the lives of patients diagnosed with serious
blood diseases. In addition, in AHC the Company has a
product that is already generating collaboration fees and
which diversifies the Company’s activities and lowers
business risk. It also has the potential to further expand
the application of the Company’s CDX antibodies as a
treatment for relapsed and/or refractory AML as well as
using clones of its CDX antibodies in combination with
other treatments for AML that are in clinical development.
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
29 April 2019
1 Milliman Research Report 2014 U.S. organ and tissue
transplant cost estimates and discussion
2 Drug Development Technology Report: Acute myeloid
leukaemia market to grow at CAGR of 14% by 2026
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
10
10
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 11
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
Professor Sir Marc Feldmann – Non-Executive Director
& Chairman – appointed 9 April 2018
Companion of the Order of Australia.
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 Marc’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 (Tumour Necrosis Factor alpha) in the pathogenesis
rheumatoid arthritis. This major discovery has
of
revolutionised therapy not only of rheumatoid arthritis but
other chronic inflammatory diseases (e.g. inflammatory
bowel disease, psoriasis, and 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
honoured in Australia with the knighthood equivalent, the
Sir Marc has been at the forefront of promoting effective
scientific-medical-pharmaceutical interactions. He has
built up a huge network of friends and collaborators who
meet regularly in Oxford and who will help Hemogenyx to
grow and enter clinical trials.
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 the Children’s
Hospital at 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 fellowships for
his scientific research. Dr Sandler received his PhD from
the University of British Columbia. He is a member of the
International Society for Stem Cell Research.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 12
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
Alexis Sandler – Non-Executive Director – appointed 4
October 2017
Peter Redmond – Non- Executive Director – appointed
29 July 2015
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 AIM-quoted Kennedy
Investments plc and 3Legs Resources plc (now SalvaRx
plc). Peter is Chairman of AIM-quoted Pires Investments
plc and of URA Holdings plc.
Alexis M. Sandler is the co-founder of Hemogenyx, for
which she has served as the Chief Operating Officer. Ms
Sandler is an attorney specialising 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 organisations, 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 specialised 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
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
13
13
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 8
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 8
The Directors present their Strategic Report of Hemogenyx
Pharmaceuticals plc for the year ended 31 December
2018.
These expenses have been met from the proceeds of
the issue of shares. The Group received other income
of £91,357 (2017 - £101,138) from a collaboration with a
partner.
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 to 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.
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.
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 2018
of £1,477,532 (31 December 2017 – loss of £2,361,599).
In the year to 31 December 2018 the loss mainly arose
from operational expenses pursuing
the Group’s
objectives listed above as well as salaries, consulting and
professional fees, and general administration expenses.
Cash flow and cash position
Cash used in operations totalled £1,352,727 (31 December
2017: £452,979).
As at 31 December 2018, the Group had a cash balance of
£1,762,428 (31 December 2017: £1,876,655).
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
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 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
The provisional patent application relating to CDX bi-
specific antibodies is an application filed by Hemogenyx
LLC in the USA on 4 April 2016 (“CDX Patent”). The
invention summarised in the patent application 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 8
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
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 Group is planning to file additional composition
of matter patent applications in relation to the CDX
antibodies product.
Hu-PHEC cell therapy
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 utilise post-natal hemogenic endothelial cells
to regenerate the hematopoietic system in a patient.
Advanced Hematopoietic Chimeras
The provisional patent application relating to the Group’s
proprietary humanised mouse model, the Advanced
Hematopoietic Chimera, is an application filed by Dr
Sandler and Dr Rita Simone in the USA on 20 February
2018 (“AHC Patent”). The invention summarised in the
patent application is mice whose hematopoietic system
is at least 40% humanised and methods for preparing the
same. The patent was assigned to the Group’s subsidiary
Immugenyx LLC on 24 May 2018.
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.
In addition, the Group’s AHC product is currently the
subject of three collaborations with other pharmaceutical
companies to evaluate AHCs’ effectiveness as platforms
for disease modelling and drug discovery.
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. If successful,
the Company may be able to use the CDX product to
eliminate R/R AML in patients who qualify for bone marrow
transplantation. The Company is also investigating the
possibility of using its CDX antibodies in combination with
other treatments for AML to increase their effectiveness.
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:
Organisation as a whole
Executive management team
Board
Men Women
7
2
3
4
1
1
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 16
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 8
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
commercialisation.
in both
Dr Jules Mitchel
CLINICAL DEVELOPMENT ADVISOR
• President of Target Health Inc., a CRO
• Established a broad base pharma experience including
three NDA submissions, many FDA discussions
Dr Alexander Tarakhovsky M.D., Ph.D.
• Expertise in Pharmacokinetics
SCIENTIFIC ADVISOR
• Professor and Head of Laboratories at The Rockefeller
University
• An expert and recognised thought leader in immunology
and epigenetics
Dr H. Michael Shepard, Ph.D.
SCIENTIFIC ADVISOR
• Led 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
Corporate Responsibility
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
• Founded NewBiotics, Inc., acquired by Kiadis Pharma
standards
• Founded BioLogix, acquired by Symphogen
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
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.
Greenhouse 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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 17
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 8
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.
The risk factors are summarised below:
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 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.
Costs of 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, as well as the Orgenesis
convertible loan made to Hemogenyx-Cell SPRL, 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;
• 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;
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 8
• Difficulty or inability to monitor subjects adequately
during or after treatment;
a good record of compliance, there is no assurance that
the Group’s activities will always be compliant.
18
•
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.
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.
Intellectual property (IP) control
The Group is partially reliant on an exclusive, world-wide
licence of a patent from Cornell University for its Hu-PHEC
line of business. The exclusivity and exploitable territory
for this licence depend on the Group meeting various
developmental milestones.
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
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
Market conditions, including general economic conditions
and their effect on exchange rates, interest rates and
inflation 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 29 April 2019
Dr Vladislav Sandler
CEO
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
19
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 8
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 8
The Directors present their report with the audited
financial statements of the Group for the year ended 31
December 2018.
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 is the discovery, development
and commercialisation 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/HSC transplantation – the
HuPHEC. Each of these products holds the potential
to revolutionise 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 three companies that are located outside
of the UK. The principal laboratory of the Group is located
in Brooklyn, New York, USA. The Group is in the course of
establishing additional operations in Liège, Belgium.
Results and Dividends
The Consolidated Statement of Comprehensive Loss set
out on page 45 shows a loss for the year amounting to
£1,477,532 (2017: loss of £2,361,599). The Directors do
not propose a dividend in respect of the year ended 31
December 2018 (31 December 2017: nil).
