Redx Pharma
Annual Report
For the year ended 30 September 2019
Registered number: 07368089
Page
3
4
6
11
16
21
23
26
26
28
30
31
37
40
44
45
46
47
48
76
77
78
88
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 Auditors’ Report
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Individual Financial Statements
Company Information
2
Key Events
Key Events & Results
Corporate
19 November 2018 – Dr James Mead is appointed as Chief Financial Officer from 1 February 2019,
replacing Mr Dominic Jackson.
6 February 2019 – Recovery of the loan previously granted to Redag Crop Protection Ltd.
28 February 2019 – Completion of an agreement with Alderley Park Ltd to significantly reduce the Group’s
accommodation footprint.
10 June 2019 – The Group announces the agreement of a £2.5m loan note facility with Moulton Goodies
Ltd (“MGL”).
10 July 2019 – Sale of the pan-RAF inhibitor programme to Jazz Pharmaceuticals plc.
Research & Development
14 November 2018 – The Group announces its first development compound to treat fibrosis, RXC006.
21 January 2019 – Formal MHRA approval is granted to re-commence the phase 1/2A trial for RXC004.
31 January 2019 – Rights to the NBTI programme are returned to Redx by Deinove.
19 August 2019 – The Group announces the successful completion of dosing of the first cohort of patients
in its RXC004 phase 1/2A study.
Financial results – Year ending 30 September 2019
• Revenue:
• Operating Expenditure:
• R&D Expenditure:
•
Loss after tax:
• Closing Cash:
£3.1m
£10.2m
£6.2m
£4.3m
£3.7m
Post Year-end Events
19 November 2019 – Redx and the Medicines Discovery Catapult awarded Innovate UK grant to develop
biomarkers in fibrosis.
31 December 2019 - The Group announces loan capitalisation notice for the MGL loan and possible offer
for the Company.
9 January 2020 - announcement of development candidate nomination, RXC007, a selective ROCK2
inhibitor for systemic fibrotic conditions.
21 January 2020 – General meeting approves capitalisation of the MGL loan, 52,030,789 ordinary shares
issued.
28 February 2020 – The Group announces that the potential offer for the company has been withdrawn,
and that a funding package has been agreed with Redmile Group LLC and Sofinnova Partners. Redmile
subscribes for 11,500,00 ordinary shares at 11.2p.
3
Chairman’s Statement
Chairman’s Statement
Dear Shareholder
The financial year ending 30 September 2019 was a year of strong progress for the Company -
strategically and scientifically. In challenging circumstances the Redx team has continued to deliver
programmes that are the basis of creating long term shareholder value.
The new management team is now well established with the appointment of James Mead as Chief
Financial Officer and Board Director on 1 February 2019. This team, under the leadership of our very
experienced and high-profile Chief Executive Officer, Lisa Anson, has pursued a clear and focused
strategy aimed at enhancing shareholder value.
Clear Focused Strategy - Redx’s ambition is to become a leading biotech company focused on the
development of precision medicines in oncology and fibrosis by progressing prioritised programmes
to deliver clinical proof of concept. Redx’s core strengths of medicinal chemistry expertise and
proven ability to design molecules against a validated target, continue to be leveraged to discover
the next generation of clearly differentiated drug candidates. The Company aims to partner
additional programmes to drive further value, as and when the Board feels that such a course will be
in the best interests of shareholders.
2019 has seen significant delivery against this strategy with the following notable achievements:
• Clinical Progress: In oncology, 2019 saw the Company achieve its aim to take its lead
molecule, RXC004, into Phase 1 trials at a significantly lower dose than previously.
Importantly, the first two patient cohorts (0.5mg and 1mg) have been successfully dosed
such that a third cohort (1.5mg) has been initiated in October 2019. RXC004 is on track to
move into a Phase 1b/2 clinical study in 2020.
• New fibrosis programmes: In fibrosis, Redx’s 2019 goal was to select development
candidates from the Company’s portfolio of three promising fibrosis assets and invest in
work to enable subsequent clinical development. The first of these selections, a Wnt
inhibitor, was made in November 2018 and a second nomination, a ROCK2 selective inhibitor
was made in January 2020. The intention is to initiate Phase 1 studies for both in early 2021.
This is a strong outcome in terms of success rates.
• Commercial Partnerships: The Company has also demonstrated its ability to deliver
commercial partnerships with the sale of the research stage Pan-RAF inhibitor programme
to Jazz Pharmaceuticals plc on 10 July 2019, with $3.5 million cash received on signing of the
agreement, as the first stage in a contract potentially worth up to $203 million in deferred
development, regulatory and commercial milestone payments. This is our second such deal,
following the sale of Redx’s BTK inhibitor programme in 2017 to Loxo Oncology (recently
bought by Eli Lilly), which is now progressing well through clinical trials, and further
demonstrates the strength and depth of our chemistry expertise.
Financial Prudence - During the period under review, the Board and management have continued to
adopt a robust set of financial and governance controls to maintain the highest standards throughout
the Company; more details on this can be found in the Corporate Governance Statement. The Board
remained committed to strengthening the Group’s balance sheet during 2019 and has achieved this
by securing a short-term loan from Moulton Goodies Ltd, our largest shareholder, and by completing
the Jazz Pharmaceuticals deal.
4
Chairman’s Statement
Chairman’s Statement (Cont’d)
Outlook - The last 12 months have been encouraging in terms of delivery on our strategy in that we
have demonstrated our clinical and scientific capabilities and the ability to execute commercial deals.
However, we remain faced with the ongoing and underlying challenge of securing sufficient
investment - a common challenge for many early-stage listed biotech companies - to enable the full
pursuit of the potential evident in our pipeline. 2019 has shown that there is not sufficient demand
in the UK public market to deliver a successful transaction of the quantum required. As a
consequence, the Board undertook active discussions with shareholders, advisers, third party sector
specialist investment groups, private equity groups and potential industry partners regarding funding
and/or monetisation of early stage programme assets. We announced very recently the successful
outcome of this process with the introduction of two well established and well funded investment
partners in Redmile Group LLC and Sofinnova Partners. We will continue to provide further details
and updates on these funding plans in the near future.
On behalf of the Board, I would like to thank our Management team and employees for their hard
work and dedication as well as our suppliers, business partners and shareholders for their continued
support over the last year.
Iain G Ross
Chairman of the Board of Directors
5
Strategic Report
Chief Executive’s Report
I am pleased to report on the substantial progress we are making in delivering our strategy to create
high value precision medicines that aim to treat clear unmet needs in cancer and fibrosis, and thereby
create significant shareholder value.
The key strength of Redx remains a distinctive expertise in medicinal chemistry and target
selection that sets it apart from many other small biotech companies. This has been evident in our
operational achievements for the year – including progress in the clinic with our lead cancer agent
RXC004, nomination of two development programmes in fibrosis and delivery of a meaningful
commercial partnership. The most significant challenge for the Company was to secure sufficient
investment capital to fully realise the potential now evident in these programmes and the
innovative science in our Company.
I was delighted to appoint Dr James Mead as Chief Financial Officer (CFO) in February 2019 to
complete the Company’s new senior leadership team. Together with myself, Dr Richard Armer (CSO)
and Dr Andrew Saunders (CMO), I am confident that this team has the appropriate experience,
expertise and focus to continue to deliver our strategy and progress our pipeline.
A Clear and Focused Strategy
On appointment as your CEO in 2018, and following a business review, I put in place 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 precision medicines that have the potential to
transform the treatment of oncology and fibrosis. Within these areas of focus, the organisation’s
strategy is first to progress the lead programmes to deliver clinical proof of concept, a key value
inflection milestone.
The second part of the strategy is to leverage Redx’s core strength of medicinal chemistry expertise
and proven ability to design molecules in order to generate value. We will therefore continue to
invest our resources in discovering the next generation of differentiated drug candidates against
biologically validated targets in our areas of therapeutic focus.
Finally partnering will remain a critical part of the Redx strategy to enable additional development
and to drive further shareholder value.
Oncology: Into the Clinic with Porcupine
Our lead programme, RXC004, is a potential best-in-class porcupine inhibitor which is currently in
Phase 1 clinical development to treat cancer. Redx is developing RXC004 as a precision oncology
treatment for Wnt driven tumours both as a monotherapy (direct tumour targeting) and as an
immuno-oncology combination agent, representing a large commercial opportunity. RXC004 has
shown compelling animal efficacy data through highly targeted impact on the Wnt pathway and has
now demonstrated a safe dose in the first two patient cohorts, with a third cohort initiated at 1.5mg
in October 2019. RXC004 is expected to move into the Phase 1b/2 part of the study during 2020.
Oncology is a crowded area for drug development, however, it is also one where there remains
significant unmet need. In particular, we believe that precision medicines are the key to unlocking
the full potential of modulating critical pathways such as the Wnt pathway. Aberrations in this
pathway have been shown to drive tumour growth and are increasingly implicated in shaping the
immune environment around the tumour. In particular, the Wnt pathway is implicated in a range of
hard-to-treat cancers with poor prognosis such as colorectal, pancreatic, biliary and gastric cancers.
At the molecular level, the Wnt pathway has long been viewed as containing potentially “druggable”
6
Strategic Report
Chief Executive’s Report (Cont’d)
cancer targets. Porcupine, a key enzyme in the pathway, is one such target. It is very encouraging to
see that the first-in-class drug that targets Porcupine (WNT974, Novartis), is in phase 2 clinical
development, and that the class overall apparently has a viable therapeutic window, with over 110
patients now treated across the class in Phase 1 trials. We believe that the full potential of targeting
porcupine as an anticancer therapy will require the generation of efficacy data in genetically selected
patients (those with upstream Wnt pathway aberrations driving tumour growth, whose tumours are
addicted to Wnt) and understanding the clinical effects of longer duration of treatment.
RXC004, is a potent and selective inhibitor of Porcupine and therefore the Wnt pathway which results
in strong direct tumour growth inhibitory effect in a variety of cancer models. When RXC004 is
administered either alone or together with an anti-PD1 immune checkpoint inhibitor (ICI), RXC004
enhances anti-tumour immune effects1. Redx data are in keeping with the external strong scientific
evidence for a role of the Wnt pathway in resistance to ICI2,3. This evidence supports Redx’s view
that RXC004 has the potential to be used to treat Wnt driven cancers both as a monotherapy and
in combination with immuno-oncology treatments such as 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).
RXC004 re-entered the clinic in the first half of 2019 at a significantly lower starting dose of 0.5mg,
following reformulation work (NCT03447470). Initial results from this unblinded study are
encouraging. The drug was well tolerated in both 0.5mg and 1mg patient cohorts treated so far,
and no serious adverse events have been reported. Measured pharmacokinetic parameters were
compatible with once daily dosing and importantly, there was strong target engagement detected in
markers in skin tissue. The pre-specified protocol of this phase 1a drug safety and tolerability study
in cancer ‘all comers’ dictates continued incremental dose escalation up to 3mg and Redx anticipates
full safety and tolerability results from this phase 1a study will be available during 2020. Redx’s
development plan for RXC004 has been reviewed with leading experts in this field, and is expected
to continue in 2020, once safety data and dose selection is available from the ongoing monotherapy
phase 1a trial.
Fibrosis: Two exciting Development Compounds Nominated
In fibrosis, the goal for fiscal year ending 30 September 2019 was to select one to two development
candidates from the portfolio of three promising fibrosis assets. The first of these selections was
made in November 2018 with the announcement of RXC006 in idiopathic pulmonary fibrosis (IPF)
and a second nomination of RXC007, our Rho associated protein Kinase 2 (ROCK2) candidate, post
period, in January 2020 for multiple disease indications. This is a strong outcome in terms of success
rate.
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 fibrosis in major diseases of the lung, liver,
kidney and bowel. 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 inflammatory diseases will result in fibrosis, 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 fibrosis can occur as a result of many different
diseases and current therapeutic options are limited for these chronic and often life-threatening
illnesses.
7
Strategic Report
Chief Executive’s Report (Cont’d)
RXC006 is a porcupine inhibitor being developed as a treatment for the orphan disease IPF, a life-
threatening and progressive lung condition with a prognosis worse than many cancers. RXC006 has
demonstrated excellent antifibrotic activity in a range of fibrosis disease models including fibrosis of
the kidney, liver and lung. There is considerable evidence supporting a pathogenic role for Wnt
signalling in IPF and increased Wnt pathway expression is associated with poor patient prognosis in
IPF. RXC006 has progressed through preclinical manufacturing and safety studies in 2019 with the
aim to enter first in man clinical trials in early 2021 once funding is secured. This programme has
been delayed due to funding constraints and priorities.
Redx are also invested in targeting the ROCK signalling pathway, a key enzyme in the development
of tissue fibrosis. The Redx selective ROCK2 inhibitor programme is designed to overcome the
systemic limitations of pan-ROCK inhibitors (which inhibit both ROCK1 and ROCK2 and can induce
systemic hypotension) enabling potential use in the treatment of systemic fibrotic conditions such
as liver fibrosis, IPF and diseases with an element of fibrosis such as Pulmonary Arterial Hypertension
(PAH) or chronic graft versus host disease (cGVHD). Developing a selective ROCK2 inhibitor has been
a particular technical challenge as evidenced by the lack of competitor programmes behind
Kadmon’s ROCK2 inhibitor (KD025), which leads the field and is in registration studies for cGVHD.
Redx has developed highly selective ROCK2 compounds that have an improved profile compared to
lead compounds have demonstrated good pharmacokinetic and
this competitor. Our
pharmacodynamic profiles in preclinical models as well as strong proof of concept data in a range of
fibrosis disease models during the reporting period. As a result, RXC007 was nominated as a
development candidate, post period, in January 2020 with the aim of entering the clinic in early 2021
with a view to developing in IPF and then more broadly into systemic fibrotic conditions.
Significant Commercial Partnering Deal Secured with Jazz Pharmaceuticals
As a result of the portfolio prioritization, Redx made the decision to out-license the pan-RAF inhibitor
programme in order to prioritise internal resources on the core Wnt and ROCK pathways. Redx’s
pan-RAF inhibitor program aims to overcome both resistance mechanisms and safety concerns
associated with clinically approved BRAF selective drugs.
On 10 July 2019, the Company signed a deal with Jazz Pharmaceuticals Plc under which Jazz acquired
the rights to Redx’s pan-RAF inhibitor programme for the potential treatment of RAF and RAS mutant
tumours. Jazz will be responsible for all future development, regulatory, manufacturing and
commercialisation activities. Redx received a $3.5 million upfront cash payment and is eligible for
up to $203 million in development, regulatory and commercial milestone payments as well as
incremental tiered royalty payments in mid-single digit percentage, based on future net sales. As
part of a separate collaboration agreement, signed in parallel, Jazz will pay Redx to perform research
and preclinical development services with the goal of completing IND-enabling studies. This
transaction validates Redx’s excellence in drug design and its business partnering capability as the
company’s second oncology deal in the last two years, following the sale of our BTK inhibitor
programme (RXC005) to Loxo Oncology in 2017 – which is now being successfully developed by Eli
Lilly.
