ANNUAL REPORT & ACCOUNTS 2015-16
DRUG DISCOVERY AND INNOVATION
ACROSS CANCER, INFECTION &
AUTOIMMUNE DISEASE
REDX PHARMA PLC
2016 ANNUAL REPORT
CONTENTS
Chairman’s Statement
Strategic Report
Operational Review
Principal Risks and Uncertainties
Porcupine Program
BTK Program
Governance
Board of Directors
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Company Statement of Financial Position
Notes to the Individual Financial Statements
Company Information
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02
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19
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REDX PHARMA PLC
2016 ANNUAL REPORT
C H A I R M A N ’ S S T A T E M E N T
CHAIRMAN’S STATEMENT
Outlook
We look forward with confidence to further
developments of the business in 2017, which
the Board expects will be a transformational
year for Redx as it transitions from a pre-clinical
to a clinical stage Company. As we make
that change, our investment focus will be on
driving our high-value, clinical development
programs. We will continue to support the
right level of pre-clinical projects to maintain
the breadth of our pipeline and provide the
next generation of clinical programs for the
Company, however the implementation of
this restructuring will mean a reduction in
the current headcount of Redx. Although,
unfortunately, this will have a major impact
on many valued employees of the Group, the
Board has agreed that this is the right thing
to do to enable Redx to progress its emerging
clinical pipeline. The business will make every
effort to support and assist those affected.
We also aim to seek further opportunities to
develop the business, including potential new
commercial partnerships.
On a personal note, after careful consideration
I have decided not to offer myself for re-
election at the next Annual General Meeting.
I am pleased to have been a part of Redx,
guiding the Company through the transition
from private to public markets. Redx has
made substantial progress with the portfolio
since the IPO in 2015 and I look forward to
monitoring the Company’s continued progress
as it makes this critical transition to clinical
development and wish the management, staff
and shareholders every success for the future.
Dr Frank Armstrong FRCPE, FFPM
Non-Executive Chairman
20 March 2017
compounds which are being progressed into
further research studies.
One of the key developments for the anti-
infective team was the identification of novel
antibiotic compounds against drug resistant
In vivo testing
Gram-negative bacteria.
confirmed that these compounds are highly
effective and they have the potential to
provide a new class of antibiotic agents in the
fight against Anti-microbial Resistance (AMR)
which is an area of medical concern.
In developing new therapies, all our research
teams will continue to focus on targets
which are both commercially attractive and
scientifically validated. Our objective is to
create valuable, novel drug candidates that
we can progress into development ourselves
or in partnership with large pharmaceutical
companies or well-financed emerging
companies.
Our Team
We have established an outstanding senior
executive team, with breadth and depth of
scientific and commercial experience. The
success we have achieved so far reflects the
talent and ambition within the business as a
whole and on behalf of the Board, I would like
to thank everyone at Redx for their continued
hard work and commitment over the year.
During the year, we were delighted to further
strengthen our Board of Directors with the
appointments of Bernd Kirschbaum and David
Lawrence as Non-Executive Directors. Bernd
has over 25 years’ experience in the industry
having held research leadership positions in
Merck/Merck Serono, Sanofi-Aventis, Aventis
and Hoechst Marion Roussel and brings expert
knowledge in drug research across a range of
therapeutic areas. David also has over 25 years’
experience in the biotech and pharmaceutical
industries
including companies such as
Chiron, Acambis and GlaxoSmithKline. He
has a strong track record in strategy, business
development and commercial management,
including working with a number of investors,
biotech start-ups and SMEs.
At the end of September 2016 our CFO Phil
Tottey left the Company and Andrew Booth,
formerly Financial Controller, has been
acting as Interim Finance Director pending a
permanent appointment.
01
It has been another important
year for Redx and I am pleased
to report the Company’s
second set of annual results
as a publicly listed company.
Redx’s £10m (gross) share
placing at the end of March
2016 allowed the Company
to aggressively continue to
progress its pipeline.
Redx has made significant progress with
its proprietary research programs over the
year. We identified two drug development
candidates in oncology, in our Porcupine
(RXC005)
(RXC004) and reversible BTK
programs. BTK was announced after financial
year end in October 2016. During the year,
we demonstrated
that our Porcupine
inhibitor could have a crucial role in improving
immune system response of some
the
cancer patients when used in combination
with an existing
immunotherapy, anti-
programmed cell death-1 (anti-PD-1). We
also achieved our seventh pre-clinical proof
of concept, with our reversible BTK program
in oncology.
The newly established immunology research
team at Redx made good progress during
2016. One of the key disease areas for the
team is fibrotic diseases of the lung, kidney
and liver. There remains a huge unmet
medical need in this area, and we believe
we already have a range of potent and novel
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
OPERATIONAL REVIEW
The Directors present their Strategic Report
on pages 2 to 7 for the year ended 30
September 2016. The Operational Review, Key
Performance Indicators and Principal Risks
and Uncertainties sections form part of the
Strategic Report.
We currently have two programs,
reversible BTK and Porcupine,
which we are progressing into
first-in-human clinical studies.
The successful share placing (£10m gross) in March 2016 established
the financial foundations for Redx to progress its pipeline during the
year. The progress of our two leading programs, Porcupine (RXC004)
and BTK (RXC005), has been rapid and, as these programs transition
into the clinic, the Company will need to focus and balance its
resources on the clinical development of these key assets in addition
to continuing to maintain a steady flow of projects through the
research pipeline.
Pipeline Progress
The Redx pipeline has continued to advance significantly over the
last year. During the period, we achieved in vivo proof of concept for
the reversible BTK program, taking the total to seven.
Oncology
During the financial year, our oncology research team nominated a
development candidate in our Porcupine program (RXC004). This
compound is now in formal development studies in preparation for
progress into first-in-human clinical studies and RXC004 is expected
to enter clinic in the next few months. We also secured proof of
concept in our reversible BTK program and aim to initially develop this
compound for Chronic Lymphocytic Leukaemia (CLL). Post financial
year-end, we nominated a clinical candidate in this BTK program
(RXC005). RXC005 is now in formal development studies and is
targeted to be ready for the clinic by the end of 2017.
02
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
Reversible Bruton’s Tyrosine Kinase program
Bruton’s Tyrosine Kinase (BTK) is a key biological enzyme target which
has been validated by the approval of the drug ibrutinib (Imbruvica™)
in the treatment of a range of blood cancers, such as chronic
lymphocytic leukaemia (please see p.11 for a more comprehensive
overview). Redx’s reversible BTK inhibitor RXC005 has shown potent
inhibitory activity towards wild-type (normal) BTK as well as mutant
BTK (C481S), the latter of which is refractory to ibrutinib inhibition.
Porcupine program
Porcupine is a key enzyme in the oncogenic Wnt signalling pathway.
This pathway is implicated in a range of hard-to-treat cancers with
poor prognosis such as pancreatic, biliary and gastric cancers. Our
Porcupine inhibitor, RXC004, is a potent inhibitor of this enzyme
and pathway, leading to strong tumour growth inhibitory effects
in a variety of cancer models. We have also shown that RXC004,
when administered together with an immune checkpoint inhibitor
(anti-PD-1) has a synergistic immune system modifying effect. Our
initial clinical studies with RXC004 will be as a monotherapy but we
have included the option for a combination therapy expansion arm
together with a checkpoint inhibitor in our clinical study design.
Pan-Raf program
Raf kinases have been implicated in a multitude of cancers. Although
there are already several Raf inhibitors approved there is scope for
improving the characteristics of these drugs. Redx is developing
novel small molecule therapeutics with activity against several Raf
isoforms. These novel compounds target mechanisms of resistance
associated with first generation Raf inhibitors. Currently these
compounds are in lead-optimisation phase.
Year End Cash Held
£5.8m
9.4
5.8
Other Operating
Income
£2.4m
6.2
2.9
2.4
2.6
2016
2015
2014
2016
2015
2014
In February and March 2017
the Group raised a further
£12m (gross) by way of a share
placing and open offer. See
note 26.
Reflecting the continuation of
RGF5 funding, 2014 included
milestone payments on the
MRSA program.
Cash Flows - Net Outflow
£3.7m
6.5
Immunology
The immunology group is focussing on BTK and Porcupine targets
for a variety of immunology indications, with an emphasis on
fibrotic diseases such as Idiopathic Pulmonary Fibrosis (IPF),
Diabetic Nephropathy and Non-alcoholic Steatohepatitis (NASH)
and autoimmune conditions. This is supplemented by work on Rho-
associated protein kinase 2 (ROCK2), a target that is also implicated
in fibrotic disease.
Reflecting the increased R&D
spend as Immunology research
was undertaken for a full year.
See note 5. Further funding
was received as a result of the
successful share
issue noted
above, see note 26.
1.9
2016
2015
2014
Anti-infectives
The group made significant progress in its infection portfolio
during the period, particularly in its Gram negative antibacterial
program which shows great promise. Whilst Redx’s antibacterial
assets continue to offer the prospect of value, future research
and development activities will be conducted under external
collaboration arrangements in order that we can focus our efforts on
priority programs in oncology and immunology.
Key Performance Indicators
The Group’s key performance indicators include a range of financial
and non-financial measures. Details about the progress of our
research programs (non-financial measures) are included elsewhere
in this Operational Review, and below are the other indicators
(financial) considered pertinent to the business.
3.7
Net Outflow
Net Inflow
Research & Development Expenditure
(excluding staff costs)
£8.1m £5.1m £4m
2016
2015
2014
The Group’s continuing focus is to
maximise to amount of operating
expenditure spent on research
and development activities.
03
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
OPERATIONAL REVIEW CONT.
Industry Overview
The pharmaceutical industry continues to struggle with drug pricing
which was a key topic in the US Presidential election. It remains to be seen
how the new Trump administration will interact with the industry but
there are clear signs that pricing will remain on the agenda. There are early
indications that his may be off-set by a more liberal regulatory approach
that could make it easier for companies to get new therapies approved.
Following the surge in new drug approvals in the US over the last 5 years
which alleviated concerns over the industry’s R&D productivity, approvals
in 2016 dropped to lows not seen since 2007 with only 19 new drugs
sanctioned during the year.
Collaborations and Partnerships
Redx continues to build on the partnerships that have been secured to
date. In particular, our collaboration with AstraZeneca focused on an
undisclosed oncology target has made good progress.
Our pipeline assets have been carefully chosen as programs that not
only match the demand for new therapies that will improve patient
outcomes but which are attractive to potential commercialisation
partners. Looking forward, we continue to have encouraging
discussions for out- and in-licensing programs with a number of
parties regarding future commercial collaborations across our pipeline.
Deal-making activity continued apace in the year although the move
back to a preference for clinical-stage assets was further confirmed.
In addition to continued attention on immuno-oncology assets and,
particularly, combination therapies, one key trend that emerged
during the year was the increased focus on fibrotic disease. Novel
agents for conditions such as diabetic nephropathy (affecting the
kidneys), non-alcoholic steatohepatitis (NASH – affecting the liver)
and idiopathic pulmonary fibrosis (IPF – affecting the lungs) are
sought after as the industry turns its attention to a slate of chronic
life-threatening conditions that are inadequately served by current
therapies. When we established our immunology group in 2015,
fibrotic disease was one of the key pillars that our research portfolio
was built around.
All of this reinforces Redx’s strategy to focus on cancer and
immunology taking our lead programs into clinic so increasing their
value and lining up the potential for higher value deals once clinical
proof of concept is secured.
Filings and Approvals 2000 - 2016
60
50
40
30
20
10
0
04
0
0
0
2
1
0
0
2
2
0
0
2
3
0
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2
4
0
0
2
5
0
0
2
6
0
0
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7
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0
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8
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9
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1
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1
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2
BLA Approvals
NDA Approvals
Filings
Source – FDA
Strategy
Redx is entering a pivotal period in its growth. Over the last few
years, we have created a world-class capability in small molecule
drug discovery. The Company’s discovery engine has created an
innovative pipeline that has delivered two development assets – the
Porcupine inhibitor RXC004 and the BTK inhibitor RXC005. As we
take these assets toward first-in-man clinical studies, the Company
needs to concentrate its resources on ensuring that we secure the
best return possible from our portfolio.
To this end, Redx will focus its business on its key assets in oncology
and immunology. Whilst we continue to see value in our infectious
disease portfolio, we will seek to continue to progress these assets
under collaborative arrangements with external partners.
Redx remains committed to discovery research in order to ensure
that we maintain an effective, high-value pipeline but the balance
of resource allocation will shift to support a greater degree of
development activity as we move forward into clinic in 2017. As
detailed in note 26 one result of this rebalancing will be a reduction in
fixed costs as we decrease the number of research staff during the year.
Senior Management Team
At the beginning of the financial year, we were delighted to announce
the appointment of Nicholas Adams as Chief Business Officer and at
the end of the financial year Karl Hård joined as Head of Investor
Relations and Corporate Communications. These key appointments
have significantly strengthened the senior management team.
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
Financial Review
Other operating income
The Group generated other operating income of £2.4 million
during the year ended 30 September 2016 (2015: £2.6 million). This
principally comprised £2.2 million in respect of Regional Growth fund
grants for immunology research administered by the Department of
Business, Energy and Industrial Strategy.
There were no new sources of other operating income during
the year.
Share-based compensation
During the year a Save as You Earn scheme was launched for all
staff, resulting in the granting of 1.1m new options, this together
with other new and existing options resulted in a charge of £0.2m
being recognised in the Consolidated Statement of Comprehensive
Income (2015: £0.6m).
Non recurring relocation costs
During late summer 2016 the Group relocated its oncology research
facilities from Liverpool to Alderley Park in Cheshire, consolidating
the Redx Pharma group on a single site. For clarity, the employment,
removal and other costs associated with the move have been disclosed
separately in the consolidated Statement of Comprehensive Income,
and amounted to £0.56m. It is not expected that there will be any
further costs incurred in relation to the relocation.
