ANNUAL REPORT
For the year ended 30 September 2018
Registered number: 07368089
Contents
Key Events & Results
Chairman’s Statement
Strategic Report
Chief Executive’s Report
Science Report – Oncology
Science Report – Fibrosis
Operational Review
Principal Risks and Uncertainties
Governance
Introduction
Board of Directors
Directors’ Report
Directors’ Responsibility Statement
Corporate Governance Statement
Directors’ Remuneration Report
Independent Auditor’s Report
Financial Statements
1
3
5
10
17
22
24
26
27
29
30
31
36
39
Consolidated Statement of
Comprehensive Income
43
Consolidated Statement of Financial Position 44
Consolidated Statement of Changes in Equity 45
Consolidated Statement of Cash Flows
46
Notes to the Financial Statements
47
Company Statement of Financial Position
67
Company Statement of Changes in Equity
68
Notes to the Individual Financial Statements 69
Company Information
77
Key Events & Results
Financial results
Revenue:
£0.1m
Operating
Expenditure:
£10.6m
R&D
Expenditure:
£5.7m
Loss
after tax:
£8.8m
Closing
Cash:
£6.5m
Research & Development
6 February 2018
The fi rst patient is dosed in
Phase 1/2a of the Clinical trial
of the oral Porcupine inhibitor
RXC004.
29 March 2018
RXC004 Clinical trial is
temporarily suspended.
22 March 2018
4 September 2018
The Group signs an option and
license agreement with Deinove
for it s NBTI anti-infective
programme.
The Group announces MHRA
agreement in principal to restart
the Phase 1/2a Clinical trial of
RXC004.
Corporate
Post Year-end Events
14 November 2018 – RXC006 selected as Redx’s
fi rst development candidate in fi brosis and now
expects to be in clinical trials in 2020.
19 November 2018 – Announcement of appointment
of new full time Chief Financial Offi cer, Dr James
Mead, effective 1 February 2019 when current
interim Chief Financial Offi cer will step down.
6 November 2017 – Following 5 months in
Administration the share suspension from trading on
AIM was lifted and a revised strategy announced under
the leadership of a new Board of Directors comprising:
Mr Iain Ross, Executive Chairman
Mr Dominic Jackson, Chief Financial Offi cer
Mr Peter Presland, Non-Executive Director,
Chairman of the Audit, Risk & Disclosure
Committee
Dr Bernd Kirschbaum, Non-Executive Director,
Chairman of Remuneration and Science
Committees
22 January 2018 – Dr Andrew Saunders is
appointed as Chief Medical Offi cer.
1 June 2018 – Following an extensive worldwide
search Lisa Anson is appointed as Chief Executive
Offi cer and Iain Ross reverts to the position of Non-
Executive Chairman.
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Iain G Ross
Chairman of the Board of Directors
“The fi nancial year ending
30 September 2018 was a
seminal year for the Group
- lessons were learnt and
action was taken.”
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Chairman’s Statement
Dear Shareholder
The fi nancial year ending 30 September 2018 was a seminal year for the Group -
lessons were learnt and action was taken.
New Leadership
In November 2017 the Company emerged from
Administration with a restructured Board and a new
executive management team determined to re-build
the Group on the basis of its proven world class
scientifi c capabilities. The Directors immediately
embarked upon the search for, and recruitment of,
a new CEO and in April 2018 we were pleased to
announce the appointment of Lisa Anson, a high
profi le and experienced industry executive.
Clear Strategy
Since joining the Company in June 2018, Lisa Anson
has provided the Redx team with fi rm leadership and
brought a sense of urgency, focus and realism. In a
short period of time Lisa has met with the majority
of stakeholders and third parties interested in the
development of our scientifi c programmes. Under
her leadership the team in Alderley Park has been
working tirelessly to prioritise and refi ne our strategy
to generate future sources of value. We now have a
clear strategy focused on the development of novel
medicines in oncology and fi brotic diseases, whereby
we will progress our current programmes to deliver
clinical proof of concept, leverage our medicinal
chemistry expertise to build our pipeline and thereafter
aim to partner to drive further value. The Management
goals are bold and ambitious and the team has the full
support of the Board to execute a plan to fund, grow
and develop the business over the next 12 months and
thereby create sustainable shareholder value.
Finance
During the period under review, the Board and
Management have continued to adopt a robust
set of fi nancial controls including a project based
operating model and associated rolling short-term
cash fl ow forecasts to assist in the prioritisation of
resources to projects resulting in greater transparency
and project accountability. The team has delivered
annualised cost savings of approximately £5.2m
and has a cash runway into the second quarter of
2019. As a consequence, your Board is committed to
strengthening the Group’s Balance Sheet in the short
term and is in active discussions with shareholders,
advisers, third party sector specialist investment
groups and potential industry partners regarding
funding and/or monetisation of early stage programme
assets. Our CFO Dominic Jackson has done a sterling
job overseeing our “fi nancial health” over the last
12 months including the resolution of legacy issues
post Administration. However, as originally planned
Dominic will step down from the CFO role early next
year and we are pleased to announce the appointment
of a new full-time CFO with signifi cant sector
experience, Dr James Mead, effective 1 February
2019. On a personal basis and on behalf of the Board
I would like to thank Dominic for his support and wish
him well as he returns to the private equity sector.
Strong Board and Governance
The Directors continue to acknowledge the
importance of high standards of corporate
governance and I would refer you to the Chairman’s
Corporate Governance Statement on page 31 of this
report. Given the Group’s size and the constitution of
the Board, the Directors have decided to adopt the
principles set out in the QCA Corporate Governance
Code for small and mid-sized companies published
in April 2018 (‘‘QCA Code’’) in advance of the
requirement to adopt the code under AIM rule 50. In
addition, we continue to operate a robust framework
of systems and controls to maintain high standards
throughout the Group and Company and more
details can be found in the Directors’ report. The
Board believes that effective corporate governance
assists us in the delivery of our corporate strategy, the
sustainable generation of shareholder value and the
safeguarding of our stakeholders’ long-term interests.
Outlook
The last twelve months have been challenging for
all involved and as a result the Board has continued
to focus upon total transparency and realism. I
believe we have emerged as a stronger and more
professional organisation whilst retaining a strong
scientifi c core and that the forthcoming year will be
transformational. I look forward to an exciting future
under Lisa’s leadership and on behalf of the Board, I
would like to thank our employees for their hard work
and dedication as well as our suppliers, business
partners and shareholders for their continued
support over the last year.
(cid:1)
Iain G Ross,
Chairman of the Board of Directors
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Lisa Anson
Chief Executive Offi cer
“Taken together our scientifi c
strength, our focused strategy,
our new management team, and
our streamlined organisation put
us in a good position to deliver
against our ambitions in the
coming year.”
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Chief Executive’s Report
Strategic Report
I am pleased to provide my fi rst report as CEO of Redx Pharma Plc and to outline
the progress we are making in creating high value drugs that treat signifi cant unmet
needs in cancer and fi brosis.
In my previous role, as President of AstraZeneca UK,
I was part of a team that not only looked to develop,
distribute and market innovative therapeutic products
but also, where appropriate to partner, license or
acquire products and technologies that would add
value to patients, physicians and shareholders.
The main reason I was attracted to join Redx is the
scientifi c strength of the Group. My initial view was
that Redx was a Group whose unique capability in
medicinal chemistry set it apart from many small
biotech companies. I am confi dent that despite
the trials and tribulations of the previous twelve
months the Group still has this core strength. On
my arrival at the business on 1 June 2018, I led
a detailed, systematic review of the business and
its programmes and I met many stakeholders and
advisers to gain their input and build a clear business
plan. Five months into my new role, and having
completed this review, my view remains the same;
that the programmes and innovative science in our
Group remain the foundation of its future success.
Accordingly, in this report, as well as presenting the
results for the period, I would like to lay out what
I believe is a coherent strategy to build increasing
shareholder value. I am excited about the challenge
that lies before us and I am also very confi dent
that with the new management and the dedicated
scientifi c team coupled with the support of the
Redx Board and shareholders we can deliver a very
exciting future for this Group.
Streamlined Organisation and new
management team in place
With the appointment of Dr Andrew Saunders
(CMO) and Dr James Mead (CFO), combined with
the experienced science leadership of Dr Richard
Armer, I believe we have an ambitious and capable
management team in place to lead the next stage of
the organisation.
As this set of results shows, Redx is operationally a
stronger, leaner Company than in prior years. Since
joining I have reviewed all aspects of the business
and we have worked hard to ensure our costs
are under control and resources are realistically
prioritised. Our cost base in 2018 has reduced by
a third compared to 2017. In addition, we are in
the late stages of an agreement with our landlord
to right-size our operational footprint at Alderley
Park, reducing our space requirements by 57%. We
have delivered £1.4M additional cash compared to
the original plan through the effective resolution of
fi nancial and tax issues. The Redx team has worked
determinedly to create a streamlined organisation
whilst successfully retaining the core team of
dedicated and talented scientists. This platform and
transparent culture provide us with a sound basis for
moving forward with our new business plan.
Clear, Focused Strategy
Following the business review we have a clear,
focused strategy aimed at driving shareholder value.
Redx’s ambition is to become a leading biotech
Company focused on the development of novel
medicines that have the potential to transform the
treatment of oncology and fi brosis.
Oncology is a crowded area for drug development.
However, it is also one where there is signifi cant
unmet need. In particular we believe that the role of
precision medicines remains critical to unlocking the
full potential of modulating critical pathways such
as the Wnt pathway. This pathway can drive tumour
growth and is increasingly implicated in shaping the
immune environment around the tumour. As experts
in this pathway, Redx is well positioned to unlock
this potential. Fibrosis is an area where there are few
treatments and a large and growing unmet need.
Redx’s medicinal chemistry strengths combined with
its depth of biology expertise, make it competitive
to develop novel precision therapies to tackle the
underlying fi brosis in major diseases of the lung, liver,
kidney and bowel.
Within these areas of focus, the organisation’s
strategy is fi rst to progress the current
programmes to deliver clinical proof of concept
and to generate signifi cant shareholder value. In
the near term this entails taking our lead cancer
asset RXC004, back into phase 1 in H1 2019, to
demonstrate a safe dose. In fi brosis, our aim is to
select development candidates from the portfolio of
three promising fi brosis assets and the fi rst of these
selections was made, post period, in November
2018 with the announcement of RXC006 in
idiopathic pulmonary fi brosis (IPF).
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Chief Executive’s Report continued
The second part of the strategy is to leverage Redx’s
core strength of medicinal chemistry expertise to
generate value. We will therefore continue to invest
our resources both in-house, to discover the next
generation of differentiated drug candidates against
biologically validated targets in our areas of therapeutic
focus, and will also use our expertise and insights to
identify and acquire appropriate molecules.
Finally partnering will remain a critical part of the
Redx strategy to enable additional development and
to drive further shareholder value.
Redx’s newly focused pipeline shows
progress in Oncology and Fibrosis
As a management team we have focused on
prioritising and progressing our pipeline, as follows:
The lead programme, RXC004, is a
potential best-in-class porcupine inhibitor
which has shown compelling animal
effi cacy data through impact on the Wnt
signalling pathway. Redx is developing
RXC004 as an oncology treatment
including as an immuno-oncology
combination and is preparing to re-start
the Phase 1 trial in 1H19 at lower doses
(0.5-3mg).
RXC006, our lead fi brosis programme,
is a porcupine inhibitor being developed
as a treatment for the orphan disease,
Idiopathic Pulmonary Fibrosis (IPF), a life-
threatening and progressive lung condition
with a prognosis worse than many
cancers. The nomination of Redx’s fi rst
development candidate in fi brosis, post
period, in November 2018 was a major
milestone for the Group.
The Group’s two programmes targeting
rho associated protein kinase (ROCK)
inhibition – ROCK2 selective inhibitors
for the treatment of liver fi brosis and
gastrointestinal (GI) targeted ROCK
inhibitors for the treatment of fi brosis
associated with Crohn’s disease - have both
demonstrated strong data in preclinical
models during the reporting period and are
now approaching development candidate
nomination decisions in 2019.
1
2
3
6
Lead asset RXC004 in Phase 1 Clinical
Development
Redx’s lead asset is RXC004, an oral potential best-
in-class porcupine inhibitor aimed at treating cancer.
RXC004 entered the clinic for the fi rst time in
February 2018 (NCT03447470). The trial was
subsequently suspended due the emergence of
on-target side-effects (dysgeusia (distortion of
taste), diarrhoea and bone fragility) which were
expected to be seen at higher doses than the initial
10mg start dose. Pharmacokinetic analysis of the
exposure data indicated a much longer half-life
than had been predicted from preclinical studies.
Whilst the suspension of the trial and the resulting
delay was initially disappointing, there were several
positive observations, namely that RXC004 was
well absorbed and had good pharmacokinetic
parameters, no off-target side-effects were seen
and that strong target engagement in skin tissue
was achieved. Redx held a scientifi c advice meeting
with the MHRA in July 2018 where an amended
protocol proposal was discussed. This included
employing a lower start dose and escalation for
the trial and the provision of enhanced safety entry
criteria and safety monitoring. The MHRA agreed in
principle with the new proposals and an amended
protocol has been submitted for approval. Redx and
its clinical investigators believe that the required
RXC004 exposures can be achieved at lower
doses (0.5-3mg) and reformulation work has been
undertaken to allow the safety and tolerability phase
1a part of the trial in cancer ‘all comers’ to restart
in 1H19. On this timeline, Redx anticipates initial
safety and tolerability results from the study during
2H19 with full results in 2020.
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 colorectal, pancreatic, biliary and gastric
cancers. Aberrant Wnt signalling pathway activity
has been demonstrated to enhance tumour growth
both directly and by weakening the host anti-cancer
immune response. Redx’s Porcupine inhibitor,
RXC004, is a potent and selective inhibitor of this
enzyme and therefore the Wnt signalling pathway.
Inhibition of this pathway, via Porcupine results
in strong direct tumour growth inhibitory effect
in a variety of cancer models. In addition, when
administered either alone or together with an anti-
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Chief Executive’s Report continued
Strategic Report
PD1 immune checkpoint inhibitor (ICI), RXC004
enhances anti-tumour immune effects. These data
were presented at the prestigious AACR Oncology
meeting1 and is in keeping with the external strong
scientifi c evidence for a role of the Wnt signalling
pathway in resistance to ICI2,3.
This emerging evidence supports Redx’s view
that RXC004 has the potential to be used as
a combination partner in immuno-oncology
treatment paradigms with ICIs to enhance the
response rate of ICIs and to overcome resistance
to ICIs in a range of solid tumour types including
colorectal cancer (CRC). Redx is now working with
leaders in this fi eld, including at Institut Gustave
Roussy in Paris, to develop the evidence generation
plan that will inform future development direction,
including with potentially interested partners, once
safety data is available from the phase 1 trial.
Promising Fibrosis Portfolio Progressing
Towards Clinic
Fibrosis is an internal scarring process, which can
occur in response to injury, where excess connective
tissue is deposited in an organ or tissue, thereby
impairing its function. Most chronic infl ammatory
diseases will result in fi brosis, with progressive
injury resulting in organ failure. Fibrotic disease
can occur in nearly any tissue in the body and is
a contributory factor in up to 45% of deaths in
the developed world4. Solid organ fi brosis can
occur as a result of many different diseases, for
example infl ammatory bowel disease (IBD). Current
therapeutic options are limited for these chronic and
often life-threatening diseases.
Redx’s experienced team of scientists has
considerable expertise in understanding the
molecular mechanisms underlying fi brosis and
hence the druggable targets on which to focus. Redx
are developing cutting edge therapies that aim to
stop and reverse the formation of fi brotic tissue. By
targeting pathways involved in the progression of
these devastating diseases, these drugs are designed
to be disease modifying rather than simply providing
symptomatic relief. Redx is targeting lung, liver and
intestinal fi brosis with its lead projects which are all
multi-billion-dollar addressable markets.
The lead fi brosis programme, is a Porcupine
inhibitor targeted as a treatment of idiopathic
pulmonary fi brosis (IPF), a life-threatening lung
disease with a prognosis worse than many cancers.
REDX06109 has demonstrated excellent antifi brotic
activity in a range of fi brosis disease models including
fi brosis of the kidney, liver and lung. Successful
completion of Preclinical Development Candidate
nomination work post reporting period has allowed
REDX06109 to be nominated as the Group’s sixth
development candidate, RXC006 and its fi rst in
Fibrosis. This represents a major milestone for the
Group and RXC006 will now progress into preclinical
manufacturing and safety studies during 2019 with
the aim to enter fi rst in man clinical trials during 2020.
Redx have invested in two approaches targeting the
Rho Kinase (ROCK) signalling pathway which is
a key nodal enzyme in the development of tissue
fi brosis. Both projects are in the Lead Optimisation
stage of research and decisions to select Preclinical
Development Candidates are expected by mid-
2019 and if successful enter the clinic in 2020.
Redx’s ROCK2 selective inhibitor programme is
aimed at treating liver fi brosis associated with the
growing obesity and diabetes epidemic. The build-
up of lipids and infl ammation in the liver leads to a
condition known as non-alcoholic steatohepatitis
(NASH) which progressively leads to liver fi brosis
and ultimately life-threatening liver cirrhosis. There
are currently no approved treatments for NASH.
Redx has developed highly selective ROCK2
compounds that have an improved profi le compared
to competitor inhibitors. The lead compounds
have demonstrated good pharmacokinetic and
pharmacodynamic effects in preclinical models and
are currently undergoing proof of concept testing
in a range of fi brosis disease models with data
expected early in 2019.
The GI-targeted ROCK project is aimed at treating
intestinal fi brosis associated with Crohn’s disease
which leads to strictures and resection surgery
for patients. There is currently no pharmaceutical
therapy available to treat this condition and we
believe that Redx’s compounds would be fi rst-in-
class agents. These GI-targeted ROCK inhibitors are
restricted to the gut due to their limited absorption
profi le and rapid enzymatic metabolism of any
absorbed material. They have demonstrated
very strong anti-fi brotic effects in GI fi brosis
disease models along with a good general and
cardiovascular safety profi le.
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In September, Redx agreed to license the Novel
Tricyclic Topoisomerase (NTTI) program through an
option agreement with Kyrulem, a company focused
upon the development of novel agents for the
treatment of bacterial infections.
Following this re-prioritisation Redx has made the
decision to partner its pan-RAF programme rather
than progress internally.