Research into Next Generation Therapies
Redx is committed to continuing research against biologically validated targets in oncology and
fibrosis to maintain the pipeline. The Company has focused its research activities on highly selected
targets in research, although not all these targets have been publicly disclosed. As a result of financial
constraints, a number of our research projects have been de-prioritised or paused.
8
Strategic Report
Chief Executive’s Report (Cont’d)
The gastrointestinal (GI) targeted ROCK inhibitor project is aimed at treating intestinal fibrosis
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 first-in-class agents. GI-targeted ROCK inhibitors are restricted to the gut due
to their limited absorption profile and rapid enzymatic metabolism of any absorbed material. The
compounds have demonstrated very strong anti-fibrotic effects in GI fibrosis disease models along
with a good general and cardiovascular safety profile. Redx is now ready to develop a full Candidate
Nomination package and having taken the decision to do this in partnership, we are currently seeking
a partner with the relevant development expertise, relevant formulation experience and resources
to take this programme forward.
As a result of decisions to focus research investment, we have made a number of stop decisions, one
of which was, by mutual agreement, the research collaboration with AstraZeneca for technical
reasons. The anti-infectives business was closed in 2017 for strategic reasons resulting in the Novel
primarily
(NBTI)
Bacterial
focused upon combating multi-drug resistant Gram-negative bacteria, being licensed to Deinove in
March 2018 as an option and license agreement. Following a nine-month option period to assess
the NBTI programme the rights were returned to Redx. These rights were subsequently partnered
with the Anti Microbial Research Centre (AMRC) in October 2019.
Topoisomerase
programme,
Inhibitor
which
is
Redx has both intellectual property filings and owns granted patents for its programmes, and
management are confident of obtaining patent protection in relevant chemical spaces.
Financial strategy
Throughout the year we have continued to manage our costs carefully and ensured that our
resources are allocated to maximum effect in line with our strategy. Following some further
headcount reductions, we now have in place an organisation that is operationally stronger and leaner
than in prior years. Our operating expenses of £10.2 million in 2019 are 35 percent lower than 2017
and 4 percent lower than 2018. The reductions seen in 2019 reflect a continuing decrease in
overhead expenditure, and were partially offset by increased investment in our research and
development activities – particularly on RXC004 as it re-entered the clinic. Despite an agreement
with Alderley Park, we are aware that our financial commitments under our historic long term lease
remain relatively high and we continue to work with our landlord, now Bruntwood SciTech (a joint
venture between Bruntwood and Legal and General) to find ways to reduce and mitigate
accommodation costs through sub-lease of excess space.
The last 12 months have been encouraging in terms of delivering on our strategy and demonstrating
our clinical and scientific capabilities as well as an ability to deliver commercial partnerships.
Throughout the year we faced the underlying challenge of securing sufficient investment to realise
the full potential now evident in our pipeline and this impacted some of our programmes. Our Board
stated that we would move to strengthen the balance sheet and during the period we extended our
operating runway into 2020 through the repayment of the Redag loan, adjusted R&D tax credit to
reflect the absence of Regional Growth Fund (RGF) support, receipt of the Jazz upfront payment,
securing a grant from Innovate UK and securing a short term loan from Moulton Goodies Ltd., our
major shareholder. However, the public markets remain challenging to raise sufficient capital for the
Company as a result of the early stage pipeline, the small market capitalisation and broader market
conditions. The Board and Executive team held numerous discussions with shareholders, and third-
party sector specialist investment groups including private equity with the intention of crystallizing
an investment syndicate around the core business plan. These discussions concluded with the recent
announcement of Redmile Group and Sofinnova Partners committing to the Company and its
business plan. In parallel the team continue to talk to potential industry partners regarding funding
and/or monetisation of early stage programme assets.
9
Strategic Report
Chief Executive’s Report (Cont’d)
I continue to be excited by the differentiated programmes in our pipeline. Taken together, I believe
that with the strength of our science, the proprietary position of our assets and their commercial
potential now combined with strong investment partners, we are in a position to deliver against our
ambition of delivering meaningful results in the clinic which will drive value for shareholders. I would
like to thank our employees for their hard work and commitment to Redx and congratulate them on
the scientific and partnering progress achieved.
Lisa Anson
Chief Executive Officer
10
Strategic Report
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 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 activation of both the classical canonical and non-canonical
signalling pathways (Fig. 1). Porcupine is a key enzyme required for the release of all active Wnt ligands
and its inhibition will importantly affect signalling via both canonical and non-canonical pathways which
are both involved in disease progression. Preclinical in vitro and in vivo data has demonstrated that
RXC004, a potent and selective inhibitor of Porcupine, has significant anti-cancer effects in genetically-
defined cancer cells harbouring upstream Wnt pathway alterations e.g. RNF43 loss of function (LoF)
mutations and RSPO-fusions/translocations. RNF43 LoF mutations and RSPO-fusions/translocations both
result in increased levels of surface Fzd receptors (see Fig. 1), and hence increased Wnt-ligand dependent
signalling. Consistent with
this, cancer cells carrying RNF43 LoF mutations and RSPO-
fusions/translocations are sensitive to RXC004 in vitro and in vivo.
RSPO
RNF43
PORCNi
RXC004
Figure 1: Signalling through the Wnt pathway is highly regulated at the level of ligand (Wnt), receptors
(Fzd/LRP) and downstream components. The pathway is initiated by the binding of Wnt ligands to Frizzled
(Fzd) receptors resulting in activation of both the classical canonical and non-canonical signalling
pathways.
In addition to targeting cancer cell growth directly, RXC004 has shown strong monotherapy efficacy in a
mouse in vivo model that imitates a checkpoint inhibitor-resistant cancer patient. There is strong
preclinical and clinical data linking Wnt pathway activation to immune system avoidance in cancer
11
Strategic Report
patients. Thus, in genetically defined cancer patients, RXC004 will have a dual action; by directly inhibiting
cancer cell growth and stimulating the patient’s immune system to help fight the cancer.
RXC004 clinical trial update
The porcupine inhibitor class of compounds continue to show a therapeutic window in the clinic with over
110 patients now safely dosed with competitor agents. Dosing in the RXC004 trial restarted in the first
half of 2019 at the agreed initial dose of 0.5mg once daily. This dose was well tolerated with no serious
adverse events. The pharmacokinetic profile was in line with predictions and good target engagement
was also achieved in tissue. Subsequent escalation of the dose to 1mg once daily showed a similar safety
profile with good pharmacokinetic correlation. Further monotherapy dose escalations are currently
ongoing with a full readout due in 2020 prior to expansion efficacy and ICI combination studies (Fig. 2)
(NCT03447470).
Figure 2: RXC004 Clinical Trial Outline
RXC004 in genetically-defined cancers
Cancers harbouring genetic alterations upstream in the Wnt pathway have demonstrated sensitivity 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. By selecting patients with these genetic alterations,
RXC004 has a unique opportunity to target tumour proliferation directly, in addition to having an immune-
enhancing effect. Data supporting this effect is shown in Fig 3.
12
Strategic Report
Pancreatic Cancer Xenograft
(RNF43 mutation)
Colorectal Cancer Xenograft
(RSPO3 fusion)
Figure 3: RXC004 causes tumour growth inhibition in tumour models with both RNF43 mutation and
RSPO fusions.
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 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 pathway in immune evasion by tumours (i.e. promoting “cold” tumours) has been the
subject of several recent high-profile reviews2,3.
Activation of the Wnt 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 the hypothesis that RXC004 will block activation of the Wnt
pathway and restore the ability of the immune system to fight the tumour. RXC004 will have the ability to
turn “cold” tumours “hot” by facilitating entry of tumour-fighting immune cells into the tumour
microenvironment.
Redx scientists have demonstrated the ability of RXC004 to enhance the immune system response to
cancer in preclinical models1 . These data suggest that RXC004 alone or in combination with ICIs 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.
RXC004 in preclinical immuno-oncology models
RXC004 monotherapy inhibited tumour growth and improved survival of mice in a melanoma (B16F10
tumour), (see Fig 4) model by reducing the proportion of immune-supressing myeloid-derived suppressor
cells (MDSCs) in the tumour microenvironment. Anti-PD-1 alone had no effect on this immunologically
“cold” model.
13
Strategic Report
Figure 4: Left: RXC004 increased survival of mice implanted with the B16F10 melanoma tumour cell line.
Right: Working model of RXC004 effects on MDSC tumour infiltrate. 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.
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-fighting) to regulatory (immune-
suppressive) T-cells as shown in Fig 5.
Figure 5: RXC004 combines with anti-PD-1 to enhance the anti-tumour immune environment. Flow
cytometry of day 14 tumour infiltrate shows significant increase in the ratio of cytotoxic CD8+ T-cells to
regulatory FOXP3+ T-cells when RXC004 and anti-PD-1 are combined.
A working model of RXC004 effects on dendritic cells and T cells is shown in Fig 6.
14
Strategic Report
Figure 6: Model of RXC004 effects on Dendritic cells (DC). Wnt produced within the tumour
microenvironment leads to immunosuppressive dendritic cells, with increased levels of β-catenin and
IDO1; causing ↑Tregs and ↓CD8+. RXC004 treatment reduces Wnt, ↓Tregs and allows DCs to ↑CD8+ in
the tumour.
15
Strategic Report
Science Report – Fibrosis
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 inflammatory
diseases will result in fibrosis, 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 disease-related deaths in the
developed world4. Solid organ fibrosis can occur as a result of many different diseases and current
therapeutic options are limited for these chronic and often life-threatening illnesses.
Redx has developed deep expertise in two nodal pathways in fibrosis - Wnt and ROCK. As a result of this
focus, Redx has a Porcupine inhibitor, RXC006, in preclinical development and a ROCK2 selective inhibitor,
RXC007, recently nominated for preclinical development. Redx has also had success with a third
programme – GI-Targeted ROCK which is currently in candidate selection.
Porcupine inhibitor RXC006 for the treatment of IPF
Idiopathic pulmonary fibrosis (IPF) is a life-threatening lung disease with a prognosis worse than many
cancers (see Fig 7). 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 pathway expression is associated
with poor patient prognosis in IPF.
Figure 7. Images from CT scan of normal lungs and lungs from a patient with IPF. In the normal lung
(left), the black image indicates healthy tissue, filled with air. In the IPF lung (right), scarring forms a typical
‘honeycomb’ pattern, showing fibrotic areas and restricted lung capacity.
RXC006 is Redx’s lead porcupine inhibitor of the Wnt pathway for the treatment of IPF. RXC006 has
demonstrated excellent antifibrotic activity in a range of fibrosis disease models, including fibrosis of the
kidney, liver and lung. See Fig 8 for data in lung model.
RXC006 is currently progressing through preclinical manufacturing and safety studies with the aim to enter
first in man clinical trials in 2021. RXC006 is from a different chemical series compared to RXC004 and is
protected by a separate composition of matter patent.
Figure 8. Redx Porcupine inhibitor RXC006 suppresses fibrosis in a murine model of IPF.
16
Strategic Report
Small regions of dense, collagenous connective tissue (fibrosis; black arrows demarcate) and lymphocyte
infiltrates/aggregates (*) are present following bleomycin injury. Bronchiole (Br) and blood vessels (BV)
are indicated. Therapeutic treatment with RXC006 reduced fibrosis areas.
ROCK as a therapeutic target for fibrosis
The Rho-associated coiled-coil containing serine/threonine protein kinases ROCK1 and ROCK2, are
signalling proteins central to the regulation of various cellular responses that are often inappropriately
activated in fibrosis pathology (see Fig 9). These pathways include cell migration, proliferation, apoptosis,
cytokine expression, gene transcription and integrin-mediated cell-to-cell adhesions. Aberrant wound
healing, tissue remodelling and fibrosis processes have been shown to be highly dependent on ROCK
signalling, with pan-ROCK inhibitors able to suppress tissue injury and fibrosis in a number of animal
models including models of liver, lung and kidney fibrosis.
Figure 9. ROCK is a central node in signalling pathways associated with fibrosis.
ROCK2 selective inhibitor
ROCK2 has been shown to be upregulated in acute inflammation and in metabolic and fibrotic diseases8-
10. A specific role for ROCK2 in the pathogenesis of fibrosis has been demonstrated in mouse models,
where heterozygous ROCK2 knockout mice have reduced disease severity. ROCK2-specific inhibitors also
show anti-fibrotic effects in a number of murine fibrosis models.
Redx’s ROCK2 selective inhibitor programme has the potential to treat a range of fibrotic diseases
affecting critical organs such as the lungs, kidneys and liver by its systemic route of administration. One
approach is aimed at treating liver fibrosis associated with the growing obesity and diabetes epidemic.
The build-up of lipids and inflammation in the liver leads to a condition known as non-alcoholic
17
Strategic Report
steatohepatitis (NASH) which progressively leads to liver fibrosis and ultimately life-threatening liver
cirrhosis (see Fig. 10).
Figure 10. Liver injury induced by western diet leads to fat accumulation in the liver and causes
inflammation and injury (steatosis). As this injury continues, this leads to scarring, fibrosis and ultimately
the development of NASH. NASH is a progressive disease and if untreated, the scarring process may
continue into cirrhosis where the liver is no longer functional and the only treatment at this stage is liver
transplant. We believe our ROCK2 inhibitor will reduce fibrosis progression and reverse liver inflammation
in NASH patients.
inhibitors, with Redx
Redx has developed highly selective ROCK2 compounds that have an improved profile compared to
competitor
lead compounds demonstrating good pharmacokinetic and
pharmacodynamic effects in preclinical models as well as strong proof of concept data in range of fibrosis
disease models during the reporting period. Representative data is shown below for the histopathological
effects observed in a lung IPF model (Fig. 11) and a liver fibrosis model (Fig. 12). As a result, RXC007 was
nominated as a candidate for development, post period in January 2020 with the aim of entering the clinic
in early 2021.
Figure 11: RXC007 suppresses fibrosis in bleomycin-induced murine IPF model
Reductions in tissue damage, fibroblast infiltrate and collagen deposition are observed with RXC007
treatment.
Figure 12: RXC007 suppresses fibrosis in murine CCl4-induced liver fibrosis model
Significantly reduced collagen deposition (red stained collagen fibres) with Redx’s ROCK2 inhibitor
RXC007. The percentage of fibrotic tissue affected by fibrosis is also reduced in a dose-dependent
manner.
