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1
Annual Report
and Accounts
for the year ended 30 September 2021
Block 33
Mereside
Alderley Park
SK10 4TG
www.redxpharma.com
Redx is a clinical-stage biotechnology company focused
on discovering and developing novel, small molecule,
highly targeted therapeutics for the treatment of cancer
and fibrotic disease.
Overview
Key Events & Results
Strategic Report
Chair’s Statement
Chief Executive’s Report
Section 172 Statement
Operational Review
Principal Risks and Uncertainties
Governance
Introduction
Board of Directors
Directors’ Report
Directors’ Responsibilities Statement
Corporate Governance Statement
Directors’ Remuneration Report
Independent Auditor’s Report
Financial Statements
Consolidated Statement of Comprehensive Loss
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
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3
5
11
13
14
19
20
24
27
29
35
38
49
50
51
52
53
86
87
88
99
Key Events & Results
Revenue:
£10.0m
Operating
Expenditure:
£30.9m
R&D
Expenditure:
£24.4m
Loss
after tax:
Closing
Cash:
£21.5m
£29.6m
Research & Development
3 June 2021
The Group announces the first subject dosed in the Phase 1
study evaluating RXC007, its ROCK2 inhibitor.
17 June 2021
The Group announces the triggering of a milestone payment
of $4 million from AstraZeneca in connection with its RXC006
programme.
27 July 2021
The Group announces the selection of 2 mg once daily as the
dose for the planned Phase 2 monotherapy clinical trials of
RXC004, its Porcupine inhibitor.
2 September 2021
The Group announces the triggering of a milestone payment
of $3 million from Jazz Pharmaceuticals in connection with its
pan‑RAF inhibitor programme.
20 September 2021
Data from the Group’s RXC004 Phase 1 monotherapy study
is presented at the European Society of Medical Oncology
(“ESMO”) Congress.
Corporate
27 November 2020
The appointment of Dr Jane Robertson as Chief Medical
Officer from 1 March 2021 is announced.
2 December 2020
The Group announces a Placing to raise £25.5m and Open
Offer to raise up to £2.2m. Conversion of £3.3m and £1.8m
of loan notes by Redmile and Sofinnova respectively, at
15.5 pence per share, in connection with the transaction is
also announced.
7 April 2021
Redx Inc. is incorporated in the United States.
5 May 2021
The Group announces the appointment of Peter Collum as
Chief Financial Officer.
19 May 2021
The appointment of Natalie Berner, to represent Redmile
Group on the Board of Directors, is announced.
1 June 2021
The resignation of Iain Ross as a Director and Chairman
with immediate effect is announced. It is further announced
that Peter Presland, a Non‑Executive Director, has been
appointed as interim Chairman, also with immediate effect.
Post Year‑end Events
11 October 2021
The Group holds an R&D Day with leading experts and
provides an update on its lead programmes, RXC004 and
RXC007.
1 November 2021
The Group announces the appointment of Dr Jane Griffiths as
Non‑Executive Chair, with effect from 1 December 2021.
15 November 2021
The first subject dosed in the Phase 2 trial of RXC004, the
Group’s Porcupine inhibitor, is announced.
9 December 2021
The Group announces it is to receive a $10m milestone
payment from Jazz Pharmaceuticals in connection with its
MAPK research collaboration.
21 December 2020
The Placing, Open Offer and conversion are approved by
shareholders, raising £25.7m before costs.
23 December 2021
The Group announces it is to receive a $9m milestone payment
from AstraZeneca in connection with its RXC006 programme.
2 March 2021
The Group announces that James Mead will step down as a
Director with immediate effect, remaining as Chief Financial
Officer until a new appointment is made, and thereafter
transitioning to the position of Chief Operating Officer.
1
Redx | Annual Report and Accounts for the year ended 30 September 2021 Overview Strategic Report
2
Chair’s Statement
Dear Shareholder
Over the last 12 months, Redx has made substantial progress in all
aspects of its pipeline, now with two clinical stage assets, and in
raising significant funds to further support the development of its
lead therapeutic programmes. We have deployed our resources
wisely, thereby allowing the Company’s management to continue to
pursue its clear strategy under the excellent leadership of its Chief
Executive Officer, Lisa Anson.
During the financial year ended 30 September 2021,
despite the ongoing challenges of COVID‑19, we saw
continued positive momentum in shareholder value,
building on the strong foundational work of 2019 and
2020. We did this by delivering clinical and scientific
progress, securing new investment and building on our
organisational capabilities. The Company has ended
the period in a strong financial position, enabling it
to continue to progress its differentiated pipeline in
oncology and fibrosis.
Clear strategy
Redx’s ambition is to become a leading biotechnology
company through the development of novel and
differentiated targeted medicines in cancer and fibrotic
disease and to progress highly differentiated product
candidates that will transform the lives of patients. 2021 has
seen significant delivery against the Company’s strategy
with the following notable achievements:
•
RXC004 progressed to Phase 2: The Company has
continued to progress its lead product candidate,
RXC004, a Porcupine inhibitor being developed as
a targeted therapy for Wnt‑ligand driven cancer, in
clinical trials. During the period, the monotherapy
module of the Phase 1 clinical trial was completed and
the data was subsequently presented at the European
Society for Medical Oncology (ESMO) Congress.
Following completion of this trial, a recommended
dose was selected for the monotherapy Phase 2 trial.
In parallel, the combination module of the Phase 1
trial, of RXC004 with nivolumab (an anti PD1 antibody),
initiated during 2021, is ongoing with results expected
in the first half of 2022 (calendar year). The RXC004
Phase 2 programme initiated post fiscal year end and
•
•
•
we expect to see topline results from this in the first
half of the calendar year 2023.
First clinical programme in fibrosis: RXC007 is a
selective ROCK2 inhibitor, being developed as a
treatment for idiopathic pulmonary fibrosis (IPF), a
life‑threatening orphan disease. During the period,
the Company completed the necessary toxicology
and manufacturing processes to submit a Clinical Trial
Application (CTA) and in June 2021 initiated a Phase
1 clinical trial in healthy volunteers. We believe this
programme could have strong commercial potential in
an area of limited competition. The RXC007 Phase 1
data is expected to be available in the first half of 2022.
Investment in our Redx discovery engine: During the
year, we continued to leverage Redx’s core strengths
in medicinal chemistry, designing molecules against
validated targets in order to discover the next generation
of product candidates for our pipeline. We have built a
core team of 60 scientists pursuing several programmes
with the aim of submitting three new investigational new
drug applications (INDs) by 2025.