Directors and Directors’ Interests
The Directors who held office during the year were as
follows:
Professor Sir Marc Feldmann
Dr Vladislav Sandler
Dr Robin Campbell
Lawrence Pemble
Adrian Beeston
Alexis Sandler
Peter Redmond
Date Appointed
Date Resigned
9 April 2018
4 October 2017
-
-
4 October 2017
5 January 2019
4 October 2017
5 November 2018
29 July 2015
9 April 2018
4 October 2017
29 July 2015
-
-
The Directors of the Company who held office at 31 December 2018 had the following beneficial interests in the Ordinary
shares of the Company at 31 December 2018 according to the register of directors’ interests:
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 21
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 8
Director
Professor Sir Marc Feldmann
Peter Redmond*
Dr Vladislav Sandler
Dr Robin Campbell
Alexis Sandler
At 31 December 2018
At 31 December 2017
-
5,040,714
40,451,210
1,142,857
-
5,040,714
40,451,210
1,142,857
75,090,685
75,090,685
* Peter Redmond holds the majority of these shares through Catalyst Corporate Consultants Ltd of which he is the sole
shareholder.
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 19 for detail on option plans):
OPTIONS
Date of
grant
Number of
options at
start of year
Options
granted
or acquired
during year
Options
lapsed
during year
Number of
options at
end of year
Dr Robin Campbell
Lawrence Pemble
Professor Sir Marc Feldmann
4 Oct 2017
3,560,429
3,560,429
4 Oct 2017
3,560,429
3,560,429
-
-
-
-
-
-
3,560,429
3,560,429
(890,107)
2,670,322
(890,107)
2,670,322
9 Apr 2018
5,340,643
18,002,568
(5,340,643)
18,002,568
5,340,643
18,002,568
(5,340,643)
18,002,568
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 8
WARRANTS
Date of
grant
Number of
warrants at
start of year
Warrants
granted or
acquired
during year
Warrants
lapsed
during year
Number of
warrants at
end of year
Dr Vladislav Sandler
Peter Redmond
4 Oct 2017
214,286
214,286
4 Oct 2017
1,942,857
1,942,857
-
-
-
-
-
-
-
-
214,286
214,286
1,942,857
1,942,857
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 2018, the total number of issued Ordinary Shares with voting rights in the Company was 360,176,186.
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.
Party Name
Alexis Sandler
Vladislav Sandler
Craig Auringer
Samantha Bauer
Optiva Securities Limited*
HSBC Client Holdings Nominee (UK) Limited
Alliance Trust Savings Nominees Ltd
43 North LLC
Number of Ordinary
Shares
% of
Share Capital
75,090,685
40,451,210
31,407,913
27,996,487
18,506,211
18,360,404
16,692,863
11,371,429
20.8
11.2
8.7
7.7
5.1
5.1
4.6
3.2
* Optiva Securities Limited holds these shares through JIM Nominees Limited.
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 23
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 8
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 action 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.
to carry on
The Directors believe that the terms of the Relationship
Agreement enable
its
the Company
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.
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
Directors’ Report and is disclosed on pages 25-30.
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 24 to
the financial statements discloses the Company’s capital
risk management policy and note 2 details out further
considerations made by the Directors 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
(2017: £nil).
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 24
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 8
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.
Directors’ Responsibility Statement Pursuant to Disclo-
sure and Transparency Rules
Each of the Directors, whose names and functions
are listed on page 3, 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 29 April 2019
Dr Vladislav Sandler
CEO
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
25
25
G O V E R N A N C E R E P O R T
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 26
Code for dealings in the Ordinary Shares.
The Company is small 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 2018.
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 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
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.
is maintained,
The members of the Audit Committee are Peter Redmond,
who acts as chairman of the committee, and Professor Sir
Marc Feldmann.
The Group’s external auditor is PKF Littlejohn LLP who
has served as external auditor for four 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.
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 2016 (“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. As at
31 December 2018 the Board consisted of an Executive
Director and four Non-Executive Directors (currently:
three). The Non-Executive Directors are interested in
either ordinary shares in the Company, options over
ordinary shares in the 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 a code for Directors’
dealings based on the Model Code contained in the Listing
Rules of the UK Listing Authority that was previously in
force. The Board will be responsible for taking all proper
and reasonable steps to ensure compliance with the
code by the Directors. Compliance with the 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 it, 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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 27
G O V E R N A N C E R E P O R T
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 2019 Annual General Meeting.
During the year to 31 December 2018 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
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 2018.
Going Concern review
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.
Review of audit and non-audit
services and fees
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 with the external auditor’s assessment
of its own independence.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 28
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 8 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 development and risk
diversification of the Company.
G O V E R N A N C E R E P O R T
Remuneration Committee
The remuneration committee reviews the performance
of the Executive Directors and makes recommendations
to the Board on matters relating to their remuneration
and terms of employment. The committee also makes
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 Peter
Redmond, who acts as chairman of the committee, and
Alexis Sandler.
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 Peter
Redmond, who acts as chairman of the committee,
Professor Sir Marc Feldmann, and Alexis Sandler.
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 29
G O V E R N A N C E R E P O R T
Attendance at meetings
Number held and entitled to attend
Number attended
Dr Vladislav Sandler
Professor Sir Marc Feldmann
Dr Robin Campbell1
Lawrence Pemble2
Adrian Beeston3
Alexis Sandler
Peter Redmond
8
5
8
7
3
8
8
7
4
8
7
3
7
7
1 Until resignation on 5 January 2019
2 Until resignation on 4 November 2018
3 Until resignation on 9 April 2018
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
to
challenge
responsibility
and
constructively
the Executive
the performance of
management (where appointed) and to monitor the
performance of the management team in the delivery of
the agreed objectives and targets.
independently
All directors with the exception of the CEO and Professor
Sir Marc Feldmann were appointed for an initial term
of 12 months. These terms were extended by mutual
agreement after satisfactory performance and re-election
by shareholders.
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.
Andrew Wright. He is responsible for the Board complying
with UK procedures.
Effectiveness
For the period under review the Board comprised a
Chief Executive Officer, a Non-Executive Chairman, and
two independent Non-Executive Directors. Biographical
details of the Board members are set out on pages 10-12
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.
The Company Secretary: the Company Secretary is
Induction: all new Directors received an induction as soon
as practical on joining the Board.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 30
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.
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.
Dr Vladislav Sandler
CEO
G O V E R N A N C E R E P O R T
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 has 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.
annually. Having
Board performance and evaluation: Hemogenyx
Pharmaceuticals plc has a policy of appraising Board
performance
various
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
that considers the functionality of the Board and its
committees is most appropriate at this stage.
reviewed
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 disclose 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
31
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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
32
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;
• 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
information
reliable, up-to-date
about
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 for establishing the selection
criteria, selecting, appointing and setting the terms of
reference for any remuneration consultants who advise
the Committee;
• 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 recognised; and
• Oversee any major changes in employee benefits
structures throughout the Company.
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.
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 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 33 to 37 of this report, will be submitted to
shareholders for approval at our Annual General Meeting.