Conclusion
I am excited by the potential of the scientifi c
programmes we have in our portfolio outlined in the
report and detailed further in our Science report.
Taken together our scientifi c strength, our focused
strategy, our new management team, and our
streamlined organisation put us in a good position to
deliver against our ambitions in the coming year.
Lisa Anson
Chief Executive Offi cer
Chief Executive’s Report continued
Research Into Next Generation
Therapies
Redx is committed to continuing research against
biologically validated targets in oncology and fi brosis
to maintain the pipeline. As part of the Strategy and
Portfolio Review conducted mid 2018, the Group
has focused its research activities on highly selected
targets in research, although not all these targets
have been publicly disclosed.
A key highlight is the project to inhibit the SHP2
protein, a tyrosine phosphatase enzyme. By
inhibiting the SHP2 protein we aim to overcome
the multiple resistance mechanisms associated
with receptor tyrosine Kinase treatments, with the
ultimate aim of improving cancer patient survival.
This SHP2 project has made good progress over the
reporting period, with the identifi cation of potent
compounds with an improved safety profi le which
has allowed progression into the Lead Optimisation
phase. Additionally, recent research has suggested
an important role for SHP2 in immune checkpoint
signalling, where Inhibition of SHP2 could enhance
the ability of the immune system to fi ght cancer.
As a result of decisions to focus research
investment, we have made a number of stop
decisions.
Redx has both intellectual property fi lings and
owns granted patents for its programmes, and
management are confi dent of obtaining patent
protection in relevant chemical spaces.
Partnering Activity
As a result of the decision to focus the organisation
on Fibrosis and Oncology, the anti-infectives
business was closed in 2017. During the period
the Group executed partnering deals for the anti-
infective assets. In March 2018 Redx entered an
option and license agreement with Deinove for the
Novel Bacterial Topoisomerase Inhibitor (NBTI)
programme, which is primarily focused upon
combating multi-drug resistant Gram-negative
bacteria. Under the terms of the agreement,
Deinove has paid an option fee to allow them
a nine-month option period to assess the NBTI
programme for further development. Should the
option be exercised at the end of this period, Redx
will receive an additional license fee.
8
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Science Report
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Science Report:
Oncology
RXC004 – our lead cancer asset
Aberrant activation of the Wnt signalling pathway is
involved in the initiation and progression of cancer.
Activation of the Wnt signalling pathway is also
associated with poor prognosis and resistance of
cancers to current therapies, including immune
checkpoint inhibitors (ICIs). The pathway is
initiated by the binding of Wnt ligands to Frizzled
(Fzd) receptors resulting in disruption of the
destruction complex, this allows β-catenin to
accumulate, translocate to the nucleus and induce
the transcription of multiple target genes, including
Axin2 (Fig. 1). Porcupine is a key enzyme required
for the release of all active Wnt ligands. Preclinical
data demonstrates that RXC004, a potent and
selective inhibitor of Porcupine, has signifi cant anti-
cancer effects in models of Wnt-ligand dependent
cancer. These models include genetically-defi ned
tumours harbouring upstream pathway alterations
(i.e. RNF43 mutant and RSPO-fusion in vitro and in
vivo models), and models of immune resistance.
RXC004 Clinical investigators:
Professor Sarah P Blagden, PhD, FRCP
Associate Professor of Experimental Cancer
Medicines & Consultant Medical Oncologist/
Director of Early Phase Cancer trails unit
& Oxford ECMC lead, University of Oxford,
Department of Oncology.
Dr. Natalie Cook, MBchB, MRCP, PhD
Senior Clinical Lecturer in Experimental Cancer
Medicine and Honorary Consultant, Christie
Hospital.
Professor Ruth Plumber, MA, DPhil, BMBch,
MD, FRCP
Clinical Professor of Experimental Cancer
Medicine, Northern Institute of Cancer Research,
Newcastle University.
Figure 1: The Wnt signalling pathway
Signalling through the Wnt pathway is highly regulated at the level of ligand (Wnt), receptor (Fzd/LRP) and
downstream components (e.g. destruction complex – APC/Axin/GSK3β). Pathway activation stabilises
β-catenin, allowing its translocation to the nucleus and the expression of target genes.
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Strategic Report
Redx held a scientifi c advice meeting with the
MHRA in July 2018 where an amended protocol
proposal was discussed. This included employing a
lower start dose and escalation for the trial and the
provision of enhanced safety entry criteria and safety
monitoring. The MHRA agreed in principle with the
new proposals and an amended protocol has now
been submitted for approval (Fig. 3). Redx believes
that the required safe and effi cacious RXC004
exposures can be achieved at lower doses (0.5-3
mg) and reformulation work has been undertaken to
allow the safety and tolerability phase 1a part of the
trial in cancer ‘all comers’ to restart in 1H19. On this
timeline, Redx anticipate initial safety and tolerability
results from the study during 2H19.
Phase 1 (Module 1 Part A) trial of RXC004 will be
conducted in patients with advanced cancer and will
allow Redx to select a suitable dose and schedule for
both Module 1 Part B and Module 2 Combinations
(NCT03447470).
Comparison of predicted drug exposure of
RXC004 based on preclinical models (black line)
with actual exposure achieved in patient 001
(orange line). Predicted exposure of proposed
new starting dose 0.5 mg RXC004 based on
patient 001 (blue line). Grey box depicts the
concentration range predicted to give effi cacy in
patients.
RXC004 clinical trial due to restart in 1H2019
In February 2018, RXC004 entered the clinic for the
fi rst time in a Phase 1 clinical trial (NCT03447470).
The trial was subsequently suspended due the
emergence of on-target side-effects (dysgeusia
(distortion of taste), diarrhoea and bone fragility)
which were expected to be seen at higher doses
than the initial 10 mg start dose. Pharmacokinetic
analysis of the exposure data indicated a much
longer half-life than had been predicted from
preclinical studies (Fig. 2). Whilst the suspension
and resulting delay was initially disappointing, there
were several positive observations, namely:
•
RXC004 was well absorbed and had good
pharmacokinetic parameters
• No off-target side-effects were seen
• Strong target engagement was achieved in tissue
Figure 2: RXC004 Plasma Concentration
)
l
m
/
g
n
(
n
o
i
t
a
r
t
n
e
c
n
o
C
a
m
s
a
P
l
1000
100
10
1
0
2
4
6
8 10 12 14 16 18 20 22 24
Hours
10mg RXC004 original prediction
10mg RXC004 data from patient 001
0.5mg prediction
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Science Report: Oncology continued
Figure 3: RXC004 Phase 1/2a Trial Design
Phase 1 (Part A) trial of RXC004 will be conducted in patients with advanced cancer and will allow Redx to
select a suitable dose and schedule for both Module 1 Part B and Part 2a (NCT03447470).
Phase 1, Dose Escalation
Monotherapy, Single Ascending Dose/
Multiple Ascending Dose (3+3 design)
1.0mg
Cohort 2
N=3-6
Starting Dose,
0.5mg
Cohort 1
N=3-6
3.0mg
Cohort 6
N=3-6
2.5mg
Cohort 5
N=3-6
2.0mg
Cohort 4
N=3-6
1.5mg
Cohort 3
N=3-6
Multiple decision points expand/escalate/hold based
on emerging safety data (Dose Limiting Toxicity, DLT)
pharmacodynamic markers and clinical efficacy.
Phase 1 Part a
Dose escalation cohorts:
To assess the safety and tolerability of RXC004 in an all-comers cohorts of advanced
cancer patients. 3-5 UK sites; 12-18 months.
Phase 1 Part b
Dose expansion cohorts:
To assess the effi cacy of RXC004 monotherapy in biomarker selected patients (eg CRC,
gastric and pancreatic cancer patient cohorts) 3-5 UK sites.
Phase 2a
To assess the safety, tolerability and effi cacy of RXC004 in combination with standard
of care therapies, including ICIs, in e.g. CRC.
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Science Report: Oncology continued
Strategic Report
Enhancing immune-checkpoint response with RXC004
Immune checkpoint inhibitors (ICIs) such as
anti-PD-1 and anti-PD-L1 antibodies, have
revolutionised the treatment of cancer, but they do
not work in all patients. Many tumours that are not
responsive to ICI therapy are described as “cold” in
that the tumour-killing immune cells are not present
at the tumour site.
The role of the Wnt signalling pathway in immune
evasion by tumours (i.e. promoting “cold” tumours)
has been the subject of several recent high-profi le
reviews2,3. Activation of the Wnt signalling pathway
has been described to:
•
•
Drive critical mechanisms for tumour immune
evasion
Inhibit multiple cell types required for an anti-
tumour immune response
There is strong preclinical evidence to support that
RXC004 will block activation of the Wnt signalling
pathway and restore the ability of the immune
system to fi ght the tumour. RXC004 will have the
ability to make “cold” tumours “hot” by facilitating
entry of tumour fi ghting immune cells into the
tumour microenvironment.
In addition to this strong preclinical data, Novartis
recently presented (AACR, 2018) the fi rst clinical
demonstration of their porcupine inhibitor,
WNT974 (LGK974), promoting a tumour fi ghting
microenvironment as a monotherapy. This is in
line with our internal preclinical mouse model data
on RXC0041. In response to these data Novartis
have now refocused the development of WNT974
as an immune-oncology agent which is currently
recruiting for phase 1 both as monotherapy and
in combination with Novartis’ anti-PD-1 inhibitor,
Spartalizumab (ClinicalTrials.gov Identifi er:
NCT01351103).
Redx scientists have demonstrated the ability of
RXC004 to enhance the immune system response
to cancer in preclinical models1 . These data suggest
RXC004 alone or in combination with ICIs (such
as anti-PD-1, anti-PD-L1 antibodies) may help to
address the shortcomings of this exciting class of
therapies by increasing the response rates and
the duration of the response. In line with these
data, Redx is exploring clinical opportunities for a
RXC004 combination approach with ICIs, with the
ultimate aim of increasing patient response rates to
immuno-oncology therapy.
Extract from a recent high impact review from (Wang et al.
2018), Trends in Pharmacological Sciences, highlighting the
opportunity for Wnt signalling pathway inhibitors, such as
RXC004 as potential cancer immunotherapy agents.
‘Despite some success with checkpoint inhibitors in cancer patients,
cancer immunotherapy has met challenges regarding the low response
rates in major cancer patients and tumour relapse after initial response.
As a well-known therapeutic target of cancer, Wnt signalling pathway
is focused mainly on tumor cells. Increasing evidence highlights the
essential role of Wnt signalling pathway in the cancer immunity system.
By directly controlling the expression of critical regulators of dendritic
cells, eff ector T cells, regulatory T cells, T helper cells, and tumor cells,
abnormal activation of Wnt signalling pathway disrupts the tumor-
immune cycle and facilitates cancer development. Combination therapy
with modulation of Wnt signalling pathway is expected to overcome the
primary, adaptive, and acquired resistance to cancer immunotherapy’
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Science Report: Oncology continued
RXC004 in preclinical immune-oncology models
RXC004 monotherapy inhibited tumour growth and improved survival of mice in a melanoma model (Fig. 4)
by reducing the proportion of immune supressing myeloid derived suppressor cells (MDSCs) in the tumour
microenvironment. (Fig. 5) Anti-PD-1 alone had no effect on this immunologically “cold” model.
In a mouse colorectal cancer model (CT26) RXC004, in combination with anti-PD-1, improved anti-tumour
immune response by increasing the ratio of cytotoxic (tumour fi ghting) to regulatory (immune suppressive) T-cells.
(Fig. 6) The model for this mechanism of action is shown in (Fig. 7).
Figure 4: Survival: B16F10 tumours
RXC004 increased survival of mice implanted with the B16F10 melanoma tumour cell line.
3
l
m
m
0
0
5
2
f
o
e
m
u
o
v
r
u
o
m
u
t
o
t
e
m
T
i
Control
RXC004 5mg/kg
p<0.0001
100
50
0
21
25
29
33
37
41
45
Treatment Day
Figure 5: Model of RXC004 impact on immune cells
Working model of RXC004 effects on MDSC tumour infi ltrate. MDSCs are known to suppress T cell immune
responses via multiple mechanisms; through reducing tumour MDSCs, we propose RXC004 increases
immune response to the tumour.
MDSCs
Low T cell
infiltrate –
Immunologically
cold tumour
MDSCs
Increased T cell
infiltrate –
Immunologically
hot tumour
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Science Report: Oncology continued
Strategic Report
RXC004 combines with anti-PD-1 to enhance the
anti-tumour immune environment. Flow cytometry of
day 14 tumour infi ltrate shows signifi cant increase in
the ratio of cytotoxic T-cells to regulatory T-cells when
RXC004 and anti-PD-1 are combined.
Figure 6: Cytotoxic/Regulatory T Cell Ratio
60
40
20
0
Control
Anti-PD1 RXC004
5mg/kg
RXC004
5mg/kg +
anti-PD1
Control
Anti-PD1
RXC004 5mg/kg
RXC004 5mg/kg + anti-PD1
**** p<0.0001 *** p<0.001 ** p<0.01
Redx is currently working with Prof Aurélien Marabelle MD, PhD,
Clinical Director of Cancer Immunotherapy at the Gustave Roussy
Institute, to further refi ne our clinical plan for RXC004 trials in
combination with checkpoint inhibitors.
“I look forward to continue to work with the Redx Pharma team to
help optimise the immuno-oncology clinical development plan for
RXC004. With the recent excitement around Wnt signalling pathway
being an important immune checkpoint inhibitor resistance mechanism, I
believe that with an appropriate clinical trial design, inhibition of Porcupine
by RXC004, would be a very interesting approach to exploit these scientifi c
breakthroughs as it is a key upstream regulator of the Wnt signalling pathway.’’
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Science Report: Oncology continued
Figure 7: Model of RXC004 eff ects on Dendritic cells (DC)
Wnt produced within the tumour microenvironment leads to immunosuppressive dendritic cells, with
increased levels of β-catenin and IDO1; causing ↑ regulatory T-cells and ↓cytotoxic T-cells (CD8+). RXC004
treatment reduces Wnt, ↓ regulatory T-cells and allow s DCs to ↑ cytotoxic T-cells in the tumour.
Low T cell
infiltrate –
Immunologically
cold tumour
Increased T cell
infiltrate –
Immunologically
hot tumour
RXC004 in genetically-defi ned cancers
Cancers harbouring genetic alterations upstream in the Wnt signalling pathway have been demonstrated
to be sensitive to RXC004 monotherapy via a direct tumour targeting (anti-proliferative) mechanism. Loss
of function mutations in the RNF43 gene and fusions in RSPO, both result in an increase of Fzd receptors
at the cell surface and an increased dependence on Wnt ligand for the tumour cell. These upstream Wnt
pathway mutations are present in multiple cancer types including approximately 16% of colorectal cancers.
By selecting patients with these genetic alterations, RXC004 has a unique opportunity to both target tumour
proliferation directly, in addition to having an immune enhancing effect.
Figure 8: RXC004 causes tumour growth inhibition in tumour models with both RNF43 mutation
and RSPO fusions.
Pancreatic Cancer Xenograft (RNF43 mutation)
Colorectal Cancer Xenograft (RSPO3 fusion)
600
400
200
0
)
3
m
m
l
(
e
m
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T
2500
2000
1500
1000
500
0
)
3
m
m
l
(
e
m
u
o
V
r
u
o
m
u
T
Vehicle
Control
RXC004
5mg BID
Vehicle
BID
RXC004
1.5mg/kg BID
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Science Report:
Fibrosis
Strategic Report
Porcupine inhibitor RXC006 for the treatment of IPF
Idiopathic pulmonary fi brosis (IPF) is a life-threatening lung disease with a prognosis worse than many
cancers (Fig. 9). There is considerable evidence supporting a pathogenic role for Wnt signalling in IPF. IPF
patients show a re-activation of the Wnt signalling pathway accompanied by an increased expression of
Wnt target genes. An increase in Wnt7B expression has also been correlated with IPF lung impairment and
the Wnt co-receptors Lrp5/6, markers of disease progression and severity in humans with IPF, have been
associated with increased mortality rate5,6. Overall, increased Wnt signalling pathway expression is associated
with poor patient prognosis in IPF.
RXC006 is Redx’s lead porcupine inhibitor of the Wnt signalling pathway for the treatment of IPF. RXC006 has
demonstrated excellent antifi brotic activity in a range of fi brosis disease models including fi brosis of the kidney, liver
and lung. An example of this is shown in (Fig. 10).
Successful completion of Preclinical Development Candidate nomination work has resulted in the nomination
of REDX06109 as the Company’s sixth development candidate, RXC006. RXC006 will now progress into
preclinical manufacturing and safety studies during 2019 with the aim to enter fi rst in man clinical trials
during 2020. RXC006 is from a different chemical series compared to RXC004 and is protected by a separate
composition of matter patent.
Figure 9: Images from CT scan of normal lungs and lungs from a patient with IPF
In the normal lung the black image indicates healthy tissue, fi lled with air. In the IPF lung scarring forms a
typical ‘honeycomb’ pattern, showing fi brotic areas and restricted lung capacity9.
Normal lung
IPF lung
Honeycomb scarring
Figure 10: Redx Porcupine inhibitor RXC006 suppresses fi brosis in a murine model of IPF
Small region of dense collagenous connective tissue (fi brosis; black arrows demarcate) and lymphocyte
infi ltrates/aggregates (*) are present following bleomycin injury. Therapeutic treatment with RXC006 reduced
fi brosis areas. Bronchiole (Br) and blood vessels (BV) are indicated.
Untreated
Bleomycin + vehicle
Bleomycin + RXC006
25mg/kg QD
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Science Report: Fibrosis continued
ROCK as a therapeutic target for fi brosis
The Rho associated coiled-coil containing protein kinase (ROCK) serine/threonine kinases, ROCK1
and ROCK2, are signalling proteins central to the regulation of various cellular responses that are often
inappropriately activated in fi brosis pathology (Fig. 11). These pathways include cell migration, proliferation,
apoptosis, cytokine expression, gene transcription and integrin-mediated cell-to-cell adhesions. Aberrant
wound healing, tissue remodelling and fi brosis processes have been shown to be highly dependent on ROCK
signalling with pan-ROCK inhibitors able to suppress tissue injury and fi brosis in a number of animal models
including models of liver, lung and kidney fi brosis.