Progress with partnered assets: In previous years, the
Company chose to partner two of its product candidates:
the preclinical stage Porcupine inhibitor programme,
RXC006, to AstraZeneca in August 2020, and the
pan‑RAF programme to Jazz Pharmaceuticals in July
2019. Both programmes remain in active development
and Redx received milestone payments on both
during the financial year. In addition, the 2020 research
collaboration with Jazz Pharmaceuticals remains active
with a milestone of $10 million earned post fiscal year
end, which further demonstrates the strength, depth and
value of Redx’s expertise in medicinal chemistry.
3
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Strategic Report
At the start of 2021, Redx was poised to enter a growth
phase with a strengthened financial position and support
from new investors combined with our long‑term
shareholders. Over the year, we have been able to build
on our strong scientific foundation, and to enter into this
growth phase, with good progress in the pipeline and an
expanding clinical portfolio.
As the Chair role has transitioned we remain committed
to support Redx to maintain its momentum over the
next 12 months as we work to deliver on the Company’s
strategic plans.
Peter Presland
Interim Chair,
to 30 November 2021
Dr Jane Griffiths
Chair,
from 1 December 2021
Chair’s Statement
continued
Strengthened financial position
During the year under review, the Board and management
team 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 in
our Annual Report. The Board strengthened the financial
position of the Company by securing new investment
with a placing for £25.7 million (gross) in December 2020,
which received strong support from existing investors and
broadened the Company’s shareholder register with the
addition of healthcare specialist Polar Capital.
Outlook
The last 12 months have been very encouraging as
we have continued to deliver on our strategy, which
consistently demonstrates our drug discovery and
development capabilities and our ability to progress our
in‑house pipeline. Whilst we have been encouraged by
the recent financing and the support from our investors
including Redmile Group, Sofinnova Partners and Polar
Capital, we are aware that we continue to face the
ongoing funding challenge faced by many early stage
listed biotech companies: to secure further investment
to develop their pipelines, and that further funding will
be required in the coming year. The Board continue
to review the best options for the Company to further
strengthen our financial position beyond 2022 so that we
can drive forward our two promising clinical programmes
and preclinical research at pace.
On behalf of the Board, we would like to thank our CEO,
Lisa Anson, and CSO, Richard Armer, along with the rest
of our management team and employees for their hard
work and dedication over the year. We would also like
to thank our business partners and suppliers for their
continued strong and invaluable support.
4
Redx | Annual Report and Accounts for the year ended 30 September 2021
Chief Executive’s Report
During my first two years with the Company we established a
strong foundation, building on the core scientific strength with a
clear strategy, strengthened organisation and partnering deals.
I am pleased to report that during my third year with the
Company we have entered a chapter of growth as we continue
to transition from a discovery powerhouse to a clinical stage
biotechnology company. The full year results for the 12 months
to 30 September 2021 reflect the significant recent progress we
have made on our ambitious journey. With the backing of leading
specialist healthcare investors, we have been able to grow our
scientific organisation and progress our pipeline: we now have
two wholly owned clinical stage assets and have recently initiated
our first-ever Phase 2 programme.
The hallmark of our productivity to date has been our
discovery engine, driven by a core team of experts
in medicinal chemistry and translational science who
have worked together for several years and have been
able to produce five compounds that have progressed
to preclinical and clinical development. Today, this
integrated team of chemists and biologists utilises
cutting edge technologies optimal for each specific
programme rather than being tied to a single technology
platform. This capability continues to underpin many
of our operational highlights over the year and allows
us to continue to move at pace with our pipeline.
Our promising lead oncology asset, the selective
Porcupine inhibitor, RXC004, has moved into Phase 2,
having generated encouraging Phase 1 data which
was presented at the prestigious European Society of
Medical Oncology (ESMO) Congress in September.
We also commenced a second clinical programme
during the year, with our selective ROCK2 inhibitor
RXC007, for fibrosis. Our major business partnering
deals with AstraZeneca and Jazz Pharmaceuticals are
both progressing well, as evidenced by a $4 million
milestone payment from AstraZeneca in June, and a
$3 million milestone payment from Jazz Pharmaceuticals
in September. Post fiscal year end, we also earned a
$10 million milestone from Jazz Pharmaceuticals and a
$9 million milestone from AstraZeneca, connected to
progress in the respective programmes.
We have continued to build our senior management
team with the addition of two highly experienced senior
executives during the period. Dr Jane Robertson joined
as Chief Medical Officer on 1 March 2021 and Peter
Collum joined as Chief Financial Officer on 1 May 2021,
our first US-based employee.
In December 2020 we raised £25.7 million (gross) of
funds that are now being deployed to further support
and augment the research and development pipeline,
of the Company and its subsidiaries (the "Group")
reflecting the strong support from our key investors.
As we grow, we will continue to face the industry-wide
challenge of securing sufficient investment capital in
order to fund R&D and allow us to fully realise the
potential of our programmes and innovative science. Our
cash burn rate has risen significantly during the last 12
months, as we have two wholly owned assets in the clinic
and an expanded scientific team. We have sufficient
cash runway, on current plans, to last through Q4 of the
calendar year 2022. Further fundraising will therefore be
required in the coming year.
A Clear Strategy
Our ambition is to become a leading biotechnology
company through the development of novel and
differentiated targeted medicines in cancer and fibrotic
disease and to progress highly differentiated product
5
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Chief Executive’s Report
continued
candidates that will transform the lives of patients. The
key elements of our strategy are:
•
•
•
Advance the development of our lead candidate,
RXC004, a Porcupine inhibitor, through clinical trials
in our initial indications and then for the potential
treatment of additional Wnt-ligand dependent
tumours;
Advance the development of RXC007, a selective
ROCK2 inhibitor, initially in clinical trials in idiopathic
pulmonary fibrosis (IPF) and potentially in additional
fibrotic indications;
Invest in our Redx discovery engine to expand our
pipeline; we plan to submit three new INDs by 2025
Maximise the full potential of our product pipeline
by either retaining commercial rights or considering
attractive development and commercialization
partnerships.
RXC004, an Oral Porcupine Inhibitor
for the Treatment of Wnt-Ligand
Dependent Tumours
Our lead product candidate, RXC004, is a clinical stage,
highly potent and selective, orally active once-daily
Porcupine inhibitor being developed as a targeted
therapy for Wnt-ligand driven cancer. Wnt signaling is
a heavily investigated pathway. Aberrations contribute
directly to tumour growth and play an important role in
immune resistance to treatments with immuno-oncology
agents such as anti-PD1 checkpoint inhibitors. Previous
approaches to drug targets within the Wnt pathway
have largely failed due to either toxicity or lack of
efficacy potentially due to redundancy in the pathway.