18
Strategic Report
GI-Targeted ROCK inhibitor for the treatment of Crohn’s associated fibrosis
The GI-targeted ROCK project is aimed at treating intestinal fibrosis 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
disease11 of which 50% will develop strictures or complications at some point12.
There is currently no pharmaceutical therapy available to treat intestinal fibrosis associated with Crohn’s
disease, and furthermore anti-inflammatory agents used in Crohn’s disease do not halt the progression of
fibrosis. We believe that Redx’s compounds could be first-in-class agents that could provide a safe and
effective breakthrough therapy to treat intestinal fibrosis, as well as provide complementary benefit to
existing anti-inflammatory treatments
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-fibrotic effects in GI fibrosis disease models (see Fig 13) along with a good general and
cardiovascular safety profile7
One of Redx’s scientists is also a member of the Stenosis Therapy and Anti-Fibrotic Research (STAR)
Consortium, involving other large pharma representatives. The ultimate goal of the STAR Consortium is
the successful testing of a specific anti-fibrotic agent in Crohn’s disease and is being led by world-leading
clinical investigators from the Cleveland Clinic, Mayo Clinic and Robarts Clinical Trials. The STAR
Consortium is funded in-part by the Helmsley Charitable Trust to advance anti-fibrotic therapeutic clinical
trials and address unmet medical needs of Crohn’s disease patients.
Figure 13. Redx GI-targeted ROCK inhibitor reduces collagen deposition in a murine model of Crohn’s
fibrosis. 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.
Redx are actively looking to partner this specialist project with a large biotechnology or pharmaceutical
company.
19
Strategic Report
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 myofibroblast trans-differentiation for the
treatment of fibrosis 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 fibroblastic foci of idiopathic pulmonary fibrosis. 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 Inflammatory Bowel
Disease by the Pleiotropic Actions of a Local Rho Kinase Inhibitor. Gastroenterology. 2017
Oct;153(4):1054-1067
8 Rachel S. Knipe, Clemens K. Probst, David Lagares, Alicia Franklin, Jillian J. Spinney, Patricia L. Brazee,
Paula Grasberger, Linlin Zhang, Katharine E. Black, Norihiko Sakai, Barry S. Shea, James K. Liao, Benjamin
D. Medoff, Andrew M Tager. The Rho Kinase Isoforms ROCK1 and ROCK2 each Contribute to the
Development of Experimental Pulmonary Fibrosis. Am J Respir Cell Mol Biol. 2018 Apr;58(4):471-481
9 Ryan Flynn, Katelyn Paz, Jing Du, Dawn K. Reichenbach, Patricia A. Taylor, Angela Panoskaltsis-Mortari,
Ante Vulic, Leo Luznik, Kelli K. P. MacDonald, Geoffrey R. Hill, Melanie S. Nyuydzefe, Jonathan M. Weiss,
Wei Chen, Alissa Trzeciak, Jon S. Serody, Ethan G. Aguilar, William J. Murphy, Ivan Maillard, David Munn,
John Koreth, Corey S. Cutler, Joseph H. Antin, Jerome Ritz, Samuel D. Waksal, Alexandra Zanin-Zhorov,
and Bruce R. Blazar. Targeted Rho-associated kinase 2 inhibition suppresses murine and human chronic
GVHD through a Stat3-dependent mechanism. Blood. 2016; 127(17):2144-2154
10 Zhou Q1, Mei Y, Shoji T, Han X, Kaminski K, Oh GT, Ongusaha PP, Zhang K, Schmitt H, Moser M, Bode
C, Liao JK. Rho-associated coiled-coil-containing kinase 2 deficiency in bone marrow-derived cells leads
to increased cholesterol efflux and decreased atherosclerosis. Circulation. 2012 Oct 30;126(18):2236-47
11 GlobalData Crohn’s Disease Dynamic Market Forecast to 2026 published October 2018
12 Webber Pak Wo Chan Fadi Mourad Rupert WL Leong. Crohn's disease associated strictures. Journal
of Gastroenterology and Hepatology Foundation and John Wiley & Sons Australia, Ltd. 2018 Feb 10;
33(5):998-1008
20
Strategic Report
Operational Review
The Directors present this Operational Review for the year ended 30 September 2019 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.
Management Team
Lisa Anson has continued as Chief Executive officer throughout the year, and was elected to serve on the
Board of the UK BioIndustry Association from 1 January 2019.
Dr James Mead was appointed Chief Financial Officer on 1 February 2019, taking over from Mr Dominic
Jackson. He is an experienced finance professional in the sector, having held a variety of senior roles over
a 16-year career at AstraZeneca, including Chief Financial Officer of AstraZeneca Netherlands, Finance
Director for multiple clinical development project teams and Director of Investor Relations.
Dr Richard Armer and Dr Andrew Saunders continue as Chief Scientific Officer and Chief Medical Officer
respectively.
Key Performance Indicators (KPIs)
The Group’s key performance indicators include a range of financial and non-financial 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 programmes are included in the CEO Report and in more
detail in the Science Report. Below are the Financial KPIs considered pertinent to the business.
Cash at year end
2019
£m
3.7
2018
£m
6.5
2017
£m
23.8
2016
£m
5.8
Operating expenditure during the year has been offset by significant tax refunds, the recovery of a
previously derecognised loan and the issue of a loan note. A further $3.5m was received as a result of
the sale of the pan-RAF programme. The Board works to ensure that the Group has access to sufficient
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. Included in the balance is £500k held
by the Group as security for the MGL loan in a blocked account. This amount returned to the sole
control of the Group on the capitalisation of the loan on 21 January 2020.
Total operating expenditure
2019
£m
10.2
2018
£m
10.6
2017
£m
15.8
2016
£m
16.5
The Group has again achieved the reduced levels of operating expenditure seen in the prior year,
despite an increase in clinical spend due to positive pipeline progress. Continued efforts will be made
to maintain rigorous cost control, whilst seeking to prioritise resources for scientific programmes.
Net cash flow
(including certain one-off
payments)
2019
£m
(2.8)
2018
£m
(17.3)
2017
£m
18.0
2016
£m
(3.7)
Early 2018 saw significant outflow as legacy issues from the Administration were unwound. Operating
cashflows have been bolstered in the current year by significant tax credits received (£2.7m), the
recovery of the derecognised loan (£0.9m), $3.5m revenue from the sale of the pan-RAF programme
and the issue of £1m loan notes.
With the legacy issue cash flows now settled, the Group continues to make cash conservation a priority
and the reduced cash outflow, whilst maintaining a full scientific programme, bears testament to this.
21
Strategic Report
Operational Review (Cont’d)
R & D expenditure
(as a proportion of total
operating expenditure)
2019
%
2018
%
2017
%
2016
%
82
70
76
84
The Group’s continuing focus is to maximise the amount of operating expenditure spent on research
and development activities, defined as direct R&D expenditure (per note 9) plus scientific staff costs
(excluding Board and key management). The above is prepared on a comparable basis to prior years,
and as anticipated last year, the percentage has risen favourably.
Financial Review
Financial position
At 30 September 2019, the Group had cash resources of £3.7m (2018: £6.5m). The Group issued £1m of
loan notes during the year, and subsequent to the year end has issued a further £1.5m under the facility
agreed with Moulton Goodies Ltd (“MGL”). All loan notes (£2.5m) and accrued interest were capitalised
on 21 January 2020. Further funding will be required to enable the Group to continue to progress its
business plan.
Cost management
Operating expenses continue to be tightly controlled in line with the reductions achieved in the prior year.
Recovery of derecognised asset
As stated in previous Annual reports, the Board have continued to seek full repayment of the loan to
Redag Crop Protection Ltd under its terms. As a result of a significant sale of assets by that company, the
full loan amount plus all accrued interest was recovered in February 2019, generating a cash inflow of
£869k.
Accommodation (Alderley Park)
As noted last year, the Group also set itself the target of re-aligning its accommodation with its reduced
headcount, with a view to further reduce costs. Agreement was reached this year with the landlord to
reduce the footprint occupied through the historic lease, without cash penalty through a warrant
agreement, from 72,000 sq ft to 31,000 sq ft., a 57% reduction. The Board continues to seek ways to
manage remaining accommodation costs.
Sale of pan-RAF programme
In July 2019, the Group announced it had reached agreement to sell its pan-RAF programme to Jazz
Pharmaceuticals plc. This sale generated an upfront payment of $3.5m (gross) together with the potential
for up to $203m in development, regulatory and commercial milestone payments in the future. In addition
a revenue generating collaboration agreement was signed for Redx to provide research and preclinical
development services for the programme.
Cash flows
Overall negative net cash flow for the year was £2.8m, (2018: £17.3m inflow). See KPI’s (page 21) for
details.
Going concern
See the accounting policy on page 51 for further details.
22
Strategic Report
Operational Review (Cont’d)
Taxation
As a result of no longer being supported by Regional Growth funding, the Group was able to successfully
return to claiming R&D tax credits on most of its expenditure, rather than the less favourable Research
and Development expenditure credits, with £2.7m received in the year and with a further £0.9m due at
30 September 2019 (2018: £1.2m).
Principal Risks and Uncertainties
Redx is a biopharmaceutical Group and, in common with other companies operating in this field, is subject
to a number of risks and uncertainties. The principal risks and uncertainties identified by Redx for the year
ended 30 September 2019 are below.
Research and Development
The Group is at a relatively early stage of development and may not be successful in its efforts to build a
pipeline of product candidates and develop approved or marketable products. Technical risk is present at
each stage of the discovery and development process with challenges in both chemistry (including the
ability to synthesise novel molecules) and biology (including the ability to produce candidate drugs with
appropriate safety, efficacy and usability characteristics). Additionally, drug development is a highly
regulated environment which itself presents technical risk through the need for study designs and data to
be accepted by regulatory agencies. Furthermore, there can be no guarantee that the Group will be able
to, or that it will be commercially advantageous for the Group to, develop its intellectual property through
entering into licensing deals with emerging, midsize and large pharmaceutical companies.
Commercial
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 financial, 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 sufficient 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.
23
Strategic Report
Operational Review (Cont’d)
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-specified in the trial design;
– the need to expand the clinical trial;
– delays or failures in obtaining sufficient clinical materials;
– unforeseen safety issues;
– lack of efficacy during clinical trials;
– inability or unwillingness of patients or clinical investigators to follow our clinical trial protocols; and
– inability to monitor patients adequately during or after treatment.
Additionally, 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 significant delay in completing
clinical trials for the Group’s product candidates could harm the commercial prospects for its product
candidates, and therefore, its financial results.
Regulatory
The Group’s operations are subject to laws, regulatory approvals and certain governmental directives,
recommendations and guidelines relating to, amongst other things, product health claims, occupational
safety, laboratory practice, the use and handling of hazardous materials, prevention of illness and injury,
environmental protection and human clinical studies. There can be no assurance that future legislation
will not impose further government regulation, which may adversely affect the business or financial
condition of the Group.
Intellectual Property (IP)
The Group’s success depends 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 sufficiently broad, competitors could develop and commercialise similar
technology and products which would materially affect the Group’s ability to successfully commercialise
its technology and products. The Group is exposed to additional IP risks, including infringement of
intellectual property rights, involvement in lawsuits and the inability to protect the confidentiality of its
trade secrets which could have an adverse effect on its success.
Financial
The Group has a limited operating history, has incurred significant losses in previous years, 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 profits. The Group may
not be able to raise additional funds that are needed to support its product development programmes or
commercialisation efforts, and any additional funds that are raised could cause dilution to existing
investors.
Operational
The Group’s future development and prospects depend to a significant degree on the experience,
performance and continued service of its senior management team, including the Directors. The Group
has invested in its management team at all levels. The Directors also believe that the senior management
team is appropriately structured for the Group’s size and is not overly dependent upon any particular
individual. The Group has entered into contractual arrangements with these individuals with the aim of
securing the services of each of them. Retention of these services or the identification of suitable
replacements, however, cannot be guaranteed. The loss of the services of any of the Directors or other
members of the senior management team and the costs of recruiting replacements may have a material
adverse effect on the Group and its commercial and financial performance and reduce the value of an
investment in the Ordinary Shares.
24
Governance
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 Corporate Governance Code
for small and mid-sized companies published by the QCA in April 2018 (‘‘QCA Code’’).
The Board comprises five Directors: an independent Non-Executive Chairman, two full time Executive
Directors and two Non-Executive Directors (both being independent), reflecting 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 fulfil specific 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 specific issues when
the need arises.
Board of Directors
Mr Iain Ross (Chairman)
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 Interim Executive Chairman of
Silence Therapeutics plc (LON:SLN), and Chairman of Kazia Ltd (ASX: KZA / NASDAQ:KZIA). He is a qualified
Chartered Director, and a Former Vice Chairman of the Council of Royal Holloway, London University.
Previously, he has held significant 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 Officer 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 Pfizer, AstraZeneca and Dainippon Sumitomo before completing
a merger with Intradigm Inc. He continues to consult for private equity groups on biotech and technology
company turnarounds.
26
Governance
Mrs Lisa Anson (CEO)
Lisa was appointed CEO of Redx in June 2018, previously she was President of AstraZeneca UK since 2012
and has significant 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
joining Zeneca
Aptium), a California based cancer disease management company, prior to
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).
Dr James Mead (CFO)
James was appointed CFO of Redx in February 2019. Previously James held a variety of highly relevant
Finance leadership roles over a 16 year career with AstraZeneca Plc. As Chief Financial Officer 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 significant change. As R&D Portfolio Finance Director he was responsible for financial
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.
Mr Peter Presland (Independent Non-Executive Director)
Peter joined the Board in November 2017 and 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 qualified 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-profile charity.
Dr Bernhard Kirschbaum (Independent Non-Executive Director)
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 programmes, doubling the number of phase II assets in this period.
Bernd is currently Chairman of OMEICOS Therapeutics and a board member of BioMedX, Enlivex
Therapeutics, Amarna Therapeutics as well as an advisor to the board of KAHR Medical.
27
Governance
Directors’ Report
The Directors present their annual report on the affairs of the Group, together with the financial
statements and auditor’s report for the year ended 30 September 2019. The Corporate Governance
Statement on pages 31-36 and the governance section on page 26 also form part of this report.
Directors
The Directors who were in office during the year and up to the date of signing the financial statements,
unless stated, were:
Executive
Lisa Anson
Dominic Jackson – Resigned 31 January 2019
James Mead – Appointed 1 February 2019
Non-Executive
Iain Ross
Dr Bernhard Kirschbaum
Peter Presland
The Company maintained Directors’ and officers’ liability insurance cover throughout the year.