Taxation
This year the financial statements record a tax charge of £0.1m (2015:
credit of £0.7m), As part of its continued discussions with HMRC
regarding the impact of RGF funding on the recoverability of R&D
tax credits, the group took the decision not to include any provision
for R&D tax credits until the position has been clarified, leading to a
reduction in the provision for amounts receivable for prior years of
£0.75m. Amounts due under Research and Development Expenditure
credit are unaffected.
Losses
The loss before taxation was £15.4 million (2015: £8.8million). The net loss
for the year was £15.5 million (2015: £8.2 million) representing a loss of
19.8 pence per share (2015: 14.1 pence per share).
Cash Flows
The Group had a net cash outflow of £3.7 million for the year ended 30
September 2016 as compared to a net cash inflow of £6.5 million for
the previous year.
Cash used by operating activities increased by £6.6 million to £13.3
million for the year compared to £6.7 million in the previous year. This
was driven by increased research activity in immunology (its first full
year), increased staff costs, and the progress of programs to more
expensive pre-clinical stages.
Tax credits received in the year increased by £0.65 million to
£0.75 million.
Cash inflow from financing activities was £9.3 million, being the
net proceeds of the equity placing in April 2016 (see note 19).
(2015: £13.4 million).
Financial Position
As at 30 September 2016, total cash and cash equivalents held were
£5.8 million (2015: £9.4 million).
Headcount
Average headcount of the Group for the year was 199 (2015: 145). The
increase in headcount is attributable to the further strengthening of
the management team, together with a first full year of immunology
research.
Share Capital
On 4 April, 14 April and 15 April 2016 respectively, the Company
issued 6,180,197, 285,714, and 22,105,518 Ordinary shares at £0.35
each pursuant to a placing and admission to trading on AIM. The
gross proceeds of the issue were £10m.
Outlook
We anticipate that 2017 will be an important year for Redx as our
first programs are being prepared for entry to first-in-human
clinical studies. The £12m (gross) fundraising in early 2017 leaves
the Group well placed to implement it’s strategy. While the planned
restructuring will be a time of uncertainty for some, we firmly
believe that this is the correct course of action to allow us to focus
on our core high value assets whilst maintaining sufficient research
capability in-house in oncology and immunology and progressing
our Anti-infectives research through collaborations.
Dr Frank Armstrong is stepping down as Chairman of the Group,
and together with Peter McPartland, will not seek re-election at the
Annual General Meeting Dr Peter Jackson, Non-Executive Director,
co-founder of Redx and Executive Chairman up to August 2014, will be
stepping down from the Board on 31 March 2017. The appointment of
a new Chairman will be announced in due course.
A number of commercial discussions are underway across our
pipeline assets and the Board is confident that we will secure further
partnerships.
We are also exploring options to broaden Redx’s capability and
asset base as we seek to further increase the growth capacity for
the business. The Board remains confident that Redx will continue
to adapt its strategy to ensure optimal shareholder returns in the
medium to long-term.
05
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
PRINCIPAL RISKS AND UNCERTAINTIES
Redx is a biopharmaceutical company and,
in common with other companies operating
in this field, is subject to a number of risks
and uncertainties. The principal risks and
uncertainties identified by Redx for the year
ended 30 September 2016 are below.
Research and Development
The Group is at a relatively early stage of development and may not
be successful in its efforts to use and to build a pipeline of product
candidates and develop approved or marketable products. Technical
risk is present at each stage of the discovery and development
process with challenges in both chemistry (including the ability
to synthesise novel molecules) and biology (including the ability
to produce candidate drugs with appropriate safety, efficacy and
usability characteristics). Additionally, drug development is a highly
regulated environment which itself presents technical risk through
the need for study designs and data to be accepted by regulatory
agencies. Furthermore, there can be no guarantee that the Group will
be able to, or that it will be commercially advantageous for the Group
to, develop its intellectual property through entering into licensing
deals with emerging, midsize and large pharmaceutical companies.
Commercial
industries are very
The biotechnology and pharmaceutical
competitive. The Group’s competitors include major multinational
pharmaceutical companies, biotechnology companies and research
institutions. Many of its competitors have substantially greater
financial, technical and other resources, such as larger research
and development staff. The Group’s competitors may succeed in
developing, acquiring or licensing drug product candidates that are
more effective or less costly than any product candidate which the
Group is currently developing or which it may develop and may have
a material adverse impact on the Group.
Clinical Trials
We do not know whether any future clinical trials with any of our
product candidates will be completed on schedule, or at all, or
whether our ongoing or planned clinical trials will begin or progress
to the time schedule we anticipate. The commencement of future
clinical trials could be substantially delayed or prevented by several
factors, including:
– delays or failures to raise additional funding;
– results of future meetings with the MHRA, EMA, FDA and/or other
regulatory bodies;
– a limited number of, and competition for, suitable patients with
particular types of cancer for enrolment in our clinical trials;
– delays or failures in obtaining regulatory approval to commence
a clinical trial;
– delays or failures in obtaining sufficient clinical materials;
– delays or failures
independent
institutional review boards to conduct a clinical trial at prospective
sites; or
in obtaining approval from
– delays or failures in reaching acceptable clinical trial agreement
terms or clinical trial protocols with prospective sites.
The completion of our clinical trials could be substantially delayed or
prevented by several factors, including:
– delays or failures to raise additional funding;
– slower than expected rates of patient recruitment and enrolment;
– failure of patients to complete the clinical trial;
– delays or failures in reaching the number of events pre-specified
in the trial design;
– the need to expand the clinical trial;
– delays or failures in obtaining sufficient clinical materials;
– unforeseen safety issues;
– lack of efficacy during clinical trials;
– inability or unwillingness of patients or clinical investigators to
follow our clinical trial protocols; and
– inability to monitor patients adequately during or after treatment.
Additionally, our clinical trials may be suspended or terminated at
any time by the MHRA, other regulatory authorities, or ourselves.
Any failure to complete or significant delay in completing clinical
trials for our product candidates could harm our financial results and
the commercial prospects for our product candidates.
Regulatory
The Group’s operations are subject to laws, regulatory approvals and
certain governmental directives, recommendations and guidelines
relating to, amongst other things, product health claims, occupational
safety, laboratory practice, the use and handling of hazardous
materials, prevention of illness and injury, environmental protection
and human clinical studies. There can be no assurance that future
legislation will not impose further government regulation, which may
adversely affect the business or financial condition of the Group.
Intellectual Property (IP)
The Group’s success depends in large part on its ability to obtain
and maintain patent protection for its proprietary technology and
products in the United States, Europe and other countries. If the
Group is unable to obtain or maintain patent protection for its
technology and products, or if the scope of the patent protection is
not sufficiently broad, competitors could develop and commercialise
similar technology and products which would materially affect the
Group’s ability to successfully commercialise its technology and
products. The Group is exposed to additional IP risks, including
infringement of intellectual property rights, involvement in lawsuits
and the inability to protect the confidentiality of its trade secrets
which could have an adverse effect on the success of the Group.
Financial
The Group has a limited operating history, has incurred significant
losses since its inception and does not have any approved or
revenue-generating products. The Group expects to incur losses for
the foreseeable future, and there is no certainty that the business will
generate a profit. The Group may not be able to raise additional funds
that will be needed to support its product development programs
06
REDX PHARMA PLC
2016 ANNUAL REPORT
S T R A T E G I C R E P O R T
or commercialisation efforts, and any additional funds that are raised
could cause dilution to existing investors.
Operational
The Group’s future development and prospects depend to a significant
degree on the experience, performance and continued service of its
senior management team including the Directors. The Group has
invested in its management team at all levels. The Directors also
believe that the senior management team is appropriately structured
for the Group’s size and is not overly dependent upon any particular
individual. The Group has entered into contractual arrangements
with these individuals with the aim of securing the services of each
of them. Retention of these services or the identification of suitable
replacements, however, cannot be guaranteed. The loss of the services
of any of the Directors or other members of the senior management
team and the costs of recruiting replacements may have a material
adverse effect on the Group and its commercial and financial
performance and reduce the value of an investment in the Ordinary
Shares.
This report was approved by the Board on 20 March 2017 and signed
on its behalf.
Dr Neil D. Murray
Chief Executive Officer
07
MRSA PROJECT
PORCUPINE
Redx Pharma is developing a porcupine (PORCN) inhibitor drug
candidate – RXC004. Our scientists have been able to demonstrate
the potential for RXC004 as a cancer treatment using in vivo models of
pancreatic and gastric cancer. Importantly, an acceptable therapeutic
window has been achieved in pre-clinical models.
Since its nomination as a drug candidate in December 2015, RXC004
has successfully completed pre-clinical development activities and
Redx remains on track to initiate a first-in-human clinical trial by
mid-2017.
REDX PHARMA PLC
2016 ANNUAL REPORT
P O R C U P I N E
The Wnt pathway is implicated in cancer initiation, its progression
and the maintenance of cancer stem cells (CSCs). CSCs are a tiny
population of cells that chemotherapy leaves behind which allow
the cancer to come back at a later date. Similar to normal stem cells,
CSCs undergo a process of self-renewal and are therefore associated
with tumorigenesis, metastasis, recurrence and resistance in cancer.
Emerging research also shows that the Wnt pathway plays a critical
role in the development of fibrotic disease in different human organs,
many of which currently lack satisfactory therapies.
Despite the importance of Wnt biology in cancer and other diseases,
there are currently no approved drugs which target this pathway and
there are only two other porcupine inhibitors in clinical trials. A key
challenge in developing drugs which target important pathways in
humans is safety. Scientists have struggled to identify components of
the Wnt pathway that can be targeted to provide a therapeutic effect
in cancer patients without causing toxicity associated with interfering
with the target in healthy cells. Much research has focused on different
targets in the Wnt pathway but has been hindered due to the failure
to demonstrate a suitable therapeutic window – the gap between the
dose needed to see the desired effect and the dose at which toxicity is
observed. Consequently, for a time it was felt that this critical pathway
would be unsuitable for drug therapy.
Redx Pharma is developing a porcupine (PORCN) inhibitor drug
candidate – RXC004. Scientists from Redx have been able to
demonstrate the potential for RXC004 as a cancer treatment using
in vivo models of pancreatic and gastric cancer. Importantly, an
acceptable therapeutic window for targeting this key Wnt pathway
component with RXC004 has been achieved in pre-clinical models.
Since its nomination as a drug candidate in December 2015, RXC004
has successfully completed pre-clinical development activities and
Redx remains on track to initiate a first-in-human clinical trial in mid
2017. During this time Redx scientists have continued their research
into the potential uses of RXC004 in cancer therapy and have:
– Identified specific patient sub-groups likely to respond to RXC004.
Molecular alterations in gastric, pancreatic and biliary cancers have
been identified which will facilitate the identification of patients
likely to benefit from treatment.
– Demonstrated the ability of RXC004 to enhance the immune
system response to cancer in pre-clinical models. The data suggests
RXC004 in combination with checkpoint inhibitors (such as anti-
PD1 antibodies) may enhance the already impressive results
observed for this exciting class of therapies by increasing the
response rates and the duration of response.
Phase 1 Trial of RXC004
The trial will be conducted in patients with advanced cancer and the
modular approach will allow Redx to:
– Investigate additional responsive patient populations from the
all-comers Phase 1a cohort.
– Evaluate combination therapies which have the potential to
broaden the patient populations likely to benefit from therapy.
Module 1 Part a
To assess the safety and tolerability of RXC004 in
an all-comers cohort of advanced cancer patients.
Module 1 Part b
To assess the efficacy of RXC004 in biomarker
selected gastric and pancreatic cancer patient
cohorts as well as a biliary cancer cohort.
Module 2
To assess the safety tolerability and efficacy of
RXC004 in combination with standard of care
therapies including checkpoint inhibitors.
“
I am delighted that Redx Pharma has chosen the University of
Manchester / The Christie NHS Foundation Trust as the lead site for
the first-in-man trial of their porcupine inhibitor RXC004 in 2017.
We look forward to working with Redx to advance this compound
towards clinical studies in some of the hardest to treat cancers such
as pancreatic (as a partner in the Precision-Panc initiative), gastric
and biliary cancer.”
Juan Valle, Professor and Honorary Consultant in Medical Oncology,
The Christie NHS Foundation Trust
Fibrotic Disease
Redx Pharma is also developing a second, distinct chemical series
of PORCN inhibitors for development in the area of fibrotic disease.
To fully understand the emerging potential for PORCN inhibitors in
this area the scientific team are currently evaluating their effects in a
range of in vivo models of fibrotic disease.
09
BTK
The impressive clinical efficacy observed with first generation Bruton’s
tyrosine kinase (BTK) inhibitors such as ibrutinib (Imbruvica®) highlights
the importance of BTK as a clinically-validated drug target across a
range of haematological malignancies.
REDX PHARMA PLC
2016 ANNUAL REPORT
B T K
The potency of first generation irreversible BTK inhibitors such as
ibrutinib, and second generation inhibitor Acalabrutinib and others
rely on the formation of a covalent bond with cysteine 481 (C481) at
the BTK active site, which leads to an irreversible inhibition of the
kinase activity.
As such, any mutation of this cysteine amino acid to a different
residue will interfere with the drug binding mode, and thus reduce
the effectiveness of irreversible BTK inhibitors. Importantly, C481
mutations in BTK have been reported in patients. These mutations
have been linked to cases of resistance that have emerged in patients
with chronic lymphocytic leukaemia (CLL) progression following
treatment with ibrutinib. The latest studies presented in 2016 estimate
that approximately 60% of these resistance patients have a mutation
in C481.
Redx’s scientists have taken on this challenge by developing RXC005,
which is a novel, potent and highly selective, reversible inhibitor of
BTK, which is equally as effective at inhibiting non-mutated BTK
(wild-type BTK) and C481-mutated BTK.
As such, RXC005 aims to overcome the resistance mechanisms to
first and second generation inhibitors, whilst retaining activity where
irreversible inhibitors such as ibrutinib are active.