Figure 11: ROCK is a central node in signalling pathways associated with fi brosis
Angiotensin, ET-1
TGFβ-BB, CTGF
Collagen, matrix stiffness
Hormones
Growth factors
ECM/mechanical
Recruitment of
inflammatory cells
Metastases
Cell migration
ROCK
Proliferation
Cell contraction
Gene expression
ROCK inhibitor
↑α-SMA
↑col1α2
Apoptosis/survival
Inflammatory response
Myofibroblasts survival
(apoptosis resistance)
Macrophage activation
B and T cell activation
Fibroblast differentiation
into myofibroblasts
Fibrosis
Pro-inflammatory and
pro-fibrotic gene
expression drives disease
MCP-1, MMPs, TIMPs,
TGFβ, CTGF
Increased extracellular
matrix, activation
of fibroblasts and
epithelial cells
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Science Report: Fibrosis continued
Strategic Report
GI-Targeted ROCK inhibitor for the treatment of Crohn’s associated fi brosis
The GI-targeted ROCK project is aimed at treating intestinal fi brosis associated with Crohn’s disease.
Fibrotic tissue can cause stricture formation and obstruction of the intestine often requiring invasive surgical
intervention. Fibrosis commonly recurs in these patients, necessitating further surgeries that can ultimately
result in short bowel syndrome. Approximately 1.5m people globally suffer from Crohn’s disease of which
50% will develop strictures or complications at some point.
There is currently no pharmaceutical therapy available to treat intestinal fi brosis associated with Crohn’s
disease, and furthermore anti-infl ammatory agents used in Crohn’s disease do not halt the progression of
fi brosis. We believe that Redx’s compounds would be fi rst-in-class agents.
Redx’s GI-targeted ROCK inhibitors are restricted to the gastrointestinal tract due to their limited absorption
and rapid enzymatic metabolism of any absorbed material. They have demonstrated very strong anti-fi brotic
effects in GI fi brosis disease models (Fig. 12) along with a good general and cardiovascular safety profi le7 .
A fi rst in class Preclinical Development Candidate is due to be selected in 1H19.
Figure 12: Redx GI-targeted ROCK inhibitor reduces collagen deposition in a murine model of
Crohn’s fi brosis.
Increase of collagen expression, shown in blue with Trichrome Stain, in the DSS treated animals. Treatment with
GI-targeted ROCK inhibitor at 3 mg/kg reduced the deposition of collagen seen as a reduction in staining.
Untreated
2.5% DSS 9 wk
DSS + GI-t ar geted ROCK inhibitor
3 mg/kg QD
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Science Report: Fibrosis continued
ROCK2 selective inhibitor for the treatment of NASH
ROCK2 has been shown to be upregulated in acute infl ammation and in metabolic and fi brotic diseases.
A specifi c role for ROCK2 in the pathogenesis of fi brosis has been demonstrated in mouse models, where
heterozygous ROCK2 knockout mice have reduced disease severity. ROCK2 specifi c inhibitors also show
anti-fi brotic effects in a number of murine fi brosis models.
Redx’s ROCK2 selective inhibitor programme is aimed at treating liver fi brosis associated with the growing
obesity and diabetes epidemic. The build-up of lipids and infl ammation in the liver leads to a condition
known as non-alcoholic steatohepatitis (NASH) which progressively leads to liver fi brosis and ultimately
life-threatening liver cirrhosis (Fig. 13). Redx has developed highly selective ROCK2 compounds that have
an improved profi le compared to competitor ROCK2 selective compounds. The lead compounds have
demonstrated good pharmacokinetic and pharmacodynamic effects in preclinical models and in October
2018 Redx scientists presented the encouraging project progress at a major US scientifi c conference8. Lead
compounds are currently undergoing proof of concept testing in a range of fi brosis disease models with data
expected early in 2019 and the best in class Preclinical Development Candidate is due to be selected 2H19.
Figure 13: Liver injury induced by western diet leads to a fatty liver where fat accumulates in the
liver and causes infl ammation and injury (steatosis).
As this injury continues this leads to scarring and fi brosis and the development of NASH. NASH is a
progressive disease and if untreated the scarring process may continue to cirrhosis where the liver is no
longer functional and the only treatment at this point is liver transplant. We believe our ROCK2 inhibitor will
reduce fi brosis progression and reverse liver infl ammation and fi brosis in NASH patients.
Science Report - References:
1
Bhamra I, Armer R, Bingham M, Eagle C, Edmenson Cook A, Phillips C, Woodcock S. Porcupine inhibitor RXC004 enhances immune response in
pre-clinical models of cancer. 2018 July, Cancer Research 78 (13 Supplement): 3764-3764
2 Spranger S, Gajewski TF. Impact of oncogenic pathways on evasion of antitumour immune responses. Nat Rev Cancer. 2018 Mar;18(3):139-147
3 Wang B, Tian T, Kalland KH, Ke X, Qu Y. Targeting Wnt/β-Catenin Signaling for Cancer Immunotherapy.Trends Pharmacol Sci. 2018
Jul;39(7):648-658.
4 Bollong M. et al, Small molecule-mediated inhibition of myofi broblast trans-differentiation for the treatment of fi brosis PNAS,May 2, 2017,vol.
114,no. 18,4683
5 Meuten T, Hickey A, Franklin K, Grossi B, Tobias J, Newman DR, Jennings SH, Correa M, Sannes PL. WNT7B in fi broblastic foci of idiopathic
pulmonary fi brosis. Respir Res. 2012 Jul 28;13:62.
6 Lam AP, Herazo-Maya JD, Sennello JA, Flozak AS, Russell S, Mutlu GM, Budinger GRS, DasGupta R, Varga J, Kaminski N, Gottard CJ. Wnt
Coreceptor Lrp5 Is a Driver of Idiopathic Pulmonary Fibrosis. Am J Respir Crit Care Med. 2014 Jul 15; 190(2): 185-195
7 Holvoet T, Devriese S, Castermans K, Boland S, Leysen D, Vandewynckel YP, Devisscher L, Van den Bossche L, Van Welden S, Dullaers M,
Vandenbroucke RE, De Rycke R, Geboes K, Bourin A, Defert O, Hindryckx P, De Vos M, Laukens D. Treatment of Intestinal Fibrosis in Experimental
Infl ammatory Bowel Disease by the Pleiotropic Actions of a Local Rho Kinase Inhibitor. Gastroenterology. 2017 Oct;153(4):1054-1067
8 Offer E.P., Guisot, N.E.S., Best, S.A, Pesnot, T., MacFaul, P., Ceccarelli, S., Eckersley, K., Pitt, G.R., Bunyard, P.R., Jones, C.D., Armer, R. Abstract
TH-PO877. ROCK2 inhibitors for the treatment of chronic kidney disease. In ASN Kidney Week, 2018 Oct 23-28, San Diego, CA
9
IPF Webinar for the British Lung Foundation 2012: Dr. Helen Parfrey
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Strategic Report
Redx team working in their
laboratory at Alderley Park,
Cheshire, UK
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Operational Review
The Directors present this Operational Review for the
year ended 30 September 2018 and cover issues not
covered elsewhere in their Strategic review, namely:
Key Performance Indicators, Financial Review and the
Principal Risks and Uncertainties.
The principal activities of the business continue to
be the discovery and development of proprietary,
small molecule drugs to address areas of high, unmet
medical need.
New Management Team
Lisa Anson was appointed as Chief Executive Offi cer
on 1 June 2018 at which time Iain Ross reverted to
Non-executive Chairman from his role as Executive
Chairman. Lisa is an experienced industry leader
following a twenty year career at AstraZeneca Plc
most recently as President of AstraZeneca UK and
was also the President of the Association of British
Pharmaceutical Industries (ABPI) until August 2018.
The new executive team includes Dr Andrew Saunders
who was appointed Chief Medical Offi cer in 2018,
a critical new role in the new management team,
alongside the experience of Dr Richard Armer (Chief
Scientifi c Offi cer). Mr Dominic Jackson (Interim Chief
Financial Offi cer) will step down at the end of January
2019, and Dr James Mead (Chief Financial Offi cer
designate) takes up the role on 1 February 2019. Dr
Matilda Bingham (Head of Research and Operations)
left the business during the year and Mr Nicholas
Adams (Chief Business Offi cer) left the business, post
the reporting period, and their roles are not being
replaced on the Executive team.
Key Performance Indicators (KPIs)
The Group’s key performance indicators include a
range of fi nancial and non-fi nancial measures. The
Board considers pipeline progress, and in particular
progress towards the clinic, to be the main KPI, and
updates about the progress of our research programs
are included in the CEO Report and in more detail
in the Science Report. Below are the fi nancial KPIs
considered pertinent to the business.
Cash at year end
2018
£m
6.5
2017
£m
23.8
2016
£m
5.8
2015
£m
9.4
A considerable amount of expenditure in the year
related to the settling of legacy issues from the
Administration, including Regional Growth Fund (RGF)
clawbacks and creditor claims. The Board works to
ensure that the Group has access to suffi cient funding
to enable it to carry out its full business plan in order
to maximise shareholder value, and as such will be
seeking additional funding during the coming year.
2018
£m
2017
£m
2016
£m
2015
£m
Total operating
expenditure
10.6
15.8
16.5
11.4
The Group has in prior years stated its expectation
of a reduction in operating expenditure by circa £4m
per annum; this has now been achieved. Continued
efforts will be made to maintain rigorous cost control,
reducing expenditure further if possible, whilst seeking
to prioritise resources for scientifi c programs.
2018
£m
2017
£m
2016
£m
2015
£m
Net cash fl ow
(including certain
one-off payments)
(17.3)
18.0
(3.7)
6.5
Refl ecting both the expenditure in the year on scientifi c
research, together with the settling of various legacy
issues connected with Administration.
2018
%
2017
%
2016
%
2015
%
R & D expenditure
(as a proportion
of total operating
expenditure)
70
76
84
83
The Group’s continuing focus is to maximise the
amount of operating expenditure spent on research
and development activities, defi ned as direct R&D
expenditure per note 10 plus scientifi c staff costs
(excluding Board & key management). More recent
years have been affected by increased accommodation
costs, which as noted in the Financial Review, the
Board is taking steps to address. The above is prepared
on a comparable basis to prior years, however going
forward more costs can be attributed to projects and it
is anticipated that this percentage will rise in future.
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Operational Review continued
Strategic Report
Option agreement for Anti-infectives
programme
The successful partnering of one of our Anti-Infective
programmes with Deinove for an initial sum of £129k
increased our focus on the core areas of oncology and
fi brosis and has created liquidity for the Group whilst
retaining further upside value creation.
Cashfl ows
Overall negative net cash fl ow for the year was £17.3m,
(2017: £18.0m infl ow). 2017 saw signifi cant infl ow,
generated from the BTK sale and the share issue. As
previously noted, a signifi cant proportion of the current
year’s outfl ow is with regard to fi nalising legacy issues
caused by the Administration and took place prior to
control being returned to the Directors in November
2017.
Reorganisation
A major reorganisation of the Group took place in
spring 2017, resulting in a signifi cant reduction in
staff numbers. The cost of this was £0.8m. Average
headcount reduced to 131 in 2017 falling further to 52
over the year to 30 September 2018. Actual headcount
at 30 September 2018 was 51. A reorganisation of the
Board following the Group’s exit from Administration
resulted in further non-recurring costs of £0.2m.
Taxation
The Group continues to claim Research and
Development expenditure credits, with £726k received
in the year and with a further £1.1m due at 30
September 2018 (2017: £1.1m).
Financial Review
Financial position
At 30 September 2018, the Group had cash
resources of £6.5m (2017: £23.8m). The Group
exited Administration on 2 November 2017 with a
remaining £13.9m in cash, after a £6.1m clawback of
RGF funding was repaid in October 2017, together
with fi nal costs associated with the Administration.
This signifi cant use of funds in reducing exceptional
liabilities is highlighted in the Consolidated Statement
of Cashfl ows and is legacy in nature.
Cost savings
The Group had targeted £4m of year on year fi xed cost
savings and this target has been signifi cantly exceeded,
with operational costs running at £5.2m less in 2018
versus 2017 noting that 2017’s operating costs
already refl ected some of the restructuring savings and
that 80% of the reduction is overhead related.
Accommodation (Alderley Park)
The Group also set itself the target of re-aligning its
accommodation with its reduced headcount, with a
view to further reduce costs. Agreement in heads of
terms, subject to fi nal contract has been reached with
landlords to reduce the footprint occupied, without cash
penalty through a warrant agreement, from 72,000
sq ft to 31,000 sq ft., a 57% reduction. As a result, an
onerous lease provision of £752k has been established
as described further in note 21. Establishment of the
provision has no cash fl ow consequences in the current
fi nancial year. Signifi cantly, future lease obligation have
been reduced From £13.4m to £6.7m (note 27), and
the benefi t of these savings, together with associated
savings in rates and service charges, which will benefi t
the Group going forward.
Impact of Administration
As detailed elsewhere in the Annual Report, two Group
companies, Redx Pharma Plc and Redx Oncology Ltd
were placed into Administration on 24 May 2017.
The principal fi nancial impacts of this in the current
year were the recognition of the fi nal costs of the
Administration (note 1) of £177k.
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23
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Operational Review continued
Principal Risks and Uncertainties
Redx is a biopharmaceutical Group and, in common
with other companies operating in this fi eld, is subject
to a number of risks and uncertainties. The principal
risks and uncertainties identifi ed by Redx for the year
ended 30 September 2018 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, effi cacy 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
The biotechnology and pharmaceutical industries are
very competitive. The Group’s competitors include
major multinational pharmaceutical companies,
biotechnology companies and research institutions.
Many of its competitors have substantially greater
fi nancial, technical and other resources, such as
larger numbers of 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 that competition may have a
material adverse impact on the Group.
Clinical Trials
The Group does not know whether any future clinical
trials with any of its product candidates will be
completed on schedule, or at all, or whether its ongoing
or planned clinical trials will begin or progress on the
time schedule it anticipates. 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 suffi cient clinical
materials;
delays or failures in obtaining approval from
independent institutional review boards to conduct
a clinical trial at prospective sites; or
delays or failures in reaching acceptable clinical
trial agreement terms or clinical trial protocols with
prospective sites.
The completion of the Group’s 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;
further protocol amendments;
failure of patients to complete the clinical trial;
delays or failures in reaching the number of events
pre-specifi ed in the trial design;
the need to expand the clinical trial;
delays or failures in obtaining suffi cient clinical
materials;
unforeseen safety issues;
lack of effi cacy 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, the Group’s clinical trials may be
suspended or terminated at any time by the MHRA,
other regulatory authorities, or by the Group itself. Any
failure to complete or signifi cant delay in completing
clinical trials for the Group’s product candidates
could harm the commercial prospects for its product
candidates, and therefore, its fi nancial results.
24
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Operational Review continued
Strategic Report
Regulatory
Operational
The Group’s future development and prospects depend
to a signifi cant 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
identifi cation 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 fi nancial performance and reduce the
value of an investment in the Ordinary Shares.
The Board continually monitors these risks and
uncertainties and takes corrective action if considered
necessary.
This report was approved by the Board on
18 November 2018 and signed on its behalf by
Lisa Anson
Chief Executive Offi cer
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 fi nancial condition of the Group.
Intellectual Property (IP)
The Group’s success depends largely 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 suffi ciently 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
confi dentiality of its trade secrets which could have an
adverse effect on its success.
Financial
The Group has a limited operating history, has incurred
signifi cant losses other than in the prior year, and does
not currently 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 future profi ts. The Group may not
be able to raise additional funds that may be needed
to support its product development programs or
commercialisation efforts, and any additional funds that
are raised could cause dilution to existing investors.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
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Governance
Introduction
It is the Chairman’s responsibility, working with
Board colleagues, to ensure that good standards
of corporate governance are embraced throughout
the Group. As a Board, we set clear expectations
concerning the Group’s culture, values and
behaviours.
The Directors acknowledge the importance of high
standards of corporate governance and, given the
Group’s size and the constitution of the Board,
have decided to adopt the principles set out in the
Corporate Governance Code for small and mid-sized
companies published by the QCA in April 2018 (‘‘QCA
Code’’) in advance of the requirement to adopt the
code under AIM rule 50.
The Board comprises fi ve Directors: an independent
Non-Executive Chairman, two full time Executive
Directors and two Non-Executive Directors (both
being independent), refl ecting a blend of different
experiences and backgrounds. The function of the
Chairman is to supervise and manage the Board and
to ensure its effective control of the business. The
Board believes that the composition of the Board
brings a desirable range of skills and experience in
light of the Group’s challenges and opportunities as
a public Company, while at the same time ensuring
that no individual (or a small group of individuals) can
dominate the Board’s decision-making.
The Board meet regularly to review, formulate and
approve the Group’s strategy, budgets, corporate
actions and oversee the Group’s progress towards
its goals. The Board has established the following
committees to fulfi l specifi c functions – Audit, Risk
& Disclosure committee (the ‘‘Audit Committee’’)
and a Remuneration committee (the ‘‘Remuneration
Committee’’) with formally delegated duties and
responsibilities. Each of these committees meet on a
regular basis and at least two times a year. The Board
has elected not to constitute a dedicated nomination
committee, instead retaining such decision-
making with the Board as a whole. This approach is
considered appropriate to enable all Board members
to take an active involvement in the consideration of
Board candidates and to support the Chair in matters
of nomination and succession.
From time to time, separate committees may also be
set up by the Board to consider specifi c issues when
the need arises.
26
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Board of Directors
Governance
Mr Iain Ross
(Chairman)
Mrs Lisa Anson
(CEO)
Mr Dominic Jackson
(Chief Financial Offi cer – Interim)
Iain was appointed Non-Executive
Chairman of Redx in May 2017
assuming the role of Interim Executive
Chairman in October 2017 which
he held until the appointment of Lisa
Anson on 1 June 2018, at which time
he reverted to the role of Non-Executive
Chairman. In addition, he is Chairman of
e-Therapeutics Plc (AIM:ETX), Kazia Ltd
(ASX: KZA / NASDAQ:KZIA) and Biomer
Technology Limited. He is a qualifi ed
Chartered Director, and a Former
Vice Chairman of the Council of Royal
Holloway, London University.