Principal activities of the Group
Details of current and future trading as well as the principal risks and uncertainties are included in the
Strategic Report on pages 6- 25.
Business review
The Strategic Report on pages 6 – 25 provides a review of the business, the Group’s trading for the year
ended 30 September 2019, 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 £4.3m (2018 loss £8.8m). The Directors do not recommend the
payment of a dividend. (2018 £nil).
Financial instruments
Information regarding Financial instruments can be found in note 22.
Directors’ interest in share options
Details of the Directors’ interests, share options and service contracts are shown in the Directors’
Remuneration report.
Research and development
The Group is continuing to research products within its chosen areas of therapeutic focus.
Information given to the Auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
•
So far as the Director is aware, there is no relevant audit information of which the Group’s Auditor
is unaware, and
The Director has taken all steps that he ought to have taken as a Director to make himself aware of
any relevant audit information and to establish that the Auditor is aware of that information.
•
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 6 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.
28
Governance
Directors’ Responsibilities Statement
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial
year. The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial
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 financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
The group financial statements are required by law and IFRS adopted by the EU to present fairly the
financial position and performance of the group; the Companies Act 2006 provides in relation to such
financial statements that references in the relevant part of that Act to financial statements giving a true
and fair view are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the group and the company and of the profit or loss
of the group for that period.
In preparing each of the group and company financial statements, the directors are required to:
a.
select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c.
for the group financial statements, state whether they have been prepared in accordance with IFRSs
adopted by the EU and for the company financial statements state whether applicable UK accounting
standards have been followed, subject to any material departures disclosed and explained in the
company financial statements;
d.
prepare the financial 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 sufficient to show and
explain the group’s and the company’s transactions and disclose with reasonable accuracy at any time the
financial position of the group and the company and enable them to ensure that the financial 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 prevention and detection of fraud and
other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Redx Pharma Plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Lisa Anson
Chief Executive Officer
James Mead
Chief Financial Officer
30
Governance
Corporate Governance Statement
The Board believes in the importance of corporate governance and is aware of its responsibility for overall
corporate governance, and for supervising the general affairs and business of the Company and its
subsidiaries.
The Company is listed on the Alternative Investment Market (‘AIM’) of the London Stock Exchange and is
subject to the continuing requirements of the AIM Rules. 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 field of oncology
and fibrotic diseases.
The Group invests its efforts and financial 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 6 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 satisfied that the level of retained risk is appropriate and commensurate with the financial rewards that
should result from achievement of its strategy.
Board of Directors
There were two changes to the composition of the Board during the year. As planned, Dominic Jackson
resigned as a Director on 31 January 2019 and James Mead was appointed as an Executive Director and
Chief Financial Officer on 1 February 2019. All other Directors remained throughout the period under
review.
As of the date of this Report the Board comprises five Directors in total: an independent Non-Executive
Chairman, two Executive Directors and two Non-Executive Directors (both being independent), reflecting
a blend of different experiences and backgrounds. The skills and experience of the Board are set out in
their biographical details on pages 26-27. The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to scrutinize performance.
31
Governance
Corporate Governance Statement (Cont’d)
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 scientific, operational and
financial 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 34.
There is a clear separation of the roles of Chief Executive Officer (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 Officer has the responsibility for implementing the strategy of the Board and
managing the day-to-day business activities of the Group.
Time Commitments
On joining the Board, Non-Executive Directors receive a formal appointment letter, which identifies 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 significant outside commitments prior to their appointment. The Board is satisfied that both
the Chairman and the other Non-Executive Directors are able to devote sufficient 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
sufficient independence on the Board and, that all the Non-Executive Directors are of sufficient
competence and calibre to add strength and objectivity to the Board, and bring considerable experience
in scientific, operational and financial development of biopharmaceutical products and companies.
Specifically the Board has considered and determined 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 five 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 significant links with other Directors through involvement
in other companies or bodies
do not represent a significant shareholder.
The Company Secretary maintains a register of outside interests and any potential conflicts 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 office, 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 briefings 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 first 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.
32
Governance
Corporate Governance Statement (Cont’d)
Board Committees
The Board no longer maintains a separate Nominations and Corporate Governance Committee as these
matters are deemed sufficiently important such that the full Board will address these matters as required.
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 the members of the Audit, Risk & Disclosure Committee were Mr Peter
Presland, Mr Iain Ross and Dr Bernd Kirschbaum. Mr Peter Presland is the Chairman of the Committee.
The responsibilities of the committee include the following:
• Monitoring the integrity of the financial statements of the Group
• Reviewing accounting policies, accounting treatment and disclosures in the financial reports
• Reviewing the Group’s internal financial controls and risk management systems
• Overseeing the Group’s relationship with external auditors, including making recommendations to the
Board as to the appointment or re-appointment of the external auditors, reviewing their terms of
engagement, and monitoring the external auditors’ independence, objectivity and effectiveness.
During the year, the Committee met to review audit planning and findings with regard to the Annual
Report, and planning and findings from the review of the interim Financial Statements. In addition it
reviewed and updated the Group’s Financial Reporting Procedures Manual.
Remuneration Committee
During the year under review 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.
• Within the terms of the agreed policy, determining the total individual remuneration package for
Executive Directors.
• Overseeing the evaluation of executive officers.
• Determining bonuses payable under the Group’s cash bonus scheme.
• Determining the vesting of awards under the Group’s long-term incentive plans and exercise of share
options.
During the year it met to discuss staff remuneration, options packages, bonus schemes and remuneration
packages for the new Director.
The Directors’ Remuneration Report is presented on pages 37 to 39.
33
Governance
Corporate Governance Statement (Cont’d)
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:
Mr Iain Ross
Mrs Lisa Anson
Mr Dominic Jackson
Dr James Mead
Dr Bernd Kirschbaum
Mr Peter Presland
Board
17/17
17/17
3/4
11/12
17/17
17/17
Audit
3/3
Remuneration
4/4
3/3
3/3
4/4
4/4
(resigned 31 January 2019)
(appointed 1 February 2019)
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 financial and management controls within the business.
Examples of control procedures include:
an annual budget set by the Board with regular review of progress;
•
• monthly management accounts;
•
•
dual bank signatories for all payments with pre-determined authority limits for specific Directors
and employees;
regular meetings of Executive Directors and Senior management to review management
information and follow up on operational issues or investigate any exceptional circumstances:
a risk register;
clear levels of authority, delegation and management structure;
•
•
• Board review and approval of significant 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 Officer and Chief Executive Officer.
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 confirms that the
effectiveness of the system of internal control, covering all material controls including financial,
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.
34
Governance
Corporate Governance Statement (Cont’d)
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.
Board effectiveness 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 confidential
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 flexibility of the Board in dealing with a wide range
of 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;
effectiveness in challenging assumptions, in maintaining own views and opinions and in following up
main areas of concern;
building successful
and communication with and
Shareholders.
relationships with other Board members, management and advisers;
influence on other Board members, management and key
•
effective leadership of the Board;
In addition to the above, the Chairman was evaluated on his:
•
• management of relationships and communications with Shareholders;
•
identification 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
confirm 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 Officer reports to the Board and the Chairman reviews her performance on behalf of
the Board. The Chief Executive Officer 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.
35
Governance
Corporate Governance Statement (Cont’d)
Following the 2019 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.
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.
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 Officer ensure that the views of
the shareholders are communicated to the Board as a whole. The Board ensures that the Group’s strategic
plans have been carefully reviewed in terms of their ability to deliver long-term shareholder value. Fully
audited Annual Reports are published, and Interim Results statements notified via Regulatory Information
Service announcements. All financial reports and statements are available on the Company’s website.
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 briefing 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 is re-enforced 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.
Further details of how we comply with Corporate Governance Code for small and mid-sized companies
can be found on our website, www.redxpharma.com
Iain G. Ross
Chairman of the Board of Directors
36
Governance
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 benefit of the
Group.
The remuneration of the Executive Directors during the year 2018/19 is set out below.
Basic salary
Basic salaries are reviewed annually. The review process is managed by the Remuneration Committee
with reference to market salary data, and the Executive Directors’ performance and contribution to the
Group during the year.
Bonuses
Annual bonuses are based on achievement of Group strategic and financial targets, and personal
performance objectives.
The Non-Executive Directors believe that bonuses are an incentive to achieve the targets and objectives,
and represent an important element of the total compensation awards to the Executive Directors.
Longer term incentives
In order to further incentivise the Executive Directors and employees, and align their interests with
shareholders, the Company 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 39. There are no conditions
attached to vesting other than service conditions.
Pension
The Group operates a defined contribution pension scheme which is available to all employees. The assets
of the scheme are held separately from those of the Group in independently administered funds.
Executive Directors service contracts and termination provisions
The service contracts of Executive Directors are approved by the Board. The service contract may be
terminated by either party giving notice to the other. The details of the Directors’ contracts are
summarised below:
Lisa Anson
James Mead
Date of Contract
1 June 2018
1 February 2019
Notice period
6 months
6 months
Mrs Lisa Anson was appointed CEO and an Executive Director on 1 June 2018. She is paid £300,000 per
annum and qualifies for employee benefits including participation in the annual performance bonus and
option schemes.
Mr James Mead was appointed CFO and an Executive Director, on 1 February 2019. He is paid £145,000
per annum and qualifies for employee benefits 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, benefits or option grants from the Group.
The Non-Executive Directors Letters of Appointment are reviewed by the Board annually.
37
Governance
Directors’ Remuneration Report (Cont’d)
Directors’ remuneration
The Directors received the following remuneration during the year:
Executive
L Anson1
J Mead2
D Jackson3
Dr N Murray4
Non-Executive
Iain Ross
Dr B Kirschbaum
P Presland5
N Molyneux6
Salaries,
bonuses
and fees
£
390,000
96,667
33,333
-
80,000
46,000
45,000
-
691,000
Pension
contributions
£
26,362
4,833
1,667
-
Share
based
payments
£
22,644
5,220
4,929
-
Total
2018/19
£
439,006
106,720
39,929
-
Salaries,
bonuses
and fees
£
100,000
-
91,667
243,974
Pension
contributions
£
8,787
-
4,583
949
Share
based
payments
£
62,875
-
22,708
-
Total
2017/18
£
171,662
-
118,958
244,923
-
-
-
-
32,862
-
-
-
-
32,793
80,000
46,000
45,000
-
756,655
*1 250,000
46,000
41,250
3,833
776,724
-
-
-
-
14,319
-
-
-
-
85,583
250,000
46,000
41,250
3,833
876,626
1L. Anson was appointed as a Director on 1 June 2018.
2J. Mead was appointed as a Director on 1 February 2019.
3D. Jackson was appointed as a Director on 3 November 2017, and resigned on 31 January 2019.
4Dr N. Murray resigned as a Director on 3 November 2017, payments reflect contractual obligations.
5P. Presland was appointed as a Director on 3 November 2017.
6N. Molyneux resigned as a Director on 3 November 2017.
*1 Includes additional payments 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 Mr N. Molyneux’s remuneration in 2017/18 disclosed above, £6,000 was paid for
consultancy and secretarial services to Acceleris Capital Ltd, a related party (note 28).
No compensation for loss of office was paid in the years ended 30 September 2019 or 30 September 2018.
Mr Ross, Mr Presland and Dr Kirschbaum do not participate in the Group Option Scheme.
Directors’ shareholdings
The Directors who served during the year, together with their beneficial interest in the shares of the
Company are as follows:
Ordinary shares of 1p each
Executive
L Anson
D Jackson
J Mead
Non-Executive
I Ross
P Presland
B Kirschbaum
At 30 September
2019
At 1 October
2018
-
-
-
-
-
-
600,000
120,000
50,000
600,000
120,000
50,000
38
Governance
Directors’ Remuneration Report (Cont’d)
Directors Share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire
Ordinary Shares in the Company granted to or held by the Directors. There are no performance conditions
attached to the vesting of these options other than service conditions. Details of the options are as
follows:
Granted
during the
period/
(lapsed)
At 30
September
2019
Price per
share (p)
Date from
which
exercisable
Director
Date of grant
L Anson
D Jackson
J Mead
1-Jun-18
1-Jun-18
1-Jun-18
1-Jun-18
1-Jun-18
1-Jun-18
21-Dec-17
21-Dec-17
21-Dec-17
13-Feb-19
13-Feb-19
13-Feb-19
13-Feb-19
13-Feb-19
13-Feb-19
At 1
October
2018
600,000
600,000
600,000
600,000
600,000
600,000
3,600,000
166,666
166,667
166,667
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
200,000
200,000
200,000
200,000
600,000
600,000
600,000
600,000
600,000
600,000
3,600,000
166,666
166,667
166,667
500,000
200,000
200,000
200,000
200,000
200,000
200,000
1,200,000
1,200,000
13.75
20.0
27.0
35.0
42.5
50.0
22.0
33.0
50.0
13.75
20.0
27.0
35.0
42.5
50.0
Expiry date
1-Jun-28
1-Jun-28
1-Jun-28
1-Jun-28
1-Jun-28
1-Jun-28
2-Jun-20
2-Jun-20
2-Jun-20
2-Jun-20
2-Jun-20
2-Jun-20
22-Dec-19
22-Dec-19
22-Dec-19
21-Dec-27
21-Dec-27
21-Dec-27
14-Feb-21
14-Feb-21
14-Feb-21
14-Feb-21
14-Feb-21
14-Feb-21
13-Feb-29
13-Feb-29
13-Feb-29
13-Feb-29
13-Feb-29
13-Feb-29
The options held by D. Jackson remain for a period of 2 years from his date of resignation.
Dr Bernd Kirschbaum
Chairman of the Remuneration Committee
39
Governance
Independent Auditor’s report to the members of Redx Pharma Plc
Opinion
We have audited the financial statements of Redx Pharma Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 September which comprise the consolidated statement of total
comprehensive income, the consolidated statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows and notes to the consolidated financial
statements, including a summary of significant accounting policies, the company statement of financial
position, the company statement of changes in equity and notes to the company financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been
applied in the preparation of the group financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that
has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, 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 financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 30 September 2019 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group and the parent company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to the Going concern policy on page 51 in the financial statements, which indicates
that the Group incurred a net loss of £4.3m during the year ended 30 September 2019 and, as of that
date, the Group had total equity of £1.5m including an accumulated deficit of £34.1m. The Directors
estimate that the cash held by the Group together with known receivables and the equity injection
detailed on page 51 will be sufficient to support the current level of activities to the end of April 2020. The
Directors have agreed draft heads of terms with a group of investors to provide financial resource to the
Group in the form of short-term debt funding, and a convertible loan, and are also in ongoing discussions
in respect of other business development opportunities. The short-term debt funding and the convertible
loan, including its subsequent conversion, along with ongoing business opportunities are not committed
at the date of approval of these financial statements. As stated in the going concern policy on page 51,
these events or conditions along with other matters as set forth in the policy, indicate that a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
40
Governance
Independent Auditor’s report to the members of Redx Pharma Plc (Cont’d)
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the group and parent company financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit
and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the group and parent company financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. In addition to the matter described
in the Material uncertainty related to going concern section we have determined the matters described
below to be key audit matters to be communicated in our report.