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
the
members of
the executive management of
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 33
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
Peter Redmond
Alexis Sandler
Position
Chairman
Member
Date of appointment
5 October 2017
5 October 2017
Remuneration Components
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 Director has entered into a service
agreement 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
intellectual
the use of confidential
property and the Executive Director’s service contract
imposes restrictive covenants which apply following the
termination of the agreement.
information and
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). Dr Sandler also has a separate contract
with Immugenyx LLC effective 1 January 2019 (following
the period in review) appointing him as CEO and Chief
Scientific Officer of Immugenyx LLC for a three-year term
and setting out his duties in relation to his day-to-day work
in connection with Immugenyx’s development of its AHC.
Pursuant to this contract, Dr Sandler receives $60,000
per annum. This contract has similar non-compete and
non-interference covenants in the event of its termination.
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 has established a workplace pension
scheme but it does not presently have any employees
qualifying under the auto-enrolment pension rules who
have not opted out of the scheme. It does not currently pay
pension amounts in relation to Directors’ 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
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.
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 T
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 Director’s service agreement had an initial term of twelve months and may subsequently 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
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
Alexis Sandler
Peter Redmond
Date of service
agreement
4 October 2017
4 October 2017
Professor Sir Marc Feldmann
9 April 2018
Current
term
(years)
Notice period
by Company
(months)
Notice period
by Director
(months)
Date of
resignation
1
1
3
3
3
3
3
3
3
-
-
-
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 35
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
Executive Directors’ Remuneration
The table below sets out the remuneration received by each Executive Director for the years ended 31 December 2018
and 2017. Dr Vladislav Sandler was the highest paid Director:
Executive Directors
Basic salary
2018
£’000
Pension
2018
£’000
Share based
payments
2018
£’000
Other*
2018
£’000
Dr Vladislav Sandler
Lawrence Pemble
Total
94
34
138
4
-
4
-
18
18
Executive Directors
Dr Vladislav Sandler
Lawrence Pemble
Geoffrey Dart
Total
Basic salary
2017
£’000
Pension
2017
£’000
Share based
payments
2017
£’000
79
10
-
89
-
-
-
-
-
7
-
7
-
-
-
-
-
35
35
Total
2018
£’000
98
52
150
79
17
35
131
Other*
2017
£’000
Total
2017
£’000
* 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 36
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
Non-Executive Directors’ Remuneration
The table below sets out the remuneration received by each Non-Executive Director during the years ended 31 December
2018 and 2017:
Basic salary
2018
£’000
Share based
payments
2018
£’000
Other*
2018
£’000
Dr Robin Campbell
Alexis Sandler
Peter Redmond
Adrian Beeston
Professor Sir Marc Feldmann
Total
45
9
36
3
9
102
19
-
-
-
118
137
-
-
-
-
-
-
Dr Robin Campbell
Alexis Sandler
Peter Redmond
Adrian Beeston
Tim Le Druillenec
Total
Basic salary
2017
£’000
Share based
payments
2017
£’000
Other*
2017
£’000
11
-
9
2
9
31
7
-
-
-
-
7
-
-
35
35
-
70
Total
2018
£’000
64
9
36
3
127
239
Total
2017
£’000
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.
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 2018 and 2017:
Distributions to
shareholders
£
Total
employee pay
£
Operational
cash outflow
£
Year ended 31 December 2018
Year ended 31 December 2017
Percentage change
-
-
n/a
747,015
246,919
202.5%
1,352,727
441,368
206.5%
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
37
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
Total employee pay includes wages and salaries, social
security costs, 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 is an
important consideration for the Remuneration Committee
and Board of Directors when determining cash-based
remuneration for directors and employees.
Historical share price performance comparison
The table below compares the share price performance
(based on a notional investment of £100) of Hemogenyx
Pharmaceuticals plc against the FTSE SmallCap and
FTSE Techmark Mediscience for the period November
2015 to December 2018 calculated on a month end spot
basis. The FTSE SmallCap has been chosen to provide
a wider market comparator constituting companies of an
appropriate size and the FTSE Techmark Mediscience
chosen due to sector relevance:
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
-
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
15
16
16
16
16
16
16
17
17
17
17
17
17
18
18
18
18
18
18
HEMO
FTSE small cap
FTSE Techmark Mediscience
Hemogenyx Pharmaceuticals 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.
Peter Redmond
Director & Remuneration Committee Chairman
29 April 2019
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
38
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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
39
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.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
• The directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is not appropriate; or
• The directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s or the
Parent Company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
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
2018 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.
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 2018 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.
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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
40
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.
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 £31,000
based upon 2% of expenses. We agreed with the Board
that all audit differences in excess of £1,550, 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 subsidiaries. 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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
41
Investments in Subsidiary
Investment - £8m (note 15)
Loan - £1.45m (note 14)
The investment in Hemogenyx LLC following
the reverse acquisition is the only material
asset and represents a significant portion of the
Parent Company’s total assets.
Carrying Value of Intangible Asset (note 13)
The carrying value of Intangible Asset recorded
in the subsidiary’s books of £273k 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.
We undertook several audit procedures which included:
• Agreeing the accounting entries from supporting documentation
and undertaking a review of the acquisition agreement and the
admission document issued to investors during the listing.
• 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 and also agreed
ownership documents of all the subsidiaries in the Group.
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 42
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
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; and
• 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
• Certain disclosures of directors’ remuneration specified
by law are not made; or
• We have not received all
the
information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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
43
override of internal controls.
Our audit opinion is consistent with the additional report
to the audit committee.
Use of our report
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.
Zahir Khaki (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
29 April 2018
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.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters which we are required to address
We were appointed by the directors on 19 December
2018 to audit the financial statements for the year ending
31 December 2018. Our total uninterrupted period of
engagement is 4 years, covering the periods ending 28
February 2015 to 31 December 2018.