RXC005 was successfully nominated as a drug candidate in October
2016 and the pre-clinical data supporting this decision were presented
at the 58th American Society of Hematology (ASH) Annual Meeting in
December 2016 where Redx scientists revealed the impressive efficacy
of RXC005 in a relevant pre-clinical xenograft model. Additionally, our
team at Redx have been working in collaboration with Prof. Jennifer
Woyach at Ohio State University, and have demonstrated inhibition
of BTK with our compound in CLL patient samples, which we also
reported at the ASH meeting in December.
“Many patients with progressive CLL following ibrutinib treatment
have mutations in BTK at the time of clinical relapse. RXC005, a
reversible BTK inhibitor, therefore represents an opportunity for
future clinical trials to target this emerging resistance mechanism.
We look forward to advancing this compound towards clinical
studies in CLL patients with Redx Pharma.”
Dr Jennifer Brown, MD, PhD, Director, Chronic Lymphocytic Leukemia
Center, Institute Physician, Associate Professor of Medicine, Harvard
Medical School, Dana Farber Cancer Institute
BTK
inhibitors
Irreversible
have
dramatically changed the management
of CLL but we are beginning to see a
subset of high risk patients who are
relapsing,” said Dr Jennifer Woyach, M.D.,
of The Ohio State University College of
inhibitors
Medicine. “Reversible BTK
represent an exciting option for future
clinical trials as they do not rely upon
the C481 mutation site. We are delighted
to be working with RXC005, Redx’s
proprietary BTK reversible inhibitor and
look forward to its progress towards
first-in-man studies.”
RXC005 has the potential
to become a potent
therapy for Chronic
Lymphocytic Leukaemia
(CCL) patients by tackling
the growing resistance to
ibrutinib treatment. We
aim to initiate first-in-
human clinical studies in
late 2017.
ALDERLEY PARK BLOCK 33
All Redx activities are now housed
here at Alderley Park in Cheshire.
We are seeing significant benefits
from all R&D and management
staff being together in one world-
class facility.
ALDERLEY PARK BLOCK 33
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
BOARD OF DIRECTORS
Dr Frank Armstrong
Non-Executive Chairman
Dr Neil Murray
CEO
Dr Peter Jackson
Non-Executive Director
Mr Norman Molyneux
Non-Executive Director
Frank joined the Company on
1 September 2014. Frank has
previously led Medical Science
and Innovation (MSI) in R&D
at Merck Serono, Worldwide
Development at Bayer and the
Worldwide Medical Organisa-
tion at Zeneca.
He has also been the CEO
of a number of life sciences
companies and has extensive
experience of medical and prod-
uct development, leading suc-
cessful product approvals in the
US and EU.
Frank has been the CEO of
five biotechnology companies
(public and private) and was CEO
of Fulcrum Pharma, before it was
sold to private equity. In 2007, he
led the sale of 454 Life Sciences
for CuraGen to Roche for a con-
sideration of $154 million.
Frank has experience acting
as Chairman and Non-Execu-
tive Director in the UK and USA
with both private companies
and a NASDAQ listed company
as well as being chairman of a
charitable institution. Frank has
been Non-Executive Chairman
of AIM listed Summit Plc (LSE:
SUMM) since June 2013 and is
also a Non-Executive Director of
Mereo BioPharma Plc.
Neil co-founded the Company in
2010 and has over 25 years’ ex-
perience in the pharmaceutical
industry with experience of drug
development, business growth
and general management.
He has held a variety of
senior operational, commercial
and R&D positions
including
as Global Director for Sales and
Marketing with Solutia’s Phar-
maceutical Services business.
Prior to joining Solutia he was
Director of Chemical Develop-
ment at Vernalis (formerly Van-
guard Medica) with additional
responsibility for management of
the company’s research portfolio.
Neil was also European Busi-
ness Development Director for
SigmaAldrich before which he
was External Projects Director at
GlaxoWellcome with responsi-
bility for the company’s external
development science.
He has extensive experience
of drug discovery and develop-
ment and commercialisation
in large and small companies
across a wide range of therapeu-
tic areas.
Peter is a co-founder of the
Company and previously served
as Executive Chairman before
becoming a Non-Executive Di-
rector in September 2014.
In 2007, Peter founded the
Company’s predecessor compa-
ny Bradford Pharma. From 2005
until 2010, Peter was founder
and CEO of Reaxa, exploiting
chemical catalyst
technology
for the production of drugs with
lower
impurities to
meet stricter quality standards.
levels of
He is founder and Non-Exec-
utive Director of two other bio-
pharma ventures, ADC Biotech-
nology focused on production
of new antibody-based cancer
therapeutics, and Yprotech Ltd
(formally Yorkshire Process Tech-
nology), focused on develop-
ment of new chemical processes
for pharmaceuticals and agro-
chemicals.
Peter has over 25 years’ expe-
rience in the sector, holding sen-
ior executive roles as commercial
Director then head of Avecia’s
Pharmaceutical Products busi-
ness unit, following senior com-
mercial and R&D positions at
Zeneca and ICI.
Norman was previously the CFO
of the Company before becom-
ing a Non-Executive Director in
September 2014.
Norman is a qualified Char-
tered Management Accountant
and has 15 years’ experience in
arranging early stage business
angel and venture capital fund-
ing. Following training in ac-
countancy with GKN, he joined
PriceWaterhouseCoopers, work-
ing on many consultancy assign-
ments with both SME and multi-
national companies.
Following this, he returned
to industry with Director roles
in the paper manufacturing and
food manufacturing sectors in
the UK.
In 2000, Norman founded
Acceleris Capital Limited, an FCA
regulated fund management and
corporate finance firm specialis-
ing in EIS-led investment trans-
actions. Norman holds numer-
ous Directorships fulfilling both
executive and non-executive
positions.
14
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
Mr Peter McPartland
Non-Executive Director
Dr Bernhard Kirschbaum
Non-Executive Director
Mr David Lawrence
Non-Executive Director
Peter has been a Non-Executive
Director of the Company since
October 2010.
A graduate pharmacologist,
he worked for six years as an in-
vestment analyst before joining
Schroder Ventures (now Permira)
in 1988.
In 1994 Peter became a
co-founder and general partner
of SV Life Sciences (SVLS). From
1998 he began to develop his
own personal
interests while
maintaining a part-time role at
SVLS, leaving that firm in 2007 to
become an independent venture
capital consultant.
During his spell at SV/SVLS
he was a Director of a number of
leading companies in the field,
including Shire Pharmaceuticals,
Chiroscience and Triangle Phar-
maceuticals.
David joined the Board in May
2016 and has over 25 years’ ex-
perience
in the biotech and
pharmaceutical industries with
a strong track record in strategy,
business development and com-
mercial management, including
working with a number of in-
vestors, biotech start-ups and
SMEs.
David is currently a Non-Ex-
ecutive Director at Synpromics
Ltd, a synthetic biology company
that he co-founded. In 2014-2015
he was CEO of Sentintext Ther-
apeutics, a biotech focused on
the development of vaccines for
enterviruses. He was also a Di-
rector of QSpine Limited, which
designs, manufactures and dis-
tributes surgical spine medical
devices.
David has been Chairman of
Ambicare Health Limited, CEO
of Tayside Flow Technologies Ltd
and formerly worked at Chiron
Vaccines (now part of Novartis),
Acambis Plc (now part of Sanofi),
and GlaxoSmithKline.
Bernd joined the Board in Janu-
ary 2016.
Bernd has over 25 years’
experience
in pharmaceutical
research and drug develop-
leadership
ment, having held
roles at Merck/Merck Serono,
Sanofi-Aventis, Aventis
and
Hoechst Marion Roussel. He has
expertise in a broad range of dis-
ease areas including oncology,
immuno-oncology, immunology,
neurological disorders and cardi-
ometabolic diseases.
In the eight years to 2013,
he worked at Merck/Merck Ser-
ono, becoming a member of the
Board and Executive Vice-Pres-
ident, Global Research & Early
Development. He was responsi-
ble for a budget of 1 billion euros
and a global team of over 2,500
associates. In his last three years
at Merck Serono, he led the suc-
cessful growth of the company’s
R&D portfolio, with over 70 pro-
grams, doubling the number of
phase II assets in this period.
Dr Kirschbaum is currently
a board member of BioMedX,
Protagen Diagnostics, OMEICOS
Therapeutics and KAHR Thera-
peutics.
15
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
DIRECTORS’ REPORT
The Directors present their annual report on
the affairs of the Group, together with the
financial statements and auditor’s report for
the year ended 30 September 2016.
Information given to the Auditor
Each of the persons who is a Director at the date of approval of this
annual report confirms that:
– So far as the Director is aware, there is no relevant audit information
of which the Group’s auditor is unaware, and
– the Director has taken all steps that he ought to have taken as a
Director to make himself aware of any relevant audit information
and to establish that the auditor is aware of that information..
Independent auditors
RSM UK Audit LLP have expressed their willingness to continue in
office as auditors for the year. A resolution to reappoint them will be
proposed at the forthcoming AGM.
Annual General Meeting
The Annual General Meeting of the Company will be held at 9.30am
on 20 April 2017 at Redx Pharma Plc, Mereside, Alderley Park,
Macclesfield SK10 4TG.
Approved by the Board of Directors and signed on behalf of the Board.
Dr Neil D. Murray
Chief Executive Officer
20 March 2017
Redx Pharma Plc
c/o Acceleris Capital Ltd
Floor 9, Lowry House,
17 Marble Street
Manchester M2 3AW
Company registration number: 7368089
DIRECTORS
The Directors who were in office during the year and up to the date
of signing the financial statements, unless stated, were:
Executive
Dr Neil Murray
Dr Derek Lindsay – Resigned 6 May 2016
Philip Tottey – Resigned 30 September 2016
Non-Executive
Dr Frank Armstrong
Dr Peter Jackson
Norman Molyneux
Peter McPartland
Dr Bernhard Kirschbaum – Appointed 1 January 2016
David Lawrence – Appointed 6 May 2016
The Company maintained Directors’ and officers’ liability insurance
cover throughout the year.
Principal activities of the Group
Details of current and future trading as well as the principal risks and
uncertainties are included in the Strategic Report.
Business review
The review of the business and future developments are covered in
the Strategic Report.
Financial results and dividend
The Group’s loss for the year was £15.521m (2015 loss £8.175m). The
Directors do not recommend the payment of a dividend. (2015 £nil).
Directors’ interest in share options
Details of the Directors interests, share options and service contracts
are shown in the Directors’ Remuneration report.
Research and development
The Group is continuing to research products within its chosen area
of therapeutic focus.
Employee involvement
Employee involvement in the overall performance of the Group is
encouraged through both formal and informal meetings which deal
with a whole range of issues from the Group’s financial performance
and future developments to health and safety issues. Copies of
both the Annual Report and Interim Report are made available to all
employees.
16
REDX P HARM A PLC
2016 ANNUAL REPORT
G O V E R N A N C E
CORPORATE GOVERNANCE REPORT
The Board believes in the importance of
corporate governance and is aware of
their responsibility for overall corporate
governance, and for supervising the general
affairs and business of the Company and
its subsidiaries.
The Company is listed on the Alternative Investment Market (‘AIM’)
of the London Stock Exchange and is subject to the continuing
requirements of the AIM Rules. Although Redx is not required to
comply with the UK Corporate Governance Code by virtue of being
an AIM-listed company, the Board seeks to apply the QCA Corporate
Governance Code (as devised by the QCA in consultation with a
number of significant institutional small company investors) to the
extent appropriate and practical for a Company of its nature and size.
This section provides general information on the Group’s adoption
of the QCA Corporate Governance Code.
The Board
At 30 September 2016, the Board comprised six Non-Executive
Directors, and one Executive Director.
Directors’ biographies are on pages 14 and 15.
The Board is responsible to the shareholders for the proper management
of the Group and meets regularly to set the overall direction and
strategy of the Group, to review scientific, operational and financial
performance, and to advise on management appointments. The Board
has also convened by telephone conference during the year to review
the strategy and activities of the business. All key operational and
investment decisions are subject to Board approval. The Company
Secretary is responsible for ensuring that Board procedures are
followed and applicable rules and regulations are complied with.
There is a clear separation of the roles of Chief Executive Officer
and Non-Executive Chairman. The Chairman is responsible for
overseeing the running of the Board, ensuring that no individual
or group dominates the Board’s decision-making and ensuring
the Non-Executive Directors are properly briefed on matters. The
Chief Executive Officer has the responsibility for implementing the
strategy of the Board and managing the day to day business activities
of the Group.
The Board considers there to be sufficient independence on the
Board and, that all the Non-Executive Directors are of sufficient
competence and calibre to add strength and objectivity to the Board,
and bring considerable experience in scientific, operational and
financial development of biopharmaceutical products and companies.
Performance Evaluation
The Board has a process for evaluation of its own performance, that
of its committees and individual Directors, including the Chairman.
These evaluations are carried out at least annually.
Board Committees
The Company has established audit, nomination and remuneration
committees of the Board with formally delegated duties and
responsibilities.
Audit Committee
The members of the Audit Committee are Mr Norman Molyneux,
Mr Peter McPartland and Mr David Lawrence. Mr Norman Molyneux
is the chair of the Audit Committee. The responsibilities of the
committee include the following:
– Monitoring the integrity of the financial statements of the Group.
– Reviewing accounting policies, accounting treatment and
disclosures in the financial reports.
– Reviewing the Group’s internal financial controls and risk
management systems.
– Overseeing the Group’s relationship with external auditors,
including making recommendations to the Board as to the
appointment or re-appointment of the external auditors,
reviewing their terms of engagement, and monitoring the
external auditors’ independence, objectivity and effectiveness.
Remuneration Committee
The members of the Remuneration Committee are Mr Peter
McPartland, Dr Frank Armstrong and Mr Norman Molyneux.