Group Key Audit matters
There are no additional Key Audit Matters to highlight in this report in respect of the group financial
statements.
Parent company key audit matters
Carrying value of intra-group balances in the company balance sheet
(Refer to page 78 regarding the accounting policy in respect of goodwill, page 81 in respect of critical
judgements and estimates applied by the Directors and note 8 to the financial statements on page 84)
The risk
The Company has material receivables from subsidiary undertakings that are currently loss making. As a
consequence, there is a significant risk that these are impaired and need to be written down. At the 30
September 2019, the carrying value of amounts due from group undertakings amounted to £14,911k
(2018: £13,835k) in the Company Statement of Financial Position.
Our response
We identified amounts due from each subsidiary undertaking and discussed with management whether
each balance is recoverable taking into account the strategic plans established by the board in respect of
each subsidiary undertaking.
We also obtained management’s impairment reviews and underlying calculations prepared to support
the carrying value of the financial assets. We reviewed the 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 where 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. When evaluating whether misstatements, both
individually and on the financial statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature and the size of the misstatements.
During planning materiality for the group financial statements as a whole was calculated as £130,000,
which was not significantly changed during the course of our audit. Materiality for the parent company
financial statements as a whole was calculated as £130,000, which was not significantly changed during
the course of our audit. We agreed with the Audit Committee that we would report to them all unadjusted
differences in excess of £7,500, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
The audit was scoped to obtain sufficient and appropriate audit evidence over the significant operations
of the Group during the year ended 30 September 2019. This included the performance of full scope
statutory audits on the group and parent company and on each of the subsidiary undertakings which
forms part of the group accounts. As part of our planning we assessed the risk of material misstatement
and areas that required significant auditor consideration at the component and group level. Procedures
were designed and performed to address the most significant assessed risks of material misstatement, as
outlined above in the key audit matters section, along with those undertaken on going concern.
41
Governance
Independent Auditor’s report to the members of Redx Pharma Plc (Cont’d)
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in
this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 30. the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
42
Governance
Independent Auditor's report to the members of Redx Pharma Pic (Cont'd)
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council's website at: http://www.frc.org.uk/auditorsresponsibilities.This
description
forms part of our auditor's report.
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 FeA (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
3 Hardman Street
Manchester
M33HF
10 March 2020
43
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2019
Note
Year ended
30 September
2019
£’000
Year ended
30 September
2018
£’000
Continuing operations
Revenue
Costs of sale of programme
Operating expenses
Onerous lease credit / (charge)
Derivative financial instrument
Administration costs
Non-recurring reorganisation costs
Recovery of derecognised asset
Release of accrued accommodation
expenses
Share based compensation
Other operating income
Loss from operations
Finance costs
Finance income
Loss before taxation
Income tax
Total comprehensive loss for the year
attributable to owners of Redx
Pharma Plc
Loss per share (pence)
From continuing operations
Basic
Diluted
1
1
9
21
20
2
3
4
5
6
7
8
8
10
11
11
44
3,131
(350)
129
-
(10,170)
(10,606)
146
(67)
-
-
869
-
(45)
(752)
-
(177)
(215)
-
548
(282)
241
___________
(6,245)
1,186
___________
(10,169)
(102)
(1)
12
___________
24
__________
(6,335)
(10,146)
2,017
___________
1,301
__________
(4,318)
=========
(8,845)
==========
(3.4)
(3.4)
(7.0)
(7.0)
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 September 2019
Share
capital
Share
premium
£’000
£’000
Share
based
payment
£’000
Capital
Redemption
Reserve
£’000
Retained
Deficit
Total
Equity
£’000
£’000
At 1 October 2017
1,265
33,263
880
1
(21,082)
14,327
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the year
Share based
compensation
Movement in year
-
-
-
-
-
-
-
282
282
At 30 September 2018
1,265
33,263
1,162
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the year
Share based
compensation
Release of share
options lapsed in the
year
Movement in year
-
-
-
-
-
-
-
-
-
45
(103)
(58)
-
-
-
1
-
-
-
-
(8,845)
(8,845)
-
282
(8,845)
(8,563)
(29,927)
5,764
(4,318)
(4,318)
-
45
103
(4,215)
-
(4,273)
At 30 September 2019
1,265
33,263
1,104
1
(34,142)
1,491
46
Financial Statements
Consolidated Statement of Cash Flows
For the year ended 30 September 2019
Net cash flows from operating activities
Loss for the year
Adjustments for:
Income tax
Finance costs
Finance income
Depreciation and amortisation
Share based compensation
Derivative financial instrument
Onerous lease provision
Release of accrued accommodation expenses
Recovery of derecognised asset
Profit on disposal of assets
Movements in working capital
Decrease in trade and other receivables
Decrease in trade and other payables
Cash used in operations
Tax credit received
Interest received
Net cash used in operations
Cash flows from investing activities
Sale of property, plant and equipment
Purchase of property, plant and equipment
Net cash generated by/ (used in) investing activities
Cash flows from financing activities
Derecognised asset recovered
MGL loan
Interest paid
Net cash generated by / (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
(See note 17 for details of restrictions on certain accounts)
17
Reconciliation of liabilities arising from financing activities
MGL loan
Balance b/fwd
Cash flows
Fair value adjustment of derivative element
Accrued interest
Balance c/fwd (disclosed as current borrowings, note 19
and derivative financial instrument, note 20)
47
Note
Year ended 30
September
2019
£’000
Year ended 30
September
2018
£’000
(4,318)
(8,845)
(2,017)
102
(12)
91
45
67
(146)
-
(869)
(60)
446
(711)
__________
(7,382)
2,701
13
__________
(4,668)
__________
60
(28)
__________
32
__________
869
1,000
-
__________
1,869
__________
(2,767)
6,471
__________
3,704
__________
£’000
-
1,000
67
49
__________
1,116
__________
(1,301)
1
(24)
164
282
-
752
(548)
-
(17)
572
(8,963)
__________
(17,927)
727
23
__________
(17,177)
__________
23
(132)
__________
(109)
__________
-
-
(49)
__________
(49)
__________
(17,335)
23,806
__________
6,471
__________
£’000
-
-
-
-
__________
-
__________
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the 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 financial statements are presented in pounds Sterling, which is the Group’s presentational
currency, and all values are rounded to the nearest thousand (£000) except where indicated otherwise.
They have been prepared under the historical cost convention and in accordance with International
Financial Reporting Standards as adopted by the European Union (IFRS) and with those parts of the
Companies Acts 2006 applicable to entities reporting under IFRS.
New standards, amendments and interpretations adopted during the year ended 30 September 2019.
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
IFRS 9, Financial
Instruments
IFRS 15, Revenue from
Contracts with Customers
Amendments to IFRS 2:
Classification and
Measurement of Share-
based Payment
Transactions
IFRIC 22, Foreign
Currency Transactions
and Advance
Consideration
This standard replaces IAS 39. Whilst the standard changes the basis of
measurement of financial assets, introduces a new impairment model and
changes the hedge accounting provisions, the implementation of the new
standard has not had a material impact on our reported results or financial
position.( see note 22)
The standard specifies how and when a company will recognise revenue as well
as requiring such entities to provide users of financial statements with more
informative, relevant disclosures. The standard provides a single, principles based,
five-step model to be applied to all contracts with customers. Having considered
the impact of the new standard on the recognition of the income from the sale of
the pan-RAF programme, the implementation of the new standard has not had a
material impact on how revenue is recognised and measured in the current
period.
The amendment clarifies how to account for certain types of share-based
payment transactions and provide requirements on the accounting for:
-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 modification to the terms and conditions of a share-based payment that
changes the classification of the transaction from cash-settled to equity-settled.
The interpretation clarifies 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 adoption of this interpretation has not had an impact on the
Group.
48
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
New standards, amendments and interpretations issued but not effective for the financial year
beginning 1 October 2018 and not early adopted.
The IASB and IFRIC have issued the following standards and interpretations with effective dates as noted
below:
Effective date
(for annual
periods
beginning on or
after)
1 January 2019
1 January 2019
Standard
Key requirements
Annual IFRS
Improvements Process
(2015-17)
improvements cycle covered
The 2017 Annual
amendments to
IFRS 1 First-time Adoption of
International Financial Reporting Standards, IAS 28
Investments in Associated and Joint Ventures and IFRS
12 Disclosure of Interests in Other Entities.
IFRS 16, Leases
The standard requires lessees to account for all leases
under a single on-balance sheet model in a similar
way to finance leases under IAS 17. At the
commencement date of a lease, a lessee will
recognise a liability to make lease payments and an
asset representing the right to use the underlying
asset during the lease term. Lessees will be required
to separately recognise the interest expense on the
lease liability and the depreciation expense on the
right of use asset. The group is still assessing the
impact of this standard on the financial statements
and have not yet quantified this.
Amendments to IFRS 9:
Prepayment Features
with Negative
Compensation
The amendment will enable entities to measure at
amortised cost some prepayable financial assets with
so called negative compensation.
1 January 2019
IFRIC 23 Uncertainty
over Income Tax
Treatment
The interpretation is to be applied to the determination
of taxable profit (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.
49
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company. Control is achieved when the Company has the power over the investee; is
exposed, or has rights, to variable return from its involvement with the investee; and, has the ability to use
its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary
begins when the Company obtains control over the subsidiary and ceases when the Company loses control
of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the period are
included in the Consolidated Statement of Comprehensive Income from the date the Company gains control
until the date when the Company ceases to control the subsidiary. 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 financial statements of subsidiaries to bring the accounting
policies used into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
the members of the Group are eliminated on consolidation.
Business Combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value, which is calculated as the sum
of the acquisition‑date fair values of assets transferred by 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 profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their
fair value at the acquisition date, except that:
− deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are
recognised and measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefits’
respectively; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
−
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in
the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and
the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest
in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
50
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (cont’d)
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 profitable
operations is dependent on future uncertain events which include obtaining adequate financing to fulfil
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 £4.3 million during the year, and at 30 September 2019 had total equity of
£1.5 million including an accumulated deficit of £34.1 million. As at that date, the Group had cash and
cash equivalents of £3.7 million.
At 30 September 2019, the Group’s balance sheet included liabilities relating to a capitalisable loan from
Moulton Goodies Ltd. totalling £1,116,000 and a further £1.5 million was drawn down under this facility
in November 2019. Whilst it was repayable in full on 31 December 2019, MGL exercised during November
2019 its right to request that the Company capitalise the whole of the loan (including, inter alia, all unpaid
interest) into new ordinary shares in the Company. This capitalisation duly took place following the
passing by shareholders of a number of resolutions at a General Meeting on 21st January 2020.
For a considerable time, the Company has been in discussions with a number of specialist healthcare
investors who have a greater understanding of the potential value of the programmes as well as the
funding and likely timing of delivering clinical proof of concept data. As announced on 28th February 2020
Redmile Group LLC, a large and well-funded US based specialist healthcare and life sciences investment
firm, confirmed to the Board that it is willing to provide funding to Redx comprising (1) an initial equity
investment of £1.3 million through an issue of 11,500,000 ordinary shares; (2) a £5,000,000 short-term
debt funding; and (3) together with Sofinnova Partners, a £20,100,000 convertible loan. The £5,000,000
short-term debt funding is repayable prior to the issuance of the £20,100,000 convertible loan. The issue
of shares was completed on 4th March 2020 whilst heads of terms for the two loans were signed on 28th
February 2020. The Directors’ expectation is that conversion of the £20.1 million loan would take place
before 31st December 2020.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from
the date of the approval of these financial 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, which includes
the initial equity investment from Redmile, and known receivables will be sufficient to support the current
level of activity to the end of April 2020. To further extend the cash runway, the Directors are looking to
put in place the two aforementioned loans as soon as possible and secure conversion of the relevant
portion of debt into equity by the end of 2020. In addition, the Directors are continuing to explore
alternative sources of finance available to the Group through business development opportunities. Based
upon all ongoing discussions, the Directors have a reasonable expectation that they will be able to secure
sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date
of approval of these financial statements; they have therefore prepared the financial statements on a
going concern basis.
51
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
Going concern (Cont’d)
Although the Board is greatly encouraged by the positive discussions to date, in particular with Redmile
and Sofinnova, there can be no certainty that the Board will reach satisfactory agreement regarding the
short-term debt funding, the convertible loan and its conversion into ordinary shares, or ongoing business
development opportunities. Because these matters are not therefore concluded at the date of approval
of these financial statements, these circumstances represent a material uncertainty as to the Group’s
ability to continue as a going concern. Should the Group be unable to obtain alternative finance 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 and 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 Officer are together considered
the chief operating decision-maker and as such are responsible for allocating resources and assessing
performance of operating segments.
The Directors consider that there are no identifiable business segments that are subject to risks and
returns different to the core business. The information reported to the Directors, for the purposes of
resource allocation and assessment of performance is based wholly on the overall activities of the Group.
Therefore, the Directors have determined that there is only one reportable segment under IFRS 8.
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 fluctuate
significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the Consolidated Statement of Comprehensive income. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated.
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 significant 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 contracts to provide scientific research services to third parties are recognised as those
services are delivered.
52
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
Revenues (Cont’d)
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 financial 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 financial 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 reflects current market
assessments of the time value of money and the risks specific to the obligation. Changes in estimates are
reflected in profit 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 financial 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.
53
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
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 flows that are independent from other assets, the Directors estimate the recoverable
amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair
value less costs to sell and value in use. Furthermore, the Directors review at each reporting date the
carrying value of Goodwill in accordance with IAS 36 “Impairment of assets”.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted. If the
recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised as an expense immediately.
Property, plant and equipment
Property, plant and equipment and leasehold improvements are stated at cost less accumulated
depreciation and any impairment losses. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its intended use. Such assets acquired
in a business combination are initially recognised at their fair value at acquisition date.
Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on a straight-
line basis starting from the month they are first used, as follows:
−
Laboratory Equipment - 2 or 3 years
− Computer Equipment - 2 or 3 years
−
Leasehold improvements – over the term of the lease
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 significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Rentals payable under operating leases (net of any incentives received from
the lessor) are charged to the 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.