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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
44
44
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 8
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 C O N S O L I D A T E D S T A T E M E N T
O F C O M P R E H E N S I V E L O S S
45
Continuing Operations
Revenue
Administrative Expenses
Depreciation Expense
Operating Loss
Other Income
Finance Income
Finance Costs
Reverse acquisition expense
Loss before Taxation
Tax credit
Note
Year Ended 31
December 2018
Year Ended 31
December 2017
£
-
1,563,430
51,805
£
-
837,060
33,614
(1,615,235)
(870,674)
91,357
4,374
(1,779)
101,138
-
(10,741)
-
(1,631,020)
(1,521,283)
(2,411,297)
43,751
49,698
6
12
7
4
10
Loss for the year attributable to equity owners
(1,477,532)
(2,361,599)
Items that will be reclassified subsequently to profit or
loss:
Translation of foreign operations
Other Comprehensive income for the year
Total comprehensive income to the year attributable to
the equity owners
51,031
51,031
(36,652)
(36,652)
(1,426,501)
(2,398,251)
Basic and diluted earnings (per share)
11
(0.00)
(0.01)
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 C O N S O L I D A T E D S T A T E M E N T
O F F I N A N C I A L P O S I T I O N
46
Group
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
Total Current Liabilities
Total Liabilities
Total equity and liabilities
Note
Year Ended
31 December 2018
£
Year Ended
31 December 2017
£
12
13
16
17
18
19
4
22
21
173,943
272,753
446,696
90,475
1,762,428
1,852,903
191,578
257,525
449,103
69,784
1,876,655
1,946,439
2,299,599
2,395,542
3,601,762
7,340,267
620,059
(6,157,894)
37,047
(4,482,075)
959,166
3,600,514
7,341,056
369,147
(6,157,894)
(13,984)
(3,006,982)
2,131,857
1,172,826
1,172,826
-
-
167,607
167,607
263,685
263,685
1,340,433
263,685
2,299,599
2,395,542
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 29 April 2019 and signed on its behalf by
Dr Vladislav Sandler, CEO
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 47
C O M P A N Y S T A T E M E N T O F F I N A N C I A L P O S I T I O N
Company
Note
Year Ended
31 December 2018
£
Year Ended
31 December 2017
£
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
Total equity and liabilities
14
15
16
17
18
19
21
1,453,736
8,000,000
9,453,736
75,972
461,003
536,975
594,435
8,000,000
8,594,435
66,013
1,748,337
1,814,350
9,990,711
10,408,785
3,601,762
7,340,267
613,772
(1,699,175)
9,856,626
3,600,514
7,341,056
369,147
(1,165,532)
10,145,185
134,085
134,085
263,600
263,600
134,085
263,600
9,990,711
10,408,785
Hemogenyx Pharmaceuticals plc has used the exemption granted 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 2018 was £536,082 (2017: £558,997).
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 29 April 2019 and signed on its behalf by
Dr Vladislav Sandler, CEO
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
48
Group
Called up
Share Capital
Share
Premium
Other
reserves
As at 1 January 2017
1,010,849
-
-
£
£
£
Loss in year
Other Comprehensive
Income
Total comprehensive income
for the year
-
-
-
Transfer to reverse
acquisition reserve
(1,010,849)
-
-
-
-
-
-
-
-
Reverse
acquisition
reserve
Foreign
currency
translation
reserve
Retained
losses
Total Equity
£
-
-
-
-
£
£
£
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
Recognition of Hemogenyx
Pharmaceuticals 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
669,000
841,243
-
831,257
2,285,714
5,714,286
30,000
75,000
571,429
1,428,571
(495,316)
44,371
110,927
-
-
-
-
-
-
-
-
35,492
(333,655)
333,655
(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
Loss in year
Other Comprehensive
Income
Total comprehensive income
for the year
Issue of shares – exercise of
warrants
Embedded derivate on
convertible note
Issue of options
Writeback of options lapsed
Write-back of warrants
exercised
-
-
-
-
-
-
1,248
3,745
-
-
-
-
-
-
-
-
-
-
-
6,287
242,530
(2,439)
(4,534)
4,534
-
-
-
-
-
-
-
-
-
(1,477,532)
(1,477,532)
51,031
-
51,031
51,031
(1,477,532)
(1,426,501)
-
-
-
-
-
-
-
-
2,439
-
4,993
6,287
242,530
-
-
As at 31 December 2018
3,601,762 7,340,267
620,059
(6,157,894)
37,047
(4,482,075)
959,166
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 49
C O M P A N Y S T A T E M E N T O F C H A N G E S I N E Q U I T Y
Company
Called up Share
Capital
Share Premium Other reserves
Retained
earnings/(loss)
Total Equity
As at 1 January 2017
669,000
841,243
£
£
Loss in year
Other Comprehensive Income
Total comprehensive income for
the year
Issue of shares for acquisition of
subsidiary
Issue of shares to directors for
services
Issue of shares - share
subscription
-
-
-
-
-
-
2,285,714
5,714,286
30,000
75,000
571,429
1,428,571
Share issue costs
-
(495,316)
£
-
-
-
-
-
-
-
-
£
£
(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
Issue of shares for debt
settlement
Issue of options
Issue of warrants
Loss in year
Other Comprehensive Income
Total comprehensive income for
the year
Issue of shares – exercise of
warrants
Issue of options
Writeback of options lapsed
Write-back of warrants exercised
44,371
110,927
-
-
-
35,492
(333,655)
333,655
-
-
-
-
-
-
1,248
3,745
-
-
-
-
-
-
-
-
-
242,530
(536,082)
(536,082)
-
-
(536,082)
(536,082)
-
-
4,993
242,530
(2,439)
2,439
-
-
(4,534)
4,534
-
As at 31 December 2018
3,601,762
7,340,267
613,772
(1,699,175)
9,856,626
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 50
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Group
Note
Year Ended
31 December 2018
£
Year Ended
31 December 2017
£
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
Foreign exchange gain
Working capital changes applicable to pre-acquisition
retained earnings
(Decrease)/increase in trade and other payables
(Increase)/decrease in trade and other receivables
Net cash outflow used in operating activities
Cash flows generated from financing activities
Proceeds from issuance of equity securities
Share issue costs
Proceeds from borrowings
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
12
4
19
22
22
4
(1,477,532)
51,805
-
(4,374)
1,779
-
242,530
(49,000)
-
(98,670)
(19,266)
(2,361,599)
33,614
105,000
(732)
11,473
1,631,020
35,492
-
(1,145)
7,637
86,260
(1,352,728)
(452,980)
4,993
-
1,175,915
-
-
2,000,000
(383,871)
-
(154,422)
(245,000)
1,180,908
1,216,707
4,374
(6)
-
(24,589)
(20,221)
732
(1,011)
1,098,640
(64,257)
1,034,104
Net (decrease)/increase in cash and cash equivalent
(192,041)
1,797,831
Effect of exchange rates on cash
77,814
(8,399)
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
1,876,655
1,762,428
87,223
1,876,655
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 51
C O M P A N Y S T A T E M E N T O F C A S H F L O W S
Company
Note
Year Ended
31 December 2018
£
Year Ended
31 December 2017
£
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
Interest expense
Share based payments
(Decrease)/increase in trade and other payables
Decrease in trade and other receivables
(536,082)
(558,997)
-
(105,350)
(1,267)
6
242,530
(9,960)
(129,514)
19
105,000
19,176
(1,166)
-
35,492
23,459
(64,332)
Net cash outflow used in operating activities
(539,637)
(441,368)
Cash flows generated from financing activities
Proceeds from issuance of equity securities
Share issue costs
Net cash flow generated from financing activities
Cash flows generated from investing activities
Interest income
Interest paid
Loan to related parties
Net cash flow generated from investing activities
4,993
-
4,993
1,267
(6)
(802,951)
(801,690)
2,000,000
(383,871)
1,616,129
1,166
-
(473,313)
(472,147)
Net (Decrease)/increase in cash and cash equivalent
(1,336,334)
702,614
Effect of exchange rates on cash
49,000
-
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
1,748,337
461,003
1,045,723
1,748,337
The notes to the financial statements form an integral part of these financial statements.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 Hemogenyx Pharmaceuticals plc
Annual Report & Financial Statements For the Year Ended 31 December 2018
52
52
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 S
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
53
on
the
development
treatments
1. General information
The Group’s business is preclinical-stage biotechnology
and
discovery,
focused
relating
innovative
commercialisation of
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 it is listed on the London
Stock Exchange.