Mr Peter McPartland is the chair of the Remuneration Committee.
The responsibilities of the committee include the following:
– Determining and agreeing with the Board on the remuneration
policy for all Directors.
– Within the terms of the agreed policy, determining the total
individual remuneration package for Executive Directors.
– Overseeing the evaluation of executive officers.
– Determining bonuses payable under the Group’s cash
bonus scheme.
– Determining the vesting of awards under the Group’s long-term
incentive plans and exercise of share options.
The Directors’ Remuneration Report is presented on pages 19 to 21.
Nominations and Corporate Governance Committee
The members of the Nominations and Corporate Governance
Committee are Dr Frank Armstrong, Mr Peter McPartland and Mr
Norman Molyneux. Dr Frank Armstrong is the Chair of the Nominations
and Corporate Governance Committee. The responsibilities of the
committee include the following:
All of the Directors are subject to election by shareholders at the first
Annual General Meeting (‘AGM’) after their appointment to the Board.
Executive Directors will continue to seek re-election at least once
every three years.
– Identifying individuals qualified to become members of the Board
of Directors.
– Recommending Directors to be appointed to the Committees.
– Overseeing the annual evaluation of the Board and its Committees.
17
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
CORPORATE GOVERNANCE REPORT CONT.
Our website, RedxPharma.com, has a section dedicated to investor
matters and provides useful information for the Company’s owners.
The Board as a whole is responsible for ensuring that a satisfactory
dialogue with shareholders takes place, while the Chairman and
Chief Executive Officer ensure that the views of the shareholders are
communicated to the Board as a whole. The Board ensures that the
Group’s strategic plans have been carefully reviewed in terms of their
ability to deliver long-term shareholder value. Fully audited Annual
Reports are published, and Interim Results statements notified via
Regulatory Information Service announcements. All financial reports
and statements are available on the Company’s website.
Shareholders are welcome to attend the Group’s AGM, where they
have the opportunity to meet the Board. All shareholders will have
at least 21 days’ notice of the AGM at which the Directors will be
available to discuss aspects of the Group’s performance and question
management in more detail.
– Reviewing and making recommendations to the Board on Board
leadership structure.
– Reviewing and making recommendations to the Board on
management succession planning.
– Developing and recommending to the Board appropriate
corporate governance principles.
Attendance at Board meetings
The Directors attended the following Board meetings during the year:
Dr Frank Armstrong
Dr Neil Murray
Dr Derek Lindsay
Mr Philip Tottey
Dr Peter Jackson
Mr Norman Molyneux
Mr Peter McPartland
Dr Bernd Kirschbaum
Mr David Lawrence
14/15
15/15
9/11 (resigned 6 May 2016)
13/15 (resigned 30 September 2016)
8/15
12/15
12/15
11/12 (appointed 1 January 2016)
3/4 (appointed 6 May 2016)
Risk Management and Internal Control
The Board is responsible for the systems of internal control and for
reviewing their effectiveness. The internal controls are designed to
manage rather than eliminate risk and provide reasonable but not
absolute assurance against material misstatement or loss. The Board
reviews the effectiveness of these systems annually by considering
the risks potentially affecting the Group.
The Group does not consider it necessary to have an internal audit
function due to the small size of the administrative function. Instead
there is a detailed monthly review and authorisation of transactions
by the Chief Financial Officer and Chief Executive Officer.
A comprehensive budgeting process is completed once a year and is
reviewed and approved by the Board. The Group’s results, compared
with the budget, are reported to the Board on a monthly basis and
discussed in detail.
The Group maintains appropriate insurance cover in respect of
actions taken against the Directors because of their roles, as well as
against material loss or claims against the Group. The insured values
and type of cover are comprehensively reviewed on a periodic basis
Corporate Social Responsibility
The Board recognises the growing awareness of social, environmental
and ethical matters and it endeavours to take into account the interest
of the Group’s stakeholders, including its investors, employees,
suppliers and business partners, when operating the business.
Employment
The Board recognises
legal responsibility to ensure the
well-being, safety and welfare of its employees and maintain a safe
and healthy working environment for them and for its visitors.
its
Relations with shareholders
The Board recognises the importance of communication with
its shareholders to ensure that its strategy and performance is
understood and that it remains accountable to shareholders.
18
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
DIRECTORS’ REMUNERATION REPORT
Date of Contract
Notice period
Dr Neil Murray
26 March 2015
12 months
Non-Executive Directors’ service contracts and remuneration
The remuneration of the Non-Executive Directors is determined by
the Remuneration Committee, with regard to market comparatives,
and independent advice is sought to ensure parity is maintained with
similar businesses.
The Non-Executive Directors do not receive any pension, or bonus
or benefits from the Company. The contracts of the Non-Executive
Directors are reviewed by the Board annually. Current contracts are
summarised below:
Date of Contract
Initial term
Frank Armstrong
Peter Jackson
Norman Molyneux
Peter McPartland
26 March 2015
26 March 2015
26 March 2015
26 March 2015
1 Year
1 Year
1 Year
1 Year
Directors’ shareholdings
The Directors who served during the year, together with their
beneficial interest in the shares of the Company are as follows:
Ordinary shares
of 1p each
At 30 September
2016
At 1 October
2015
Executive
N Murray
D Lindsay
P Tottey
Non-Executive
F Armstrong
P Jackson
N Molyneux
P McPartland
1,293,671
2,016,711
-
46,586
3,345,428
283,436
80,782
1,265,085
2,002,425
-
11,765
3,268,374
248,615
77,925
This report sets out the remuneration
policy operated by Redx in respect of the
Executive and Non-Executive Directors.
The remuneration policy is the
responsibility of the Remuneration
Committee, a sub-committee of the Board.
No Director is involved in discussions
relating to their own remuneration.
Remuneration policy for Executive Directors
The Remuneration Committee sets a remuneration policy that
aims to align Executive Directors remuneration with shareholders’
interests and attract and retain the best talent for the benefit of
the Group.
The remuneration of the Executive Directors during the year 2015/16
is set out below:
Basic salary
Basic salaries are reviewed annually. The review process is managed
by the Remuneration Committee with reference to market salary
data, and the Executives’ performance and contribution to the
Company during the year.
Bonuses
Annual bonuses are based on achievement of Group strategic and
financial targets, and personal performance objectives.
The Non-Executive Directors believe that bonuses are an incentive
to achieve the targets and objectives, and represent an important
element of the total compensation awards to the Executive Directors.
Longer term incentives
In order to further incentivise the Executive Directors and employees,
and align their interests with shareholders, the Company granted
new share options during the year. The share options will vest at
various future dates as described in the table on page 21.
Pension
The Group operates a defined contribution pension scheme which is
available to all employees. The assets of the scheme are held separately
from those of the Company in independently administered funds.
Executive Directors service contracts and termination
provisions
The service contracts of Executive Directors are approved by the
Board. The service contract may be terminated by either party giving
six months’ notice to the other. The details of the Directors’ contracts
are summarised as follows:
19
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
DIRECTORS’ REMUNERATION REPORT CONT.
Directors’ remuneration
The Directors received the following remuneration during the year:
Executive
Dr N Murray
Dr D Lindsay
P Tottey
Non-Executive
F Armstrong
P Jackson
N Molyneux
P McPartland
Dr B Kirschbaum
D Lawrence
Salaries,
bonuses
and fees
£
Compensation
for loss of
office
£
Pension
contributions
£
165,625
59,599
149,132
-
-
30,000
9,271
9,285
7,762
66,000
38,000
46,000
46,000
34,500
15,297
-
-
-
-
-
-
-
-
-
-
-
-
Total
2015/16
£
174,896
68,884
186,894
66,000
38,000
46,000
46,000
34,500
15,297
Salaries,
bonuses
and fees
£
318,368
151,731
77,858
14,558
33,000
33,000
17,596
-
-
Pension
contributions
£
Total
2014/15
£
8,199
19,093
2,250
326,567
170,824
80,108
-
-
-
-
-
-
14,558
33,000
33,000
17,596
-
-
620,153
30,000
26,318
676,471
646,111
29,542
675,653
Dr D Lindsay resigned as a director on 6 May 2016.
P Tottey resigned as a director on 30 September 2016.
Dr B Kirschbaum was appointed as a director on 1 January 2016.
D Lawrence was appointed as a director on 6 May 2016.
In addition to N. Molyneux’s remuneration in 2014/15 and 2015/16 disclosed above, amounts were paid to Norman Molyneux Consulting Ltd
and Acceleris Capital Ltd both related parties as detailed in note 23.
In addition to P. Jackson’s remuneration in 2014/15 disclosed above, fees were paid to Intelia Consulting Ltd, a related party as detailed in note
23. No amounts were paid in 2015/16.
In addition to Frank Armstrong’s remuneration in 2014/15 and 2015/16 disclosed above, fees were paid to Dr Frank M. Armstrong Consulting
Ltd, a related party as detailed in note 23.
No compensation for loss of office was paid in the year ended 30 Septemeber 2015.
20
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire Ordinary Shares in the Company
granted to or held by the Directors. Details of these options are as follows:
At 1
October
2015
Granted
during the
period/
(exerc’d)
At 30
September
2016
Date of
grant
Price per
share (p)
Date from which
exercisable
Expiry date
Director
N Murray
F Armstrong
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
P Jackson
26-March-15
26-March-15
26-March-15
N Molyneux
26-March-15
26-March-15
26-March-15
P Tottey
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
26-March-15
01-April-16
25,050
24,975
24,975
75,000
78,875
78,875
78,875
78,875
78,875
78,875
473,250
551,325
24,975
24,975
601,275
200,475
24,975
24,975
250,425
36,675
36,675
36,675
8,325
8,325
8,325
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,325)
35,294
25,050
24,975
24,975
75,000
78,875
78,875
78,875
78,875
78,875
78,875
473,250
551,325
24,975
24,975
601,275
200,475
24,975
24,975
250,425
36,675
36,675
36,675
8,325
8,325
-
35,294
135,000
26,969
161,969
85.0
85.0
85.0
56.0
56.0
56.0
85.0
85.0
85.0
85.0
85.0
85.0
85.0
85.0
85.0
50.0
50.0
50.0
85.0
85.0
85.0
42.5
27-March 15
27-March-16
27-March-17
26-March-25
26-March-25
26-March-25
27-March-15
1-Sept-15
1-Sept-16
27-March-15
27-March-16
27-March-17
26-March-25
26-March-25
26-March-25
26-March-25
26-March-25
26-March-25
27-March-15
27-March-16
27-March-17
26-March-25
26-March-25
26-March-25
27-March-15
27-March-16
27-March-17
26-March-25
26-March-25
26-March-25
27-March-15
17-June-16
17-June-17
27-March-15
27-March-16
27-March-17
01-April-16
26-March-25
26-March-25
26-March-25
26-March-25
26-March-25
26-March-25
26-March-25
21
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing
the Strategic report, the Directors’ 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 Group financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union and to prepare the parent company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and the Group and
of the profit or loss of the Company and the Group for that period.
In preparing these financial statements the Directors are required to:
– select suitable accounting policies and then apply them
consistently;
– make judgments and accounting estimates that are reasonable
and prudent;
– state whether the Group financial statements have been prepared
in accordance with IFRSs as adopted by the European Union;
– state, with regard to the parent company financial statements,
whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
– prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company and the Group will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions, to disclose with reasonable accuracy at any
time the financial position of the Company and to enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Redx
Pharma Plc website. Legislation in the United Kingdom governing
the preparation and dissemination of the financial statements
and other information included in annual reports may differ from
legislation in other jurisdictions.
22
REDX PHARMA PLC
2016 ANNUAL REPORT
G O V E R N A N C E
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF REDX PHARMA PLC
– 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 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.
Respective responsibilities of directors and auditor
As more fully explained in the Directors’ Responsibilities Statement
set out on page 22, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
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.
Graham Bond FCA (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
3 Hardman Street
Manchester
M3 3HF
20 March 2017
We have audited the Group and parent
company financial statements (“the
financial statements”) on pages 24 to 59.
The financial reporting framework that
has been applied in the preparation of the
group financial statements is applicable
law and International Financial Reporting
Standards (IFRSs) as adopted by the
European Union. The financial reporting
framework that has been applied in the
preparation of the parent company financial
statements is applicable law and United
Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting
Practice), including FRS 102 “The Financial
Reporting Standard applicable in the UK
and Republic of Ireland”.