Previously, he has held signifi cant roles
in multi-national companies including
Sandoz, Hoffman La Roche, Reed
Business Publishing and Celltech Group
Plc. He has advised banks and private
equity Groups on numerous company
turnarounds. These include, as CEO
of Quadrant Healthcare, taking the
Company public, signing numerous
collaborations before selling the
business to Elan in 2001. As Chairman
and Chief Executive Offi cer at Allergy
Therapeutics, he re-structured the
Company balance sheet to position
Allergy Therapeutics as a virtually debt
free cash generative company prior to its
subsequent IPO. As Executive Chairman
at Silence Therapeutics Plc (formerly
SR Pharma Plc), he turned the business
around through M&A and established
collaborations with Pfi zer, AstraZeneca
and Dainippon Sumitomo before
completing a merger with Intradigm Inc.
Lisa has been President of
AstraZeneca UK since 2012 and has
signifi cant leadership experience in
pharmaceuticals. Over a 20 year career
at AstraZeneca Plc, Lisa has held a
number of senior management roles in
both the US and the UK including Global
Vice President, Oncology and as Vice
President of emerging brands where she
worked closely with the Research and
Development teams.
Lisa holds an MBA (awarded with
distinction) from INSEAD, France and
a First Class honours degree in Natural
Sciences from Cambridge University
in the UK. Upon graduating she joined
KPMG in London as a management
consultant and then moved to California
where she worked for Salick Health Care
(now Aptium), a California based cancer
disease management company, prior to
joining Zeneca Pharmaceuticals (USA)
in 1998 as a business development
manager. Lisa has also been President
of the Association of the British
Pharmaceutical Industry (ABPI), a
position from which she stepped down
in 2018 in order to assume her current
role. She was a Board member of the
ABPI from 2012 during which time she
has chaired a number of UK industry
committee’s and worked closely with
the UK Government. In 2018 she was
elected to the Board of the Bio Industry
Association (BIA).
Dominic has worked in private equity
since 2007 (DIC Europe, Merrill Lynch
Global Private Equity and latterly for
multiple fi nancial sponsors) and in
M&A prior to that (Deutsche Bank,
PricewaterhouseCoopers).
He has been seconded into portfolio
companies as CFO on numerous
occasions to stabilise distressed core
businesses and implement value
initiatives. Within the healthcare space,
Dominic has completed a variety of
deals as principal including the £450m
sale of IDH to Carlyle, the carve-out and
€485m sale of Euromedic’s Dialysis
division to Fresenius Medical Care
(14x EBITDA), and the refi nancing
and syndication of €565m term debt
tranches within Euromedic’s diagnostic
imaging business. Dominic has extensive
situational distressed experience having
acquired Peverel (UK’s largest property
manager, now Knight Square) for £65m
out of Administration, following which
his secondment into the business
contributed to its successful turnaround
and sequential refi nancings with Electra
Partners and RBS. He was also heavily
involved in the private equity portfolio of
a recent landmark bank work-out as well
as the $8bn restructuring of a Middle
Eastern sovereign wealth fund. Dominic
qualifi ed as a Chartered Accountant
with PricewaterhouseCoopers and is
a member of the Chartered Institute
of Securities and Investment and the
Institute for Turnaround.
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Board of Directors continued
Dr James Mead
(Chief Financial Offi cer Designate)
Mr Peter Presland
(Independent Non-Executive Director)
Dr Bernhard Kirschbaum
(Independent Non-Executive Director)
James will be appointed on 1 February
2019. James has held a variety of highly
relevant Finance leadership roles over a
16 year career with AstraZeneca Plc. As
Chief Financial Offi cer of AstraZeneca
Netherlands – a $200 million turnover
business – he was a core member of
a management team accountable for
delivery of stretching annual P&L targets
and other balanced scorecard objectives
during a period of signifi cant change. As
R&D Portfolio Finance Director he was
responsible for fi nancial analysis of the
entire R&D portfolio in order to support
decision-making at the CEO-chaired
AZ Portfolio Investment Board. He has
been the Finance Director of multiple
clinical development project teams,
guiding assessment of the valuation
impact of key decisions such as clinical
trial design, commercial launch strategy
and product lifecycle management.
Additionally, James has gained capital
markets experience through positions
in AstraZeneca’s Investor Relations and
Corporate Finance teams. James holds
a PhD in Molecular Biology and a First
Class honours degree in Biochemistry,
both awarded by Cardiff University.
He is also an Associate Member of the
Chartered Institute of Management
Accountants.
Peter has over 45 years’ experience in
business, much of that at the highest
levels of management within both public
and private companies. A law graduate at
King’s College, London, he also qualifi ed
as a Chartered Accountant with Arthur
Andersen. In 1980, he joined C E Heath
Plc, a major publicly quoted international
insurance Group, as Group Accountant/
Treasurer and became in 1985 the
youngest ever PLC Director when
appointed Group Finance Director at the
age of 34. He was promoted to become
Heath’s Group Chief Executive in 1990,
and in 1996, he devised the demerger
of C E Heath’s computer services
operations into a separate publicly listed
company, Rebus Group Plc, becoming its
Chief Executive and in 1999 its Executive
Chairman. Shareholders doubled their
money in three years. Since 2001, Peter
has pursued a portfolio non-executive
career. These appointments include
the Chairmanship in 2003 of LINK,
the UK ATM network, where he led a
major corporate governance change
and completed the merger of LINK with
Voca, the provider of the BACS service,
becoming Chairman of VocaLink in
2007. From 2012 to 2015, he served as
Chairman of the Audit and Governance
Committee of East Kent Hospitals NHS
Trust and has recently joined the Audit
and Governance Committee of The
Lord’s Taverners, a high-profi le charity.
Bernd joined the Board in January
2016. Bernd has over 25 years’
experience in pharmaceutical research
and drug development, having held
leadership roles at Merck/Merck Serono,
Sanofi -Aventis, Aventis and Hoechst
Marion Roussel. He has expertise
in a broad range of disease areas
including oncology, immuno-oncology,
immunology, neurological disorders and
cardiometabolic diseases. In the eight
years to 2013, he worked at Merck/
Merck Serono, becoming a member of
the Board and Executive Vice-President,
Global Research & Early Development.
He was responsible 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 successful
growth of the company’s R&D portfolio,
with over 70 programs, doubling the
number of phase II assets in this period.
Bernd is currently a board member
of BioMedX, Protagen Diagnostics,
OMEICOS Therapeutics, Enlivex
Therapeutics and an advisor to the board
of KAHR Therapeutics and FutuRx.
28
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Directors’ Report
Governance
The Directors present their annual report on the affairs of the
Group, together with the fi nancial statements and auditor’s
report for the year ended 30 September 2018. The Corporate
Governance Statement on pages 31 – 35 and the governance
section on page 26 also forms part of this report.
Directors
The Directors who were in offi ce during the year and up to the
date of signing the fi nancial statements, unless stated, were:
Executive
Lisa Anson – Appointed 1 June 2018
Dominic Jackson – Appointed 3 November 2017
Dr Neil Murray – Resigned 3 November 2017
Non-Executive
Iain Ross*
Dr Bernhard Kirschbaum
Peter Presland – Appointed 3 November 2017
Norman Molyneux – Resigned 3 November 2017
* Mr Ross was appointed Interim Executive Chairman on 3 November
2017 and returned to a non-executive capacity on 1 June 2018
The Company maintained Directors’ and offi cers’ 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 on
pages 5 – 25 .
Business review
The Strategic Report on pages 5 – 25 provides a review
of the business, the Group’s trading for the year ended
30 September 2018, key performance indicators and an
indication of future developments and risks and forms part of
this Directors’ Report.
Financial results and dividend
The Group’s loss after tax for the year was £8.845m (2017
profi t £1.528m). The Directors do not recommend the
payment of a dividend. (2017 £nil).
Research and development
The Group is continuing to research products within its
chosen areas 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 fi nancial performance and future developments to
health and safety issues. Copies of both the Annual Report
and Interim Report are made available to all employees.
Information given to the Auditor
Each of the persons who is a Director at the date of approval
of this Annual Report confi rms 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.
Strategic report
The Company has chosen in accordance with Companies
Act 2006, section 414C (11) to set out in the Company’s
strategic report on pages 5 to 25 information required to be
contained in the Directors’ Report by Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008, Sch. 7, where not already disclosed in the Directors’
Report.
Independent Auditor
RSM UK Audit LLP have expressed their willingness to
continue in offi ce as Auditors for the fi nancial year under
review. A resolution to appoint Auditors will be proposed at
the forthcoming Annual General Meeting.
Approved by the board of Directors and signed on behalf of
the board.
Financial instruments
Information regarding Financial instruments can be found in
note 22.
Lisa Anson
Chief Executive Offi cer
18 November 2018
Directors’ interest in share options
Details of the Directors’ interests, share options and service
contracts are shown in the Directors’ Remuneration report.
Redx Pharma Plc
Block 33, Mereside, Alderley Park
Macclesfi eld, SK10 4TG
Company registration number: 07368089
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
29
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Directors’ Responsibilities Statement
The directors are responsible for preparing the Strategic Report, the Directors’
Report and the fi nancial statements in accordance with applicable law and
regulations.
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and fi nancial information included on
the Redx Pharma Plc website.
Legislation in the United Kingdom governing the preparation
and dissemination of fi nancial statements may differ from
legislation in other jurisdictions.
Lisa Anson
Chief Executive Offi cer
Dominic Jackson
Chief Financial Offi cer
Company law requires the directors to prepare group and
company fi nancial statements for each fi nancial year. The
directors are required by the AIM Rules of the London Stock
Exchange to prepare group fi nancial statements in accordance
with International Financial Reporting Standards (“IFRS”) as
adopted by the European Union (“EU”) and have elected under
company law to prepare the company fi nancial statements
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law).
The group fi nancial statements are required by law and IFRS
adopted by the EU to present fairly the fi nancial position and
performance of the group; the Companies Act 2006 provides
in relation to such fi nancial statements that references in
the relevant part of that Act to fi nancial statements giving
a true and fair view are references to their achieving a fair
presentation.
Under company law the directors must not approve the
fi nancial statements unless they are satisfi ed that they give a
true and fair view of the state of affairs of the group and the
company and of the profi t or loss of the group for that period.
In preparing each of the group and company fi nancial
statements, the directors are required to:
a.
b.
c.
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
for the group fi nancial statements, state whether they
have been prepared in accordance with IFRSs adopted
by the EU and for the company fi nancial statements state
whether applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the company fi nancial statements;
d.
prepare the fi nancial statements on the going concern
basis unless it is inappropriate to presume that the group
and the company will continue in business.
The directors are responsible for keeping adequate accounting
records that are suffi cient to show and explain the group’s
and the company’s transactions and disclose with reasonable
accuracy at any time the fi nancial position of the group and
the company and enable them to ensure that the fi nancial
statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the group and
the company and hence for taking reasonable steps for the
30
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Corporate Governance Statement
Governance
The Board believes in the importance of corporate governance and is aware of its
responsibility for overall corporate governance, and for supervising the general
aff airs 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. The Board has
adopted the principles set out in the Corporate Governance
Code for small and mid-sized companies published by the
QCA in April 2018 (‘‘QCA Code’’). This section provides
general information on the Group’s adoption of the QCA
Corporate Governance Code.
Our Strategy, business model and
approach to risk
The Group’s strategy is the commercialisation of novel
medicines for indications for which there are no existing or
only inadequate therapies. The Group’s current focus is on
indications in the fi eld of oncology and fi brotic diseases.
The Group invests its efforts and fi nancial resources into
the process of identifying suitable pharmaceutical product
candidates which it then intends to take through an extensive
development process. The nature of this work is inherently
risky. There is no certainty that any of its product candidates
will progress successfully through preclinical and clinical
trials and become marketable products. Redx’s internal
development expertise and unique knowledge of the
therapeutic areas in which it operates should however allow
it to identify and develop valuable products in a manner that
will substantially reduce, but which cannot eliminate, this risk
in the future. All of the Group’s activities involve an ongoing
assessment of risks and the Group seeks to mitigate such
risks where possible.
The Board has undertaken an assessment of the principal
risks and uncertainties facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity. In addition, the Board has considered
the longer-term viability of the Group including factors such
as the prospects of the Group and its ability to continue in
operation for the foreseeable future. The Board considers that
the disclosures outlined in the Group’s Strategic Report on
pages 5 to 25 , are appropriate given the stage of development
of the business. The Board considers that these disclosures
provide the information necessary for shareholders to assess
the Group’s future viability and potential requirements for
further capital to fund its operations.
Having carried out a review of the level of risks that the Group
is taking in pursuit of its strategy, the Board is satisfi ed that
the level of retained risk is appropriate and commensurate
with the fi nancial rewards that should result from achievement
of its strategy.
Board of Directors
During the year under review there were a number of changes
to the composition of the Board as set out on page 29 .
Following the Group’s exit from Administration on 2 November
2017 the Board was re-structured. On 3 November 201 7 Neil
Murray, Executive Director and CEO and Norman Molyneux
non-executive director both resigned and concurrently Non-
Executive Chairman, Iain Ross was appointed interim Executive
Chairman until Lisa Anson’s appointment as Executive Director
and Chief Executive Offi cer on 1 June 2018, at which time he
reverted to being Non-Executive Chairman. On 3 November
2017 Dominic Jackson was appointed as an Executive Director
and Chief Financial Offi cer. Bernd Kirschbaum remained as an
independent Non -Executive director throughout the period
under review and on 3 November 2017, Peter Presland was
appointed as an independent Non-Executive Director.
As of the date of this Report the Board comprises fi ve
Directors in total: an independent Non-Executive Chairman,
two Executive Directors and two Non-Executive Directors
(both being independent), refl ecting a blend of different
experiences and backgrounds. The skills and experience of the
Board are set out in their biographical details on pages 27 - 28.
The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to
scrutinize performance.
The Board is responsible to the shareholders for the proper
management of the Group and meets typically bi-monthly to
set the overall direction and strategy of the Group, to review
scientifi c, operational and fi nancial performance, and to
advise on management appointments. The Board has also
convened, when necessary, 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. The number of
meeting attended by each Director can be found on page 33 .
There is a clear separation of the roles of Chief Executive
Offi cer (CEO) 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 Offi cer has the
responsibility for implementing the strategy of the Board and
managing the day-to-day business activities of the Group.
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Corporate Governance Statement continued
Time Commitments
On joining the Board, Non-Executive Directors receive a
formal appointment letter, which identifi es the terms and
conditions of their appointment and, in particular, the time
commitment expected of them. A potential Director candidate
(whether an Executive Director or Non-Executive Director)
is required to disclose all signifi cant outside commitments
prior to their appointment. The Board is satisfi ed that both the
Chairman and the other Non-Executive Directors are able to
devote suffi cient time to the Group’s business.
Independence of Directors
The Directors acknowledge the importance of the principles
of the QCA Code which recommends that a company should
have at least two independent Non-Executive Directors.
The Board considers it has suffi cient independence on
the Board and, that all the Non-Executive Directors are
of suffi cient competence and calibre to add strength and
objectivity to the Board, and bring considerable experience
in scientifi c, operational and fi nancial development of
biopharmaceutical products and companies. Specifi cally the
Board has considered and d etermined that since the date of
their respective appointments Bernd Kirschbaum and Peter
Presland are independent in character and judgement and
that they:
• Have not been employees of the Company within the last
fi ve years;
• Have not, or have not within the last three years, a material
business relationship with the Group;
• Have no close family ties with any of the Group’s advisers,
Directors or senior employees
• Do not hold cross directorships or have signifi cant
links with other Directors through involvement in other
companies or bodies
• Do not represent a signifi cant shareholder.
The Company Secretary maintains a register of outside
interests and any potential confl icts of interest are reported
to the Board. The Non-Executive Directors have regular
opportunities to meet without Executive Directors being
present (including time after Board and Committee meetings).
Professional Development
Throughout their period in offi ce, the Directors are continually
updated on the Group’s business, the competitive and
regulatory environments in which it operates, corporate
social responsibility matters and other changes affecting the
Group and the industry it operates in as whole by written
briefi ngs and meetings with senior executives. Directors are
also advised on appointment of their legal and other duties
and obligations as a Director of an AIM-Listed company both
in writing and in face to face meetings with the Company
Secretary and Nominated Adviser (“NOMAD”).
All of the Directors are subject to election by shareholders
at the fi rst Annual General Meeting (‘AGM’) after their
appointment to the Board. Non-Executive Directors will
continue to seek re-election at least once every three years.
Board Committees
In view of the events of the prior year the Board Committees were
streamlined on exit from Administration on 2 November 2017.
As was stated in the 2017 Annual Report there is no longer a
separate Nominations and Corporate Governance Committee
as these matters are deemed suffi ciently important such that
the full Board will address these matters going forward.
The full terms of reference of the Board committees are
published on the Group’s website at www. Redxpharma.com.
Audit Risk & Disclosure Committee
During the year under review, and with effect from the exit
from Administration on 2 November 2017, the members
of the Audit, Risk & Disclosure Committee were Mr Peter
Presland, Mr Iain Ross and Mr Bernd Kirschbaum. Mr
Peter Presland is the Chairman of the Committee. The
responsibilities of the committee include the following:
• Monitoring the integrity of the fi nancial statements of the
Group
• Reviewing accounting policies, accounting treatment and
disclosures in the fi nancial reports
• Reviewing the Group’s internal fi nancial 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.
During the year, the Committee met to review audit planning
and fi ndings with regard to the Annual Report, and planning
and fi ndings from the review of the interim Financial
Statements. In addition it reviewed the appointment of
auditors, and after a tender process involving a number of
fi rms, agreed unanimously to re-elect RSM UK Audit LLP.
Remuneration Committee
During the year under review, and with effect from the exit
from Administration on 2 November 2017, the members of
the Remuneration Committee were Dr Bernd Kirschbaum,
Mr Iain Ross and Mr Peter Presland. Dr Bernd Kirschbaum
is the Chairman 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.
32
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Corporate Governance Statement continued
Governance
• Within the terms of the agreed policy, determining the total
individual remuneration package for Executive Directors.
• an annual budget set by the Board with regular review of
progress;
• Overseeing the evaluation of executive offi cers.
• monthly management accounts;
• Determining bonuses payable under the Group’s cash
• dual bank signatories for all payments with pre-determined
bonus scheme.
authority limits for specifi c Directors and employees;
• Determining the vesting of awards under the Group’s long-
• regular meetings of Executive Directors and Senior
term incentive plans and exercise of share options.
During the year it met to discuss staff remuneration, options
packages, bonus schemes and remuneration packages for
new Directors.
managem ent to review management information and follow
up on operational issues or investigate a ny exceptional
circumstances:
• a risk register;
The Directors’ Remuneration Report is presented on pages 36
to 38 .