Porcupine is a key enzyme situated at the top of the
Wnt signaling pathway and we designed RXC004 as an
inhibitor of Porcupine to specifically target this pathway
and maximise efficacy while avoiding redundancy and
off-target toxicity. By genetically selecting patients
with tumours that have high Wnt-ligand dependency,
such as those with loss of function, (LoF), mutations
in the Ring Finger 43 (RNF43) gene and fusions in the
R-spondin (RSPO) gene family, Porcupine inhibitors
have the potential to directly target tumours, in addition
to having an immune-enhancing effect. We believe
RXC004, if approved, has the potential to be used as
monotherapy and in combination with immunotherapies
in Wnt-ligand dependent tumours.
6
Strategic Report
In July 2021, we selected 2 mg once daily as the
recommended dose of RXC004 for our Phase 2
monotherapy, proof of concept clinical trials based
on the safety, pharmacokinetic and target exposure
profile observed in our Phase 1 clinical trial. The clinical
trial data from the Phase 1 monotherapy module
was presented at the ESMO Congress in September
2021 and included differential activity in Wnt-ligand
dependent tumours, the patient population of interest.
This was the first time Redx reported clinical results and
showcased a breakthrough in the therapeutic potential
of the Wnt pathway. In the read-out from the Phase 1
study, RXC004 monotherapy was well tolerated at doses
demonstrated to inhibit the pathway in patients and
showed a differentiated level of activity in Wnt-ligand
dependent patients. This Phase 1 efficacy signal supports
our strategy to prescreen patients in our ongoing
Phase 2 trials and select only those with specific genetic
mutations that define the tumour as highly dependent
on the Wnt ligands. This enables us to more precisely
target patient populations who we believe can benefit
from RXC004, either as monotherapy, as observed in
our Phase 1 clinical trial, or in combination with immune
checkpoint inhibitors, which could be applicable in over
25 different tumour types where activation of the Wnt
pathway has been linked to immune evasion.
We are also evaluating RXC004 in a second module of
our Phase 1 clinical trial in combination with nivolumab,
an anti-PD1 antibody. The primary objective of this
module is to evaluate the safety and tolerability of this
combination in patients with unselected advanced
malignancies. The results from this combination trial are
expected in the first half of 2022 and will be used to
define a dose of RXC004 to be used in combination with
standard dose nivolumab as part of the Phase 2 clinical
trial. A third module, in which patients are given RXC004
monotherapy on an intermittent dose levels schedule, is
expected to be initiated in the first half of 2022.
Post period we initiated two Phase 2 proof-of-concept
clinical trials in genetically selected patients with
microsatellite stable metastatic colorectal cancer, or MSS
mCRC, as monotherapy and in combination with anti-
PD1 immunotherapy, as well as in genetically selected
patients with pancreatic cancer and unselected biliary
cancer as monotherapy. The first trial, PORCUPINE,
evaluates RXC004 as a monotherapy and in combination
with an anti-PD1 checkpoint immunotherapy in
genetically selected MSS mCRC. The monotherapy arm
in CRC initiated in November 2021 and the second
arm, in combination with anti-PD1, is expected to
Redx | Annual Report and Accounts for the year ended 30 September 2021
initiate in the first half of 2022 following dose selection.
The second trial, PORCUPINE2, evaluates RXC004 as
monotherapy in genetically selected pancreatic cancer
and in unselected biliary cancer, given biliary cancer
is a highly Wnt-ligand driven cancer. This second
trial initiated in January 2022.These indications have
significant unmet medical need given poor survival
outcomes and limited safe and effective treatment
options. The addressable patient population for these
initial indications aggregates to approximately 74,000
new cases per year in the United States, the five major
markets in Europe, or EU5, and Japan. We expect to
report topline data from the Phase 2 clinical trials in the
first half of 2023.
We remain confident that our RXC004 programme can
unlock the therapeutic potential of the Wnt pathway as
a means to tackle unmet need in a number of difficult to
treat cancers.
RXC007, an Oral Selective ROCK2
Inhibitor for the Treatment of Fibrotic
Diseases
Our second product candidate, RXC007, is a clinical
stage, highly selective and orally available small
molecule inhibitor of Rho-Associated Protein Kinase 2,
or ROCK2, a clinically validated target that has been
shown to sit at a key junction that regulates various
cell signaling pathways central to fibrosis. Our initial
development focus for RXC007 is IPF, given the strong
evidence of the upregulation of ROCK2 in IPF, along with
supportive preclinical data in various lung fibrosis models
and compelling data in human precision cut lung slices
(PCLS), which we believe makes RXC007 particularly
well-suited for development in IPF as a lead indication.
IPF is an orphan disease with high unmet need and with
a very poor survival and a prognosis similar to many
severe cancers, with median survival of three to five years
following diagnosis. By 2029, the growing IPF market is
projected to reach $3.6 billion in the United States, EU5
and Japan, with approximately 170,000 patients.
Following successful completion of preclinical studies,
RXC007 entered a Phase 1 clinical trial in healthy
volunteers in the first half of 2021, with IPF being
targeted as the first indication for clinical development.
The primary endpoint of the Phase 1 trial is to assess
the safety, tolerability, pharmacokinetic (PK) profile and
some pharmacodynamic (PD) properties of RXC007. In
October 2021, we reported initial data from the single
ascending dose, or SAD, arm of this trial in which we
observed that RXC007 was well tolerated and exhibited
a PK profile potentially suitable for once-daily dosing.
We achieved biologically relevant exposures at higher
doses and the half-life was around 11 hours at the
40 mg dose, potentially suitable for once-daily dosing.
We expect to report topline data in the first half of 2022.
Our Phase 2 programme for RXC007 in IPF will initiate
in 2022 and will be a staged approach based on the
learnings from what we have observed from recent
trials in the field. Initially, we plan to start a Phase 2a
clinical trial to assess the safety, tolerability, and early
efficacy of RXC007 in IPF patients as monotherapy and
in combination with standard of care. The Phase 2a
will inform the subsequent Phase 2b dose and in that
Phase 2b study we will dose RXC007 over 12 months in
combination with standard of care to assess changes in
lung function as the primary endpoint.
Our Redx Discovery Engine
We continue to leverage our extensive industry
experience and know-how with our Redx discovery
engine that integrates our extensive in-house capabilities
in medicinal chemistry and translational biology with
a network of external specialist contractors and high
profile academic collaborations. This engine enables
us to identify validated targets so that we can create
potentially differentiated small molecule new chemical
entities (NCEs), typically intended for oral administration
and designed to have high potency, high exposure and
other optimized drug properties.
To date, our approach has successfully delivered five
patented compounds, all of which remain in active
development and four of which are now in clinical
development. Our approach involves the following:
1. Target: With the goal of de-risking our programmes
we select biologically or clinically validated targets
where we believe there is an opportunity to
successfully apply our drug discovery capabilities in
diseases with high unmet medical need.