2. Summary of significant accounting policies
The principal accounting policies applied
the
preparation of these financial statements are set out
below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
in
Basis of preparation
in
The financial statements have been prepared
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 Pharmaceuticals plc
and its subsidiaries as at 31 December 2018. The financial
statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent
accounting policies.
intra-group balances,
income and
All
expenses and profits and losses resulting from intra-group
transactions that are recognised in assets, are eliminated
in full.
transactions,
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 LLC.
Hemogenyx Pharmaceuticals plc has used the exemption
granted 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 2018 was £536,082 (2017: £558,997).
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.
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 organisations,
clinical sites, and other organisations who conduct
development activities on the Company’s behalf. The
amount of clinical trial expenses recognised 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 54
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 S
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.
Fixed assets
All property, plant and equipment are 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.
Intangibles
is written off as
Research and development
Research expenditure
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 following rates are used:
Computer equipment
Laboratory equipment
33%
20% - 50%
Straight-line
Straight-line
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
55
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.
to
the estimation of
Impairment reviews require
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
technological, market and financial risks
relate
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 and discount
rates to determine present values of cash flows.
the next 12 months. Therefore the Directors consider the
going concern basis appropriate.
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.
Foreign currencies
Functional and presentation currency
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 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 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 financial statements of Hemogenyx LLC and
Immugenyx LLC 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
the average rate for the period). The foreign exchange
differences on translation of Hemogenyx LLC and
Immugenyx LLC are recognised 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.
Share capital
Ordinary Shares are classified as equity. Equity instruments
issued by the Hemogenyx Group are recorded as the
proceeds received, net of direct issue costs.
Cash
Cash consists of cash bank deposit balances.
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.
In 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.
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 57
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 S
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:
in the United Kingdom. The main assets of the Group,
cash and cash equivalents, are held in both the United
Kingdom and the United States. The Board ensures that
adequate amounts are transferred internally to allow all
companies to carry out their operations on a timely basis.
• 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 in New York, USA (and,
from 2019, in Liège, Belgium) with the head office located
focused on
The Group currently has one reportable segment – a
the discovery,
biotechnology company
development and commercialisation of
innovative
treatments
to bone marrow/hematopoietic
(blood-forming) stem cell (BM/HSC) transplants for blood
disease.
relating
New Accounting Standards and Interpretations issued
and applied in the Financial Statements
IFRS 9, Financial Instruments
As of 1 January 2018, the Company adopted IFRS 9,
Financial Instruments (“IFRS 9”), which replaced IAS 39,
Financial Instruments: Recognition and Measurement.
IFRS 9 addresses the classification, measurement and
recognition of financial assets and liabilities. IFRS 9
retains but simplifies the mixed measurement model and
establishes three primary measurement categories for
financial assets: amortised cost, fair value through other
comprehensive income (“FVOCI”), and fair value through
the profit and loss statement (“FVTPL”). The basis of
classification depends on the entity’s business model and
the contractual cash flow characteristics of the entity’s
business model and of the financial asset. Investments
in equity instruments are required to be measured
at FVTPL with the irrevocable option at inception to
present changes in fair value in other comprehensive
income. There is now a new expected credit losses
model that replaces the incurred loss impairment model
previously used in IAS 39. For financial liabilities there
were no changes to classification and measurement
except for the recognition of changes in own credit risk
in Other Comprehensive Income/(Loss) for liabilities
designated at FVTPL. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship
between the hedged item and hedging instrument and for
the hedged ratio to be the same as the one management
uses for risk management purposes. Contemporaneous
documentation is still required but is different than what
was prepared under IAS 39.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 58
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 S
The Group has applied IFRS 9 retrospectively but has
elected not to restate comparative information. As a
result, the comparative information provided continues
to be accounted for in accordance with the Group’s
previous accounting policy. The retrospective adoption
did not result in any changes to the Statement of Financial
Position for the previous year.
The accounting policy that reflects the new accounting
standard for IFRS 9 is effective from 1 January 2018 and
is as follows:
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.
Impairment of Financial Assets
The Company and Group assesses at each reporting date
whether a financial asset is impaired and will recognise
the impairment loss immediately through the consolidated
statement of comprehensive loss.
Interest Bearing Loans and Borrowings
Borrowings are initially recognised at the fair value
of consideration received
less directly attributable
transaction costs. After initial recognition, borrowings
are subsequently measured at amortised cost using the
effective interest rate method. Where borrowings are
provided by shareholders at an interest rate discounted
to market rates, the difference on initial fair value is taken
to equity as a capital contribution.
instrument less the fair value of the derivative financial
liability is equal to loan recognised on initial measurement.
IFRS 15, Revenue from Contracts with Customers
IFRS 15 establishes principles
for reporting useful
information to users of financial statements about the
nature, amount, timing, and uncertainty of revenue
and cash flows arising from an entity’s contracts with
customers. The standard is effective for annual periods
beginning on or after 1 January 2018, and supersedes:
IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13
Customer Loyalty Programmes, IFRIC 15 Agreements
for the Construction of Real Estate, IFRIC 18 Transfers
of Assets from Customers, and SIC-31 Revenue—Barter
Transactions Involving Advertising Services. The standard
establishes a five-step principle-based approach for
revenue recognition and is based on the concept of
recognising an amount that reflects the consideration for
performance obligations only when they are satisfied, and
the control of goods or services is transferred.
The majority of the Group’s revenue is derived from fees
related to collaboration agreements.
Management reviewed contracts where the Group
received consideration in order to determine whether or
not they should be accounted for in accordance with IFRS
15. To date, Hemogenyx has entered into few transactions
that meet the scope of IFRS 15. Instead, most income has
been generated through collaboration agreements and
grants with counterparties that do not meet the definition
of a customer, and therefore the contracts fall outside
the scope of IFRS 15 and have been accounted for in
accordance with IAS 20.
Revenue is recognised at either a point-in-time or over
time, depending on the nature of the services and
existence of acceptance clauses.
New Accounting Standards and Interpretations in issue
but not applied in the Financial Statements
New standards, amendments and Interpretations in issue
but not yet effective or that in some cases have not yet
been adopted by the EU:
Where the Group has entered into a Hybrid instrument
whereby there is a debt instrument and an embedded
derivative financial liability, the fair value of the debt
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 intends to
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 59
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 S
adopt these standards, if applicable, when they become
effective. These are summarised below:
The principal areas in which judgement is applied are as
follows:
•
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.