• clear levels of authority, delegation and management
structure;
Attendance at meetings
The Board meets regularly on a bi-monthly basis,
together with further meetings as required. The Audit and
Remuneration committees meet as required, but with a
minimum of two meetings each year.
The Directors attended the following meetings during the year:
Audit
Remuneration
6/6
7/7
Mr Iain Ross
Mrs Lisa Anson
(appointed 1 Jun 2018)
Mr Dominic Jackson
(appointed 3 Nov 2017)
Board*
10/10
2/2
9/10
Dr Bernd Kirschbaum
10/10
6/6
Mr Peter Presland
(appointed 3 Nov 2017)
Dr Neil Murray
(resigned 3 Nov 2017)
Mr Norman Molyneux
(resigned 3 Nov 2017)
10/10
6/6
Nil
Nil
7/7
7/7
* No Board meetings were held during the period of Administration
ending on 2 November 2017.
Risk Management and Internal Control
The Board is responsible for the systems of internal controls
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.
Redx is an entrepreneurial company with strong fi nancial and
management controls within the business. Examples of control
procedures include:
• Board review and approval of signifi cant contracts and
overall project spend;
• a Quality Management System to support the clinical trial
activities the Company conducts, ensuring compliance with
clinical trial legislation and guidelines;
• annual audits and other contractor management
procedures to ensure good vendor performance;
• restriction of user access to IT systems; and ongoing review
of the need for IP protection of core assets and processes.
The Company’s system of internal control is designed to
safeguard the Company’s assets and to ensure the reliability
of information used within the business. The system of
controls manages appropriately, rather than eliminates, the
risk of failure to achieve business objectives and provides
reasonable, but not absolute, assurance against material
misstatement or loss.
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 Offi cer and
Chief Executive Offi cer.
The independent Auditor does not perform a comprehensive
review of internal control procedures, but reports to the Audit
Committee on the outcomes of its annual audit process. The
Board confi rms that the effectiveness of the system of internal
control, covering all material controls including fi nancial,
operational and compliance controls and risk management
systems, has been reviewed during the year under review and
up to the date of approval of the Annual Report.
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.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
33
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Corporate Governance Statement continued
Board eff ectiveness and performance
evaluation
The Board is mindful that it needs to continually monitor and
identify ways in which it might improve its performance and
recognises that board evaluation is a useful tool for enhancing
a board’s effectiveness. Alongside the formal annual evaluation,
the Chairman routinely assesses the performance of the Board
and its members and discusses any problems or shortcomings
with the relevant Directors. As a consequence, during the
period, the Board has undertaken a rigorous and formal
annual evaluation of its own performance, balance of skills,
experience, independence, diversity (including gender diversity)
and other factors relevant to its effectiveness (and also of
that of its Committees) and the performance of its individual
Directors. During the review, the Chairman undertook a formal
discussion with the other Non-Executive Directors regarding
the performance of the Board and its Committees and the
other Non-Executive Directors’ own individual contributions
and performance. In preparation, the Chairman solicited the
views of the other Directors, including the completion by each
Director of a confi dential questionnaire.
With regard to the evaluation of the Board itself, the
discussions focused in particular on:
• Board roles and responsibilities;
• the Board’s contribution to developing and testing strategy
and to risk management;
• the composition of the Board (i.e. mix of skills, experience
and expertise);
• the effectiveness of internal and external relationships and
communication;
• the effectiveness in anticipating and responding to
challenges and crises;
• the effectiveness of Board Committees; and the fl exibility of
the Board in dealing with a wide range issues.
The evaluation of the performance of individual Directors
encompassed:
• preparation and meeting attendance;
• preparedness to understand key Company issues;
• quality of contribution at Board and Committee meetings;
• contribution to the development of strategy and risk
management;
• use of previous experience to contribute to key issues and
strategy;
• building successful relationships with other Board
members, management and advisers; and communication
with and infl uence on other Board members, management
and key Shareholders.
In addition to the above, the Chairman was evaluated on his:
• effective leadership of the Board;
• management of relationships and communications with
Shareholders;
• identifi cation of development needs of individual Directors
with a view to enhancing the overall effectiveness of the
Board as a team;
• promotion of the highest standards of corporate
governance; and management of Board meetings and
ensuring effective implementation of Board decisions.
Following the reviews, the Chairman shared his observations
and any actions arising, where appropriate, with the other
Non-Executive Directors and the Executive Directors. These
individual evaluations aim to confi rm that each Director
continues both to contribute effectively and to demonstrate
commitment to the role (including the allocation of necessary
time for preparation and attendance at Board and Committee
meetings and any other duties).
The Chief Executive Offi cer reports to the Board and the
Chairman reviews her performance on behalf of the Board.
The Chief Executive Offi cer reviews the performance of the
other Executive Director. The Executive Directors and the
other Non-Executive Directors are responsible for evaluating
the performance of the Chairman.
Following the 2018 evaluation process, the Company
considers that the Board and its individual members continue
to perform effectively, that the Chairman performs his role
appropriately and that the process for evaluation of his
performance has been conducted in a professional and
rigorous manner.
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 Group endeavours to appoint employees with appropriate
skills, knowledge and experience for the roles they undertake
and thereafter to develop and incentivise staff.
• effectiveness in challenging assumptions, in maintaining
own views and opinions and in following up main areas of
concern;
The Board recognises its 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.
34
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Corporate Governance Statement continued
Governance
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.
The website, www.redxpharma.com, has a section dedicated
to investor matters and provides useful information for the
Company’s shareholders. The Board as a whole is responsible
for ensuring that a satisfactory dialogue with shareholders
takes place, while the Chairman and Chief Executive Offi cer
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
notifi ed via Regulatory Information Service announcements.
All fi nancial reports and statements are available on the
Company’s website.
During the period under review the Board believes that the
communication with the Shareholders has been effective in
that Iain Ross and/or Lisa Anson have had meetings and/or
calls with the majority of institutional shareholders, high net
worth shareholders and during the period there have been
several shareholder briefi ng sessions involving Directors and
senior managers.
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.
The Board is committed to continued engagement with its
shareholders.
The Board believes that the Group has a strong governance
culture and this has been re-inforced by the adoption of the
QCA Code and recognition of the 12 principles of corporate
governance set out in the QCA Code, which the Board
continually considers in a manner appropriate for a company
of its size.
(cid:1)
Iain G. Ross
Chairman
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
35
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Directors’ Remuneration Report
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 benefi t of the Group.
The remuneration of the Executive Directors during the year
2017/18 is set out below.
Basic salary
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 notice to the other. The details of the Directors’
contracts are summarised below:
Date of Contract
Notice period
Lisa Anson
1 June 2018
Dominic Jackson
3 November 2017
6 months
3 months
Basic salaries are reviewed annually. The review process is
managed by the Remuneration Committee with reference to
market salary data, and the Executive Directors’ performance
and contribution to the Group during the year.
Mrs Lisa Anson was appointed CEO and an Executive Director
on 1 June 2018. She is paid £300,000 per annum and
qualifi es for employee benefi ts including participation in the
annual performance bonus and option schemes.
Bonuses
Annual bonuses are based on achievement of Group strategic
and fi nancial 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 has granted share options in the current and
previous years. The share options will vest at various future
dates as described in the table on page 38 . There are no
conditions attached to vesting other than service conditions.
Pension
The Group operates a defi ned contribution pension scheme
which is available to all employees. The assets of the scheme
are held separately from those of the Group in independently
administered funds.
Mr Dominic Jackson was appointed CFO and an Executive
Director, on 3 November 2017. He is paid £100,000
per annum and qualifi es for employee benefi ts including
participation in the annual performance bonus and option
schemes.
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,
bonus, benefi ts or option grants from the Group. The Non-
Executive Directors Letters of Appointment are reviewed by
the Board annually.
36
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Directors’ Remuneration Report continued
Governance
Directors’ remuneration
The Directors received the following remuneration during the year:
Salaries,
bonuses and
fees
£
Pension
contributions
£
Share based
payments
£
Total
2017/18
£
Salaries,
bonuses and
fees
£
Pension
contributions
£
Share based
payments
£
Total
2016/17
£
Executive
L Anson1
D Jackson2
Dr N Murray3
100,000
91,667
243,974
8,787
4,583
949
Non-Executive
Iain Ross4
*1250,000
Dr B Kirschbaum
P Presland5
N Molyneux6
F Armstrong7
P Jackson8
P McPartland9
D Lawrence10
46,000
41,250
3,833
-
-
-
-
-
-
-
-
-
-
-
-
62,875
171,662
22,708
118,958
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
244,923
200,000
10,000
4,021
214,021
250,000
*283,333
46,000
41,250
46,000
-
3,833
*271,000
-
-
-
-
33,000
19,000
23,000
32,604
-
-
-
-
-
-
-
-
-
-
-
83,333
46,000
-
4,021
75,021
12,699
45,699
4,021
23,021
-
-
23,000
32,604
776,724
14,319
85,583
876,626
507,937
10,000
24,762
542,699
L. Anson was appointed as a Director on 1 June 2018.
I. Ross was appointed as a Director on 1 May 2017.
P. Presland was appointed as a Director on 3 November 2017.
1
2 D. Jackson was appointed as a Director on 3 November 2017.
3 Dr N. Murray resigned as a Director on 3 November 2017, payments refl ect contractual obligations.
4
5
6 N. Molyneux resigned as a Director on 3 November 2017.
F. Armstrong resigned as a Director on 20 April 2017.
7
P. Jackson resigned as a Director on 31 March 2017.
8
P. McPartland resigned as a Director on 20 April 2017.
9
10 D. Lawrence resigned as a Director on 14 August 2017.
*1
Includes additional payments as detailed below totalling £120,000 relating to the period as Executive Chairman, and a bonus of £50,000 paid
on 30 June 2018 relating to the successful appointment of, and handover to the new CEO.
In addition to their non-executive Directors’ fees, Mr I Ross and Mr N Molyneux received one-off bonuses of £50,000 and £25,000 respectively to
recognise the additional work undertaken whilst the Company was in Administration. These amounts are included in the remuneration table above.
*2
In addition to Mr N. Molyneux’s remuneration in 2016/17 and 2017/18 disclosed above, £6,000 (2017: £90,000) was paid for
consultancy and secretarial services to Acceleris Capital Ltd, a related party (note 28).
In addition to Dr F. Armstrong’s remuneration in 2016/17 disclosed above, expenses of £2,000 were paid to Dr Frank M.
Armstrong Consulting Ltd, a related party as detailed in note 28.
No compensation for loss of offi ce was paid in the years ended 30 September 2018 or 30 September 2017.
Consequential arrangements upon exiting Administration on 2 November 2017
Dr Neil Murray resigned from the Board and his contractual obligations were met. For the avoidance of doubt, he did not receive
an annual bonus for 2016/17 nor did he receive any compensation for loss of offi ce.
Mr Norman Molyneux resigned from the Board and did not receive any compensation for loss of offi ce.
On 3 November 2017 Iain Ross was appointed Interim Executive Chairman and was paid an additional monthly fee of £15,000
up until one month following the appointment of the CEO. Mr Ross then reverted to being non-executive Chairman.
Mr Ross, Mr Presland and Dr Kirschbaum will not participate in the Group Option Scheme.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
37
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Directors’ Remuneration Report continued
Directors’ shareholdings
The Directors who served during the year, together with their benefi cial interest in the shares of the Company are as follows:
Ordinary shares of 1p each
Executive
L Anson
D Jackson
N Murray
Non-Executive
I Ross
P Presland
B Kirschbaum
N Molyneux
*As at the date of resignation on 3 November 2017.
Directors Share options
At 30 September
2018
At 1 October
2017
-
-
-
-
*1,293,655
1,293,655
600,000
120,000
50,000
*283,436
-
-
-
283,436
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. There are no performance conditions attached to the vesting of these options other
than service conditions. Details of the options are as follows:
At 1 October
2017
Granted during
the period/
(exerc’d)
At 30
September
2018
Price per
share (p)
Date from
which
exercisable
Expiry date
Date of grant
1-June-18
1-June-18
1-June-18
1-June-18
1-June-18
1-June-18
21-Dec-17
21-Dec 17
21-Dec 17
Director
L Anson
D Jackson
N Murray
26-March-15
26-March-15
26-March-15
25,050
24,975
24,975
75,000
N Molyneux
26-March-15
200,475
26-March-15
26-March-15
24,975
24,975
250,425
-
-
-
-
-
-
-
-
-
-
-
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
600,000
3,600,000
3,600,000
166,666
166,667
166,667
500,000
-
-
-
-
-
-
-
-
166,666
166,667
166,667
500,000
25,050
24,975
24,975
75,000
200,475
24,975
24,975
250,425
13.75
2-June-20
1-June-28
20.0
27.0
35.0
42.5
50.0
22.0
33.0
50.0
2-June-20
1-June-28
2-June-20
1-June-28
2-June-20
1-June-28
2-June-20
1-June-28
2-June-20
1-June-28
22-Dec 19
21-Dec-27
22-Dec 19
21-Dec-27
22-Dec 19
21-Dec-27
85.0 27-March-15 26-March-25
85.0 27-March-16 26-March-25
85.0 27-March-17 26-March-25
85.0 27-March-15 26-March-25
85.0 27-March-16 26-March-25
85.0 27-March-17 26-March-25
The options held by N. Murray and N. Molyneux remain for a period of 5 years from their date of resignation.
Bernd Kirschbaum
Chairman of the Remuneration Committee
38
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Independent Auditor’s report
to the members of Redx Pharma Plc
Governance
Opinion
We have audited the fi nancial statements of Redx Pharma
Plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 September 2018 which comprise
the consolidated statement of comprehensive income, the
consolidated statement of fi nancial position, the consolidated
statement of changes in equity, the consolidated statement of
cash fl ows and notes to the consolidated fi nancial statements,
including a summary of signifi cant accounting policies,
the company statement of fi nancial position, the company
statement of changes in equity and notes to the company
fi nancial statements, including a summary of signifi cant
accounting policies. The fi nancial reporting framework that
has been applied in the preparation of the group fi nancial
statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. The fi nancial reporting framework that has been
applied in the preparation of the parent company fi nancial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 “The
Financial Reporting Standard applicable in the UK and Republic
of Ireland (United Kingdom Generally Accepted Accounting
Practice).
In our opinion:
•
the fi nancial 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 2018 and of the group’s loss for the year
then ended;
•
•
•
the group fi nancial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company fi nancial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the fi nancial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
fi nancial statements section of our report. We are independent
of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the
fi nancial statements in the UK, including the FRC’s Ethical
Standard as applied to SME listed entities and we have
fulfi lled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we
have obtained is suffi cient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going
concern
We draw attention to the accounting policy on going concern
on page 49 of the fi nancial statements, which indicates that
the cash fl ow forecast prepared by the directors estimate that
the Group has suffi cient funds to support the current level of
activities into the second quarter of 2019 and therefore needs
to raise additional funds. As stated in the accounting policy
on going concern, these events or conditions, along with the
other matters as set forth on page 49 indicate that a material
uncertainty exists that may cast signifi cant doubt on the
Group’s ability to continue as a going concern. Our opinion is
not modifi ed in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most signifi cance in our audit of the
fi nancial statements of the current period and include the
most signifi cant assessed risks of material misstatement
(whether or not due to fraud) we identifi ed, including those
which had the greatest effect on the overall audit strategy, the
allocation of resources in the audit and directing the efforts
of the engagement team. These matters were addressed in
the context of our audit of the fi nancial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Onerous lease provision
(Refer to page 50 regarding the accounting policy in respect
of provisions, page 52 in respect of critical judgements and
estimates applied by the Directors and note 21 to the fi nancial
statements on page 60 ).
The risk
As disclosed in note 21 the Group has made a provision at
the period end in respect of an onerous leave provision due
to the Group vacating certain leased units. As a consequence,
there is a signifi cant judgement in respect of the value of this
provision at the period end. At the 30 September 2018, the
carrying value of the provision amounted to £782k (2017:
£nil) in the Consolidated Statement of Financial Position.
Our response
We obtained management’s onerous lease provision
assessment and underlying calculations prepared to support
the carrying value of the fi nancial provision. We have audited
these costs, where applicable, by checking back to the existing
lease agreements. In addition, we reviewed and challenged
the assumptions made by the directors in respect of the
overall expected future lease costs, proposed discount rate
and assumed vacancy.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
39
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Independent Auditor’s report to the members of Redx Pharma Plc continued
Carrying value of intra-group balances in
the company balance sheet
(Refer to page 52 regarding the accounting policy in respect
of Trade and other receivables and Group debtors, page 52
in respect of critical judgements and estimates applied by the
Directors and note 9 to the fi nancial statements on page 55 ).
The risk
The Company has material receivables from subsidiary
undertakings that are currently loss making. As a
consequence, there is a signifi cant risk that these are impaired
and need to be written down. At the 30 September 2018,
the carrying value of amounts due from group undertakings
amounted to £13,835k (2017: £4,330k) in the Company
Statement of Financial Position.
Our response
We identifi ed amounts due from each subsidiary undertaking
and discussed with management whether each balance was
recoverable taking into account the strategic plans established
by the board in respect of each subsidiary undertaking.
We also obtained management’s impairment review and
underlying calculations prepared to support the carrying value
of the fi nancial assets. We reviewed forecasts and considered
whether they were consistent with the forecasts prepared
by management in relation to going concern. In addition,
we reviewed and challenged the assumptions utilised in the
model and as many of these were based on publicly available
information, we agreed a sample of these back to supporting
information.
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and
extent of our audit procedures and to evaluate the effects
of misstatements, both individually and on the fi nancial
statements as a whole. During planning we determined a
magnitude of uncorrected misstatements that we judge would
be material for the fi nancial statements as a whole (FSM).
During planning FSM was calculated as £286,000, which
was updated during the course of our audit to £307,000.
We agreed with the Audit Committee that we would report
to them all unadjusted differences in excess of £10,000, as
well as differences below those thresholds that, in our view,
warranted reporting on qualitative grounds.
An overview of the scope of our audit
The audit was scoped to ensure that the audit team obtained
suffi cient and appropriate audit evidence in relation to
signifi cant operations of the Group during the year ended
30 September 2018. This included the performance of full
statutory audits on each of the subsidiary undertakings.
As part of our planning we assessed the risk of material
misstatement including those that required signifi cant auditor
consideration at the component and group level. Procedures
were designed and performed to address the risk identifi ed
and for the most signifi cant assessed risks of material
misstatement, the procedures performed are outlined above
in the key audit matters section of this report.