2. Design: Design molecules with differentiated
properties, leveraging our design frameworks and
our strength and experience in medicinal chemistry
and translational biology to optimise a novel
differentiated molecule for the target.
3. Deliver: Focus our differentiated, targeted small
molecules towards commercially attractive markets in
which we believe we can be successful.
7
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Chief Executive’s Report
continued
The Redx discovery engine’s approach is strengthened
by the experienced management team and our
renowned chemistry and biology groups, who have
collectively brought 18 product candidates into
clinical development. Our group of 60 scientists are
deployed in integrated chemistry and biology teams
that utilise cutting edge technologies as is optimal for
each programme, rather than being tied to a single
technology platform. The teams each have the ability
to exchange specific expertise between themselves and
to access additional flexible capacity through our global
network of contract scientists, partners and contract
research organisations, or CROs.
We aim to submit three new INDs by 2025 from our
current discovery portfolio of wholly owned research
programmes, which are outlined below:
Oncology
Oncology continues to be an area of high unmet need
and our oncology research strategy is focused on
discovery and development of highly selective small
molecule drugs for genetically defined cancers and
Immuno-oncology.
Targeted therapies for genetically defined cancers
prevent the growth of cancers by inhibiting specific
proteins/genes required for tumour growth, with
one major advantage being the reduced side effects
compared to traditional chemotherapy. Recent advances
in precision medicine have shown that drugs which
target cancer at the genetic level often have the best
timely outcomes, with the choice of treatment options
based on the individual genetic alterations found in
a patient’s tumour. Early in the discovery process, our
targeted therapy programmes involve discovering
biomarkers to identify a defined/specific patient
population that will benefit from our drugs. This includes
the identification and targeting of newly emerging
clinical resistance mechanisms. We believe this approach
will increase our success in the clinic, reduce overall
development costs and help to accelerate the delivery of
medicines to patients.
Immuno-oncology is an approach that uses the
patient’s own immune system to identify and kill the
tumour. Recent advances in immuno-oncology have
been transformative, producing long-lasting, robust
responses for certain patients. These advances include
the immune checkpoint inhibitor class of therapies,
such as anti-PD1/PD-L1 antibodies. Despite these
breakthroughs, there remains a significant proportion
8
Strategic Report
of patients whose tumours are unresponsive or develop
resistance to such treatments, and therefore fail to
benefit from these lifesaving therapies. Our programmes
in immuno-oncology aim to combine our compounds
with existing immune checkpoint inhibitors to improve
response rates in these resistant patient populations.
Redx’s oncology research portfolio currently includes
three genetically targeted oncology programmes in
early discovery and an immuno-oncology kinase target
programme also in early discovery.
Fibrosis
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 world. 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.
In fibrosis research, the Company continues to progress
its gastrointestinal targeted ROCK, (GITR), inhibitor
research project aimed at treating intestinal fibrosis
associated with Crohn’s disease, which leads to strictures
and resection surgery for patients. There is currently
limited pharmaceutical therapy available to manage
this condition and we believe that Redx’s compounds
could potentially be first-in-class agents. GITR 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. The Redx GITR inhibitor programme has a
compound in preclinical toxicology evaluation and a go/
no-go decision to nominate a development candidate is
expected in the first half of 2022.
During the period, Redx moved a new fibrosis
programme into the lead optimisation phase. Discoidin
Domain Receptors (DDRs) have recently gained
Redx | Annual Report and Accounts for the year ended 30 September 2021 traction as new targets with potential to treat multiple
fibrotic conditions. DDRs are receptor tyrosine kinases
containing a discoidin homology domain in their
extracellular region. There are two DDR receptors, DDR1
and DDR2, which act as non-integrin collagen receptors.
On binding of collagen, the DDR autophosphorylates,
which initiates various downstream signaling pathways
that drive clustering, upregulation and further collagen
synthesis. DDR expression is increased in many fibrotic
diseases and preclinical proof of concept for small
molecule inhibitors has been demonstrated in preclinical
models of lung and kidney fibrosis. We have developed
both dual DDR1/ DDR2 and selective DDR1 series of
potent inhibitors with drug-like characteristics that are
now in lead optimisation.
Partnered Asset Portfolio Makes
Progress Towards Clinic
During the year, Redx-designed molecules continued to
make strong progress with partners, as detailed below:
•
•
In July 2019, we entered into an asset sale to Jazz
Pharmaceuticals of our pan-RAF inhibitor, which is
currently in IND enabling preclinical testing. During
the reporting period, in September 2021, we
earned a milestone payment of $3.0 million for this
programme.
In August 2020, Redx entered into an exclusive
license agreement with AstraZeneca AB for our
Porcupine inhibitor RXC006 for development and
potential commercialisation. RXC006 (AZD5055) has
completed IND enabling preclinical testing and is
now in a Phase 1 clinical trial. Under the terms of the
RXC006 License Agreement, we received an upfront
payment of $4.0 million. A second milestone payment
of $4.0 million was received in July 2021 with a further
milestone of $9 million earned in December 2021
as a result of the initiation of a Phase 1 clinical trial.
In addition, we are eligible to receive up to a further
$105.0 million of aggregate payments related to
development, regulatory and commercial milestones for
the first indication, and additional milestone payments
aggregating $105.0 million for a second and third
indication. We are also eligible to receive aggregate
sales-based milestones of $150.0 million and mid-single
digit percentage tiered royalties on net sales.
for two cancer targets on the Ras/Raf/MAP kinase
(MAPK) pathway. Under the terms of the agreement
we received an upfront payment of $10 million with
a development milestone of $10 million earned on
9 December 2021, post the reporting period. Following
delivery of an IND-ready molecule, we will be eligible
to receive up to a further $200 million from Jazz in
development, regulatory and commercial milestone
payments for each programme. The first milestone
is payable upon successful IND submission and all
subsequent milestones are contingent on successful
completion of the relevant stages of development.
In addition, for both programmes, we are eligible to
receive tiered royalties in mid-single digit percentages
based on any future net sales.
These transactions continue to underscore Redx’s
excellence in drug design and its business partnering
capability. There are few biotech companies of our
size that have completed four major deals as Redx
has done in a three year period starting with the
sale of our BTK inhibitor programme (RXC005) to
Loxo Oncology in 2017. This molecule is now being
developed by Eli Lilly in several Phase 3 clinical
studies as pirtobrutinib/LOXO-305 and showing
potential in a range of B cell malignancies including
those resistant to first generation BTK inhibitors.
Significantly Strengthened Financial
Position
Throughout the year we have worked hard to secure
sufficient investment to realise the full potential evident
in our pipeline. The investment by Redmile Group,
Sofinnova Partners and Polar Capital has given us greater
security from a cash perspective, allowing the Company
to proceed with an ambitious, but measured, business
plan going forward. The Company ended the period
with a cash balance of £29.6 million (30 September
2020: £27.5 million) as a result of a number of financial
transactions throughout the year.