There are no other IFRS or IFRIC interpretations that
are not yet effective that would be expected to have a
material impact on the Group.
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.
Fair value disclosure
The embedded derivative is measured using a risk-based
pricing model. For more information in relation to the fair
value measurement of this derivative please refer to note
22. The fair value of financial instruments that are not
traded in an active market is determined using valuation
techniques.
Warrants to be issued pursuant to IPO
Under terms of the share placement completed pursuant
to the IPO there was a maximum of 62,021,429 warrants
eligible to be issued eligible participants. During the year
124,826 warrants were exercised. As at 31 December
2018 45,671,689 warrants had been issued to eligible
IPO participants who had been identified and remain
available to exercise. A total of 16,224,914 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 as the holdings are held in the
names of nominees and the Company has no vision of
the underlying beneficial warrant holders. The Group has
not brought the value of the unissued warrants to account
as at 31 December 2018 as it cannot be reasonably
ascertained if these outstanding warrants will ever be
issued. The 16,224,914 warrants have a value of £99,033.
Management has determined that a discount of 40% is
reasonable to allow for the probability of the identity of
the warrant holders remaining unknown. After applying
this discount, a value of £39,613 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018
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 S
60
impairment analysis
is carried out. The
Intangible assets impairment
When there is an indicator of a significant and permanent
reduction in the value of intangible assets, an impairment
is
review
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 4 (5 as of 31 December 2018)
members of the Board of Directors of the Company are
Hemogenyx LLC shareholders and management.
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:
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 its 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 Hemogenyx LLC.
On 4 October 2017, the quoted share price of Hemogenyx
Pharmaceuticals 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,
Hemogenyx Pharmaceuticals plc, formerly known as 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 a 100%
holding in Hemogenyx Pharmaceuticals 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 61
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 S
Year Ended 31 December 2018
Year Ended 31 December 2017
As at start of year
Pre-acquisition losses of
Hemogenyx Pharmaceuticals plc1
Hemogenyx LLC issued
capital at acquisition2
Investment in Hemogenyx LLC3
Reverse acquisition expense4
As at end of year
£
(6,157,894)
-
-
-
-
(6,157,894)
£
-
(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, totalling £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.
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 2018:
Year Ended 31 December 2018
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
£
-
536,976
446,696
1,315,927
446,696
1,852,903
-
24,589
24,589
£
-
1,814,350
449,103
132,089
449,103
1,946,439
-
64,257
64,257
Capital expenditure consists of the purchase of property, plant and equipment.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 62
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 S
6. Expenses by nature
Year Ended 31 December 2018
Year Ended 31 December 2017
Group
Group
Laboratory expenses
Consumable equipment and supplies
Contractors & consultants
Transaction completion success fees
Travel
Staff Costs
Insurance
Other
Operating lease expense
Legal and professional fees
Foreign exchange loss / (gain)
Total Administrative Expenses
£
57,653
290,613
40,350
-
14,632
747,015
50,926
19,804
45,283
291,899
5,255
1,563,430
£
14,046
64,287
59,876
105,000
19,494
319,119
13,820
22,521
22,188
166,902
29,807
837,060
7. Other income
Other income of £91,357 during the year to 31 December 2018 (2017: £101,138) relates to funds received from a third party
under a research collaboration programme.
8. Employees
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
Wages and salaries
470,580
269,265
Social security
23,279
12,811
£
£
£
145,142
-
Share based payments
242,530
35,492
242,530
Pension contributions
10,626
747,015
1,551
319,119
-
387,672
£
41,325
2,634
35,492
-
79,451
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 63
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 S
Average number of people (including Executive Directors) employed:
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
5
2
7
3
1
4
-
2
2
-
3
3
Research & development
Administration
9. Auditor’s remuneration
Fees payable to the Company auditor:
Audit of the financial statements of the Group
and Company
Services relating to corporate finance
transactions
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
Loss on ordinary activities before tax
Analysis of charge in the year:
Loss on ordinary activities multiplied by
weighted average tax rate for the group of
30.46%% (2017: 25.69%)
Disallowed items
Timing differences
Tax losses carried forward
Current Tax charge
Company
Company
Year Ended 31 December 2018
Year Ended 31 December 2017
£
36,500
-
36,500
£
35,000
37,995
72,995
Company
Company
Year Ended 31 December 2018
Year Ended 31 December 2017
£
-
43,751
-
43,751
£
-
49,698
-
49,698
(1,521,283)
(2,411,297)
(463,383)
99,265
-
(364,118)
-
(619,558)
398,630
(7,466)
(228,394)
-
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 64
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 S
Weighted average tax rate is calculated by reference to the tax rates effective in each of the jurisdictions. The tax rates
effective at 31 December 2018 are 19% and 34% in the UK and the USA respectively.
The Group has accumulated tax losses arising in the UK of approximately £713,000 (Dec 2017: restated £340,000) 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 £1,100,000 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 £1,477,532 (2017: £2,361,599) for the Group by the weighted average number of ordinary shares
in issue during the year of 360,125,230 (2017: 260,270,699).
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 shares is based on the Company.
Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2018 and 2017,
there is no dilutive effect from the subsisting share options.
12. Property, plant and equipment
Group
Cost
31 December 2016
Additions
Foreign exchange movement
31 December 2017
Additions
Foreign exchange movement
31 December 2018
Accumulated depreciation and impairment losses
31 December 2016
Depreciation
Foreign exchange movement
31 December 2017
Depreciation
Foreign exchange movement
31 December 2018
Carrying amounts
31 December 2016
31 December 2017
31 December 2018
Property, plant & equipment
£
188,785
64,257
(17,344)
235,698
24,589
14,590
274,877
12,987
33,614
(2,482)
44,120
51,805
5,009
100,934
175,797
191,578
173,943
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 65
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 S
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 2016
Exchange movements
31 December 2017
Exchange movements
31 December 2018
Intellectual Property
£
281,577
(24,052)
257,525
15,228
272,753
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
Year Ended 31 December 2018
Company
Year Ended 31 December 2017
£
1,453,736
1,453,736
£
594,435
594,435
Hemogenyx Pharmaceuticals plc has made cumulative loans to Hemogenyx LLC of US$1,896,915 (£1,453,736) as at 31
December 2018 (Dec 2017 US$802,121; £594,435). The loans are 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
2018 and has determined that that there was no impairment required. The interest rate and impairment assessment are
reviewed on an annual basis.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 66
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 S
15. Investment in subsidiary
Name
Address of the
registered office
Nature
of business
Proportion of
ordinary shares held
directly by parent (%)
Proportion of ordinary
shares held ultimately
by parent (%)
Hemogenyx UK
Limited
5 Fleet Place, London, UK
EC4M 7RD
Holding Company
100
-
Hemogenyx LLC
9 East Lookerman Street,
Suite 3A, Dover, Kent,
Delaware, USA, 19901
Immugenyx LLC
c/o Corporation Service
Company
251 Little Falls Drive,
Wilmington, Delaware,
USA, 19808
Biomedical sciences
-
100
Biomedical sciences
-
100
16. Trade and other receivables
VAT receivable
Prepayments
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
£
64,361
26,114
£
64,784
5,000
£
64,361
11,612
£
61,013
5,000
Total trade and other receivables
90,475
69,784
75,973
66,013
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 67
£
1,010,849
(1,010,849)
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 S
17. Called up share capital
Group
Class A
shares
Number
Class B
shares
Number
Ordinary
shares
Number
As at 31 December 2016
13,153,846
8,769,230
(13,153,846)
(8,769,230)
-
-
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
Issue of shares for exercise of warrants
29 May 2018
As at 31 December 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,900,000
669,000
228,571,428
2,285,714
3,000,000
30,000
57,142,857
571,429
4,437,075
44,371
360,051,358
3,600,514
124,826
1,248
360,176,184
3,601,762
The issued capital of the Group for the period 31 December 2016 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 Pharmaceuticals plc was brought to account.