Other information
The directors are responsible for the other information. The
other information comprises the information included in
the annual report, other than the fi nancial statements and
our auditor’s report thereon. Our opinion on the fi nancial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the fi nancial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the fi nancial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
fi nancial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
Opinions on other matters prescribed by
the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
•
•
the information given in the Strategic Report and the
Directors’ Report for the fi nancial year for which the
fi nancial statements are prepared is consistent with the
fi nancial statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
40
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
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Independent Auditor’s report to the members of Redx Pharma Plc continued
Governance
A further description of our responsibilities for the audit
of the fi nancial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
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
18 November 2018
Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the group
and the parent company and their environment obtained
in the course of the audit, we have not identifi ed material
misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company fi nancial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specifi ed by
law are not made; or
we have not received all the information and explanations
we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 30 , the directors are responsible
for the preparation of the fi nancial statements and for being
satisfi ed that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of fi nancial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the fi nancial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the fi nancial statements
Our objectives are to obtain reasonable assurance about
whether the fi nancial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to infl uence the economic decisions of
users taken on the basis of these fi nancial statements.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
41
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Financial Statements
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Consolidated Statement of
Comprehensive Income
For the year ended 30 September 2018
Financial Statements
Continuing operations
Revenue
Operating expenses
Onerous lease charge
RGF clawback
Costs of Administration
Write-off of derivative instrument
Other Administration costs
Non-recurring reorganisation costs
Derecognition of non-current asset
Release of accrued accommodation expenses
Share based compensation
Other operating income
(Loss)/profi t from operations
Finance costs
Finance income
(Loss)/profi t before taxation
Income tax
Total comprehensive (loss)/profi t for the year attributable to
owners of Redx Pharma Plc
(Loss)/earnings per share (pence) From continuing operations
Basic
Diluted
Note
2
10
21
3
6
1
4
17
5
7
8
9
9
11
12
12
Year ended
30 September
2018
£’000
Year ended
30 September
2017
£’000
129
(10,606)
(752)
-
-
(177)
(215)
-
548
(282)
1,186
(10,169)
(1)
24
(10,146)
1,301
30,474
(15,768)
-
(6,086)
(3,560)
(2,930)
(791)
(641)
-
(13)
1,291
1,976
(368)
38
1,646
(118)
(8,845)
1,528
(7.0)
(7.0)
1.4
1.4
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
43
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Consolidated Statement
of Financial Position
At 30 September 2018
Company No. 7368089
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Current assets
Trade and other receivables
Current tax
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Share-based compensation
Capital redemption reserve
Retained defi cit
Equity attributable to shareholders
Note
14
15
18
19
20
21
21
24
25
2018
£’000
191
423
614
2,023
1,211
6,471
9,705
2017
£’000
222
430
652
2,588
643
23,806
27,037
10,319
27,689
3,803
147
3,950
605
13,362
-
13,362
-
4,555
13,362
5,764
14,327
1,265
33,263
1,162
1
(29,927)
5,764
1,265
33,263
880
1
(21,082)
14,327
The fi nancial statements were approved and authorised for issue by the Board on 18 November 2018 and were signed on its
behalf by :
Lisa Anson
Director
44
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Consolidated Statement
of Changes in Equity
For the year ended 30 September 2018
Financial Statements
At 1 October 2016
Share options exercised
Share issue
Share issue costs
Transactions with owners
in their capacity as owners
Profi t and total comprehensive
income for the year
Share based compensation
Movement in year
At 30 September 2017
Transactions with owners in
their capacity as owners
Loss and total comprehensive
income for the period
Share based compensation
Movement in year
Share
capital
£’000
936
1
328
-
Share
premium
£’000
22,526
69
11,966
(1,298)
329
10,737
-
-
329
1,265
-
-
10,737
33,263
-
-
-
-
-
-
-
-
At 30 September 2018
1,265
33,263
Share
based
payment
£’000
867
Capital
Redemption
Reserve
£’000
Retained
Defi cit
£’000
1
(22,610)
Total
Equity
£’000
1,720
70
12,294
(1,298)
11,066
1,528
13
12,607
14,327
-
-
-
-
1,528
-
1,528
(21,082)
-
-
(8,845)
-
(8,845)
(29,927)
(8,845)
282
(8,563)
5,764
-
-
-
-
-
13
13
880
-
-
282
282
1,162
-
-
-
-
-
-
-
1
-
-
-
-
1
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
45
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Consolidated Statement
of Cash Flows
For the year ended 30 September 2018
Net cash fl ows from operating activities
(Loss)/profi t for the year
Adjustments for:
Income tax
Finance costs
Finance income
Depreciation and amortisation
Share based compensation
Onerous lease provision
Release of accrued accommodation expenses
Derecognition of non-current asset
Write-off of derivative asset
Profi t on disposal of assets
Movements in working capital
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash (used in)/generated by operations
Tax credit received
Interest received
Year ended
30 September
2018
£’000
Year ended
30 September
2017
£’000
Note
(8,845)
1,528
(1,301)
1
(24)
164
282
752
(548)
-
-
(17)
572
(8,963)
(17,927)
727
23
118
368
(38)
327
13
-
-
641
3,560
(107)
(1,185)
8,871
14,096
-
2
Net cash (used in)/generated by operations
(17,177)
14,098
Cash fl ows from investing activities
Purchase of Intangible assets
Sale of property, plant and equipment
Purchase of property, plant and equipment
Net cash (used in) investing activities
Cash fl ows from fi nancing activities
Proceeds from share issue
Share issue costs
Purchase of derivative fi nancial instrument
Receipt from derivative fi nancial instrument
Interest paid
Loan repaid by AMR Centre
LCC loan repaid
Net cash (used in)/from fi nancing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
19
-
23
(132)
(109)
-
-
-
-
(49)
-
-
(49)
(17,335)
23,806
6,471
(121)
124
(33)
(30)
12,364
(1,298)
(3,666)
106
(1,551)
25
(2,000)
3,980
18,048
5,758
23,806
As at 30 September 2017, £23.7m of the above amount was held in bank accounts operated by FRP Advisory LLP. All cash from
these accounts was returned to the control of the directors of the relevant companies on exit from Administration.
46
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Notes to the Financial Statements
Financial Statements
Accounting policies
The principal accounting policies adopted in the preparation of these fi nancial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
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 fi nancial 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 2018.
The IASB and IFRIC have issued the following standards and interpretations which the Directors consider relevant to the group
and have been adopted during the year. The adoption of these standards and interpretations has not had a material impact on the
Group.
Standard
Key requirements
Amendments to IAS 7,
Disclosure Initiative
The amendments require additional disclosures to be made regarding changes in liabilities arising
from fi nancing activities to enable users of fi nancial statements to better understand changes in the
Group’s debt. Having reviewed the Group’s liabilities, the Directors do not expect adoption of these
amendments to have a material impact on the Group.
Amendments to IAS
12, Recognition of
Deferred Tax
The amendments clarify that an entity needs to consider whether tax law restricts the sources of
taxable profi ts against which it may make deductions on the reversal of unrealised losses on debt
instruments measured at fair value. As the Group currently has no debt instruments measured at fair
value, the Directors do not expect adoption of these amendments to have an impact on the Group.
New standards, amendments and interpretations issued but not effective for the fi nancial year beginning 1
October 2017 and not early adopted.
The IASB and IFRIC have issued the following standards and interpretations with effective dates as noted below:
Standard
Key requirements
IFRS 9, Financial
Instruments
Annual IFRS
Improvements
Process (2015-17)
IFRS 15, Revenue
from Contracts with
Customers
This standard replaces IAS 39. Whilst the standard changes the basis of
measurement of fi nancial assets, introduces a new impairment model
and changes the hedge accounting provisions the directors do not expect
the implementation of the new standard to have a material impact on our
reported results or fi nancial position.
The 2017 Annual improvements cycle covered amendments to IFRS 1
First-time Adoption of International Financial Reporting Standards, IAS 28
Investments in Associate s and Joint Ventures and IFRS 12 Disclosure of
Interests in Other Entities.
The standard specifi es how and when a company will recognise revenue
as well as requiring such entities to provide users of fi nancial statements
with more informative, relevant disclosures. The standard provides a
single, principles based, fi ve-step model to be applied to all contracts
with customers. Having considered the impact of the new standard on the
recognition of the income from the sale of the BTK programme, the directors
do not expect the implementation of the new standard to have a material
impact on how it is recognised and measured revenue in the current period.
Effective date
(for annual periods
beginning on or after)
1 January 2018
1 January 2019
1 January 2018
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
47
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Notes to the Financial Statements continued
Standard
Key requirements
Effective date
(for annual periods
beginning on or after)
1 January 2019
IFRS 16, Leases
Amendments to IFRS
2: Classifi cation and
Measurement of
Share-based Payment
Transactions
IFRIC 22, Foreign
Currency Transactions
and Advance
Consideration
The standard requires lessees to account for all leases under a single on-
balance sheet model in a similar way to fi nance 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. The group is still assessing the impact of this standard
on the fi nancial statements and have not yet quantifi ed this.
The amendment clarifi es how to account for certain types of share-based
payment transactions and provide requirements on the accounting for:
1 January 2018
– the effects of vesting and non-vesting conditions on the measurement of
cash-settled share-based payments;
– share-based payment transactions with a net settlement feature for
withholding tax obligations; and
– a modifi cation to the terms and conditions of a share-based payment that
changes the classifi cation of the transaction from cash-settled to equity-
settled.
The interpretation clarifi es that in determining the spot exchange rate to
use on initial recognition of a related asset, expense or income on the
derecognition of a non-monetary asset or liability relating to advance
consideration, the date of the transaction is the date on which an entity
initially recognises the non-monetary asset or liability arising from the
advance consideration. As the Group has not been involved in any
transactions including advance consideration in foreign currencies, the
Directors do not expect adoption of this interpretation to have an impact on
the Group.
1 January 2018
IFRIC 23 Uncertainty
over Income Tax
Treatment
The interpretation is to be applied to the determination of taxable profi t (tax
loss), tax bases, unused tax losses, unused tax credits and tax rates, when
there is uncertainty over income tax treatments under IAS 12.
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 fi nancial statements incorporate the fi nancial 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 the subsidiary. Specifi cally, 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. During the period of Administration, Redx Pharma
Plc retained control of all its’ subsidiary undertakings within the elements of control listed above.
Where necessary, adjustments are made to the fi nancial 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 fl ows 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 or to 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 profi t or loss as incurred.
48
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Notes to the Financial Statements continued
Financial Statements
At the acquisition date, the identifi able 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 benefi t arrangements are recognised and
measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefi ts’ respectively; and
assets (or disposal groups) that are classifi ed 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 identifi able assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date
amounts of the identifi able 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 profi t 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 the Going Concern Basis of Accounting and Reporting on Solvency Risks – Guidance for directors of
companies that do not apply the UK Corporate Governance Code”.
The Group and Parent Company are subject to a number of risks similar to those of other development stage pharmaceutical
companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks
associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the
attainment of profi table operations is dependent on future uncertain events which include obtaining adequate fi nancing to fulfi l the
Group’s commercial and development activities and generating a level of revenue adequate to support the Group’s cost structure.
The Group made a net loss of £8.8m during the year, and at 30 September 2018 had total equity of £5.8m including an
accumulated defi cit of £29.9m. As at that date, the Group had cash and cash equivalents of £6.5m.
The Directors have prepared detailed fi nancial forecasts and cash fl ows looking beyond 12 months from the date of the approval
of these fi nancial statements. In developing these forecasts, the Directors have made assumptions based upon their view of
the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that
the cash held by the Group together with known receivables will be suffi cient to support the current level of activities into the
second quarter of 2019. The Directors are continuing to explore sources of fi nance available to the Group and based upon initial
discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to secure
suffi cient cash infl ows for the Group to continue its activities for not less than 12 months from the date of approval of these
fi nancial statements; they have therefore prepared the fi nancial statements on a going concern basis.
Because the additional fi nance is not committed at the date of approval of these fi nancial statements, these circumstances
represent an uncertainty as to the Group’s ability to continue as a going concern. Should the Group be unable to obtain further
fi nance such that the going concern basis of preparation were no longer appropriate, adjustments would be required including to
reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.
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 Offi cer 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 identifi able 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. Therefore, the Directors have determined that there is only one reportable
segment under IFRS8.
Currencies
(a) Functional and presentational currency
Items included in the Financial Statements are measured using the currency of the primary economic environment in which
the Company and its subsidiaries operate (“the functional currency”) which is UK sterling (£). The Financial Statements are
accordingly 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 fl uctuate signifi cantly. 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 Consolidated Statement of Comprehensive income. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
49
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Notes to the Financial Statements continued
Revenue
Revenue is measured at the fair value of the consideration received or receivable.
Revenues from the sale of intellectual property, where there are no obligations subsequent to delivery, are recognised when
signifi cant risks and rewards have transferred which is considered to be the point at which all patents and other information in
accordance with the substance of the agreement are handed over.
Revenues from the grant of an option over a license agreement, where there are no obligations subsequent to the granting of the
option, are recognised as soon as all information in accordance with the substance of the agreement is handed over.
Income received as a contribution to on-going costs, together with grant income, is treated as Other operating income within the
Consolidated Statement of Comprehensive income.
Government grants
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 fi nancial support with no future related costs are recognised in the period in which they become
receivable.
Provisions
Where, at the reporting date, the Group has a present obligation (legal or constructive) as a result of a past event and it is probable
that the Group will settle the obligation, a provision is made in the statement of fi nancial position. Provisions are made using best
estimates of the amount required to settle the obligation and are discounted to present values using a pre-tax rate that refl ects
current market assessments of the time value of money and the risks specifi c to the obligation. Changes in estimates are refl ected
in profi t or loss in the period they arise.
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 Consolidated 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 any deferred tax assets or liabilities are settled. It is charged or credited in the Consolidated 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.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the fi nancial information and the corresponding tax bases used in the computation of taxable income, and is
accounted for using the liability method.
Deferred tax liabilities are 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 in future accounting periods 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.
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, Intellectual property
(IP) and goodwill to determine whether there is any indication that those assets have suffered an impairment loss. 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 fl ows 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. Furthermore, the Directors review at each reporting date the carrying value of Goodwill in accordance with IAS 36.
50
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Notes to the Financial Statements continued
Financial Statements
In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that
refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimates of future
cash fl ows 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 fi rst used, as follows:
–
Laboratory Equipment – 2 or 3 years
– Computer Equipment – 2 or 3 years
–
Leasehold improvements – over the term of the lease
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 Consolidated Statement of Comprehensive Income.
Operating leases
Leases in which a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed as operating
leases. Rentals payable under operating leases (net of any incentives received from the lessor) are charged to the Consolidated
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.
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 programmes, 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 benefi ts will fl ow to the Group. The Group does not currently
have any such internal development costs that qualify for capitalisation as intangible assets.
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 benefi ts;
adequate technical, fi nancial 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 classifi ed 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.
Purchased intangible assets are capitalised even if they have not yet demonstrated technical feasibility. The intangible asset
relating to intellectual property rights for the programme purchased from Amakem in 2017 is estimated to have a useful life of 20
years, and is amortised over this period.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
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Notes to the Financial Statements continued
Pension costs
The Group operates a defi ned contribution pension scheme for the benefi t of its employees. The Group pays contributions into an
independently administered fund via a salary sacrifi ce arrangement. The costs of providing these benefi ts are recognised in the
Consolidated 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 Consolidated 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 fi nancial liabilities are recognised in the Group’s Consolidated 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 fl ows from the fi nancial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specifi ed in the contract is discharged, cancelled or expired.
(a) Other receivables
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 Consolidated 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 and at bank, demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignifi cant 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
The Directors consider there to be no signifi cant accounting judgements, however critical accounting estimates are set out in the
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 signifi cant 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 7 and 26.
(b) Goodwill
The goodwill arose on the original purchase of the business and assets of Bradford Pharma in 2012. The Directors consider
the goodwill to be intrinsic to the whole Group’s on-going business. Goodwill is not amortised but each year the Directors
undertake a review for potential impairment, which requires them to make assumptions about key variables and forecasts.
52
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Notes to the Financial Statements continued
Financial Statements
(c) Onerous lease provision
As a result of a change in the accommodation occupied by the Group, the Directors consider that a provision is required in
respect of an onerous lease (note 21). In calculating the provision required, using a discounted cash fl ow model, the Directors
were required to make assumptions regarding an appropriate discount rate and likely occupancy levels which could be
achieved by way of sub-let or license.
1. Administration
On 24 May 2017, two companies within the Group, Redx Pharma Plc and Redx Oncology Limited were placed into Administration
as a result of the default on repaying a loan from Liverpool City Council, which was subsequently repaid in full together with
accrued interest in August 2017 (see the Consolidated Statement of Cash Flows). FRP Advisory LLP were appointed as
Administrators. As at 30 September 2017 those companies remained in Administration. They exited Administration on 2
November 2017, when control was returned to the Directors. The costs directly associated with the Administration, principally
Administrators’ costs, legal costs and taxation costs, have been separately disclosed on the face of the Consolidated Statement of
Comprehensive income, and total £0.18m. (2017: £2.93m).
2. Revenue
In August 2017, the Group sold its BTK inhibitor drug development programme and related IP to Loxo Oncology Inc. for $40m.
The sale included certain patents, intellectual property, contracts for product manufacture, and physical materials relating to that
program.
In March 2018, the Group granted an option for a license agreement on its NBTI programme to Deinove, a French drug discovery
company.
Option fees
Sale of scientifi c programme and related IP
2018
£’000
129
-
129
2017
£’000
-
30,474
30,474
3. Clawback of Regional Growth Fund grant funding
The Group has, in past years, received Regional Growth Funds (RGF) grants administered by the Department of Business, Energy
and Industrial Strategy of the UK Government. At the end of the prior year the Group had received total grants as follows:
RGF 2
RGF 3
RGF 5
2018
£’000
-
-
-
-
2017
£’000
5,920
4,700
3,007
13,627
Under the terms of the grant awards, clawback amounts totalling £9.7m became repayable on Redx Pharma Plc entering
Administration. During the course of the Administration, a full and fi nal settlement was reached in the sum of £6.1m. This amount
is included within Trade and Other Payables, Note 20. It was repaid in October 2017, as part of the exit from Administration.