During the year the Company strengthened its balance
sheet by completing a gross fundraise of £25.7 million
which was approved by shareholders on 21 December
2020 and served to add Polar Capital and other investors
to our shareholder register and extend our cash runway
through Q4 of the calendar year 2022.
•
In September 2020, Redx entered an oncology research
collaboration agreement with Jazz Pharmaceuticals
Ireland to discover and develop drug candidates
In addition, the Company added further to its financial
security by generating new revenue from partnership
deals including the receipt of a $4 million milestone
9
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021
Strategic Report
I would like to pay tribute to our former Chairman,
Mr. Iain Ross, who stood down and left the Company
on 31 May 2021 after four years in the role. Iain’s
leadership and tenacity are recognized by all on the
Board and management team as a key reason that
Redx continues to make strong progress. Our thanks
also go to Mr. Peter Presland who stepped up as
Interim Chair from 1 June 2021 as we initiated a search
for a new Chair. This was subsequently successfully
concluded and we were delighted to announce the
appointment of Dr Jane Griffiths who assumed the
role on 1 December 2021. The Board look forward to
benefitting from her expertise and experience to guide
the Company through this next stage of the Redx story.
On a personal note, I want to thank the whole
Board, management team and shareholders for their
support during what has been an exciting period in
the Company’s history, as we now look to growth
and transformation. I look forward to continuing the
job I came here to do, which is to build a world-class
biotech company. Most importantly, I would like to
thank our employees for their hard work, resilience and
commitment to Redx and to congratulate them on the
strong research and clinical progress achieved in another
success-filled year.
Lisa Anson
Chief Executive Officer
Chief Executive’s Report
continued
payment from AstraZeneca earned in June 2021,
followed by a $3 million milestone payment from Jazz
Pharmaceuticals earned in September 2021.
During the period we have continued to manage our
costs carefully whilst ensuring that optimal resources are
allocated to maximum effect in line with our strategy.
As a result of our transformation into a clinical stage
company, our operating expenses excluding share based
compensation, of £27.1 million have nearly doubled
(£14.1 million in 2020) as we continue to invest in and
advance our pipeline and our programmes move into
more cash intensive clinical stages.
Notwithstanding our strong closing cash position,
the level of required investment in our pipeline and
programmes going forward will necessitate the raising
of additional capital in the coming year. Whilst we
believe our clinical programmes and pipeline provide
an attractive opportunity to raise additional capital, we
acknowledge that our ultimate ability to raise sufficient
capital on acceptable terms is out of our control. The
associated uncertainty is discussed in more detail in
the basis of preparation of the Consolidated Financial
Statements on page 53.
Outlook
During the period, whilst navigating our way through
various financial scenarios and the COVID-19 global
pandemic, we made strong progress in advancing our
pipeline. Our lead oncology asset, RXC004, entered
Phase 2; our lead fibrosis asset, RXC007, entered
Phase 1; and all our partnered assets have progressed.
I continue to be really excited by the differentiated
programmes in our pipeline and 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 meaningful results in the clinic which could drive
benefits for patients and value for shareholders.
10
Redx | Annual Report and Accounts for the year ended 30 September 2021 Directors’ Duties – Section 172 Statement
The Directors acknowledge their duty under section
172 of the Companies Act 2006 and consider that
they have, both individually and collectively, acted in
the way that, in good faith, would be most likely to
promote the success of the Company for the benefit of
all shareholders. In doing so, the Directors have regard
(amongst other matters) to:
•
The likely consequences of any decision in the long
term;
• The interests of the Company’s employees;
•
•
•
•
The need to foster the Company’s business relations
with suppliers, customers and others;
The impact of the Company’s operations on the
community and the environment;
The Company’s reputation for high standards of
business conduct; and
The need to act fairly as between members of the
Company.
In 2018, the Group adopted the Corporate Governance
Code for Small and Mid‑Size Quoted Companies from
the Quoted Companies Alliance (the “QCA Code”).
The QCA code is an appropriate code of conduct for
the Group’s size and stage of development. Details of
how the Group applies the ten principles of the QCA
Code are set out on pages 29 to 34. The Chair’s and
Chief Executive Officer’s statements describe the Group’s
activities, strategy and future prospects including
considerations for long-term decision making on
pages 3 and 5. The Group’s strategy, business model and
approach to risk is also discussed within the Corporate
Governance Statement on page 29. The Board considers
the Group’s major stakeholders to be its shareholders,
employees, suppliers, collaboration partners and
patients involved in clinical trials.
During the year, the Directors were involved in a
number of significant decisions affecting the Company’s
stakeholders. In December 2020, The Placing and Open
Offer of shares, raising £25.7m (gross), had significant
impact on shareholders and employees, securing
ongoing liquidity, and strengthening the balance sheet.
The agreement with Redmile and Sofinnova to convert
£5.1m of the outstanding convertible loan notes as
part of the same transaction had a similar significant
impact. The Board met frequently during this period,
with 8 meetings in the first half of the financial year.
In addition, there was close cooperation and frequent
communication with advisors, principally brokers, lawyers
and Nomad. Throughout, the Board was mindful of the
need to act in the best interests of all shareholders, and
to ensure full and accurate communication.
Later in the year, important decisions were taken
regarding the progress of the Groups two principal
assets, RXC004 and RXC007, including selecting the
Phase 2 dose for RXC004, and initiating Phase 1 studies
for RXC007. Regular portfolio reviews take place,
involving employees and outside experts, to ensure
that Directors are aware of all factors impacting such
decisions.
The resignation in May 2021 of Iain Ross as Chairman
and non‑Executive Director was also an event potentially
affecting all stakeholders. The Directors acted swiftly in
appointing an experienced interim Chairman in Peter
Presland, keeping all stakeholders informed. The process
to identify a permanent replacement was enacted
immediately, and on 1 November 2021 the Group
announced the appointment of Dr Jane Griffiths, a highly
experienced non‑Executive Director, as Chair with effect
from 1 December 2021.
Employees
The Group is a relatively small organisation and
Executive Directors have regular day‑to‑day contact with
employees at all levels, both formal and informal. The
CEO regularly briefs employees on developments in the
business and conducts question and answer sessions at
these times.
Suppliers
The Board takes a close interest in relations with key
suppliers whose performance is crucial to the Group’s
success. The Group endeavours to maintain good
relationships with its suppliers and seeks to pay them
promptly in accordance with the contracted terms.
Where appropriate, the activities of suppliers are subject
to audit.