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 30 September
2016 and of the Group’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 United Kingdom Generally Accepted
Accounting Practice; and
– the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditscopeukprivate
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where
the Companies Act 2006 requires us to report to you if, in our opinion:
23
REDX PHARMA PLC
2016 ANNUAL REPORT
F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2016
CONTINUING OPERATIONS
Operating expenses
Non recurring relocation costs
Share based compensation
Other operating income
Loss from operations
Gain on disposal of subsidiary undertaking
Finance costs
Finance income
Loss before taxation
Income tax
Total comprehensive loss for the year
attributable to owners of Redx Pharma Plc
LOSS PER SHARE (PENCE)
FROM CONTINUING OPERATIONS
Basic & diluted
Year ended
30 September
2016 £’000
Year ended
30 September
2015 £’000
Notes
5
5
2
3
1
4
4
6
7
(16,527)
(556)
(245)
2,380
(14,948)
-
(526)
67
(15,407)
(114)
(11,471)
-
(608)
2,648
(9,431)
895
(348)
59
(8,825)
650
(15,521)
(8,175)
(19.8)
(14.1)
24
REDX PHARMA PLC
2016 ANNUAL REPORT
F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AT 30 SEPTEMBER 2016
Company No. 7368089
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Current tax
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Non-current liabilities
Non-current borrowings
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Share-based compensation
Capital redemption reserve
Retained deficit
Equity attributable to shareholders
Notes
9
10
12
13
14
15
16
16
19
20
2016
£’000
533
309
605
1,447
1,553
5,758
637
7,948
2015
£’000
353
309
750
1,412
1,407
9,436
1,501
12,344
9,395
13,756
5,675
2,000
7,675
-
7,675
1,720
936
22,526
867
1
(22,610)
1,720
4,056
-
4,056
2,000
6,056
7,700
650
13,516
622
1
(7,089)
7,700
The financial statements were approved and authorised for issue by the Board on 20 March 2017 and were signed on its behalf by Dr Neil
D. Murray, Chief Executive Officer.
25
REDX PHARMA PLC
2016 ANNUAL REPORT
F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2016
Share
Capital
£’000
Share
Premium
£’000
Share-based
payment
£’000
Capital
Redemption
Reserve
£’000
Retained
Deficit
£’000
Total
Equity
£’000
AT 1 OCTOBER 2014
7
12,313
Share issue
Exercise of share options
Share issue costs
Cancellation of share premium
Creation of capital redemption reserve
Bonus issue
177
-
-
-
(1)
467
14,823
14
(1,567)
(11,600)
-
(467)
152
-
(138)
-
-
-
-
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the period
Share-based
compensation
Movement in year
AT 30 SEPTEMBER 2015
Share issue
Share issue costs
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the year
Share-based
compensation
Movement in year
AT 30 SEPTEMBER 2016
26
643
1,203
(138)
-
-
643
650
286
-
-
-
1,203
13,516
9,714
(704)
286
9,010
-
-
286
936
-
-
9,010
22,526
-
608
470
622
-
-
-
-
245
245
867
-
-
-
-
-
1
-
1
-
-
1
1
-
-
-
-
-
-
1
(10,652)
1,820
-
138
-
11,600
-
-
15,000
14
(1,567)
-
-
-
11,738
13,447
(8,175)
(8,175)
-
608
3,563
5,880
(7,089)
7,700
-
-
-
10,000
(704)
9,296
(15,521)
(15,521)
-
245
(15,521)
(5,980)
(22,610)
1,720
REDX PHARMA PLC
2016 ANNUAL REPORT
F I N A N C I A L S T A T E M E N T S
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
NET CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year
Adjustments for:
Income tax
Finance costs (net)
Gain on disposal of subsidiary undertaking
Depreciation and amortisation
Share-based compensation
Movements in working capital
(Increase)/Decrease in trade and other receivables
Increase in trade and other payables
Decrease in items held for sale
CASH USED IN OPERATIONS
Tax credit received
Interest received
Year ended 30
September 2016
£’000
Year ended 30
September 2015
£’000
Notes
(15,521)
(8,175)
114
459
-
262
245
(124)
1,272
-
(13,293)
750
36
(650)
289
(895)
139
608
1,194
815
21
(6,654)
97
19
NET CASH USED IN OPERATIONS
(12,507)
(6,538)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of property, plant and equipment
Purchase of property, plant and equipment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue less costs
Share issue costs
Interest paid
Loan granted
2
(444)
(442)
10,000
(704)
-
(25)
-
(362)
(362)
15,014
(1,567)
(3)
-
NET CASH FROM FINANCING ACTIVITIES
9,271
13,444
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
(3,678)
9,436
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
14
5,758
6,544
2,892
9,436
27
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
NOTES TO THE
FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The principal accounting policies adopted in
the preparation of these financial statements
are set out below. These policies have
been consistently applied to all the periods
presented, unless otherwise stated.
requires financial assets to be classified into two measurement
categories: those measured as at fair value and those measured
at amortised cost. The classification depends on the entity’s
business model and the contractual cash flow characteristics of the
instrument. The guidance in IAS 39 on impairment of financial assets
and hedge accounting continues to apply.
Effective date (for annual periods beginning on or after)
1 January 2018
BASIS OF PREPARATION
Redx Pharma plc (‘‘Redx” or “the Company”) is a public limited
company incorporated in the UK as Redx Pharma Ltd on 7 September
2010, and domiciled in the UK. Its shares are listed on AIM, a market
operated by The London Stock Exchange. The principal activity of
the Group is drug discovery, pre-clinical development and licensing.
The Group financial statements are presented in pounds Sterling,
which is the Group’s presentational currency, and all values are
rounded to the nearest thousand (£000) except where indicated
otherwise.
They have been prepared under the historical cost convention and
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS) and with those parts of the
Companies Acts 2006 applicable to entities reporting under IFRS.
New standards, amendments and interpretations
adopted during the year ended 30 September 2016
The IASB and IFRIC have issued the following standards and
interpretations which have been adopted during the year. The
adoption of these standards and interpretations has not had a
material impact on the Group.
Annual IFRS Improvements Process (2014)
The 2014 annual improvements cycle covered amendments to IFRS 5:
Non-current assets held for sale and discontinued operations, IFRS
7: Financial Instruments: Disclosures, IAS 19: Employee benefits and
IAS 34: Interim Financial Reporting.
New standards, amendments and interpretations
issued but not effective for the financial year
beginning 1 October 2015 and not early adopted.
The IASB and IFRIC have issued the following standards and
interpretations with effective dates as noted below:
IFRS 9, Financial Instruments
The standard is the first standard issued as part of a wider project
to replace IAS 39. It replaces the parts of IAS 39 that relate to the
classification and measurement of financial instruments. IFRS 9
IFRS 15, Revenue from Contracts with Customers
The standard specifies how and when a company will recognise
revenue as well as requiring such entities to provide users of
financial statements with more informative, relevant disclosures.
The standard provides a single, principles based, five-step model to
be applied to all contracts with customers.
Effective date (for annual periods beginning on or after)
1 January 2018
IFRS 16, Leases
The standard requires lessees to account for all leases under a single
on-balance sheet model in a similar way to finance leases under IAS
17. At the commencement date of a lease, a lessee will recognise a
liability to make lease payments and an asset representing the right
to use the underlying asset during the lease term. Lessees will be
required to separately recognise the interest expense on the lease
liability and the depreciation expense on the right of use asset.
Effective date (for annual periods beginning on or after)
1 January 2019
There are no other IFRSs or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Group.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company.
Control is achieved when the Company has the power over the
investee; is exposed, or has rights, to variable return from its
involvement with the investee; and, has the ability to use its power
to affect its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above. Consolidation
of a subsidiary begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of
28
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
the subsidiary. Specifically, the results of subsidiaries acquired
or disposed of during the period are included in the consolidated
statement of comprehensive income from the date the Company
gains control until the date when the Company ceases to control the
subsidiary.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies used into line with
the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and
cash flows relating to transactions between the members of the
Group are eliminated on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum
of the acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree
and the equity interest issued by the Group in exchange for control
of the acquiree. Acquisition related costs are recognised in profit or
loss as incurred.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognised at their fair value at the acquisition
date, except that:
– deferred tax assets or liabilities and assets or liabilities related
to employee benefit arrangements are recognised and
measured in accordance with IAS 12 ‘Income Taxes’ and
IAS 19 ‘Employee Benefits’ respectively; and
– assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations are measured in accordance with
that Standard.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the acquisition
date amounts of the identifiable assets acquired and the liabilities
assumed. If, after reassessment, the net of the acquisition date
amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the excess
is recognised immediately in profit or loss as a bargain purchase gain.
Going concern
As part of their going concern review the Directors have followed
the guidelines published by the Financial Reporting Council entitled
‘‘Guidance on Risk Management and Internal Control and Related
Financial and Business Reporting’’.
The Group incurred a net loss of £15.5m during the year; however,
the Directors are satisfied, based on detailed cash flow projections
and after the consideration of reasonable sensitivities, that sufficient
working capital is available to meet the Group’s needs as they fall
due for the foreseeable future and at least 12 months from the date
of signing the accounts.
The detailed cash flow assumptions are based on the Group’s annual
budget, prepared and approved by the Board, which reflects a
number of key assumptions in respect of costs and revenue forecasts,
underpinned by the current pipeline. The Board have also taken into
consideration the effects of the successful post year end fundraise of
£12m (gross), and the cost savings expected from the restructuring
explained elsewhere in the Financial Statements. Sensitivity analysis
has been performed on both cost and revenue forecasts to reflect a
variety of opportunities, risks and mitigating actions, both in timing
and quantum. These projections are reviewed by the Board on a
regular basis.
Within the revenue forecasts, and as discussed in the Principal
Risks and Uncertainties section of the Strategic Report, there are
inherent judgements regarding the commercial and technical risk of
programs. Whilst acknowledging the uncertainties in the operating
environment and their resultant impact on revenues, the Directors
have identified a number of further opportunities to manage working
capital, to mitigate against any deteriorations and uncertainties in
trading conditions.
On the basis of the above review, the Directors are confident that the
Group has sufficient working capital to honour all of its obligations
to creditors as and when they fall due. Accordingly, the Directors
continue to adopt the going concern basis in preparing the Financial
Statements.
Segmental information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The Board of Directors and the Chief Financial Officer are together
considered the chief operating decision-maker and as such are
responsible for allocating resources and assessing performance of
operating segments.
The Directors consider that there are no identifiable business
segments that are subject to risks and returns different to the
core business. The information reported to the Directors, for the
purposes of resource allocation and assessment of performance is
based wholly on the overall activities of the Group.
The Group has therefore determined that it has only one reportable
segment under IFRS8.
Currencies
(a) Functional and presentational currency
Items included in the Financial Information are measured using
the currency of the primary economic environment in which the
Group operates (“the functional currency”) which is UK sterling (£).
The Financial Information is presented in UK sterling.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or at an average rate for a period if the rates do not
fluctuate significantly. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement.
29
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
of comprehensive income. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Revenue
Income received as a contribution to on-going costs, together
with grant income, is treated as Other operating income within the
Income Statement.
Government grants are recognised as Other operating income
on a systematic basis over the periods in which the associated
expenses are recognised. Grants that are receivable as compensation
for expenses or losses previously incurred or for the purpose of
giving immediate financial support with no future related costs are
recognised in the period in which they become receivable.
Current and deferred tax
The tax expense or credit represents the sum of the tax currently payable
or recoverable and the movement in deferred tax assets and liabilities.
(a) Current tax
Current tax is based on taxable income for the period and any
adjustment to tax from previous periods. Taxable income differs from
net income in the statement of comprehensive income because it
excludes items of income or expense that are taxable or deductible in
other periods or that are never taxable or deductible. The calculation
uses the latest tax rates for the period that have been enacted by the
reporting date.
(b) Deferred tax
Deferred tax is calculated at the latest tax rates that have been
substantially enacted by the reporting date that are expected to
apply when settled. It is charged or credited in the statement of
comprehensive income, except when it relates to items credited or
charged directly to equity, in which case it is also dealt with in equity.
date the carrying value of Goodwill in accordance with IAS 36. If
any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Directors estimate the
recoverable amount of the cash-generating unit to which the asset
belongs. Recoverable amount is the higher of fair value less costs to
sell and value in use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash
flows have not been adjusted. If the recoverable amount of an asset
(or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately.
Property, plant and equipment
Property, plant and equipment and leasehold improvements are
stated at cost less accumulated depreciation and any impairment
losses. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for
its intended use. Such assets acquired in a business combination are
initially recognised at their fair value at acquisition date.
Depreciation is charged so as to write off the costs of assets over
their estimated useful lives, on a straight-line basis starting from the
month they are first used, as follows:
– Laboratory Equipment - 2 or 3 years
– Computer Equipment - 2 or 3 years
– Leasehold improvements – over the term of the lease
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the Financial Information and the corresponding tax bases used in
the computation of taxable income, and is accounted for using the
liability method. It is not discounted.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable income will be available against
which the asset can be utilised. Such assets are reduced to the extent
that it is no longer probable that the asset can be utilised.
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds and the carrying amount of the
asset and is recognised in the Statement of Comprehensive Income.
Operating leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Rentals payable under operating leases (net of any incentives received
from the lessor) are charged to the Statement of Comprehensive
Income on a straight-line basis over the term of the relevant lease.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against which
temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a right to
offset current tax assets and liabilities and when the deferred tax
assets and liabilities relate to taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a net basis.
Impairment of non-current assets
At each reporting date, the Directors review the carrying amounts
of property, plant and equipment assets and goodwill to determine
whether there is any indication that those assets have suffered an
impairment loss. Furthermore the Director’s review at each reporting
The minimum term of the lease is estimated if it is not clear.
Intangible assets
Expenditure on research activities is recognised as an expense in the
period in which it is incurred.
All on-going development expenditure is currently expensed in
the period in which it is incurred. Due to the regulatory and other
uncertainties inherent in the development of the Group’s programs,
the criteria for development costs to be recognised as an asset, as
prescribed by IAS 38, ‘Intangible assets’, are not met until the product
has been submitted for regulatory approval, such approval has been
received and it is probable that future economic benefits will flow
to the Group. The Group does not currently have any such internal
development costs that qualify for capitalisation as intangible assets.
30
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Development costs are capitalised when the related products meet
the recognition criteria of an internally generated intangible asset,
the key criteria being as follows:
– Technical feasibility of the completed intangible asset has been
established;
– It can be demonstrated that the asset will generate probable
future economic benefits;
– Adequate technical, financial and other resources are available
to complete the development;
– The expenditure attributable to the intangible asset can be
reliably measured; and
– The Group has the ability and intention to use or sell the asset.
Expenses for research and development include associated wages
and salaries, material costs, depreciation on non-current assets and
directly attributable overheads.
All research and development costs, whether funded by third parties
under licence and development agreements or not, are included
within operating expenses and classified as such.
The cost of a purchased intangible asset is the purchase price plus
any cost directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the
manner intended.
Payroll expense and related contributions
Wages, salaries, payroll tax, paid annual leave and sick leave,
bonuses, and non-monetary benefits are accrued in the period in
which the associated services are rendered.
Pension costs
The Group operates a defined contribution pension scheme for
the benefit of its employees. The Group pays contributions into an
independently administered fund via a salary sacrifice arrangement.