Company
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
Issue of shares for exercise of warrants 29 May 2018
As at 31 December 2018
Number of shares
66,900,000
228,571,426
3,000,000
57,142,857
4,437,075
360,051,358
124,826
360,176,184
£
669,000
2,285,714
30,000
571,429
44,371
3,600,514
1,248
3,601,762
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
18. Share premium
Group & Company
As at 31 December 2016
Issued capital of the Company 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
Issue of shares for exercise of warrants 29 May 2018
Value of warrants issued in connection with share placements
As at 31 December 2018
19. Other reserves
Group
As at start of year
Charge for the year – employees
Fair value of warrants issued in connection with share placement
Fair value of options lapsed
Convertible Note embedded derivative
As at end of year
Company
As at start of year
Charge for the year – employees
Fair value of warrants issued in connection with share placement
Fair value of options lapsed
As at end of year
68
£
-
841,243
5,714,286
75,000
1,428,571
110,927
(333,655)
(495,316)
7,341,056
3,745
(4,534)
7,340,267
Year Ended
31 December 2018
Year Ended
31 December 2017
£
369,147
242,530
4,534
(2,439)
6,287
620,059
£
-
35,492
333,655
-
-
369,147
Year Ended
31 December 2018
Year Ended
31 December 2017
£
369,147
242,530
4,534
(2,439)
613,772
£
-
35,492
333,655
-
369,147
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 69
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 S
The expense recognised for employee and non-employee services during the year is shown in the following table:
Group and Company
Expense arising from equity-settled share-based payment transactions
Total expense arising from share-based payment transactions
Year Ended
31 December 2018
Year Ended
31 December 2017
£
242,530
242,530
£
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.
Options granted vest in tranches on each of the following
events/dates:
i. Admission to the LSE (“Admission”);
ii. On the date falling six (6) months after Admission;
iii. On the date falling twelve (12) months after Admission;
and
iv. On the date falling twenty-four (24) months after
Admission
On the provision that the option holder remains an
employee of the Group.
Options granted to all other option holders from 4 January
2018 onwards vest in equal tranches of 12.5% every three
months from the date of grant, 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 between two and five years.
There are no cash settlement alternatives. 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.
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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
A schedule of options granted is below:
Employees, including directors*
Members of the Scientific Advisory Board
Total
70
Number options
26,725,616
9,346,125
36,071,741
* Details of options held by individual directors are disclosed in the Directors’ Report.
Group & Company
Outstanding at the beginning
of the year
Granted during the year
Lapsed during the year
Cancelled during the year
Outstanding at end of year
Exercisable at end of year
1 Weighted average exercise price
2018
Number
2018
WAEP1 pence
2017
Number
2017
WAEP1 pence
24,566,957
19,426,737
(2,581,310)
(5,340,643)
36,071,741
16,339,066
3.5
3.5
3.5
3.5
3.5
3.5
-
24,566,957
-
24,566,957
1,780,214
-
3.5
-
3.5
3.5
The weighted average remaining contractual life for the share options outstanding as at 31 December 2018 is 1.25
years (2017: 3.89). The weighted average fair value of options granted during the year was 0.01 pence (2017: 0.01). The
weighted average fair value of options cancelled or lapsed during the year was 0.008 pence (2017: n/a). The exercise
price for options outstanding at the end of the year was 3.5 pence (2017: 3.5).
The following table lists the inputs to the models used for the two plans for the years ended 31 December 2018 and 31
December 2017:
Expected volatility %
Risk-free interest rate %
Expected life of options
(years)
WAEP - pence
Expected dividend yield
Model used
Nov-2018
(EMP)
Apr-2018
(EMP)
Jan-2018
(EMP)
Oct-2017
(EMP)
44.67
0.818
2
3.5
-
45.32
0.918
5
3.5
-
50.09
0.577
2
3.5
-
39.56
0.472
2
3.5
-
Black-Scholes
Black-Scholes
Black-Scholes
Black-Scholes
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 71
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 S
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 2018 45,772,285 warrants had been issued to eligible IPO participants who had been identified. A total
of 16,249,144 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 16,249,144 warrants have a value of £99,033 and applying a reasonable
discount of 40% to allow for the probability of the identity of the warrant holders remaining unknown, an adjusted value
£59,420 has been brought to account with the remaining £39,613 not brought to account in the Statement of Financial
Position due to uncertainty.
The following table lists the inputs to the models used for the plan for the years ended 31 December 2018 and 31
December 2017:
Expected volatility %
Risk-free interest rate %
Expected life of options (years)
WAEP - pence
Expected dividend yield
Model used
(NEMP)
39.56
0.472
2
4.0
-
Black-Scholes
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, warrants connected with share
placements issued by the Company, and the value of the deemed embedded derivative connected with the Convertible
Note liability in accordance with IAS39.
Reverse asset acquisition reserve is the reserve created in accordance with the acquisition of Hemogenyx 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
revaluation of intercompany loans.