Community and environment
The Board is mindful of the potential social and
environmental impacts of the Group’s activities. The
Board is committed to minimising the environmental
effect of the Group’s activities wherever possible and
seeks rigorous compliance with relevant legislation.
11
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Strategic Report
Directors’ Duties – Section 172 Statement
continued
Business reputation
The Group operates in a highly regulated sector and the
Board is committed to maintaining the highest standards
of conduct and corporate governance. Further details
of the group’s rigorous approach can be found within
the Corporate Governance Statement on page 29, and
within the investor section of the Group’s website at
www.redxpharma.com
The need to act fairly as between
members of the Company
The Group’s intention is to behave responsibly towards
all its shareholders and treat them fairly and equally, so
that they too may benefit from the successful delivery
of the Company’s strategic objectives. The Group’s
website www.redxpharma.com has a section dedicated
to investor matters that details, amongst other things,
all financial reports, press releases and other regulatory
filings.
12
Redx | Annual Report and Accounts for the year ended 30 September 2021 Operational Review
The Directors present this Operational Review for the
year ended 30 September 2021 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 (Chief Executive Officer), and
Dr Richard Armer (Chief Scientific Officer) have continued
in their positions throughout the year. Peter Collum took
up the post of Chief Financial Officer on 1 May 2021
at which time Dr James Mead took up the new post
of Chief Operating Officer. Dr Jane Robertson joined
as Chief Medical Officer in March 2021, following the
departure of Dr Andrew Saunders.
Key Performance Indicators (KPIs)
The Group’s KPIs 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 Chief Executive’s
Report. Below are the Financial KPIs considered pertinent
to the business.
Cash at year end
2021
£m
29.6
2020
£m
27.5
2019
£m
3.7
2018
£m
6.5
Further progress has been made during the year in
securing funding for the business plan going forward,
principally via a Placing and Open Offer which raised
gross proceeds of £25.7m and by the receipt of $4m of
milestone income.
Total operating
expenditure
(excluding share-based
payment costs)
2021
£m
2020
£m
2019
£m
2018
£m
27.1
14.1
10.2
10.6
Expenditure has risen in line with expectations as
programmes progress positively through clinical and
preclinical stages, which are cash intensive. The considerable
amount of corporate activity during the year has led to
some increases in associated costs, but management
continues to maintain rigorous cost control, whilst seeking
to prioritise resources for scientific programmes.
Net increase in cash
and cash equivalents
(including certain
one‑off payments)
2021
£m
2020
£m
2019
£m
2018
£m
2.0
23.8
(2.8)
(17.3)
Positive cash flows have been achieved not only from
financing activities, but also importantly from business
development opportunities with AstraZeneca and Jazz
Pharmaceuticals. The inflows ensure that the Group has
a cash runway through Q4 of the calendar year 2022 that
allows it to fund its business plan during that period.
Financial Review
Financial position
At 30 September 2021, the Group had cash resources
of £29.6m (2020: £27.5m). In December 2020, the
Group raised £25.7m (gross) via a Placing and Open
Offer. At the same time, RM Special Holdings 3, LLC and
Sofinnova Crossover 1 SLP converted £3.33m and £1.75m
respectively of the principal amount of the convertible
loan notes into Ordinary shares, reducing debt and further
strengthening the Group position.
The partnership with AstraZeneca generated a further
£2.8m ($4m) in milestone payments and exercising of share
options by current and former staff generated £0.3m.
Post financial year end a further £2.2m ($3m) milestone
payment was received from Jazz Pharmaceuticals,
together with the triggering of further $9 million and
$10 million milestones from AstraZeneca and Jazz
Pharmaceuticals respectively.
This funding is sufficient to allow the Group to fund its
business plan through Q4 of the calendar year 2022,
based on currently budgeted levels of expenditure and
including certain forecast milestone receipts.
This cash runway and the need for further funding beyond
this leads to a material uncertainty regarding going
concern, which is discussed in detail on page 53 of the
financial statements.
Revenue
During the year, the Group continued to derive revenue
from the outlicensing agreement with AstraZeneca (via
milestone payments) and both the research collaboration
with, and provision of research and preclinical development
services to, Jazz Pharmaceuticals. Milestone income from
AstraZeneca is recognised as received as it relates to
contingent consideration on the license previously granted.
13
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Strategic Report
and uncertainties identified by Redx for the year ended
30 September 2021 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.
Revenue from licensing and collaboration deals is
dependent on future progression of programmes
through development and into the market. Once these
programmes transfer to a partner for progression, there is
a risk that a licensing deal may not deliver all the indicated
milestones and terms due to product failure or a partner
de‑prioritising a product.
There is a risk that parties with whom the Group trades
or has other business relationships (including partners,
customers, suppliers, subcontractors and other parties)
may become insolvent. This may be as a result of general
economic conditions or factors specific to that company.
In the event that a party with whom the Group trades
Operational Review
continued
In accordance with IFRS 15 “Revenue from Contracts
with Customers”, the funds received in advance for the
collaboration agreement with Jazz Pharmaceuticals are
recognised as revenue as the obligations under the contract
are performed (being predominantly the underlying
development services). The stage of completeness of the
Jazz collaboration is assessed at each reporting date, and
revenue recognised based on the percentage of total
expected costs incurred to date. The expected timing of
further recognition is detailed in note 16. Revenue from
other research agreements is invoiced and recognised as
the work is undertaken.
Cost management
Operating expenses continue to be tightly controlled in
the context of an expanding research organisation and
programmes progressing through more cost intensive
clinical stages.
Finance costs
Finance costs have risen considerably as a consequence of
the charging of a full years “effective interest” (calculated in
valuing the lease liability and convertible loan note liability
under IFRS), on the convertible loan notes in the current
financial year (2020: 2 months). This has been partially
offset by the removal of interest charges on the earlier loans
from Moulton Goodies Ltd and Redmile in 2020.
There was no actual interest paid in 2021 (2020: £0.4m).
Cash flows
Overall positive net cash flow for the year was £2.0m
(2020: £23.8m). See KPI’s (page 13) for details.
Taxation
The acquisition of a significant proportion of the Group’s
shares by Redmile has meant that the SME tax status
previously enjoyed is no longer applicable. The Group
has therefore prepared these financial statements on the
basis that going forward it will be claiming Research and
Development expenditure credits rather than R&D tax
credits. Claims for prior years are not affected, and every
effort will be made to ensure that the Group receives the
maximum amounts to which it is entitled.
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
14
Redx | Annual Report and Accounts for the year ended 30 September 2021 becomes insolvent, this could have an adverse impact on
the revenues and profitability of 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 agencies;
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.
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 (including delays arising from COVID‑19);
•
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;
inability to monitor patients adequately during or after
treatment; or
the insolvency of a significant partner or sub‑contractor
in the running of the clinical trial.