The costs of providing these benefits are recognised in the statement
of comprehensive income and consist of the contributions payable
to the scheme in respect of the period.
Share-based compensation
The Group issues share-based payments to certain employees and
Directors. Equity-settled share-based payments are measured at fair
value at the date of grant and if material are expensed immediately or on
a straight-line basis over any vesting period, along with a corresponding
increase in equity.
At each reporting date, the Directors revise their estimate of the number
of equity instruments expected to vest as a result of the effect of non-
market-based vesting conditions. The impact of any revision is recognised
in the statement of comprehensive income, with a corresponding
adjustment to equity reserves.
The fair value of share options is determined using a Black-Scholes
model, taking into consideration the best estimate of the expected life of
the option and the estimated number of shares that will eventually vest.
The cost of each option is spread evenly over the period from grant to
expected vesting.
When options expire or are cancelled, a corresponding credit is
recognised.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s
statement of financial position when the Group becomes party to
the contractual provisions of the instrument. Financial assets are
de-recognised when the contractual rights to the cash flows from
the financial asset expire or when the contractual rights to those
assets are transferred. Financial liabilities are de-recognised when
the obligation specified in the contract is discharged, cancelled or
expired.
(a) Trade and other receivables
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. Appropriate provisions for
estimated irrecoverable amounts are recognised in the statement
of comprehensive income when there is objective evidence that the
assets are impaired. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
(c) Trade and other payables
Trade and other payables are initially measured at their fair value
and are subsequently measured at their amortised cost using
the effective interest rate method; this method allocates interest
expense over the relevant period by applying the “effective interest
rate” to the carrying amount of the liability.
Critical accounting estimates and judgements
Details of significant accounting judgements and critical accounting
estimates are set out in this Financial Information and include:
(a) Share based compensation
The Group has issued a number of share options to certain employees.
The Black-Scholes model was used to calculate the appropriate
charge for the period of issue and subsequent periods.
The use of this model to calculate a charge involves using a number
of estimates and judgements to establish the appropriate inputs
to be entered into the model, covering areas such as the use of an
appropriate interest rate and dividend rate, exercise restrictions and
behavioural considerations. A significant element of judgement is
therefore involved in the calculation of the charge.
The total charge recognised and further information on share options
can be found in Notes 2 and 21.
(b) Government grant accrued income
The recognition of grant income (and hence the related accrued
income balances) requires the Directors to make assumptions in
relation to the allocation of resources to date and the likelihood of a
successful claim. A potential contingent liability exists with regard to
the repayment of certain grant income, which is discussed in detail
in note 25.
31
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
(c) Capitalisation of research and development expenditure
The decision on whether to capitalise any expenditure relating to
research and development in accordance with IAS 38 requires the
Directors to make judgements as to whether certain key criteria have
been met.
32
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
1. GAIN ON DISPOSAL OF SUBSIDIARY UNDERTAKING AND ASSETS HELD FOR SALE
The sale of the subsidiary Redx Crop Protection Ltd to Redag Ltd, a related party by virtue of common Directors, completed on 9 October
2014, on which date control passed to the acquirer.
The gain on the disposal of subsidiary represents cash consideration of £1 and a loan of £714,000 received for the disposal of net liabilities
of £181,000.
2. SHARE-BASED COMPENSATION
Share options have been issued to certain Directors and staff during the period, and the charge arising is shown below. The fair value of
the options granted has been calculated using a Black Scholes model.
Options granted and vested in period
Options cancelled in period
Options granted and vesting in future periods
2016
NUMBER
35,294
(226,282)
1,362,997
2015
NUMBER
1,581,075
(90,800)
1,244,700
1,172,009
2,734,975
Charge to Statement of Comprehensive Income in period
£’000
245
Assumptions used were an option life of 5 years, a risk free rate of 2% and no dividend yield. Other inputs were as follows:
Volatility
Assumed share price at grant date
Exercise price
Fair value of each option
40%
£
0.415 to 0.85
0.33 to 0.85
0.161 to 0.472
The assumptions used in the previous period reflect a 74 for 1 bonus issue in March 2015.
£’000
608
40%
£
0.85
0.70
0.38
33
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
3. OTHER OPERATING INCOME
Reimbursement of costs
Government grants receivable
4. FINANCE EXPENSE AND FINANCE INCOME
Finance expense
Loan interest
Fair value adjustment
Other interest and similar charges
Finance income
Bank and other short term deposits
Loan interest
2016
£’000
162
2,218
2,380
2016
£’000
346
180
-
526
32
35
67
2015
£’000
1,390
1,258
2,648
2015
£’000
345
-
3
348
23
36
59
34
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
5. LOSS BEFORE TAXATION
The following items have been included in arriving
at loss before taxation
Research and development
Staff costs – Note 8 (excluding share based compensation &
relocation costs)
Establishment and general:
Depreciation of owned property, plant and equipment
Operating leases on land and buildings
Operating leases – other
Amounts payable to RSM UK Audit LLP and their associates by the
Company and its subsidiaries amounted to:-
Audit of subsidiaries
Audit of parent Company and consolidation
Tax compliance
Tax consultancy
Other services – interim review
2016
£’000
8,067
7,120
262
824
212
15
17
-
-
10
2015
£’000
5,086
5,394
139
715
101
12
15
-
-
9
In 2015 RSM corporate finance LLP charged fees of £96k in relation to the IPO.
During the year, the group relocated certain aspects of its operations from Liverpool to Alderley Park. The total non recurring costs (which
included staff benefit packages and site removal costs) associated with this were £556,000, (2015: £Nil).
16,527
11,471
6.
INCOME TAX
Current income tax
UK corporation tax (R&D tax credits)
Research and Development Expenditure credit
Prior year adjustment
Income tax credit per the income statement
2016
£’000
-
(637)
751
114
2015
£’000
(507)
(307)
164
(650)
The Group is in continuing discussions with HMRC regarding the impact of RGF funding on the recoverability of R&D tax credits. Whilst
the directors remain confident that such credits are recoverable, they consider it prudent not to provide on such a basis at the present time.
Amounts due under Research and Development Expenditure credit are unaffected.
The difference between the total tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the
loss before tax is as follows:
35
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
6.
INCOME TAX CONT.
Loss before tax
Loss on ordinary activities multiplied by standard rate of
corporation tax in the UK of 20% (2015: 20.5%)
Effects of:
Income not chargeable for tax purposes
R&D expenditure credits
Expenses not deductible for tax purposes
Group relief surrendered/(claimed)
R&D enhanced tax credit
Adjustment in respect of previous periods
Losses surrendered for R&D tax credits
RDEC recognised in tax account
R&D tax credit recoverable
Deferred tax not recognised
Total taxation
2016
£’000
(15,407)
(3,081)
-
159
94
-
-
751
-
(637)
-
2,828
114
2015
£’000
(8,825)
(1,809)
(183)
79
129
(12)
(402)
164
717
(307)
(507)
1,481
(650)
The taxation credit arises on the enhanced research and development tax credits and research and development expenditure credits accrued
to the respective periods.
7. LOSS PER SHARE
Basic loss per share is calculated by dividing the net income for the period attributable to ordinary equity holders by the weighted average
number of ordinary shares outstanding during the period.
In the case of diluted amounts, the denominator also includes ordinary shares that would be issued if any dilutive potential ordinary shares
were issued following conversion of loans or exercise of share options.
The basic and diluted calculations are based on the following:
Loss for the period attributable to the owners of the Company
Weighted average number of shares – basic and diluted
Loss per share - basic and diluted
2016
£’000
(15,521)
NUMBER
78,360,552
PENCE
(19.8)
2015
£’000
(8,175)
NUMBER
58,021,962
PENCE
(14.1)
The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per
share. This is because the outstanding share options would have the effect of reducing the loss per share and would therefore not be dilutive
under IAS 33 Earnings per Share.
36
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
8. EMPLOYEES AND KEY MANAGEMENT
Staff costs (including Directors) comprise
Wages and salaries
Social security costs
Pension costs
Non-Executive Director fees
Share-based payments
Number of employees
Average number of employees (including Directors)
Management & Admin
R&D – Chemistry
R&D – Biology
R&D – Analytical
Directors & Key management
Short term remuneration
Compensation for loss of office
Social security costs
Pension costs
Share-based payments
2016
£’000
6,591
641
296
-
245
7,773
2016
NUMBER
29
85
52
33
199
2016
£’000
1,069
30
128
53
166
1,446
2015
£’000
4,618
461
217
98
608
6,002
2015
NUMBER
20
67
37
21
145
2015
£’000
799
-
99
30
504
1,432
Key management are considered to be the Directors and other members of the Executive Management Team. Payments to Directors consist
of basic salaries, fees and pension.
The amounts in respect of the highest paid Director are as follows:
Short term employment benefits
Compensation for loss of office
Pension contributions
2016
£’000
149
30
8
187
2015
£’000
318
-
8
326
37
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
9. PROPERTY, PLANT AND EQUIPMENT
Leasehold
Improvements
£’000
Laboratory
Equipment
£’000
Computer
Equipment
£’000
-
-
-
-
114
-
114
-
-
-
-
2
-
2
112
-
-
552
327
879
879
199
(6)
1,072
451
111
562
562
228
(4)
786
286
317
101
144
35
179
179
131
-
310
115
28
143
143
32
-
175
135
36
29
COST
At 1 October 2014
Additions
At 30 September 2015
At 1 October 2015
Additions
Disposals
At 30 September 2016
DEPRECIATION
At 1 October 2014
Charge for the year
At 30 September 2015
At 1 October 2015
Charge for the year
Disposals
At 30 September 2016
Net book value
At 30 September 2016
At 30 September 2015
At 1 October 2014
38
Total
£’000
696
362
1,058
1,058
444
(6)
1,496
566
139
705
705
262
(4)
963
533
353
130
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
10. INTANGIBLE ASSETS (GOODWILL)
Cost
At 1 October and 30 September
Accumulated Impairment
At 1 October and 30 September
Net carrying value at 30 September
2016
£’000
309
-
309
2015
£’000
309
-
309
The goodwill arose on the original purchase of the business and assets of Bradford Pharma. The Board considers the goodwill to be intrinsic
to the whole Group’s on-going business, and as such the calculations have been made based on forecasts and predictions relating to the
Group as a single entity.
The Directors undertook a detailed review by preparing a discounted cash flow model, using the agreed budgets and forecasts for the
coming years. The key variables that were used included:
A terminal growth rate thereafter of 2%.
A pre-tax discount rate of 11.5%, which the Directors believe to be prudent.
Based on the results of the above detailed testing, the Board do not believe that any impairment under IAS 36 is required.
11. SUBSIDIARIES
A list of the significant investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest is given
in note 4 to the Company’s separate financial statements.
12. OTHER NON-CURRENT RECEIVABLES
Loan
2016
£’000
605
605
2015
£’000
750
750
The loan of £714k was granted to Redag Crop Protection Ltd as part of the sale of the former subsidiary. It bears interest at 5% repayable
with the principal sum. The loan is unsecured, and is repayable on the sale, listing, or change of control of Redag Crop Protection ltd.
39
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
12. OTHER NON-CURRENT RECEIVABLES CONT.
The Directors expectation is that the loan will be fully recovered, but that none of the repayment terms are likely to be fulfilled in the short
term, and that it is therefore appropriate to classify the loan as a non-current receivable. A discount rate of 12% has been applied in calculating
the carrying value.
The Directors believe that the carrying value represents the fair value of the asset. An impairment review has been undertaken by the
Directors, which did not indicate that any impairment was required.
13. TRADE AND OTHER RECEIVABLES
VAT recoverable
Other receivables
Accrued income
Prepayments
2016
£’000
132
151
469
801
2015
£’000
133
117
452
705
1,553
1,407
The Directors believe that the carrying value of trade and other receivables represents their fair value.
Details of the Group’s credit risk management policies are shown in note 17. The Group does not hold any collateral as security for its trade
and other receivables.
14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
2016
£’000
5,758
-
5,758
2015
£’000
3,436
6,000
9,436
No interest is earned on immediately available cash balances. Short-term deposits are made for varying periods of up to 90 days, and earn
interest at the respective short-term deposit rates.
The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.
40
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
15. TRADE AND OTHER PAYABLES
Trade payables
Employee taxes and social security
Other payables
Accruals
2016
£’000
1,632
235
180
3,628
5,675
2015
£’000
1,601
131
117
2,207
4,056
Trade and other payables principally consist of amounts outstanding for trade purchases and on-going costs. They are non-interest bearing
and are normally settled on 30 to 45 day terms.
The Directors consider that the carrying value of trade and other payables approximates to their fair value.
16. FINANCIAL LIABILITIES - BORROWINGS
Current
Convertible loan due within one year
Non-current
Convertible loan due between two and five years
Total
2016
£’000
2,000
2,000
-
-
2,000
2015
£’000
-
-
2,000
2,000
2,000
A convertible loan facility of £2m was agreed with Liverpool City Council in June 2012. The maturity date of the loan is 31 March 2017.
Interest is charged at 12% per annum and is payable upon repayment of the loan. The lender has an option to convert into ordinary shares.
The loan is secured by a fixed and floating charge over the assets of the business and is denominated in sterling.
41
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
17. FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise borrowings, cash and cash equivalents and various items such as other receivables and trade
and other payables arising directly from the Group’s operations. The main purpose of these financial instruments is to finance the Group’s
operations.
Classes and fair values of financial instruments are as follows:
Loans and receivables
Loan
Other receivables
Cash and cash equivalents
Financial liabilities measured at amortised cost
Non-current borrowings
Current borrowings
Trade payables
Other payables
Carrying value
2016
£’000
Carrying value
2015
£’000
605
620
5,758
6,983
-
2,000
1,632
180
3,812
750
569
9,436
10,755
2,000
-
1,601
117
3,718
The Group compared fair value to carrying value for each class of financial asset and liability. No difference was identified.