4. Reorganisation costs
In March 2017, the Board of Directors agreed a proposal to undertake a restructuring of the Group, leading to a signifi cant
reduction in headcount across all areas of operation. The non- recurring costs relating to Directors, incurred in the restructuring of
the Board were £215,000. The 2017 costs of £791,000 related to the wider restructuring of the Group.
5. Release of accrued accommodation expenses
As a result of a positive outcome from negotiations regarding legacy accommodation costs, an accrual for potential expenses of
£548,000 is no longer required, and has been released. (2017: nil).
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
53
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Notes to the Financial Statements continued
6. Write off of Derivative fi nancial instrument
On 1 March 2017 the Company issued 11,500,000 new ordinary shares of 0.1p each (“Ordinary Shares”) at a price of 37.5p per
share to Lanstead Capital for £4,312,500. The Company simultaneously entered into an equity swap with Lanstead for 85 per cent
of these shares with a reference price of 50p per share (the “Reference Price”). The equity swap was for an 18-month period ending
in October 2018. All 11,500,000 Ordinary Shares were allotted with full rights on the date of the transaction. Of the subscription
proceeds of £4,312,500 received from Lanstead, £3,665,625 (85 per cent) was invested by the Company in the equity swap.
Investment in the equity swap was a condition of the placing with Lanstead.
In the period to 24 May 2017, which was the date Redx Pharma Plc entered Administration, £106,000 had been received by the
Group under the terms of the swap.
As a consequence of entering Administration, the terms of the equity swap were such that it terminated with no further benefi t to
the Company. The remaining balance of £3.56m was therefore written off.
7. Share-based compensation
Share options have been issued to certain Directors and staff, and the charge arising is shown below. The fair value of the options
granted has been calculated using a Black Scholes model. There are no further conditions attached to the vesting of the options
other than employment service conditions. Further information on options is given in Note 26.
Outstanding at the beginning of the year
Options exercised in period
Options forfeited in period
Options granted and vesting in future periods
Outstanding at the end of the year
2018
Number
2017
Number
2,963,417
3,907,784
-
(173,854)
7,360,000
(145,319)
(799,048)
-
10,149,563
2,963,417
Weighted average exercise price information is given in Note 26.
The weighted average share price at the date of exercise of options in the prior year was 56.43p.
Charge to Statement of Comprehensive Income in period
£’000
282
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 (based on historic information)
Assumed share price at grant date
Exercise price
8. Other operating income
Reimbursement of costs
Government grants receivable
RDEC income
£’000
13
40%
£
40%
£
0.1375 to 0.85
0.415 to 0.85
0.1375 to 0.85
0.33 to 0.85
2018
£’000
1,213
-
(27)
1,186
2017
£’000
278
377
636
1,291
54
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Notes to the Financial Statements continued
Financial Statements
9. Finance expense and fi nance income
Finance expense
Loan interest
Other interest and similar charges
Finance income
Bank and other short term deposits
Loan interest
10. (Loss)/profi t before taxation
The following items have been included in arriving at (loss)/profi t before taxation
Research and development
Staff costs – Note 13 (excluding share based compensation,
reorganisation & relocation costs)
Establishment and general:
Depreciation of owned property, plant and equipment
Amortisation of intangible assets
Operating leases on land and buildings
Operating leases – other
Exchange losses on translation
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
Other services – interim review
11. Income tax
Current income tax
Corporation tax
Research and Development Expenditure credit
Adjustment in respect of previous periods
Income tax charge per the Consolidated Statement of Change in Income
2018
£’000
-
1
1
24
-
24
2018
£’000
5,732
3,296
157
7
1,365
-
3
13
23
10
2017
£’000
319
49
368
2
36
38
2017
£’000
8,168
5,321
327
-
1,423
143
329
13
34
10
10,606
15,768
2018
£’000
50
-
(1,351)
(1,301)
2017
£’000
124
-
(6)
118
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
55
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Notes to the Financial Statements continued
The difference between the total tax shown above and the amount calculated by applying the standard rate of UK corporation tax
to the (loss)/profi t before tax is as follows:
(Loss)/profi t before tax
(Loss)/profi t on ordinary activities multiplied by standard
rate of corporation tax in the UK of 19% (2017: 19.5%)
Effects of:
R&D expenditure credits
Expenses not deductible for tax purposes
Adjustment in respect of previous periods
Deferred tax losses not recognised/(utilised)
Total taxation
12. (Loss)/earnings per share
2018
£’000
(10,146)
(1,928)
50
299
(1,351)
1,629
(1,301)
2017
£’000
1,646
321
124
1,015
(6)
(1,336)
118
Basic (loss)/earnings per share is calculated by dividing the total comprehensive loss 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 exercise of share options.
The basic and diluted calculations are based on the following:
(Loss)/profi t for the period attributable to the owners of the Company
Weighted average number of shares
– basic
Weighted average number of shares
– diluted
(Loss)/earnings per share – basic
(Loss)/earnings per share – diluted
2018
£’000
(8,845)
2017
£’000
1,528
Number
Number
126,447,914
113,022,840
126,447,914
113,046,401
Pence
(7.0)
(7.0)
Pence
1.4
1.4
The loss and the weighted average number of shares used for calculating the diluted loss per share in 2018 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.
13. Employees and key management
Staff costs (including Directors) comprise
Wages and salaries
Social security costs
Pension costs
Non-recurring reorganisation costs (Note 4)
Total employee related costs
2018
£’000
2,821
349
126
3,296
215
3,511
2017
£’000
4,538
467
231
5,236
791
6,027
56
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Notes to the Financial Statements continued
Financial Statements
2018
number
2017
number
Number of employees
Average number of employees (including Directors)
Management & Admin
R&D – Chemistry
R&D – Biology
R&D – Analytical
Directors’ remuneration
Short term remuneration
Pension costs
14
15
17
6
52
2018
£’000
777
14
791
Retirement benefi ts are accruing to 3 Directors (2017: 1)
Further information relating to Directors remuneration can be found in the Remuneration Report on page 36 .
Key management (including Directors)
Short term remuneration
Social security costs
Pension costs
Share based compensation
2018
£’000
1,362
144
45
170
1,721
23
57
36
15
131
2017
£’000
508
10
518
2017
£’000
1,243
154
61
18
1,476
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 benefi ts
Pension contributions
2018
£’000
250
-
250
2017
£’000
200
10
210
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
57
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Notes to the Financial Statements continued
14. Property, plant and equipment
Leasehold
Improvements
£’000
Laboratory
equipment
£’000
Computer
equipment
£’000
Cost
At 1 October 2016
Additions
Disposals
At 30 September 2017
At 1 October 2017
Additions
Disposals
At 30 September 2018
Depreciation
At 1 October 2016
Charge for the year
Disposals
At 30 September 2017
At 1 October 2017
Charge for the year
Disposals
At 30 September 2018
Net book value
At 30 September 2018
At 30 September 2017
At 1 October 2016
15. Intangible Assets
Cost
At 1 October 2016
Additions
At 30 September 2017
At 1 October 2017
Additions
At 30 September 2018
Accumulated impairment
At 1 October 2016
Impairment
At 30 September 2017
At 1 October 2017
Amortisation
At 30 September 2018
Net carrying value
At 30 September 2018
At 30 September 2017
114
-
-
114
114
-
-
114
2
11
-
13
13
12
-
25
89
101
112
1,072
32
(191)
913
913
126
(33)
1,006
786
243
(174)
855
855
82
(28)
909
97
58
286
310
1
(22)
289
289
6
(23)
272
175
73
(22)
226
226
63
(22)
267
5
63
135
Intellectual
property
£’000
Goodwill
£’000
-
121
121
121
-
121
-
-
-
-
7
7
114
121
309
-
309
309
-
309
-
-
-
-
-
-
309
309
Total
£’000
1,496
33
(213)
1,316
1,316
132
(56)
1,392
963
327
(196)
1,094
1,094
157
(50)
1,201
191
222
533
Total
£’000
309
121
430
430
-
430
-
-
-
-
7
7
423
430
58
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Notes to the Financial Statements continued
Financial Statements
The goodwill arose on the original purchase of the business and assets of Bradford Pharma in 2012. The Directors consider 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 fl ow model, using the agreed budgets and forecasts up
to September 2020. 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 given the Groups historic capital costs.
Based on the results of the above detailed testing, the Board do not believe that any impairment under IAS 36 is required.
Purchased intellectual property is estimated to have a useful life of 20 years. Because of the date of purchase, and the sums
involved, the Directors decided to commence amortisation from 1 October 2017.
16. Subsidiaries
A list of the signifi cant investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest
is given in note 8 to the Company’s separate fi nancial statements.
17. Derecognition of non-current receivable
Loan
Derecognition
2018
£’000
-
-
-
2017
£’000
641
(641)
-
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 only repayable on the sale, listing, or change of control of Redag
Crop Protection Ltd.
At 30 September 2017, the total amount outstanding (including accrued interest), was £821k. The fi nancial statements refl ected
that value less a fair value adjustment made at 30 September 2016 amounting to £180k. Following review, and as a result of the
conditionality attached to the repayment of the loan, the Directors derecognised it as an asset in accordance with International
Accounting Standards. There have been no further changes in the current year.
Whilst the loan has been de-recognised as an asset, the Directors do not consider it to be extinguished and will continue to seek
full repayment under its terms.
18. Trade and other receivables
VAT recoverable
Other receivables
Accrued income
Prepayments
2018
£’000
159
772
46
1,046
2,023
2017
£’000
915
712
-
961
2,588
The Directors believe that the carrying value of other receivables represents their fair value.
Details of the Group’s credit risk management policies are shown in Note 22. The Group does not hold any collateral as security
for its other receivables.
Included within Other receivables is an amount of £219,000 which is past due, the Directors continue to consider that it is recoverable.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
59
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Notes to the Financial Statements continued
19. Cash and cash equivalents
Cash at bank and in hand
2018
£’000
6,471
6,471
2017
£’000
23,806
23,806
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.
At 30 September 2017, £23.7m of the above amount was held in bank accounts operated by FRP Advisory LLP. All cash from
these accounts was returned to the control of the Directors of the relevant companies on exit from Administration.
20. Trade and other payables
Trade payables
Employee taxes and social security
Other payables
RGF Clawback (see Note 3)
Accruals
2018
£’000
1,685
177
30
-
1,911
3,803
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.
21. Onerous lease provision
Current
Brought forward
Recognised in the year
Carried forward
Non-current
Brought forward
Recognised in the year
Carried forward
2018
£’000
-
147
147
-
605
605
752
2017
£’000
3,991
201
151
6,085
2,934
13,362
2017
£’000
-
-
-
-
-
-
-
As at 30 September 2018, the Group no longer occupied the premises at Block 3 Alderley Park, Macclesfi eld, having relocated
all its activities to Block 33. On this basis the Director’s believe the lease for Block 3 fulfi ls the criteria to be regarded as onerous
under International Accounting Standard 37.
Following discussions with the landlord, the outstanding period of liability for the lease on Block 3 has been agreed at 2 years
(previously over 6 years) in heads of terms, subject to fi nal contract. Total potential costs relating to the remaining portion of this
lease (rent & service charges) amount to £1.47m. The Directors estimate that £0.72m of this expenditure can be recovered via
existing sub-leases and licenses. Accordingly a provision of £0.75m has been recognised. Given the short timescale involved, no
discount rate has been applied.
In total, agreement in the Heads of Terms, has been reached to reduce the footprint leased by the Group, without cash penalty
through a warrant agreement, from 72,000 sq ft to 31,000 sq ft., a 57% reduction. Total future lease obligations have been
reduced from £13.4m to £6.7m (note 27), and the benefi t of these savings, together with associated savings in rates and service
charges, which will benefi t the Group going forwards.
60
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Notes to the Financial Statements continued
Financial Statements
22. Financial instruments
The Group’s fi nancial instruments comprise 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 fi nancial instruments is to fi nance the
Group’s operations.
Classes and fair values of fi nancial instruments are as follows:
Loans and receivables
Other receivables
Cash and cash equivalents
Financial liabilities measured at amortised cost
Trade payables
Other payables
RGF clawback
The principal fi nancial risks faced by the Group are:
Currency risk
Carrying value
2018
£’000
Carrying value
2017
£’000
279
6,471
6,750
1,685
30
-
1,715
200
23,806
24,006
3,991
151
6,085
10,227
The Group’s exposure to foreign currency risk is limited; as most of its invoicing and payments are denominated in Sterling.
Accordingly, no sensitivity analysis is presented in this area as it is considered immaterial. In the prior year, revenue generated
from the disposal of the BTK programme was originally denominated in US$. It was converted to Sterling by the Administrators at
the rate ruling on the day of receipt.
Market risk
The Group’s activities expose it primarily to the fi nancial 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 fi nancial assets table. 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 cash fl ow
forecasts and medium term working capital projections.
Capital management
The Group considers capital to be its 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.
Financial risk factors
Accounts receivable and accounts payable, arising from normal trade transactions, are expected to be settled within normal credit terms.
All of the Group’s fi nancial liabilities have a contractual maturity within one year. (2017: all within one year).
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
61
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Notes to the Financial Statements continued
23. Deferred tax
Liabilities
At 30 September 2017 and 2018
Accelerated
capital
allowances
£’000
-
Other
£’000
-
Total
£’000
-
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (2017:17%). Deferred tax
assets in relation to losses carried forward of £6.8m, (2017: £5.1m) which represent trading losses carried forward, have not been
recognised on the grounds that there is insuffi cient evidence of suffi cient taxable trading profi ts arising in the future to allow recovery.
24. 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
Total movement in year
Share issues
2018
Numbers
2017
Numbers
126,477,914
126,477,914
£’000
£’000
1,265
1,265
-
-
329
329
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). The weighted average share price on this date was £0.56.
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 £12.36m.
25. Share premium
Brought forward
Share issue
Share issue costs
Exercise of share options
2018
£’000
33,263
-
-
-
33,263
2017
£’000
22,526
11,966
(1,298)
69
33,263
Description of other reserves:
Share premium
Amount subscribed for share capital in excess of nominal value.
Share based payment
The share based payment reserve arises as the expense of issuing share-based payments is
recognised over time (share option grants).
Capital redemption reserve
A statutory, non-distributable reserve into which amounts are transferred following the
redemption or purchase of a company’s own shares.
Retained defi cit
The retained defi cit records the accumulated profi ts and losses less any subsequent elimination
of losses, of the Group since inception.
62
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Notes to the Financial Statements continued
Financial Statements
26. Share based payments
Movements on share options during the period were as follows:
Exercise
Price per
share
30
September
2017
Granted
Exercised
Lapsed/
Cancelled
30
September
2018
Date from
which
exercisable
Expiry
date
50p
50p
50p
50p
50p
50p
56p
56p
56p
85p
85p
85p
33.2p
42.5p
42.5p
42.5p
22p
33p
50p
13.75p
20p
27p
35p
42.5p
50p
Total
36,675
36,675
36,675
131,650
131,650
131,650
78,875
78,875
78,875
1,223,300
187,100
178,775
432,642
66,666
66,667
66,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,253,320
1,253,339
1,253,341
600,000
600,000
600,000
600,000
600,000
600,000
2,963,417
7,360,000
Weighted
average
exercise price
66.29p
33.27p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,675
27.03.2015
26.03.2025
36,675
17.06.2015
26.03.2025
36,675
17.06.2016
26.03.2025
131,650
26.03.2016
26.03.2025
131,650
26.03.2017
26.03.2025
131,650
26.03.2018
26.03.2025
78,875
27.03.2015
26.03.2025
78,875
01.09.2015
26.03.2025
78,875
01.09.2016
26.03.2025
1,223,300
27.03.2015
26.03.2025
187,100
27.03.2016
26.03.2025
178,775
27.03.2017
26.03.2025
(113,854)
318,788
01.05.2019
26.02.2026
-
-
-
66,666
01.04.2017
26.03.2025
66,667
01.04.2018
26.03.2025
66,667
01.04.2019
26.03.2025
(20,000)
1,233,320
22.12.2019
22.12.2027
(20,000)
1,233,339
22.12.2019
22.12.2027
(20,000)
1,233,341
22.12.2019
22.12.2027
-
-
-
-
-
-
600,000
02.06.2020
01.06.2028
600,000
02.06.2020
01.06.2028
600,000
02.06.2020
01.06.2028
600,000
02.06.2020
01.06.2028
600,000
02.06.2020
01.06.2028
600,000
02.06.2020
01.06.2028
(173,854)
10,149,563
33.82p
42.90p
The number of exercisable share options at 30 September 2018 was 2,464,108 and their weighted average exercise price was 72.74p.
Subsequent to the year end a warrant for 750,000 options was issued.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
63
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Notes to the Financial Statements continued
During the prior year:
Exercise
Price per
share
30
September
2016
Granted
Exercised
50p
50p
50p
50p
50p
50p
50p
56p
56p
56p
85p
85p
85p
33.2p
42.5p
42.5p
42.5p
42.5p
Total
Weighted
average
exercise price
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
3,907,784
59.59p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Lapsed/
Cancelled
30
September
2017
Date from
which
exercisable
Expiry
date
-
-
-
36,675
27.03.2015
26.03.2025
36,675
17.06.2015
26.03.2025
36,675
17.06.2016
26.03.2025
(60,000)
(30,000)
(30,000)
131,650
26.03.2016
26.03.2025
131,650
26.03.2017
26.03.2025
131,650
26.03.2018
26.03.2025
-
-
-
-
-
26.03.2015
26.03.2025
78,875
27.03.2015
26.03.2025
78,875
01.09.2015
26.03.2025
78,875
01.09.2016
26.03.2025
(16,650)
1,223,300
27.03.2015
26.03.2025
-
-
187,100
27.03.2016
26.03.2025
178,775
27.03.2017
26.03.2025
(662,398)
432,642
01.05.2019
26.02.2026
-
-
-
-
66,666
01.04.2017
26.03.2025
66,667
01.04.2018
26.03.2025
66,667
01.04.2019
26.03.2025
-
01.04.2016
26.03.2025
-
-
-
-
-
-
(110,025)
-
-
-
-
-
-
-
-
-
-
(35,294)
(145,319)
(799,048)
2,963,417
48.18p
36.80p
66.29p
The number of exercisable share options at 30 September 2017 was 2,265,791, their weighted average exercise price was
74.95p. The weighted average share price at the date of exercise of options was 56.43p.