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, so that it can stop others from making,
using or selling its inventions or proprietary rights. The
Group owns a portfolio of patents and patent applications
and is the authorised licensee of other patents and patent
applications.
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.
15
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Operational Review
continued
Legal standards relating to patents covering
pharmaceutical or biotechnological inventions and
the scope of claims made under these patents are
continuously evolving. The policy regarding the breadth
of claims allowed in biotechnology and pharmaceutical
patents is subject to changes as the law evolves.
The Group’s patent position is therefore highly uncertain
and involves complex legal and factual issues.
Information Technology (IT) & Assets
The Group depends on the performance, reliability
and availability of its plant, equipment and information
technology systems. Any damage or unauthorised
access to, or failure of, its equipment and/or systems
could result in disruptions to the Group’s operations. The
Group’s security and disaster recovery plans (which are
currently in place for financial systems and IT systems)
may not adequately address every potential event and its
insurance policies may not cover any loss in full or in part
(including losses resulting from business interruptions) or
damage that it suffers fully or at all, which could have a
material adverse effect on the Group’s business, financial
position or prospects.
Financial
The Group has incurred significant losses in previous
years, and does not currently have any approved or
marketed products although it periodically generates
revenue through asset sales, outlicensing and
collaborations. 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, including share
options, 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,
16
Strategic Report
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.
United Kingdom’s exit from the European Union
Following the United Kingdom’s exit from the European
Union on 31 January 2020 (“Brexit”) and the completion
of the transition period, there are still many uncertainties
regarding the United Kingdom’s future relationship with
the EU which could have a significant negative impact
on the Group. The extent of the impact will depend in
part on the arrangements now in place between the UK
and the EU and the extent to which the UK continues to
apply laws that are based on EU legislation from 1 January
2021. In addition, the macroeconomic effect of Brexit on
the Group’s business is unknown. As such, it is not yet
possible to state the impact that Brexit will have on the
Group.
It could also potentially make it more difficult for the
Group to operate its business in the EU as a result of
more burdensome regulations being imposed on UK
companies (such as changes in applicable legislation
affecting the regulatory pathway of the Group’s products,
both in Europe and in the UK). This could restrict the
Group’s future prospects and adversely impact its financial
condition.
COVID-19
The global economic outlook is facing uncertainty due to
the current COVID‑19 pandemic, which has been having,
and will likely continue to have, a significant impact on
global capital markets, commodity prices and foreign
exchange.
To date, beyond the six ‑month delay in trial recruitment
to RXC004, the COVID‑19 pandemic has not had any
direct material impact on the Group’s ability to operate.
However, any infections occurring on the Group’s premises
could result in the Group’s operations being suspended,
which may have an adverse impact on the Group’s
operations as well as adverse implications on the Group’s
future cash flows, profitability and financial condition.
Supply chain disruptions resulting from the COVID‑19
pandemic and measures implemented by governmental
authorities around the world to limit the transmission of
the virus (such as travel bans and quarantining) may, in
addition to the general level of economic uncertainty
Redx | Annual Report and Accounts for the year ended 30 September 2021 caused by the COVID‑19 pandemic, also adversely impact
the Group’s operations, financial position and prospects.
The Group has implemented a COVID‑19 mitigation plan
in order to minimise the risk of infection for individuals
and will continue to review and update its COVID‑19
mitigation plan and update its plan based on the latest
guidance from health professionals and the government
as the situation develops.
The Board continually monitors these risks and
uncertainties via regular reviews of its Risk Register and
takes corrective action if considered necessary.
This report was approved by the Board on 26 January
2022 and signed on its behalf by
Lisa Anson
Chief Executive Officer
17
Strategic ReportRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
18
Introduction
It is the Chair’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 Corporate Governance
statement is set out on page 29.
The Board comprises seven Directors: an independent
Non‑Executive Chair, one full time Executive Director
and five Non‑Executive Directors (three being
independent, with Dr Thomas Burt representing
Sofinnova Crossover 1 SLP and Mrs. Natalie Berner
representing Redmile Group), reflecting a blend of
different experiences and backgrounds. The function
of the Chair 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 meets regularly to review, formulate and
approve the Group’s strategy, budgets and 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 meets on
a regular basis and at least twice a year, and are both
chaired by independent Non‑Executive Directors.
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.
19
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Board of Directors
Governance
Dr Jane Griffiths
(Chair – appointed 1 December 2021)
Mrs Lisa Anson
(CEO)
Jane has enjoyed a long and successful career in the
pharmaceutical sector at Johnson & Johnson. During
her tenure there she held executive roles in clinical
research, international and strategic marketing, product
management and operational management. In her
last role before retiring in December 2019, Jane was
Global Head of Actelion, where she led the integration
of the Swiss biotech business following its acquisition
by Johnson & Johnson. Prior to that Jane had been
Company Group Chair of Janssen EMEA, the group’s
research based pharmaceutical arm. During her time
with Johnson & Johnson, Jane led its Corporate Citizen
Trust in EMEA and sponsored its Women’s Leadership
Initiative. Jane was also sponsor of Janssen’s Global
Pharmaceuticals Sustainability Council.
Currently, Jane is a Non‑Executive Director of the FTSE
100 companies, Johnson Matthey plc, and BAE Systems
plc, and is a member of the board of directors of TB
Alliance, a not‑for‑profit organisation dedicated to the
delivery of affordable tuberculosis drugs. She also sits
on the advisory board of the PE company Inflexion.
Jane is a past Chair of the Executive committee of the
European Federation of Pharmaceutical Industries and
Associations, past Chairwoman of the PhRMA Europe
Committee and a former member of the Corporate
Advisory Board of the UK Government backed ‘Your Life’
campaign, aimed at encouraging more people to study
STEM subjects.
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 Aptium), a
California based cancer disease management company,
prior to joining Zeneca Pharmaceuticals (USA) in 1998
as a business development manager. Lisa has also been
President of the Association of the British Pharmaceutical
Industry (ABPI), a position from which she stepped
down in 2018 in order to assume her current role with
Redx. 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 UK Bio Industry Association (BIA).
20
Redx | Annual Report and Accounts for the year ended 30 September 2021 Mr Peter Presland
(Independent Non-Executive Director)
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 GeneQuine Biotherapeutics
and a board member of BioMedX, Enlivex Therapeutics,
Amarna Therapeutics as well as an advisor to the board
of KAHR Medical.
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 in 2019 was asked to become
Chairman of the Governance and Finance Committee
of The Lord’s Taverners, a high‑profile charity.