Pension costs
The Group operates a defined contribution pension scheme for the benefit of its employees. The Group
pays contributions into an independently administered fund via a salary sacrifice arrangement. The costs
of providing these benefits are recognised in the Consolidated Statement of Comprehensive Income and
consist of the contributions payable to the scheme in respect of the period.
54
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
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 benefits will flow 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 benefits;
adequate technical, financial and other resources are available to complete the
development;
the expenditure attributable to the intangible asset can be reliably measured; and
the Group has the ability and intention to use or sell the asset.
It is considered the above criteria are usually met when a drug has passed all stages of clinical trials and
is ready for commercial development.
Expenses for research and development include associated wages and salaries, material costs,
depreciation on non-current assets and directly attributable overheads.
All research and development costs, whether funded by third parties under licence and development
agreements or not, are included within operating expenses and classified as such.
The cost of a purchased intangible asset is the purchase price plus any cost directly attributable to bringing
the asset to the location and condition necessary for it to be capable of operating in the manner intended.
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.
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.
55
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
Financial instruments
Financial assets and financial 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 flows from the financial asset expire or when
the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the
obligation specified in the contract is discharged, cancelled or expired.
(a) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method less provision for impairment. Appropriate provisions for
estimated irrecoverable amounts are recognised in the Consolidated Statement of Comprehensive
Income for any expected credit losses, as detailed in the impairment of financial assets policy below.
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
insignificant risk of changes in value.
(c) Trade and other payables
Trade and other payables are initially measured at their fair value and are subsequently measured at their
amortised cost using the effective interest rate method; this method allocates interest expense over the
relevant period by applying the “effective interest rate” to the carrying amount of the liability.
(d) Derivative financial instrument
Derivative financial instruments are recognised initially at fair value. They are subsequently remeasured
at fair value at each reporting date using an Option pricing model, with any change in value recognised in
the Consolidated Statement of Comprehensive Income.
(e) Borrowings
After Initial recognition, borrowings are subsequently measured at amortised cost.
Impairment of financial assets
The Group recognised a loss allowance for expected credit losses (“ECL”) on financial assets. The expected
credit losses are estimated by reference to an analysis of the debtors’ current financial position. The loss
allowance recognised at the end of the year was £nil (2018: £nil).
56
Financial Statements
Notes to the Financial Statements
ACCOUNTING POLICIES (Cont’d)
Critical accounting estimates and judgements
The Directors believe that the correct allocation between debt and derivative financial instrument of the
capitalisable loan from Moulton Goodies Ltd is a significant accounting judgement. In calculating the split
in accordance with IAS 32, the Directors have employed an Option pricing model to value the derivative
element, the balance of the amount received being treated as debt. (see note 20).
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
significant element of judgement is therefore involved in the calculation of the charge.
The total charge recognised and further information on share options can be found in Notes 6 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 as detailed in note 14.
(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 flow 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.
(d) Valuation of derivative liability
The issuing of a £1m loan note to Moulton Goodies Ltd has, as a result of its terms allowing capitalisation
into a variable number of shares, led to the recognition of the conversion feature as an embedded
derivative financial instrument (note 20), rather than an equity instrument. In arriving at a fair value for
this liability a Black -Scholes model was used. The use of this model to calculate a fair value involves using
a number of estimates and judgements to establish the appropriate inputs to be entered into the model,
covering areas such as interest rates, the measurement of the volatility of the company’s share price and
dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is
therefore involved in the calculation of the fair value.
57
Financial Statements
Notes to the Financial Statements
1.
Revenue
In July 2019, the Group sold its pan-RAF inhibitor drug development programme and related
IP to Jazz Pharmaceuticals plc for $3.5m. In parallel, a separate collaboration agreement was
signed for Redx to perform research and provide preclinical development services for the
programme. Associated costs of sale of £0.35m are disclosed separately on the face of the
Consolidated Statement of Comprehensive Income.
In March 2018, the Group granted an option for a license agreement on its NBTI programme
to Deinove, a French drug discovery company.
Sale of scientific programme and related IP
Revenue from collaboration agreement
Option fees
2.
Administration
2019
£’000
2,790
341
-
3,131
2018
£’000
-
-
129
129
Residual costs related to the exit from Administration of two group companies, Redx Pharma
Plc and Redx Oncology Limited in November 2017 have been separately disclosed on the face
of the Consolidated Statement of Comprehensive Income, and total £177k. There were no
further costs in 2018/19.
3.
Reorganisation costs
In 2018, the Group incurred non-recurring costs relating to Directors, as a result of the
restructuring of the Board of £215k.
4.
Recovery of derecognised asset
At 30 September 2017, the Group derecognised as an asset a loan due from Redag Crop
Protection Ltd “Redag”, on the grounds of the conditionality attached to repayment. The loan
was in the sum of £715k and accrued interest at 5% per annum. In February 2019, a sale of
assets by Redag triggered the conditions necessary for the repayment of the loan, and an
amount of £869k was recovered, representing the full amount of the original loan and all
interest due up to the date of repayment.
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 £548k was released in 2017/18.
58
Financial Statements
Notes to the Financial Statements
6.
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
2019
2018
Number
10,149,563
-
(1,210,600)
Number
2,963,417
-
(173,854)
1,950,000
10,888,963
7,360,000
10,149,563
Weighted average exercise price information is given in Note 26.
Charge to Statement of Comprehensive
Income in period
£’000
45
£’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)
40%
£
40%
£
0.1375 to 0.85 0.1375 to 0.85
0.1375 to 0.85 0.1375 to 0.85
Assumed share price at grant date
Exercise price
Of the variable assumptions, volatility is considered to be the most important. An increase in
volatility from 40% to 60% would increase the balance required on the share based payments
reserve to £1.5m, and a decrease to 20% would decrease the balance required to £0.68m.
7.
Other operating income
Reimbursement of costs
RDEC income
Other income
2019
£’000
2018
£’000
231
(15)
25
_________
241
_________
1,213
(27)
-
_______
1,186
_______
59
Financial Statements
Notes to the Financial Statements
8.
Finance expense and finance income
Finance expense
Loan interest
Unwind of discount on onerous lease provision
Other interest and similar charges
Finance income
Bank and other short term deposits
9.
Loss before taxation
The following items have been included in arriving at loss before
taxation
Research and development
Staff costs – Note 12 (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
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
2019
£’000
2018
£’000
49
53
-
_________
102
_________
12
_________
12
_________
-
-
1
_______
1
_______
24
_______
24
_______
2019
£’000
2018
£’000
6,166
5,732
3,458
3,296
85
6
389
16
157
7
1,365
3
15
24
11
________
10,170
________
13
23
10
_______
10,606
_______
60
Financial Statements
Notes to the Financial Statements
10.
Income tax
Current income tax
Corporation tax
Adjustment in respect of previous periods
Income tax credit per the Consolidated Statement of
Comprehensive Income
2019
£’000
2018
£’000
(819)
(1,198)
_________
50
(1,351)
_______
(2,017)
_________
(1,301)
_______
The difference between the total tax shown above and the amount calculated by applying the
standard rate of UK corporation tax to the loss before tax is as follows:
Loss before tax
Loss before tax multiplied by standard rate of corporation tax
in the UK of 19% (2018: 19%)
Effects of:
R&D expenditure credits
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Surrender of tax losses for R&D tax credit refund
Adjustment in respect of previous periods
Deferred tax losses not recognised
Total taxation
2019
£’000
2018
£’000
(6,335)
_________
(10,146)
_______
(1,203)
(1,928)
28
158
(725)
263
(1,198)
660
_________
(2,017)
_________
50
299
-
-
(1,351)
1,629
_______
(1,301)
_______
61
Financial Statements
Notes to the Financial Statements
11.
Loss per share
Basic loss 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 for the period attributable
to the owners of the Company
Weighted average number of
shares
– basic
Weighted average number of
shares
– diluted
Loss per share - basic
Loss per share - diluted
2019
2018
£’000
£’000
(4,318)
(8,845)
Number
Number
126,447,914
126,447,914
126,447,914
126,447,914
Pence
Pence
(3.4)
(3.4)
(7.0)
(7.0)
The loss and the weighted average number of shares used for calculating the diluted loss per
share are identical to those for the basic loss per share. This is because the outstanding share
options would have the effect of reducing the loss per share and would therefore not be
dilutive under IAS 33 “Earnings per Share”.
62
Financial Statements
Notes to the Financial Statements
12.
Employees and key management
Staff costs (including Directors) comprise
Wages and salaries
Social security costs
Pension costs
Non-recurring reorganisation costs (Note 3)
Total employee related costs
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
2019
£’000
2018
£’000
3,034
279
145
_________
3,458
-
_________
3,458
_________
2,821
349
126
_________
3,296
215
_________
3,511
_________
2019
number
2018
number
15
17
14
6
_________
52
_________
14
15
17
6
_________
52
_________
2019
£’000
2018
£’000
691
33
_________
724
_________
777
14
_________
791
_________
Retirement benefits are accruing to 3 Directors (2018: 3)
Of the total balance on the share option reserve of £1.1m, £0.09 relates to options granted
to Directors. Further information relating to Directors remuneration can be found in the
Remuneration Report on page 37.
Key management (including Directors)
Short term remuneration
Social security costs
Pension costs
Share based compensation
2019
£’000
2018
£’000
1,100
138
54
(17)
_________
1,275
_________
1,362
144
45
170
_________
1,721
_________
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.
63
Financial Statements
Notes to the Financial Statements
12.
Employees and key management (Cont’d)
The amounts in respect of the highest paid Director are as follows:
Short term employment benefits
Pension contributions
Share based payments
2019
£’000
2018
£’000
390
26
23
________
439
________
250
-
-
________
250
________
13.
Property, plant and equipment
Leasehold
Improvements
£’000
Laboratory
equipment
£’000
Computer
equipment
£’000
Cost
At 1 October 2017
Additions
Disposals
At 30 September 2018
At 1 October 2018
Additions
Disposals
At 30 September 2019
Depreciation
At 1 October 2017
Charge for the year
Disposals
At 30 September 2018
At 1 October 2018
Charge for the year
Disposals
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
114
-
-
_________
114
_________
114
-
-
_________
114
_________
13
12
-
_________
25
_________
25
11
-
_________
36
_________
913
126
(33)
________
1,006
________
1,006
28
(133)
________
901
________
855
82
(28)
________
909
________
909
70
(133)
________
846
________
289
6
(23)
________
272
________
272
-
(10)
________
262
________
226
63
(22)
________
267
________
267
4
(10)
________
261
________
78
_________
55
________
1
________
89
_________
97
_________
5
_________
64
Total
£’000
1,316
132
(56)
_______
1,392
_______
1,392
28
(143)
_______
1,277
_______
1,094
157
(50)
_______
1,201
_______
1,201
85
(143)
_______
1,143
_______
134
_______
191
_______
Financial Statements
Notes to the Financial Statements
14.
Intangible Assets
Cost
Intellectual
property
£’000
Goodwill
£’000
Total
£’000
At 1 October 2017, 30 September 2018 and 30
September 2019
121
________
309
________
430
________
Accumulated amortisation
At 1 October 2017
Amortisation
At 30 September 2018
At 1 October 2018
Amortisation
At 30 September 2019
Net carrying value
At 30 September 2019
At 30 September 2018
-
7
________
7
________
7
6
________
13
________
-
-
________
-
________
-
-
________
-
________
-
7
________
7
________
7
6
________
13
________
108
________
309
________
417
________
114
________
309
________
423
________
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 flow model, using the
agreed budgets and forecasts up to September 2020 and estimates thereafter. The key variables
that were used included:
A terminal growth rate thereafter of 2%.
A pre-tax discount rate of 12%, which the Directors believe to be prudent given the Groups
historic capital costs.
The value in use suggested by the modelling was compared to the carrying value of both
intangible and tangible fixed assets. 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.
15.
Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation,
proportion of ownership interest is given in note 7 to the Company’s separate financial
statements.
65
Financial Statements
Notes to the Financial Statements
16.
Trade and other receivables
Trade debtors
VAT recoverable
Other receivables
Accrued income
Prepayments
2019
£’000
2018
£’000
256
110
143
46
677
__________
1,232
__________
-
159
772
46
1,046
_________
2,023
_________
The Directors believe that the carrying value of other receivables represents their fair value.
The Group measures the loss allowance for trade and other receivables at lifetime expected
credit losses (”ECL”). The ECL is estimated using a probability-weighted analysis of all possible
outcome with reference to the debtors’ financial position and forecasts of future economic
conditions. The resultant estimated ECL is not considered material to the financial statements,
therefore the Group has recognised a loss allowance of £nil against these receivables.
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.
17.
Cash and cash equivalents
Cash at bank and in hand
2019
£’000
2018
£’000
3,704
_________
3,704
_________
6,471
_________
6,471
_________
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 2019 £500k of the above was held as security for the MGL loan in an account with
restricted access. On the capitalisation of the loan post year end, all restrictions were removed.
18.
Trade and other payables
Trade payables
Employee taxes and social security
Other payables
Accruals
2019
£’000
2018
£’000
1,490
78
54
1,823
_________
3,445
_________
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.
66
Financial Statements
Notes to the Financial Statements
19.
Borrowings
Current
Capitalisable loan due within one year
(after recognition of embedded derivative)
2019
£’000
2018
£’000
468
_________
468
_________
-
__________
-
__________
In June 2019 a capitalisable loan note facility of up to £2.5m was agreed with Moulton Goodies
Ltd (“MGL”). As of 30 September 2019, £1m had been drawn down with associated further
liabilities of £116k. The loan is secured by fixed and floating charges over all assets of the Group
and its subsidiaries, with the exception of the pan-RAF research programme. Interest is payable
at 10 per cent. per annum, with such interest to be paid at the same time as the loan is repaid.
The loan (together with all unpaid interest) is repayable in full on 31 December 2019.
MGL can request that the Company capitalise the Loan into new ordinary shares in the Company,
either at maturity or in the event that the Company completes an equity financing to raise at
least £10 million (or such lesser amount as MGL may determine at its discretion, providing such
amount is at least £1 million). In addition, the Company has the right to require MGL to capitalise
the Loan on a Financing Round which, inter alia, raises gross proceeds of at least £20 million.
As a result of the terms of capitalisation, the number of shares issued may vary, leading to the
recognition of an embedded derivative liability in respect of the capitalisation element in line
with IFRS 9 (see note 20). The remainder of the original loan note of £1m is classified as
borrowings.
The Loan, together with all associated interest, was capitalised at the request of the lender on 21
January 2020 (see note 29).
20.