Retained earnings represent the cumulative retained losses of the Company at the reporting date.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 72
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 S
21. Trade and other payables
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
£
91,373
76,234
£
£
£
7,332
66,727
7,247
256,353
67,358
256,353
167,607
263,685
134,085
263,600
167,699
263,685
-
-
134,177
-
263,600
-
Trade and other payables
Accruals and deferred income
Total
Current liabilities
Non-current liabilities
22. Borrowings
The borrowings are comprised of borrowings and convertible notes. As of 1 January 2018 the Group adopted IFRS 9,
and as a result, where the instruments contained liability classified embedded derivatives, an election was taken to fair
value the entire financial instrument through profit and loss rather than split out the embedded derivative. During the year
ended 31 December 2018, the financial instruments for Hemogenyx LLC and Immugenyx LLC do not contain embedded
derivatives and therefore these instruments continue to be held at amortised cost. The notes payable consists of the
following:
Group & Company
Non-current
Borrowings
Drawdowns
Interest expense
Value of embedded derivative transferred to Other Reserves
Foreign exchange movement
Balance at 31 December 2018
Convertible Notes
Drawdowns
Interest expense
Foreign exchange movement
Balance at 31 December 2018
Total Borrowings at 31 December 2018
Year Ended 31
December 2018
Year Ended 31
December 2017
£
587,245
882
(6,287)
1,429
583,269
588,670
882
5
589,557
1,172,826
£
-
-
-
-
-
-
-
-
-
-
-
-
-
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 73
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 S
A summary of the debt facilities is as follows:
During 2018 Orgenesis entered in to two debt facility
agreements with the Group, one each with Hemogenyx
LLC and Immugenyx LLC. On 7 November 2018 the
Group entered in to a loan agreement with Orgenesis
Inc., an organisation with which the Group has an existing
collaboration agreement. The loan amount was for not
less than US$1,000,000 with the proceeds of the loan to
be used solely for the development of the cell therapy
technology in accordance with the plan of the collaboration
agreement. As at reporting date drawdowns totalling
US$750,000 (£587,245) had been made with Hemogenyx
LLC receiving the funds. The loan carries an interest rate
of 2% and has a term of three years. Orgenesis has the
option to convert both principal and accrued interest in
to equity in Hemogenyx-Cell at any time prior to maturity.
Hemogenyx-Cell (“Hemo-Cell”) is a wholly owned Belgian
entity and as at reporting date was not incorporated. As
Hemo-Cell was not incorporated at the reporting date no
conversion was possible and as a result this loan facility
has been treated as a borrowing in accordance with IAS9.
When Hemo-Cell is incorporated the facility will be treated
in accordance with the provisions of IAS39.
through
On 7 November 2018 the Group entered in to a loan
agreement
its wholly owned subsidiary
Immugenyx LLC, with Orgenesis Inc., an organisation with
which the Group has an existing collaboration agreement.
The loan amount was for not less than US$1,000,000
with the proceeds of the loan to be used solely for
the development of the cell therapy technology in
accordance with the plan of the collaboration agreement.
As at reporting date drawdowns totalling US$750,000
(£588,670) had been made. The loan carries an interest
rate of 2% and has a term of three years. Orgenesis
has the option to convert both principal and accrued
interest in to equity in Immugenyx LLC at any time prior
to maturity. This loan has been treated in accordance with
the provisions of IAS39.
23. Related party disclosures
There were no related party disclosures other than
Directors’ remuneration as disclosed in the Remuneration
Report section of the Directors’ Report. There are no key
management personnel other than the Directors.
24. 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
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 74
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 S
The following table sets out the categories of financial instruments held by the Company as at the year ended 31 December
2018 and period ended 31 December 2017:
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
£
£
£
£
64,361
64,784
64,361
61,013
Assets
Trade and other receivables,
except prepayments
Cash and cash equivalents
1,762,428
1,876,655
461,003
1,748,337
1,826,789
1,941,439
525,364
1,809,350
Liabilities
Trade and other payables
Borrowings
(167,607)
(1,172,826)
(1,340,433)
(263,685)
(134,085)
(263,600)
-
-
-
(263,685)
(134,085)
(263,600)
Group
1 January 2018 Cash flows
Non-cash changes
31 December 2018
Share
repayment
Foreign
exchange
movements
Interest
charge
Long-term
borrowings
Short-term
borrowings
Total
-
-
-
1,175,915
-
1,175,915
-
-
-
(4,853)
1,764
1,172,826
-
-
-
(4,853)
1,764
1,172,826
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
Total
275,500
(154,422)
(140,297)
7,746
11,473
26,335
(26,335)
-
-
-
301,835
(180,757)
(140,297)
7,746
11,473
-
-
-
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 75
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 S
a) Credit risk
The Group had receivables of £nil owing from customers
(31 December 2017: £nil). 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
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest
rates. The Group’s income and operating cash flows are
substantially independent of changes in market interest
rates as the Group has no significant interest-bearing
assets. The borrowings issued at fixed rates expose the
Group to fair value interest rate risk. The Company’s
management monitors the interest rate fluctuations on a
continuous basis and acts accordingly.
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.
The interest rates on the Convertible Notes are fixed
and hence a rise in interest rates of 1% would not have
a material impact on the profit and loss of the Group and
such is not disclosed.
In relation to sensitivity analysis, there was no material
difference to disclosures made on financial assets and
liabilities.
At the reporting date the interest rate profile of interest-
bearing financial instruments was:
Group
Group
Company
Company
Year Ended 31
December 2018
Year Ended 31
December 2017
Year Ended 31
December 2018
Year Ended 31
December 2017
£
£
£
£
Financial Assets
Cash and cash equivalents
1,762,428
1,876,655
461,003
1,748,337
Financial Liabilities
Borrowings
(1,172,826)
-
-
-
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 for the years ended 31 December
2018 and 31 December 2017:
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
Currency of net monetary
assets/(liabilities)
Pound Sterling
US Dollars
Total
Currency of net monetary
assets/(liabilities)
Pound Sterling
US Dollars
Total
31 December 2018
Functional Currency
Pound Sterling
£
109,654
351,348
461,002
31 December 2017
Functional Currency
Pound Sterling
£
1,489,737
-
1,489,737
US Dollars
£
-
26,184
26,184
US Dollars
£
-
132,003
132,003
76
Total
£
109,654
377,532
487,186
Total
£
1,489,737
132,003
1,621,740
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.
25. 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
2018
£
9,610
-
-
9,610
2017
£
8,671
-
-
8,671
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 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 S
77
Licence
Milestone and royalty payments that may become due
under the licence 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 £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 licence maintenance fee of up to £55,000
until the commercial sales are achieved.
26. Ultimate controlling party
The Directors have determined that there is no controlling
party as no individual shareholder holds a controlling
interest in the Company.
27. Subsequent events
The Company’s Belgian subsidiary, Hemogenyx-Cell
SPRL, was incorporated on 9 April 2019. Hemogenyx-Cell
is progressing preclinical development of the Hu-PHEC
technology and has lodged an application for a matched
funding grant with the Belgian government.
The Company also reviewed and extended its licence
agreement with Cornell University, the patent-holder of
the Hu-PHEC technology.
The Company, leveraging its collaboration with Janssen
Pharmaceuticals (a Johnson & Johnson pharmaceutical
company), has initiated a programme of discovery and
development of a suite of novel treatments for Systemic
Lupus Erythematosus (SLE or Lupus). The Company
is developing a cell-based approach to treat Lupus. In
parallel, it is engaged in seeking novel druggable targets
using its proprietary discovery platform that combines
an AHC-based human Lupus model and single cell
sequencing.
28. 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.
Hemogenyx Pharmaceuticals plcAnnual Report & Financial Statements For the Year Ended 31 December 2018 W W W . H E M O G E N Y X . C O M