The principal financial risks faced by the Group are:
Currency risk
The Group’s exposure to foreign currency risk is limited; most of its invoicing and payments are in sterling. Accordingly no sensitivity analysis
is presented in this area as it is immaterial.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. In the year,
both these risks are considered to have been minimal.
Credit risk
The Group gives careful consideration to which organisations it uses for banking in order to minimise credit risk. The Group holds cash with
one large bank in the UK, an institution with an A credit rating (long term, as assessed by Moody’s). The amounts of cash held with that bank
at the reporting date can be seen in the financial assets table above. All of the cash and cash equivalents held with the bank were denominated
in sterling.
Liquidity risk and capital management
Liquidity risk
The Directors manage liquidity risk by regularly reviewing the Group’s cash requirements by reference to short term cashflow forecasts and
medium term working capital projections.
Capital management
The Group considers capital to be its non-current liabilities and equity. The Group’s objective when managing capital is to safeguard the
Group’s ability to continue as a going concern. The Group is currently meeting this objective. In order to maintain or adjust the capital
structure the Group may issue new shares or sell assets to reduce debt.
42
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Financial risk factors
Accounts receivable and accounts payable, arising from normal trade transactions, are expected to be settled within normal credit terms.
The contractual maturity of the Group’s financial liabilities is as follows:
Loans
£’000
Trade payables
£’000
Other payables
£’000
2,000
-
2,000
-
2,000
2,000
1,632
-
1,632
1,601
-
1,601
180
-
180
117
-
117
Total
£’000
3,812
-
3,812
1,718
2,000
3,718
Timing of cash flows
Within one year
Between two and five years
At 30 September 2016
Timing of cash flows
Within one year
Between two and five years
At 30 September 2015
18. DEFERRED TAX
Accelerated
capital allowances
£’000
Other
£’000
Total
£’000
Liabilities
At 30 September 2015 and 2016
-
-
-
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (2015:20%).
Deferred tax assets carried forward of £6.1m, (2015: £3.4m) have not been recognised on the grounds that there is insufficient evidence of
sufficient taxable trading profits arising in the future to allow recovery.
43
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
19. SHARE CAPITAL
Number of shares in issue
Ordinary Shares of £0.01
Share Capital at par, fully paid
Ordinary Shares of £0.01
Movement in year
Ordinary shares of £0.01
Ordinary B shares of £0.01
Total movement in year
2016
NUMBERS
2015
NUMBERS
93,552,638
64,981,209
2016
£’000
936
286
-
286
2015
£’000
650
644
(1)
643
Share issues
On 4 April, 14 April and 15 April 2016 respectively, the Company issued 6,180,197 , 285,714 , and 22,105,518 Ordinary shares at £0.35 each
pursuant to a placing and admission to trading on AIM. The gross proceeds of the issue were £10m.
44
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
20. SHARE PREMIUM
Brought forward
Bonus issue
Share issue
Share issue costs
Exercise of share options
Reduction of share premium
2016
£’000
13,516
-
9,714
(704)
-
-
22,526
2015
£’000
12,313
(467)
14,823
(1,567)
14
(11,600)
13,516
Description of other reserves:
Share premium
Amount subscribed for share capital in excess of nominal value.
Share-based payment
Capital redemption reserve
Retained deficit
The share based payment reserve arises as the expense of issuing share-based payments is
recognised over time (share option grants).
A statutory, non-distributable reserve into which amounts are transferred following the
redemption or purchase of a company’s own shares.
The retained deficit records the accumulated profits and losses less any subsequent
elimination of losses, of the Group since inception.
45
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
21. SHARE-BASED PAYMENTS
Movements on share options during the period were as follows:
Exercise
price per
share
30
September
2015
Granted
Exercised
Lapsed/
Cancelled
30
September
2016
Date from which
exercisable
Expiry date
50p
50p
50p
50p
50p
50p
50p
56p
56p
56p
85p
85p
85p
33.2p
42.5p
42.5p
42.5p
42.5p
42.5p
36,675
36,675
36,675
221,650
221,650
221,650
110,025
78,875
78,875
78,875
1,239,950
187,100
187,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,145,350
66,666
66,667
66,667
35,294
17,647
Total
2,735,775
1,398,291
During the prior year:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,000)
(60,000)
(60,000)
-
-
-
-
-
-
(8,325)
(50,310)
-
-
-
-
(17,647)
36,675
36,675
36,675
191,650
161,650
161,650
110,025
78,875
78,875
78,875
1,239,950
187,100
178,775
1,095,040
66,666
66,667
66,667
35,294
-
(226,282)
3,907,784
27.03.2015
17.06.2015
17.06.2016
26.03.2016
26.03.2017
26.03.2018
26.03.2015
27.03.2015
01.09.2015
01.09.2016
27.03.2015
27.03.2016
27.03.2017
01.05.2019
01.04.2017
01.04.2018
01.04.2019
01.04.2016
01.04.2017
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.02.2026
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
Exercise
price per
share
1 October
2014
Granted
Exercised
Lapsed/
Cancelled
30
September
2015
Date from which
exercisable
Expiry date
1p
3750p
50p
50p
50p
50p
50p
50p
50p
56p
56p
56p
85p
85p
85p
Total
20,516
800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,675
36,675
36,675
251,650
251,650
251,650
110,025
78,875
78,875
78,875
1,239,950
187,100
187,100
(20,516)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(800)
-
-
-
(30,000)
(30,000)
(30,000)
-
-
-
-
-
-
-
-
-
36,675
36,675
36,675
221,650
221,650
221,650
110,025
78,875
78,875
78,875
1,239,950
187,100
187,100
21,316
2,825,775
(20,516)
(90,800)
2,735,775
20.12.2012
04.02.2014
27.03.2015
17.06.2015
17.06.2016
26.03.2016
26.03.2017
26.03.2018
26.03.2015
27.03.2015
01.09.2015
01.09.2016
27.03.2015
27.03.2016
27.03.2017
04.02.2024
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
The Group has accounted for the charge arising from the issue of share options as below:
The total charge recognised in the year to 30 September 2016 is £245,000 (2015: £608,000). The fair values of the options granted have
been calculated using a Black-Scholes model.
46
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Assumptions used were an option life of 5 years, a risk free rate of 2 per cent, a volatility of 40 per cent and no dividend yield. Other inputs
are shown in note 2.
The share options are exercisable with no further conditions to be met.
22. OPERATING LEASE ARRANGEMENTS – MINIMUM LEASE PAYMENTS
Outstanding commitments for future
minimum lease payments under non-
cancellable operating leases expiring:
Within one year
In the second to fifth years
In greater than five years
PROPERTY
PLANT & EQUIPMENT
2016
£’000
2015
£’000
2016
£’000
2015
£’000
1,000
5,512
5,413
11,925
505
2,647
-
3,152
160
-
-
160
90
10
-
100
Operating lease commitments relate to buildings and to plant and equipment.
23. RELATED PARTIES
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and
are not disclosed in this note. Transactions between the Group and other related parties are disclosed below:
Trading transactions
The Group has purchased services in the normal course of business from the following companies related to individuals who are or were
Directors of the Group:
Intelia Consulting Ltd – owned by P. Jackson
Acceleris Capital Ltd – of which N. Molyneux is a Director
Norman Molyneux Consultancy Ltd – owned by N. Molyneux
Dr Frank M Armstrong Consulting Ltd – owned by F. Armstrong
The Group has purchased arms length administration services from Mrs J. Murray, who is the wife of N. Murray.
The Group has purchased other services, and has paid deal fees and commissions, in connection with external fundraising from Acceleris
Capital Ltd. These are also set out below, and were charged to the share premium account.
The Group has provided services in the normal course of business to the following companies related to individuals who are or were Directors
of the Group:
Redag Crop Protection Ltd – of which N. Molyneux is a Director. A loan has also been granted as part of the sale of this company.
The amounts outstanding are unsecured.
47
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
23. RELATED PARTIES CONT.
As detailed in note 12 the Group has a loan of £605,000 due from Redag Crop Protection Ltd. N. Molyneux, N. Murray, D. Lindsay, P. Jackson
and P. McPartland are all shareholders in Redag Crop Protection Ltd.
On 10 June 2016, a short term, interest free loan of £25,000 was made to AMR Centre Ltd, of which P. Jackson is a Director.
Purchases from/(charges to) related parties
Intelia Consulting Ltd
Redag Crop Protection Ltd
Acceleris Capital Ltd
Acceleris Capital Ltd (fundraising items)
Norman Molyneux Consultancy Ltd
Dr Frank M Armstrong Consulting Ltd (fees)
Dr Frank M Armstrong Consulting Ltd (expenses)
Mrs J Murray
Amounts owed to/(by) related parties
Intelia Consulting Ltd
Redag Crop Protection Ltd
Redag Crop Protection Ltd - loan
Acceleris Capital Ltd
AMR Centre Ltd – short term loan
Norman Molyneux Consultancy Ltd
Dr Frank M Armstrong Consulting Ltd
Mrs J Murray
2016
£’000
-
(163)
88
309
10
-
5
24
273
2016
£’000
-
(33)
(605)
18
(25)
-
1
2
(642)
2015
£’000
84
(91)
59
295
18
32
-
18
415
2015
£’000
25
(21)
(750)
3
-
6
9
-
(728)
Amounts owed to/by related parties are disclosed in other receivables (note 13), other non current receivables (note 12), and within trade
payables (note 15).
24. CAPITAL COMMITMENTS
At 30 September 2016 the Group had no capital commitments (30 September 2015: nil).
48
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
25. CONTINGENT LIABILITIES
The Group has continued to receive Regional Growth Fund grants administered by the Department of Business, Energy and Industrial Strat-
egy of the UK Government in support of its research programs around early stage proprietary small molecule therapeutics. At the end of the
year the Group had received total grants carried forward as follows:
RGF 2
RGF 3
RGF 5
2016
£’000
5,920
4,700
2,630
13,250
2015
£’000
5,920
4,700
470
11,090
Receipt of these grant monies is subject to various performance criteria, the most significant of which are the obligation to defray specific
operational expenditure in relation to the research programs before the claims were made (considered to be the funded expenditure); and the
requirement to confirm the reasonable belief that funded expenditure will lead to the creation or safeguarding of a specific average number of
jobs connected with those programs to the end of the monitoring periods which are for RGF2 31 March 2017, for RGF3 17 April 2019 and 31 March
2020 for RGF5 (considered to be the long term results). If the Group fails to create or safeguard an average number of jobs connected with the
research programs through to the end of the monitoring periods, which are 160 for RGF2, 99 for RGF3 and 70 for RGF5, it may be required to
repay £37,000, £47,475 and £58,756 in relation to RGF2, RGF3 and RGF5 respectively for each job not created or safeguarded. The Group has
never been asked to make any such repayment in the past and believes it has satisfied the Monitoring Officer appointed by the Department
of Business, Energy and Industrial Strategy The Group has therefore made no provision for such repayment. There were no other contingent
liabilities at the year end.
26. EVENTS AFTER THE REPORTING PERIOD
On 11 October 2016, pursuant to the exercise of options, 145,319 Ordinary shares were issued (110,025 at £0.50 each and 35,294 at £0.425 each).
On 15 February 2017, the Company issued 5,999,999 Ordinary shares at £0.375 each pursuant to a placing and admission to trading on AIM.
On 1 March 2017 the Company issued a further 26,779,958 Ordinary shares pursuant to a placing and open offer, and admission to trading on AIM.
The gross amount raised being £12m.
As part of this transaction, and Pursuant to a Subscription Agreement with the Company, Lanstead Capital agreed to subscribe for 11,500,000
Subscription Shares at the Issue Price representing gross proceeds of £4,312,500. £646,875 of the Subscription proceeds (being 15 per cent. of the
gross proceeds of the Subscription) were retained by the Company and £3,665,625 (being 85 per cent. of the gross proceeds of the Subscription)
were pledged to Lanstead under a Sharing Agreement pursuant to which Lanstead will make monthly settlements (subject to adjustment upwards
or downwards, as measured against a Benchmark Price of 50 pence per Ordinary Share) to the Company over 18 months.
As a result of entering into the Sharing Agreement the aggregate amount received by the Company under the Subscription and the related Sharing
Agreement may be more or less than £4,312,500.
On 20 March 2017 the Board of directors agreed a proposal to undertake a restructuring of the Group, which is likely to lead to a significant reduction
in headcount across all areas of operation. In line with the proposed strategic refocus, we envisage making an estimated fixed cost saving of £4.2m,
which is of course subject to consultation. The Group proposes to continue it’s Anti-Infectives research under external collaborations.
The Board has also received notification from two directors, Dr Frank Armstrong, and Peter McPartland that they will not be seeking re-election at
the forthcoming Annual General Meeting.
Dr Peter Jackson, Non-Executive Director, co-founder of Redx and Executive Chairman up to August 2014, will be stepping down from the Board on
31 March 2017.
49
REDX PHARMA PLC
2016 ANNUAL REPORT
F I N A N C I A L S TAT E M E N T S
COMPANY STATEMENT OF
FINANCIAL POSITION
AT 30 SEPTEMBER 2016
Company registration number 7368089
FIXED ASSETS
Intangible assets
Tangible assets
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
TOTAL CURRENT ASSETS
Creditors: amounts falling due within one year
NET CURRENT ASSETS
NET ASSETS
CAPITAL AND RESERVES
Share capital
Share premium
Capital redemption reserve
Share-based payments reserve
Profit and loss account
SHAREHOLDERS’ FUNDS
Notes
2
3
4
5
6
7
8
8
9
2016
£’000
217
207
206
630
30,388
5,472
35,860
(6,197)
29,663
30,293
936
22,526
1
867
5,963
30,293
2015
£’000
232
3
118
353
18,700
7,706
26,406
(5,827)
20,579
20,932
650
13,516
1
622
6,143
20,932
The financial statements were approved and authorised for issue by the Board and signed on its behalf by:
Dr Neil D. Murray
Director
20 March 2017
50
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
NOTES TO THE INDIVIDUAL
FINANCIAL STATEMENTS OF
REDX PHARMA PLC
1. ACCOUNTING POLICIES
(i)
Basis of preparation
The Company’s financial statements have been prepared in accordance with Financial Reporting Standard 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland” and the Companies Act 2006. The financial statements have been prepared under
the historical cost convention.