Derivative financial liability
Current
Fair value at recognition
Recognised in the year
Carried forward
2019
£’000
2018
£’000
581
67
_________
648
_________
-
-
__________
-
__________
Financial instruments that are measured subsequent to initial recognition at fair value are
grouped into three levels based on the degree to which the fair value is observable as defined by
IFRS 13:
Level 1 fair value measurements are those derived from unadjusted quoted prices in active
markets for identical assets and liabilities;
Level 2 fair value measurements are those derived from inputs, other than quoted prices included
within Level 1, that are observable either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
67
Financial Statements
Notes to the Financial Statements
20.
Derivative financial liability (Cont’d)
Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data.
The derivative financial instrument included in the Statement of financial position, which is
classified as a Level 3 derivative financial instrument, is the fair value of the conversion option of
the £1m loan note issued to Moulton Goodies Ltd.
The fair value has been determined using an Option pricing model and is determined at the initial
recognition of the liability and then at each subsequent reporting date, using an estimated
volatility of 125% and a risk free rate of 1%. Changes to the fair value are recognised in the
Consolidated Statement of Comprehensive Income.
The Loan giving rise to the derivative financial instrument, together with all associated interest,
was capitalised at the request of the lender on 21 January 2020 (see note 29). At this point the
derivative financial liability was extinguished.
21.
Onerous lease provision
Brought forward
(Released)/recognised in the year
Unwinding of discount
Amount utilised
Carried forward
Current
Non-current
2019
£’000
2018
£’000
752
(146)
53
(353)
_________
306
_________
306
-
_________
306
_________
-
752
-
-
__________
752
__________
147
605
__________
752
__________
As at 30 September 2018, the Group no longer occupied the premises at Block 3 Alderley Park,
Macclesfield, having relocated all its activities to Block 33. On this basis the Director’s believe the
lease for Block 3 fulfils the criteria to be regarded as onerous under IAS 37 “Provisions, Contingent
liabilities and Contingent assets”.
Total potential costs relating to the remaining portion of this lease (rent & service charges)
amounted to £1.47m. The Directors estimated that £0.72m of this expenditure could be
recovered via existing sub-leases and licenses. Accordingly a provision of £0.75m was recognised.
At 30 September 2019 the directors estimate that the total potential costs remaining are £0.31m.
There will be no contractual liability beyond 30 September 2020.
68
Financial Statements
Notes to the Financial Statements
22.
Financial instruments
The Group’s financial 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 financial instruments is to finance the Group’s operations.
Classes and fair values of financial instruments are as follows:
Loans and receivables
Trade debtors
Other receivables
Cash and cash equivalents
Financial liabilities measured at
amortised cost
Current borrowings
Trade payables
Other payables
Financial liabilities measured at fair
value
Derivative financial instrument
Carrying value
2019
£’000
Carrying value
2018
£’000
-
279
6,471
6,750
_____________ ____________
256
9
3,704
3,969
-
1,685
30
1,715
_____________ ____________
468
1,490
54
2,012
-
_____________ ____________
648
The principal financial risks faced by the Group are:
Currency risk
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.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency
exchange rates and interest rates. In the year, both these risks are considered to have been
minimal.
Credit risk
The Group gives careful consideration to which organisations it uses for banking in order to
minimise credit risk. The Group holds cash with one large bank in the UK, an institution with an
A credit rating (long term, as assessed by Moody’s). The amounts of cash held with that bank at
the reporting date can be seen in the financial assets table. 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 flow forecasts and medium term working capital projections.
69
Financial Statements
Notes to the Financial Statements
22.
Financial instruments (Cont’d)
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 financial liabilities have a contractual maturity within one year. (2018: all within
one year).
23.
Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax
rate of 17% (2018:17%). Deferred tax assets in relation to losses carried forward of £6.9m, (2018:
£6.8m) which represent trading losses carried forward, have not been recognised on the grounds
that there is insufficient evidence of sufficient taxable trading profits 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
2019
Numbers
2018
Numbers
126,477,914
126,477,914
£’000
1,265
£’000
1,265
There has been no movement in share capital during the year (2018: none)
25.
Share premium
At 30 September
Description of other reserves:
2019
£’000
2018
£’000
33,263
__________
33,263
_________
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 deficit
The retained deficit records the accumulated profits and losses less any
subsequent elimination of losses, of the Group since inception.
70
Financial Statements
Notes to the Financial Statements
26.
Share based payments
Movements on share options during the year were as follows:
Exercise
Price per
share
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
13.75p
20p
27p
35p
42.5p
50p
13.75p
20p
27p
35p
42.5p
50p
Total
Weighted
average
exercise price
30
September
2018
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
318,788
66,666
66,667
66,667
1,233,320
1,233,339
1,233,341
600,000
600,000
600,000
600,000
600,000
600,000
-
-
-
-
-
-
-
-
-
-
-
-
________
10,149,563
________
Granted
Exercised
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
200,000
200,000
200,000
200,000
125,000
125,000
125,000
125,000
125,000
125,000
________
1,950,000
________
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
________
-
________
Lapsed/
Cancelled
-
-
-
(30,000)
(30,000)
(30,000)
-
-
-
-
-
-
(110,600)
(66,666)
(66,667)
(66,667)
(269,998)
(270,001)
(270,001)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
________
(1,210,600)
________
30
September
2019
Date from
which
exercisable
27.03.2015
17.06.2015
17.06.2016
26.03.2016
26.03.2017
26.03.2018
27.03.2015
01.09.2015
01.09.2016
27.03.2015
27.03.2016
27.03.2017
01.05.2019
01.04.2017
01.04.2018
01.04.2019
22.12.2019
22.12.2019
22.12.2019
02.06.2020
02.06.2020
02.06.2020
02.06.2020
02.06.2020
02.06.2020
13.02.2021
13.02.2021
13.02.2021
13.02.2021
13.02.2021
13.02.2021
27.02.2021
27.02.2021
27.02.2021
27.02.2021
27.02.2021
27.02.2021
36,675
36,675
36,675
101,650
101,650
101,650
78,875
78,875
78,875
1,223,300
187,100
178,775
208,188
-
-
-
963,322
963,338
963,340
600,000
600,000
600,000
600,000
600,000
600,000
200,000
200,000
200,000
200,000
200,000
200,000
125,000
125,000
125,000
125,000
125,000
125,000
________
10,888,963
________
42.90p
31.46p
-
37.19p
39.48p
Expiry date
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.02.2026
26.03.2025
26.03.2025
26.03.2025
22.12.2027
22.12.2027
22.12.2027
01.06.2028
01.06.2028
01.06.2028
01.06.2028
01.06.2028
01.06.2028
12.02.2029
12.02.2029
12.02.2029
12.02.2029
12.02.2029
12.02.2029
26.02.2029
26.02.2029
26.02.2029
26.02.2029
26.02.2029
26.02.2029
The number of exercisable share options at 30 September 2019 was 2,448,963 and their
weighted average exercise price was 71.86p.
71
Financial Statements
Notes to the Financial Statements
26.
Share based payments (Cont’d)
During the prior year:
Exercise
Price per
share
30
September
2017
Granted
Exercised
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
-
-
-
-
-
-
-
-
-
________
2,963,417
________
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,253,320
1,253,339
1,253,341
600,000
600,000
600,000
600,000
600,000
600,000
________
7,360,000
________
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
________
-
________
Lapsed/
Cancelled
-
-
-
-
-
-
-
-
-
-
-
-
(113,854)
-
-
-
(20,000)
(20,000)
(20,000)
-
-
-
-
-
-
________
(173,854)
________
30
September
2018
Date from
which
exercisable
27.03.2015
17.06.2015
17.06.2016
26.03.2016
26.03.2017
26.03.2018
27.03.2015
01.09.2015
01.09.2016
27.03.2015
27.03.2016
27.03.2017
01.05.2019
01.04.2017
01.04.2018
01.04.2019
22.12.2019
22.12.2019
22.12.2019
02.06.2020
02.06.2020
02.06.2020
02.06.2020
02.06.2020
02.06.2020
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
318,788
66,666
66,667
66,667
1,233,320
1,233,339
1,233,341
600,000
600,000
600,000
600,000
600,000
600,000
________
10,149,563
________
Expiry date
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.03.2025
26.02.2026
26.03.2025
26.03.2025
26.03.2025
22.12.2027
22.12.2027
22.12.2027
01.06.2028
01.06.2028
01.06.2028
01.06.2028
01.06.2028
01.06.2028
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
Weighted
average
exercise price
66.29p
33.27p
-
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.
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 2019 is £45,000 (2018: £282,000). 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 6. The share options are
exercisable with no further conditions to be met.
72
Financial Statements
Notes to the Financial Statements
27.
Operating lease arrangements – minimum lease payments
Outstanding commitments for future minimum lease
payments under non-cancellable operating leases expiring:
Within one year
In the second to fifth years
In greater than five years
Property
2019
£’000
2018
£’000
747
2,986
1,431
______
5,164
______
1,122
3,362
2,178
_______
6,662
_______
The impact of IFRS 16 is still being assessed by the Directors, but is likely to be material.
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 met that criteria. Where this was 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 purchased services, in the prior year, in the normal course of business from the
following companies related to individuals who were Directors of the Group at that time:
• 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.)
•
The Group had 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 provided services in the prior year in the normal course of business to the following
companies related to individuals who 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.)
In June 2019 the Group issued a loan note of £1m to Moulton Goodies Limited, a significant
shareholder in Redx Pharma Plc. Full details of the transaction can be found in note 19. Interest
accruing on this loan note is included in finance costs (note 8).
73
Financial Statements
Notes to the Financial Statements
28.
Related Parties (Cont’d)
Purchases from/(charges to) related parties
Moulton Goodies Ltd - loan interest
Redag Crop Protection Ltd (to 3 November 2017)
Acceleris Capital Ltd (to 3 November 2017)
Mrs J Murray (to 3 November 2017)
Amounts owed to/(by) related parties
Moulton Goodies Ltd
Redag Crop Protection Ltd (at 3
November 2017)
Acceleris Capital Ltd (at 3 November
2017)
Mrs J Murray (at 3 November 2017)
2018 balances relate to 3 November 2017.
2019
£’000
2018
£’000
49
-
-
-
__________
49
__________
-
(20)
6
2
__________
(12)
__________
2019
£’000
1,116
-
-
-
2018
£’000
-
(73)
15
14
Amounts owed to/by related parties were disclosed in other receivables (Note 16), borrowings
(note 19), trade creditors and accruals (Note 18) and derivative financial liabilities (Note 20).
In addition, a loan of £nil (2018 £857k) including accrued interest was due from Redag Crop
Protection Ltd. This asset was derecognised in the 2017 financial statements, but was recovered
in full in 2019.
29.
Events after the reporting period
On 13 November 2019 The Group drew down the remaining £1.5m available to it under the loan
note agreement with Moulton Goodies Ltd (“MGL”).
On 31 December the Group announced that it had received written notice on 29 November 2019
from MGL requesting that it capitalise the entire outstanding loan and accrued interest pursuant
to the terms of the loan notes. The capitalisation price was set at 5.25 pence per share.
The capitalisation was approved at a General meeting of shareholders on 21 January 2020 at
which date the amount outstanding was £2,731,616. Accordingly, 52,030,789 new ordinary
shares were issued. These were admitted to trading on 22 January 2020. AS MGL would hold
greater than 30% of the issued share capital post capitalisation, and with the agreement of the
Takeover Panel, shareholders also approved a waiver from the necessity to make an offer for the
entire issued share capital of the Company.
74
Financial Statements
Notes to the Financial Statements
29.
Events after the reporting period (Cont’d)
On 31 December 2019 the Group further announced that it was in discussions with Yesod Bio-
Sciences Ltd in relation to a possible cash offer for the entire issued share capital of Redx Pharma
plc. In accordance with the Takeover Code A deadline of 28 January 2020 was set by which time
the bidder was obliged to announce either a firm intention to make an offer for Redx or confirm
that it does not intend to do so. With the Agreement of the Takeover Panel, extensions were
granted to 14 February 2020 and then further to 28 February 2020. On 28 February 2020 it was
announced that Yesod Bio-Sciences Ltd did not intend to make such an offer.
On 28 February 2020, the Company also announced that it had agreed a funding package with
Redmile Group LLC and Sofinnova Partners, under the terms of which Redmile had agreed to
immediately subscribe for 11,500,000 ordinary shares at 11.2p. These shares were duly issued
and admitted to trading on 4 March 2020. In addition, terms had been agreed in principle for
Redmile Group LLC to provide a £5m term loan and together with Sofinnova Partners a £20.1m
convertible loan to the Company.
75
Financial Statements
Company Statement of Changes in Equity
For the year ended 30 September 2019
Share
capital
Share
premium
£’000
£’000
Share
based
payment
£’000
Capital
Redemption
Reserve
£’000
Profit &
loss
account
£’000
Total
Equity
£’000
At 1 October 2017
1,265
33,263
880
1
(17,445)
17,964
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the year
Share based
compensation
Movement in year
-
-
-
-
-
-
-
282
282
At 30 September 2018
1,265
33,263
1,162
Transactions with
owners in their
capacity as owners
Loss and total
comprehensive income
for the period
Share based
compensation
Release of share
options lapsed in the
year
Movement in year
-
-
-
-
-
-
-
-
-
45
(103)
(58)
At 30 September 2019
1,265
33,263
1,104
-
-
-
1
-
-
-
-
1
(1,854)
(1,854)
-
282
(1,854)
(1,572)
(19,299)
16,392
901
-
-
901
45
(103)
901
843
(18,398)
17,235
77
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
1.
(i)
Accounting Policies
Basis of preparation
The Company’s financial statements have been prepared in accordance with Financial Reporting
Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and
the Companies Act 2006. The financial statements have been prepared under the historical cost
convention.
Financial Reporting Standard 102 - reduced disclosure exemptions
The Company has taken advantage of the following disclosure exemptions in preparing these
financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the
UK and Republic of Ireland":
•
•
•
•
•
the requirements of Section 7 Statement of Cash Flows;
the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);
the requirements of Section 11 Financial Instruments paragraphs 11.39 to 11.48A;
the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and
26.23; 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 profit 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 significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Rentals payable under operating leases (net of any
incentives received from the lessor) are charged to the Statement of Comprehensive Income on a
straight-line basis over the term of the relevant lease.
The minimum term of the lease is estimated if it is not clear.
(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.
78
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
1.
(v)
Accounting Policies (Cont’d)
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 profitable operations is dependent
on future uncertain events which include obtaining adequate financing to fulfil 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 £4.3 million during the year, and at 30 September 2019 had total equity of £1.5
million including an accumulated deficit of £34.1 million. As at that date, the Group had cash and cash
equivalents of £3.7 million.