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 2018 is £282,000 (2017: £13,000). The fair values of the options
granted have been calculated using a Black-Scholes model. 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 7. The share options are exercisable with
no further conditions to be met.
64
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Notes to the Financial Statements continued
Financial Statements
27. Operating lease arrangements – minimum lease payments
Property
Plant and equipment
2018
£’000
2017
(as restated)
£’000
2018
£’000
2017
£’000
1,122
3,362
2,178
6,662
2,027
5,981
5,418
13,426
-
-
-
-
-
-
-
-
Outstanding commitments for
future minimum lease payments
under non-cancellable operating
leases expiring:
Within one year
In the second to fi fth years
In greater than fi ve years
28. 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
As a result of the restructuring of the Board in November 2017, a number of previously related parties no longer meet that criteria.
Where this is the case, transactions have been disclosed to the date that the criteria failed to be met, and outstanding balances are
shown as of that date.
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:
•
•
•
Acceleris Capital Ltd – of which Mr N. Molyneux is a Director. (Mr Molyneux ceased to be a Director of Redx Pharma on
3 November 2017, at which point Acceleris Capital Ltd ceased to meet the criteria of a related party.)
Dr Frank M Armstrong Consulting Ltd – owned by Dr F. Armstrong. (Dr Armstrong ceased to be a Director of Redx Pharma on
20 April 2017, at which point Dr Frank M Armstrong Consulting Ltd ceased to meet the criteria of a related party.)
The Group has also purchased administration services from Mrs. J. Murray, who is the wife of Dr N. Murray. (Dr Murray
ceased to be a Director of Redx Pharma on 3 November 2017, at which point Mrs. Murray ceased to meet the criteria of a
related party.)
The Group has (in the prior year) purchased other services, and has paid deal fees and commissions, in connection with external
fundraising services 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 Mr N. Molyneux is a Director. (Mr Molyneux ceased to be a Director of Redx Pharma on
3 November 2017, at which point Redag Crop Protection Ltd ceased to meet the criteria of a related party.)
AMR Centre Ltd – of which P Jackson is a Director. Mr Jackson ceased to be a Director of Redx Pharma on 31 March 2017, at
which point AMR Centre Ltd ceased to meet the criteria of a related party.)
The amounts outstanding are unsecured.
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. This
loan was repaid on 18 August 2017.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
65
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Notes to the Financial Statements continued
Purchases from/(charges to) related parties
Redag Crop Protection Ltd (to 3 November 2017)
Acceleris Capital Ltd (to 3 November 2017)
Acceleris Capital Ltd (fundraising items)
Dr Frank M Armstrong Consulting Ltd (to 20 April 2017)
AMR Centre Ltd (to 31 March 2017)
Mrs J Murray (to 3 November 2017)
Amounts owed to/(by) related parties
Redag Crop Protection Ltd (at 3 November 2017)
Acceleris Capital Ltd (at 3 November 2017)
AMR Centre Ltd – short term loan (at 31 March 2017)
AMR Centre Ltd (at 31 March 2017)
Mrs J Murray (at 3 November 2017)
2018
£’000
(20)
6
-
-
-
2
(12)
2018
£’000
(73)
15
-
-
14
2017
£’000
(257)
90
139
2
(2)
24
(4)
2017
£’000
(71)
77
(25)
(1)
12
At 30 September 2018 there were no balances due either from or to parties meeting the criteria of “related”. 2017 balances relate
to 30 September 2017 unless otherwise stated.
Amounts owed to/by related parties were disclosed in other receivables (Note 18) and within trade payables (Note 20).
29. Capital Commitments
At 30 September 2018, the Group had no capital commitments (30 September 2017: £nil).
30. Contingent liabilities
As at 30 September 2018, the Group had no contingent liabilities.
66
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Company Statement of
Financial Position
At 30 September 2018
Company No. 7368089
Financial Statements
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Notes
6
7
8
9
2018
£’000
301
94
357
752
14,432
2,633
17,065
2017
£’000
322
150
225
697
6,490
23,065
29,555
Creditors: amounts falling due within one year
10
(1,425)
(12,288)
Net current assets
Net assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Share based payments reserve
Profi t and loss account
Shareholders’ funds
15,640
17,267
16,392
17,964
1,265
33,263
1
1,162
(19,299)
16,392
1,265
33,263
1
880
(17,445)
17,964
11
12
12
The Company has taken advantage of s408 of the Companies Act 2006 and has not included its own profi t and loss account in
these fi nancial statements. The Company’s result for the year was a loss of £1,854,000 (2017 loss: £23,408,000).
The fi nancial statements were approved and authorised for issue by the board and signed on its behalf by:
Lisa Anson
Director
18 November 2018
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
67
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Company Statement of
Changes in Equity
For the year ended 30 September 2018
At 1 October 2016
Share options exercised
Share issue
Share issue costs
Transactions with owners
in their capacity as owners
Profi t and total comprehensive
income for the year
Share based compensation
Movement in year
At 30 September 2017
Transactions with owners in
their capacity as owners
Loss and total comprehensive
income for the period
Share based compensation
Movement in year
Share
capital
£’000
936
1
328
-
Share
premium
£’000
22,526
69
11,966
(1,298)
329
10,737
-
-
329
1,265
-
-
10,737
33,263
-
-
-
-
-
-
-
-
At 30 September 2018
1,265
33,263
Share
based
payment
£’000
867
-
-
-
-
-
13
13
880
-
-
282
282
1,162
Capital
Redemption
Reserve
£’000
1
-
-
-
-
-
-
-
1
-
-
-
-
1
Profi t &
loss
account
£’000
5,963
-
-
-
-
Total
Equity
£’000
30,293
70
12,294
(1,298)
11,066
(23,408)
(23,408)
-
(23,408)
(17,445)
13
(12,329)
17,964
-
-
(1,854)
-
(1,854)
(19,299)
(1,854)
282
(1,572)
16,392
68
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Notes to the individual Financial
Statements of Redx Pharma Plc
Financial Statements
1. Accounting Policies
(i) Basis of preparation
The Company’s fi nancial 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 fi nancial
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 fi nancial 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; and
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 transactions 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 profi t from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured 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) Operating leases
Leases in which a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed 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.
(iv) 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. It is reviewed annually by the Directors for potential impairment.
Purchased intangible assets
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. Purchased intangible assets are
capitalised even if they have not yet demonstrated technical feasibility. The intangible asset relating to intellectual property
rights for the programme purchased from Amakem is estimated to have a useful life of 20 years, and it will be amortised over
this period, commencing on 31 October 2017.
(v) Going Concern
As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council
entitled .”Guidance on the Going Concern Basis of Accounting and Reporting on Solvency Risks – Guidance for directors of
companies that do not apply the UK Corporate Governance Code”.
The Group and Company are subject to a number of risks similar to those of other development stage pharmaceutical
companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and
risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products.
Ultimately, the attainment of profi table operations is dependent on future uncertain events which include obtaining adequate
fi nancing to fulfi l the Group’s commercial and development activities and generating a level of revenue adequate to support
the Group’s cost structure.
The Group made a net loss of £8.8m during the year, and at 30 September 2018 had total equity of £5.8m including an
accumulated defi cit of £29.9m. As at that date, the Group had cash and cash equivalents of £6.5m.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
69
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
The Directors have prepared detailed fi nancial forecasts and cash fl ows looking beyond 12 months from the date of the
approval of these fi nancial statements. In developing these forecasts, the Directors have made assumptions based upon their
view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate
that the cash held by the Group together with known receivables will be suffi cient to support the current level of activities into
the second quarter of 2019. The Directors are continuing to explore sources of fi nance available to the Group and based upon
initial discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to
secure suffi cient cash infl ows for the Group to continue its activities for not less than 12 months from the date of approval of
these fi nancial statements; they have therefore prepared the fi nancial statements on a going concern basis.
Because the additional fi nance is not committed at the date of approval of these fi nancial statements, these circumstances
represent an uncertainty as to the Company’s ability to continue as a going concern. Should the Company be unable to obtain
further fi nance such that the going concern basis of preparation were no longer appropriate, adjustments would be required
including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise .
(vi) 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 -
2 or 3 years
Computer equipment -
2 or 3 years
Leasehold improvements - 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 profi t.
Repairs and maintenance are charged to the profi t and loss account during the fi nancial period in which they are incurred.
(vii) Financial instruments
Financial assets and fi nancial 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 fl ows from the fi nancial asset expire or when the contractual rights to those assets are transferred.
Financial liabilities are de-recognised when the obligation specifi ed 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 and in bank, demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignifi cant 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) Investments
Investments in subsidiaries are stated at cost less provision for impairment in value, and are detailed in Note 8.
70
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
Financial Statements
(ix) 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.
(x) Critical accounting estimates and judgements
Details of signifi cant 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 signifi cant 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 7 and 26 to the
Consolidated Financial Statements.
(b) Group balances
The Directors are required to make judgements regarding the recoverability of balances due from subsidiary companies
and decide if any impairment is appropriate. In making these judgements they review potential revenue streams and
other information, including net present value calculations.
2. Administration
On 24 May 2017, Redx Pharma Plc was placed into Administration as a result of the default on repaying a loan from Liverpool City
Council (“LCC”) by its subsidiary undertaking Redx Oncology Limited. FRP Advisory LLP were appointed as Administrators by LCC.
As at 30 September 2017 the Company remained in Administration. It exited Administration on 2 November 2017, when control
was returned to the Directors. Those costs directly associated with the Administration, principally Administrators costs, legal costs
and taxation costs are included in the Company’s loss for the year, and total £177,000. (2017:£2,814,000).
3. Clawback of Regional Growth Fund grant funding
The Group has, in past years, received Regional Growth Funds grants administered by the Department of Business, Energy and
Industrial Strategy of the UK Government. At the end of the prior year the Group had received total grants as follows:
RGF 2
RGF 3
RGF 5
2018
£’000
-
-
-
-
2017
£’000
5,920
4,700
3,007
13,627
Under the terms of the grant awards, clawback amounts totalling £9.7m became repayable by the Company on entering
Administration. During the course of the Administration, a full and fi nal settlement was reached in the sum of £6.1m. This amount
was disclosed within Creditors – amounts falling due within one year, Note 10. It was repaid in October 2017, prior to the exit
from Administration.
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
71
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
4. Write off of derivative fi nancial instrument
In March 2017 the Company issued 11,500,000 new ordinary shares of 0.1p each (“Ordinary Shares”) at a price of 37.5p per
share to Lanstead for £4,312,500. The Company simultaneously entered into an equity swap with Lanstead for 85 per cent of
these shares with a reference price of 50p per share (the “Reference Price”). The equity swap was for an 18-month period ending
in October 2018. All 11,500,000 Ordinary Shares were allotted with full rights on the date of the transaction.
Of the subscription proceeds of £4,312,500 received from Lanstead, £3,665,625 (85 per cent) was invested by the Company in
the equity swap.
Investment in the equity swap was a condition of the placing with Lanstead.
In the period to 24 May 2017, £106,000 had been received under the terms of the swap.
As a consequence of entering Administration, the terms of the equity swap were such that it terminated with no further benefi t to
the company. The remaining balance of £3.56m was therefore written off.
5. Staff Costs
Staff costs (including Directors) comprise
Wages and salaries
Social security costs
Pension costs
Non-recurring reorganisation costs
Total employee related costs
Number of employees
Average number of employees (including Directors)
Management & Admin
2018
£’000
1,015
165
39
1,219
215
1,434
2017
£’000
1,043
126
51
1,220
10
1,230
2018
number
2017
number
6
10
Directors remuneration is disclosed in note 13 of the Group accounts and the Directors remuneration report beginning on
page 36 .
6. Intangible fi xed assets
Cost
At 1 October 2017
Additions
At 30 September 2018
Amortisation
At 1 October 2017
Charge for the year
At 30 September 2018
Net book value
At 30 September 2018
At 30 September 2017
Intellectual
property
£’000
Goodwill
£’000
Total
£’000
121
-
121
-
6
6
115
121
309
-
309
108
15
123
186
201
430
-
430
108
21
129
301
322
72
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
Financial Statements
7. Tangible fi xed assets
Cost
At 1 October 2017
Additions
At 30 September 2018
Depreciation
At 1 October 2017
Charge for the year
At 30 September 2018
Net book value
At 30 September 2018
At 30 September 2017
Laboratory
equipment
£’000
Computer
equipment
£’000
Leasehold
Improvements
£’000
87
-
87
77
10
87
-
10
95
4
99
56
38
94
5
39
114
-
114
13
12
25
89
101
8. 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 2018 the Company held share capital in the following subsidiaries:
2018
£’000
225
46
37
49
357
Total
£’000
296
4
300
146
60
206
94
150
2017
£’000
206
19
-
-
225
Name
Redx Oncology Limited
Block 33, Mereside, Alderley
Park, Macclesfi eld SK10 4TG
Redx Anti-Infectives Limited
Block 33, Mereside, Alderley
Park, Macclesfi eld SK10 4TG
Redx Immunology Limited
Block 33, Mereside, Alderley
Park, Macclesfi eld SK10 4TG
Redx MRSA Limited
Block 33, Mereside, Alderley
Park, Macclesfi eld SK10 4TG
Country of
incorporation
Percentage
held
Nature of
business
England & Wales
100%
Pre-clinical drug
development licensing
Direct/Indirect
holding
Direct
England & Wales
100%
Pre-clinical drug
development licensing
Direct
England & Wales
100%
Pre-clinical drug
development licensing
Direct
England & Wales
100%
Dormant
Indirect
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
73
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
9. Debtors
Amounts falling due within one year:
VAT recoverable
Amounts due from Group undertakings
Other debtors
Prepayments and accrued income
Amounts falling due after more than one year
Other Debtor – Loan
Total
2018
£’000
70
13,835
280
247
14,432
-
14,432
2017
£’000
644
5,578
184
84
6,490
-
6,490
Amounts due from Group undertakings: Following a review by the Directors of the forecasts of one of its Group undertakings, it
was considered that the balance owed is unlikely to be recovered in the foreseeable future due to a decision to focus on oncology
and immunology assets, as such they have decided to further impair the balance owed in relation to this undertaking in the sum of
£1,676,000 taking the total impairment to £11,983,000. (2017: £10,307,000).
A loan of £714k was granted in prior years 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 only repayable on the sale, listing, or change of
control of Redag Crop Protection Ltd.
At 30 September 2017, the total amount outstanding (including accrued interest), was £821k. The fi nancial statements refl ected
that value less a fair value adjustment made at 30 September 2016 amounting to £180k. Following review, and as a result of
the conditionality attached to the repayment of the loan, the Directors derecognised it as an asset in 2017. There have been no
further changes in the current year.
Whilst the loan has been de-recognised as an asset, the Directors do not consider it to be extinguished and will continue to seek
full repayment under its terms.
10. Creditors: Amounts falling due within one year
Trade creditors
Social security and other taxes
Amounts owed to Group undertakings
Other creditors
RGF Clawback (see Note 3)
Accruals
11. 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
Total movement in year
2018
£’000
878
42
-
6
-
499
1,425
2017
£’000
2,399
64
2,953
127
6,085
660
12,288
2018
Number
2017
Number
126,477,914
126,477,914
£’000
£’000
1,265
1,265
-
-
329
329
74
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Notes to the individual Financial Statements of Redx Pharma Plc
continued
Financial Statements
Share issues
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) for a total consideration of £70,262.
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 was £12.36m.
12. Reserves
As at 1 October 2017
Loss for the year
Share-based compensation
As at 30 September 2018
Share
premium
£’000
33,263
-
-
Profi t & loss
account
£’000
(17,445)
(1,854)
-
33,263
(19,299)
Share
based
payments
reserve
£’000
880
-
282
1,162
Capital
redemption
reserve
£’000
1
-
-
1
Total
£’000
16,699
(1,854)
282
15,127
13. Operating lease arrangements – minimum lease payments
Property
Plant and equipment
2018
£’000
2017
£’000
2018
£’000
2017
£’000
Outstanding commitments for future
minimum lease payments under
non-cancellable operating
leases expiring:
Within one year
In the second to fi fth years
In greater than fi ve years
14. Related Parties
747
2,987
2,178
5,912
1,026
4,480
4,387
9,893
-
-
-
-
-
-
-
-
Related party information disclosed in note 28 to the Group accounts is also applicable to the Company.
15. Contingent liabilities
The Company has agreed to support its subsidiary undertakings for 12 months from the signing of these fi nancial statements. The
Directors estimate this support could be in the region of £10m.
16. Ultimate controlling party
There is no ultimate controlling party.
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75
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Scientifi c Abbreviations
AACR:
American association for cancer research
BID:
Twice daily
CRC:
Colorectal cancer
CTGF:
Connective tissue growth factor
DC:
Dendritic cell
ET-1:
Endothelin 1
Fzd:
Frizzled receptor
GI:
Gastrointestinal
IBD:
Infl ammatory bowel disease
ICI:
IPF:
Immune checkpoint inhibitor
Idiopathic pulmonary fi brosis
MCP-1: Monocyte chemoattractant protein 1
MDSC: Myeloid derived suppressor cell
MHRA: Medicines and Healthcare Products Regulatory Agency
MMP: Matrix metalloproteinase
NASH: Non-alcoholic steatohepatitis
NBTI:
Novel bacteria topoisomerase inhibitor
NTTI:
Novel tricyclic topoisomerase inhibitor
QD:
Once daily
ROCK:
Rho associated coiled-coil containing protein kinase
RNF43: Ring fi nger protein 43
RSPO:
R-spondin
ð-SMA: Alpha-smooth muscle actin
TGFß:
Transforming growth factor beta
TIMP:
Tissue inhibitor of metalloproteinase
76
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Company Information
Directors
Iain G Ross (Chairman)
Lisa Anson (Chief Executive Officer)
Dominic Jackson (Chief Financial Officer)
Dr Bernhard Kirschbaum (Non-Executive Director)
Peter Presland (Non-Executive Director)
Secretary
Andrew Booth
Company number
07368089
Principal place of business Block 33
Mereside
& registered office
Alderley Park
SK10 4TG
Auditor
Nomad
Broker
RSM UK Audit LLP
3 Hardman Street
Manchester
M3 3HF
Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London
E14 5RB
W G Partners LLP
85 Gresham Street
London
EC2V 7NQ
Redx Pharma plc Annual Report and Accounts for the year ended 30 September 2018
77
Block 33
Mereside
Alderley Park
SK10 4TG
www.redxpharma.com