Financial reporting standard 102 - reduced disclosure exemptions
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS
102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”:
– the requirements of Section 7 Statement of Cash Flows;
– the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);
– the requirements of Section 11 Financial Instruments paragraphs 11.39 to 11.48A;
– the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
– the requirement of Section 33 Related Party Disclosures paragraph 33.7.
(ii)
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where trans-
actions or events that result in an obligation to pay more, or a right to pay less tax in the future have occurred at the balance sheet date.
Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable
taxable profit from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.
(iii)
Going concern
As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled
‘‘Guidance on Risk Management and Internal Control and Related Financial and Business Reporting’’.
The Directors are satisfied, based on detailed cash flow projections and after the consideration of reasonable sensitivities, that sufficient
working capital is available to meet the Company’s needs as they fall due for the foreseeable future and at least 12 months from the date of
signing the accounts.
The detailed cash flow assumptions are based on the Company’s annual budget, prepared and approved by the Board, which reflects a number
of key assumptions in respect of cost and revenue forecasts, underpinned by the current pipeline. The Board have also taken into consideration
the effects of the successful post year end fundraise of £12m (gross), and the cost savings expected from the restructuring explained elsewhere
in the Financial Statements. Sensitivity analysis has been performed on both cost and revenue forecasts to reflect a variety of opportunities,
risks and mitigating actions, both in timing and quantum. These projections are reviewed by the Board on a regular basis.
Within the revenue forecasts, and as discussed in the Principal Risks and Uncertainties section of the Strategic Report, there are inherent
judgements regarding the commercial and technical risk of programs. Whilst acknowledging the uncertainties in the operating environment
and their resultant impact on revenues, the Directors have identified a number of opportunities to manage working capital, to mitigate against
any deteriorations and uncertainties in trading conditions.
On the basis of the above review, the Directors are confident that the Group has sufficient working capital to honour all of its
obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing
the Financial Statements.
51
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
1. ACCOUNTING POLICIES CONT.
(iv)
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Rentals payable under operating leases (net of any incentives received from the lessor) are charged to the Statement of Comprehensive
Income on a straight-line basis over the term of the relevant lease.
The minimum term of the lease is estimated if it is not clear.
(v)
(vi)
Goodwill
Goodwill, being the amount paid in connection with the acquisition of a business in 2010, is being amortised evenly over its estimated
useful life of twenty years.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Cost includes the original purchase price of the asset and
the costs attributable to bringing the assets to its working condition for its intended use. Finance costs are not included.
Depreciation is calculated on the straight-line method to write off the cost of assets to their residual values over their estimated useful
lives as follows.
– Laboratory equipment:
– Computer equipment:
– Leasehold improvements:
2 or 3 years
2 or 3 years
Over the term of the lease
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.
Repairs and maintenance are charged to the profit and loss account during the financial period in which they are incurred.
(vii)
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the company becomes
party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows
from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when
the obligation specified in the contract is discharged, cancelled or expired.
(a) Trade and other receivables and Group debtors
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. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of
comprehensive income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
(c) Trade and other payables and Group creditors
Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost using the
effective interest rate method; this method allocates interest expense over the relevant period by applying the “effective interest rate”
to the carrying amount of the liability.
(viii)
Profit and loss account
The Company has taken advantage of s408 of the Companies Act 2006 and has not included its own profit and loss account in these
financial statements. The Company’s result for the year was a loss of £180,000 (2015: £Nil).
(ix)
Investments
Investments in subsidiaries are stated at cost less provision for impairment in value, and are detailed in note 4.
52
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
(x)
Share-based compensation
The Company issues share-based payments to certain employees and Directors. Equity-settled share-based payments are measured at
fair value at the date of grant and if material are expensed immediately or on a straight-line basis over any vesting period, along with a
corresponding increase in equity.
Where such payments are made to employees of subsidiary undertakings, but relate to the shares of the parent, they are recognised as
additional capital contributions to the subsidiary, along with a corresponding increase in equity.
At each reporting date, the Directors revise their estimate of the number of equity instruments expected to vest as a result of the effect
of non-market-based vesting conditions. The impact of any revision is recognised in statement of comprehensive income, with a
corresponding adjustment to equity reserves.
The fair value of share options is determined using a Black-Scholes model, taking into consideration the best estimate of the expected life
of the option and the estimated number of shares that will eventually vest. The cost of each option is spread evenly over the period from
grant to expected vesting.
When options expire or are cancelled, a corresponding credit is recognised.
Critical accounting estimates and judgements
Details of significant accounting judgements and critical accounting estimates are set out in this Financial Information and include:
(a) Share-based compensation
The Company has issued a number of share options to certain employees. The Black-Scholes model was used to calculate the appropriate
charge for the period of issue and subsequent periods.
The use of this model to calculate a charge involves using a number of estimates and judgements to establish the appropriate inputs
to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and
behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.
The total charge recognised and further information on share options can be found in Notes 2 and 21 to the Consolidated
Financial Statements.
53
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Goodwill
£’000
Total
£’000
309
309
77
15
92
217
232
Laboratory
Equipment
£’000
Computer
Equipment
£’000
Leasehold
Improvements
£’000
66
13
79
66
-
66
13
-
11
84
95
8
5
13
82
3
-
114
114
-
2
2
112
-
309
309
77
15
92
217
232
Total
£’000
77
211
288
74
7
81
207
3
2.
INTANGIBLE FIXED ASSETS
Cost
At 30 September 2015
At 30 September 2016
Amortisation
At 30 September 2015
Charge for the year
At 30 September 2016
Net book value at 30 September 2016
Net book value at 30 September 2015
3. TANGIBLE FIXED ASSETS
Cost
At 30 September 2015
Additions
At 30 September 2016
Depreciation
At 30 September 2015
Charge for the year
At 30 September 2016
Net book value
At 30 September 2016
Net book value at 30 September 2015
54
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
4.
INVESTMENTS IN SUBSIDIARIES
During the year the Company made additional capital contributions to subsidiary undertakings by way of share-based compensation to
employees of those companies.
At 1 October
Additional capital contribution – Redx Oncology Ltd
Additional capital contribution – Redx Anti-Infectives Ltd
Additional capital contribution – Redx Immunology Ltd
At 30 September
At 30 September 2016 the Company held share capital in the following subsidiaries:
2016
£’000
118
20
50
18
206
2015
£’000
-
70
48
-
118
Name
Country of
incorporation
Percentage held
Nature of
business
Direct/Indirect
holding
Redx Oncology Limited
England & Wales
100%
Redx Anti-Infectives Limited
England & Wales
100%
Redx Immunology Limited
England & Wales
100%
Pre clinical drug
development
licensing
Pre clinical drug
development
licensing
Pre clinical drug
development
licensing
Direct
Direct
Direct
Redx MRSA Limited
England & Wales
100%
Dormant
Indirect
55
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
5. DEBTORS
Amounts falling due within one year:
VAT recoverable
Amounts due from Group undertakings
Other debtors
Prepayments
Amounts falling due after more than one year
Other Debtor - Loan
Total
2016
£’000
22
29,509
147
105
29,783
605
30,388
2015
£’000
12
17,759
109
70
17,950
750
18,700
The loan of £714k was granted to Redag Crop Protection Limited as part of the sale of the former subsidiary. It bears interest at 5% repayable
with the principal sum. The loan is unsecured, and is repayable on the sale, listing, or change of control of Redag Crop Protection Limited.
The Directors expectation is that the loan will be fully recovered, but that none of the repayment terms are likely to be fulfilled in the
short term, and that it is therefore appropriate to classify the loan as a non-current receivable. A discount rate of 12% has been applied in
calculating the carrying value.
The Directors believe that the carrying value represents the fair value of the asset. An impairment review has been undertaken by the
Directors, which did not indicate that any impairment was required.
6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2016
£’000
394
84
5,226
151
342
6,197
2015
£’000
137
25
5,226
101
338
5,827
Trade creditors
Social security and other taxes
Amounts owed to Group undertakings
Other creditors
Accruals
56
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
7. SHARE CAPITAL
Number of shares in issue
Ordinary Shares of £0.01
Share Capital at par, fully paid
Ordinary Shares of £0.01
Movement in year
Ordinary shares of £0.01
Ordinary B shares of £0.01
Total movement in year
2016
NUMBERS
2015
NUMBERS
93,552,638
64,981,209
2016
£’000
936
286
-
286
2015
£’000
650
644
(1)
643
Share issues
On 4 April, 14 April and 15 April 2016 respectively, the Company issued 6,180,197 , 285,714 , and 22,105,518. Ordinary shares at £0.35 each
pursuant to a placing and admission to trading on AIM. The gross proceeds of the issue were £10m.
57
REDX PHARMA PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
8. RESERVES
Share premium
£’000
Profit & loss
account
£’000
Share-based
payments
reserve
£’000
Capital
redemption
reserve
£’000
As at 1 October 2015
Loss for the year
On issue of shares
Share-based compensation
As at 30 September 2016
13,516
-
9,010
-
22,526
6,143
(180)
-
-
5,963
622
-
-
245
867
1
-
-
-
1
9. RECONCILIATION IN MOVEMENT IN EQUITY SHAREHOLDERS’ FUNDS
Opening shareholders’ funds
Loss for the year
On issue of shares
Exercise of share options
Share-based payments
Closing shareholders’ funds
2016
£’000
20,932
(180)
9,296
-
245
30,293
Total
£’000
20,282
(180)
9,010
245
29,357
2015
£’000
6,725
-
13,433
14
760
20,932
10. OPERATING LEASE ARRANGEMENTS – MINIMUM LEASE PAYMENTS
Outstanding commitments for future minimum
lease payments under non-cancellable
operating leases expiring:
Within one year
In the second to fifth years
In greater than five years
Property
Plant and equipment
2016
£’000
2015
£’000
2016
£’000
2015
£’000
-
4,480
5,413
9,983
-
-
-
-
38
-
-
38
38
-
-
38
58
REDX P HARM A PLC
2016 ANNUAL REPORT
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
11. POST BALANCE SHEET EVENTS
On 11 October 2016, pursuant to the exercise of options, 145,319 Ordinary shares were issued (110,025 at £0.50 each and 35,294 at £0.425 each).
On 15 February 2017, the Company issued 5,999,999 Ordinary shares at £0.375 each pursuant to a placing and admission to trading on AIM.
On 1 March 2017 the Company issued a further 26,779,958 Ordinary shares pursuant to a placing and open offer, and admission to trading on
AIM. The gross amount raised being £12m.
As part of this transaction, and Pursuant to a Subscription Agreement with the Company, Lanstead Capital agreed to subscribe for 11,500,000
Subscription Shares at the Issue Price representing gross proceeds of £4,312,500. £646,875 of the Subscription proceeds (being 15 per cent.
of the gross proceeds of the Subscription) were retained by the Company and £3,665,625 (being 85 per cent. of the gross proceeds of the
Subscription) were pledged to Lanstead under a Sharing Agreement pursuant to which Lanstead will make monthly settlements (subject to
adjustment upwards or downwards, as measured against a Benchmark Price of 50 pence per Ordinary Share) to the Company over 18 months.
As a result of entering into the Sharing Agreement the aggregate amount received by the Company under the Subscription and the related
Sharing Agreement may be more or less than £4,312,500.
On 20 March 2017 the Board of directors agreed a proposal to undertake a restructuring of the Group, which is likely to lead to a significant
reduction in headcount across all areas of operation. In line with the proposed strategic refocus, we envisage making an estimated fixed
cost saving of £4.2m, which is of course subject to consultation. The Group proposes to continue it’s Anti-Infectives research under external
collaborations.
The Board has also received notification from two directors, Dr Frank Armstrong, and Peter McPartland that they will not be seeking
re-election at the forthcoming Annual General Meeting.
Dr Peter Jackson, Non-Executive Director, co-founder of Redx and Executive Chairman up to August 2014, will be stepping down from the
Board on 31 March 2017.
12. CAPITAL COMMITMENTS
At 30 September 2016 the Company had no capital commitments (30 September 2015: nil).
13. CONTINGENT LIABILITIES
The Company had no contingent liabilities at 30 September 2016 (30 September 2015: nil).
14. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party.
15. FIRST YEAR ADOPTION
This is the first year in which the financial statements have been prepared under FRS102. The Directors have concluded that there are no
measurement differences between old UK GAAP and FRS102 and accordingly no balances have been restated. The Directors continue to
believe that the 20 year amortisation policy for goodwill is appropriate.
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REDX PHARMA PLC
2016 ANNUAL REPORT
C O M P A N Y I N F O R M A T I O N
COMPANY INFORMATION
Directors
Dr Frank Armstrong FRCPE, FFPM (Non-Executive Chairman)
Dr Neil Murray (Chief Executive)
Dr Peter Jackson (Non-Executive Director)
Norman Molyneux (Non-Executive Director)
Peter McPartland (Non-Executive Director)
Dr Bernhard Kirschbaum (Non-Executive Director)
David Lawrence (Non-Executive Director)
Secretary
Simon Thorn
Company number
7368089
Registered office
c/o Acceleris Capital Ltd, Floor 9, Lowry House
17 Marble Street
Manchester
M2 3AW
Principal place of business
Auditor
Block 33
Mereside
Alderley Park
Macclesfield
SK10 4TG
RSM UK Audit LLP
3 Hardman Street
Manchester
M3 3HF
Annual General Meeting
The Annual General Meeting of the Company will be held at 9.30am at Redx Pharma Plc, Mereside, Alderley Park, Macclesfield SK10 4TG on
20 April 2017.
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