At 30 September 2019, the Group’s balance sheet included liabilities relating to a capitalisable loan from
Moulton Goodies Ltd. totalling £1,116,000 and a further £1.5 million was drawn down under this facility in
November 2019. Whilst it was repayable in full on 31 December 2019, MGL exercised during November 2019
its right to request that the Company capitalise the whole of the loan (including, inter alia, all unpaid interest)
into new ordinary shares in the Company. This capitalisation duly took place following the passing by
shareholders of a number of resolutions at a General Meeting on 21st January 2020.
For a considerable time, the Company has been in discussions with a number of specialist healthcare investors
who have a greater understanding of the potential value of the programmes as well as the funding and likely
timing of delivering clinical proof of concept data. As announced on 28th February 2020 Redmile Group LLC, a
large and well-funded US based specialist healthcare and life sciences investment firm, confirmed to the Board
that it is willing to provide funding to Redx comprising (1) an initial equity investment of £1.3 million through
an issue of 11,500,000 ordinary shares; (2) a £5,000,000 short-term debt funding; and (3) together with
Sofinnova Partners, a £20,100,000 convertible loan. The £5,000,000 short-term debt funding is repayable prior
to the issuance of the £20,100,000 convertible loan. The issue of shares was completed on 4th March 2020
whilst heads of terms for the two loans were signed on 28th February 2020. The Directors’ expectation is that
conversion of the £20.1 million loan would take place before 31st December 2020.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the
date of the approval of these financial 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, which includes the initial
equity investment from Redmile, and known receivables will be sufficient to support the current level of activity
to the end of April 2020. To further extend the cash runway, the Directors are looking to put in place the two
aforementioned loans as soon as possible and secure conversion of the relevant portion of debt into equity by
the end of 2020. In addition, the Directors are continuing to explore alternative sources of finance available to
the Group through business development opportunities. Based upon all ongoing discussions, the Directors
have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continue
its activities for not less than 12 months from the date of approval of these financial statements; they have
therefore prepared the financial statements on a going concern basis.
Although the Board is greatly encouraged by the positive discussions to date, in particular with Redmile and
Sofinnova, there can be no certainty that the Board will reach satisfactory agreement regarding the short-term
debt funding, the convertible loan and its conversion into ordinary shares, or ongoing business development
opportunities. Because these matters are not therefore concluded at the date of approval of these financial
statements, these circumstances represent a material uncertainty as to the Group’s ability to continue as a
going concern. Should the Group be unable to obtain alternative finance 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 and to provide for further liabilities that might arise.
79
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
1.
(vi)
Accounting Policies (Cont’d)
Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Cost includes the
original purchase price of the asset and the costs attributable to bringing the assets to its working
condition for its intended use. Finance costs are not included.
Depreciation is calculated on the straight-line method to write off the cost of assets to their residual
values over their estimated useful lives as follows.
Laboratory equipment -
Computer equipment -
Leasehold improvements -
2 or 3 years
2 or 3 years
Over the term of the lease
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is
written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and
are included in operating profit.
Repairs and maintenance are charged to the profit and loss account during the financial period in
which they are incurred.
(vii)
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Statement of Financial
Position when the company becomes party to the contractual provisions of the instrument.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial
asset expire or when the contractual rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specified in the contract is discharged, cancelled or expired.
(a) Trade and other receivables and Group debtors
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method less provision for impairment. Appropriate
provisions for estimated irrecoverable amounts are recognised in the Statement of Comprehensive
Income when there is objective evidence that the assets are impaired. Interest income is
recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand 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 insignificant risk of changes in value.
(c) Trade and other payables and Group creditors
Trade and other payables are initially measured at their fair value and are subsequently measured
at their amortised cost using the effective interest rate method; this method allocates interest
expense over the relevant period by applying the “effective interest rate” to the carrying amount
of the liability.
(d) Derivative financial instrument
Derivative financial instruments are recognised initially at fair value. They are subsequently
remeasured at fair value at each reporting date using an Option pricing model, with any change in
value recognised in the profit and loss account. Mechanisms specific to individual instruments are
considered, and an appropriate classification is made between equity and debt on a case by case
basis.
80
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
1.
Accounting Policies (Cont’d)
(viii)
(ix)
Investments
Investments in subsidiaries are stated at cost less provision for impairment in value, and are
detailed in Note 7.
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 significant accounting judgements and critical accounting estimates are set out in this
Financial Information and include:
(a) Share-based compensation
The Company has issued a number of share options to certain employees. The Black-Scholes model
was used to calculate the appropriate charge for the period of issue and subsequent periods.
The use of this model to calculate a charge involves using a number of estimates and judgements
to establish the appropriate inputs to be entered into the model, covering areas such as the use of
interest rate and dividend rate, exercise restrictions and behavioural
an appropriate
considerations. A significant element of judgement is therefore involved in the calculation of the
charge.
The total charge recognised and further information on share options can be found in Notes 6 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.
(c) Derivative financial instruments
The Directors believe that the correct allocation between debt and derivative financial instrument
of the capitalisable loan from Moulton Goodies Ltd is a significant accounting Judgement.
81
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
1.
Accounting Policies (Cont’d)
Critical accounting estimates and judgements (Cont’d)
In calculating the split in accordance with FRS 102 section 22 “liabilities and equity”, the Directors
have employed a Black Scholes model to value the derivative element, the balance of the amount
received being treated as debt. (see note 10). The use of this model to calculate a fair value involves
using a number of estimates and judgements to establish the appropriate inputs to be entered into
the model, covering areas such as interest rates, the measurement of the volatility of the
company’s share price and dividend rate, exercise restrictions and behavioural considerations. A
significant element of judgement is therefore involved in the calculation of the fair value.
2.
Administration
Residual costs related to the exit from Administration of Redx Pharma Plc in November 2017
totalled £177k and were included in the Company’s loss for the year in 2018/19. There were
no further costs.
3.
Recovery of derecognised asset
At 30 September 2017, the Company derecognised as an asset a loan due from Redag Crop
Protection Ltd “Redag”, on the grounds of the conditionality attached to repayment. The loan
was in the sum of £715k and accrued interest at 5% per annum. In February 2019, a sale of
assets by Redag triggered the conditions necessary for the repayment of the loan, and an
amount of £869k was recovered, representing the full amount of the original loan and all
interest due up to the date of repayment. This amount is included in the Company’s profit for
the year.
4.
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
2019
£’000
2018
£’000
1,093
130
53
_________
1,276
-
_________
1,276
_________
1,015
165
39
_________
1,219
215
_________
1,434
_________
2019
number
2018
number
6
6
Directors remuneration is disclosed in note 12 of the Group accounts and the Directors
remuneration report beginning on page 37.
82
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
5.
Intangible fixed assets
Cost
At 1 October 2018
Additions
At 30 September 2019
Amortisation
At 1 October 2018
Charge for the year
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
6.
Tangible fixed assets
Cost
At 1 October 2018
Additions
Disposals
At 30 September 2019
Depreciation
At 1 October 2018
Charge for the year
Disposals
At 30 September 2019
Net book value
At 30 September 2019
Intellectual
property
£’000
121
-
________
121
________
6
6
________
12
________
109
________
115
________
Goodwill
£’000
309
-
________
309
________
123
16
________
139
________
170
________
186
________
Laboratory
equipment
£’000
Computer
equipment
£’000
Leasehold
Improvements
£’000
87
-
(7)
________
80
________
87
-
(7)
________
80
________
99
-
-
________
99
________
94
3
-
________
97
________
114
-
-
_________
114
_________
25
11
-
_________
36
_________
Total
£’000
430
-
________
430
________
129
22
________
151
________
279
________
301
________
Total
£’000
300
-
(7)
________
293
________
206
14
(7)
________
213
________
-
________
2
________
78
_________
80
________
At 30 September 2018
-
________
5
________
89
_________
94
________
83
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
7.
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
2019
£’000
357
11
-
-
_________
368
_________
2018
£’000
225
46
37
49
________
357
________
At 30 September 2019 the Company held share capital in the following subsidiaries:
Name
Country of
incorporation
Percentage
held
Nature of
business
Direct/Indirect
holding
Redx Oncology Limited
Block 33, Mereside, Alderley
Park, Macclesfield SK10 4TG
Redx Anti-Infectives Limited
Block 33, Mereside, Alderley
Park, Macclesfield SK10 4TG
Redx Immunology Limited
Block 33, Mereside, Alderley
Park, Macclesfield SK10 4TG
Redx MRSA Limited
Block 33, Mereside, Alderley
Park, Macclesfield SK10 4TG
England & Wales
100%
England & Wales
100%
England & Wales
100%
England & Wales
100%
Pre-clinical drug
development
licensing
Pre-clinical drug
development
licensing
Pre-clinical drug
development
licensing
Dormant
Direct
Direct
Direct
Indirect
8.
Debtors
Amounts falling due within one year:
Trade debtors
VAT recoverable
Amounts due from Group undertakings
Other debtors
Prepayments and accrued income
2019
£’000
2018
£’000
256
66
14,911
70
205
-
70
13,835
280
247
15,508
_________
14,432
_________
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 £154,000 taking the total impairment to £12,137,000. (2018:
£11,983,000).
84
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
9.
Creditors: Amounts falling due within one year
Financial liability at fair value (see note 10)
Trade creditors
Social security and other taxes
Other creditors
Accruals
10.
Financial liability at fair value
Current
Fair value at recognition
Fair value movement in the year
Accrued interest
Carried forward
2019
£’000
1,116
723
38
28
485
2018
£’000
-
878
42
6
499
_________ __________
2,390
_________
1,425
__________
2019
£’000
2018
£’000
1,000
67
49
_________
1,116
_________
-
-
-
__________
-
__________
In June 2019 a capitalisable loan note facility of up to £2.5m was agreed with Moulton Goodies
Ltd (“MGL”). As of 30 September 2019, £1m had been drawn down with associated further
liabilities of £116k. The loan is secured by fixed and floating charges over all assets of the Group
and its subsidiaries, with the exception of the pan-RAF research programme. Interest is payable
at 10 per cent. per annum, with such interest to be paid at the same time as the loan is repaid.
The loan (together with all unpaid interest) is repayable in full on 31 December 2019.
MGL can request that the Company capitalise the Loan into new ordinary shares in the Company,
either at maturity or in the event that the Company completes an equity financing to raise at
least £10 million (or such lesser amount as MGL may determine at its discretion, providing such
amount is at least £1 million). In addition, the Company has the right to require MGL to capitalise
the Loan on a Financing Round which, inter alia, raises gross proceeds of at least £20 million.
As a result of the terms of capitalisation, the number of shares issued may vary, leading to the
recognition of the loan as a derivative financial instrument.
The Loan giving rise to the financial instrument, measured at fair value, was capitalised at the
request of the lender on 21 January 2020 (see note 16). At this point the derivative financial
liability was extinguished.
85
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
10.
Financial liability at fair value (Cont’d)
The fair value has been determined using an Option pricing model and is determined at the initial
recognition of the liability and then at each subsequent reporting date, using an estimated
volatility of 125% and a risk free rate of 1%. Changes to the fair value are recognised in the
Consolidated Statement of Comprehensive Income.
11.
Share Capital
Number of shares in issue
Ordinary Shares of £0.01
Share Capital at par, fully paid
Ordinary Shares of £0.01
2019
Number
2018
Number
126,477,914
126,477,914
£’000
1,265
£’000
1,265
There was no movement in share capital in the year (2018: none).
12.
Operating lease arrangements – minimum lease payments
Outstanding commitments for future minimum
lease payments under non-cancellable
operating leases expiring:
Within one year
In the second to fifth years
In greater than five years
Property
2019
£’000
2018
£’000
747
2,986
1,431
______
5,164
______
747
2,987
2,178
_______
5,912
_______
13.
14.
15.
Related Parties
Related party information disclosed in note 28 to the Group accounts is also applicable to the
Company.
Contingent liabilities
The Company has agreed to support its subsidiary undertakings for 12 months from the signing
of these financial statements. The Directors estimate this support could be in the region of £5.4m.
Ultimate controlling party
There is no ultimate controlling party.
86
Financial Statements
Notes to the individual Financial Statements of Redx Pharma Plc
16.
Post balance sheet events
On 13 November 2019 The Group drew down the remaining £1.5m available to it under the loan
note agreement with Moulton Goodies Ltd (“MGL”).
On 31 December the Group announced that it had received written notice on 29 November 2019
from MGL requesting that it capitalise the entire outstanding loan and accrued interest pursuant
to the terms of the loan notes. The capitalisation price was set at 5.25 pence per share.
The capitalisation was approved at a General meeting of shareholders on 21 January 2020 at
which date the amount outstanding was £2,731,616. Accordingly, 52,030,789 new ordinary
shares were issued. These were admitted to trading on 22 January 2020. AS MGL would hold
greater than 30% of the issued share capital post capitalisation, and with the agreement of the
Takeover Panel, shareholders also approved a waiver from the necessity to make an offer for the
entire issued share capital of the Company.
On 31 December 2019 the Group further announced that it was in discussions with Yesod Bio-
Sciences Ltd in relation to a possible cash offer for the entire issued share capital of Redx Pharma
plc. In accordance with the Takeover Code A deadline of 28 January 2020 was set by which time
the bidder was obliged to announce either a firm intention to make an offer for Redx or confirm
that it does not intend to do so. With the Agreement of the Takeover Panel, extensions were
granted to 14 February 2020 and then further to 28 February 2020. On 28 February 2020 it was
announced that Yesod Bio-Sciences Ltd did not intend to make such an offer.
On 28 February 2020, the Company also announced that it had agreed a funding package with
Redmile Group LLC and Sofinnova Partners, under the terms of which Redmile had agreed to
immediately subscribe for 11,500,000 ordinary shares at 11.2p. These shares were duly issued
and admitted to trading on 4 March 2020. In addition, terms had been agreed in principle for
Redmile Group LLC to provide a £5m term loan and together with Sofinnova Partners a £20.1m
convertible loan to the Company.
87
COMPANY INFORMATION
Directors
Iain G Ross (Chairman)
Lisa Anson (Chief Executive Officer)
Dr James Mead (Chief Financial Officer)
Dr Bernhard Kirschbaum (Non-Executive Director)
Peter Presland (Non-Executive Director)
Secretary
Andrew Booth
Company number
07368089
Principal place of business
& registered office
Auditor
Nomad
Broker
Block 33
Mereside
Alderley Park
SK10 4TG
RSM UK Audit LLP
3 Hardman Street
Manchester
M3 3HF
Cantor Fitzgerald Europe
5 Churchill Place
Canary Wharf
London
E14 5HU
W G Partners LLP
85 Gresham Street
London
EC2V 7NQ
88
Perivan 258464
Redx Pharma
Block 33
Mereside
Alderley Park
SK10 4TG
www.redxpharma.com