21
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Board of Directors
continued
Governance
Mrs Sarah Gordon Wild
(Independent Non-Executive Director)
Dr Thomas Burt
(Non-Executive Director)
Sarah joined Redx as a Non‑Executive Director
on 1st July 2020. She brings extensive investment
experience in the biotechnology sector to her role at
Redx. She currently also serves as a Non‑Executive
Director of Oxford Nanopore Technologies and Evox
Therapeutics, as well as being a Board Member of
Lone Pine Capital LLC’s Offshore Funds.
Between 1998‑2003 Sarah was Managing Director,
Management Committee Member and Senior
Healthcare Analyst at Lone Pine Capital LLC.
Before this, for over 15 years, Sarah was a senior
biotechnology/healthcare analyst on Wall Street at
Amerindo Investments Advisors and Hambrecht &
Quist and in London at the brokerage firms Kleinwort
Grieveson and Greig Middleton. She graduated from
Aberdeen University with a BSc (Hons) in Zoology and
with an MSc from Imperial College, London in Social
& Economic Aspects of Science and Technology in
Industry.
Tom joined Redx as a Non‑Executive Director on
4th August 2020. He has been a Partner in the Crossover
fund at Sofinnova Partners since its inception in 2017.
Prior to this, he was a Research Analyst covering UK
healthcare and life science equities at Peel Hunt, joining
in 2015 after six years as an Investment Director at
specialist life science investors, Ares Life Sciences and
Novo Holdings. Before this, he spent four years in the
Healthcare Investment Banking team at Piper Sandler
& Co. Tom holds an Engineering Doctorate from UCL
in Biochemical Engineering & Bioprocess Leadership,
an MSc in Biochemical Engineering and a BSc in
Biotechnology.
22
Redx | Annual Report and Accounts for the year ended 30 September 2021 Mrs Natalie Berner
(Non-Executive Director)
Natalie joined Redx as a Non‑Executive Director on
18th May 2021 and brings extensive experience in
the healthcare sector to the Board. She is a Managing
Director focusing on Therapeutics at Redmile, which
she joined in 2016. Prior to Redmile, Natalie was a
Research Associate at the New York University School of
Medicine. Natalie received a BA in Community Health
from Brown University and a Certificate in Premedical
Sciences from Columbia University.
23
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
Financial results and dividend
The Group’s loss after tax for the year was £21.5m
(2020: £9.2m). The Directors do not recommend the
payment of a dividend. (2020: £nil).
Financial instruments
Information regarding financial instruments can be found
in note 19.
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 the
Companies Act 2006, section 414C (11) to set out in the
Company’s strategic report on pages 3 to 17 information
required to be contained in the Directors’ Report by
the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, Sch. 7, where
not already disclosed in the Directors’ Report.
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 2021.
The Corporate Governance Statement on pages 29 to 34
and the governance section on page 19 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
Mrs Lisa Anson
Dr James Mead – resigned 2 March 2021
Non-Executive
Dr Jane Griffiths – appointed 1 December 2021
Mr Iain Ross – resigned 31 May 2021
Dr Bernhard Kirschbaum
Mr Peter Presland
Mrs Sarah Gordon Wild
Dr Thomas Burt
Mrs Natalie Berner – appointed 18 May 2021
The Company maintained Directors’ and officers’ liability
insurance cover throughout the year.
Principal activities of the Group and
Company
Details of current and future trading as well as the
principal risks and uncertainties are included in the
Strategic Report on pages 3 to 17.
Business review
The Strategic Report on pages 3 to 17 provides a review
of the business, the Group’s trading for the year ended
30 September 2021, key performance indicators and an
indication of future developments and risks and forms
part of this Directors’ Report.
24
Redx | Annual Report and Accounts for the year ended 30 September 2021 Going concern
The Board have adopted the going concern basis in
preparing these accounts after assessing the Group’s
cash flow forecasts and principal risks.
At September 30, 2021 the Group held £29.6 million of
cash and cash equivalents. The Group has a history of
recurring losses from operations, including a net loss of
£21.5 million for the year ended September 30, 2021
and an accumulated deficit of £64.2 million. Operational
cash outflows continue to be driven by the ongoing
focus on the research, development and clinical activities
to advance the programs within the Group’s pipeline.
The Group recorded a net increase in cash and cash
equivalents of £2.0 million for the year ended September
30, 2021 primarily from the proceeds of the placing and
open offer in December 2020, in which the Group closed
the sale of 45,833,641 Ordinary shares, resulting in gross
proceeds of £25.7 million. As at December 31, 2021,
the Group held sufficient cash and cash equivalents to
provide a cash runway through to January 31, 2023 at
currently budgeted levels of expenditure and including
certain forecast milestone receipts.
In undertaking the going concern review, the Board has
reviewed the Group’s cash flow forecasts to January 31,
2023 (the going concern period). Accounting standards
require that the review period covers at least 12 months
from the date of approval of the financial statements,
although they do not specify how far beyond 12 months
a Board should consider. Under its base case, the Group
plans to raise significant further finance within the next
12 months, either from existing or new investors. Further
funding is required under the Board’s plans to continue
to develop its product candidates and conduct clinical
trials. Given these plans and requirements, a review
period of 12 months is considered appropriate and the
Group and Company plan to raise further funding within
this period to continue with its current strategy.
The Board has identified and assessed downside risks
and mitigating actions in its review of the Group’s cash
flow forecasts. Raising further capital is outside the
control of the directors. Accordingly, the downside risks
include a severe but plausible scenario where external
fund raising is not successful and is coupled with
underperformance against the business plan. Mitigating
actions include the delay of operating expenditure for
research activities and restriction of certain discretionary
expenditure including capital expenditure. Even if
its mitigating actions are successful, the Group and
Company will need to raise further capital.
Based on these conditions, the Group has concluded
that the need to raise further capital from either existing
or new investors represents a material uncertainty
regarding the Group’s ability to continue as a going
concern.
Notwithstanding the existence of the material
uncertainty, the Board believes that the adoption of the
going concern basis of accounting is appropriate for the
following reasons:
• based on plans and discussions with its advisors
and investors the directors have an expectation that
further funding will be obtained.
•
•
the Group has a track record and reasonable
near-term visibility of meeting expectations under
its collaboration agreements and receiving the
associated milestone payments.
the Group retains the ability to control capital and
other discretionary expenditure and lower other
operational spend, as necessary.
While the Group has successfully accessed equity and
debt financing in the past, there can be no assurance
that it will be successful now or in the future. If the Group
is unable to secure the planned additional financing,
it may not be able to generate sufficient cash flows to
support its current level of activities beyond the going
concern period. In the event financing is not obtained,
the Group will need to consider
• new commercial relationships to help fund future
clinical trial costs (i.e., licensing and partnerships);
and/or
•
reducing and/or deferring discretionary spending on
one or more research and development programs;
and/or
•
restructuring operations to change its overhead
structure.
The Group’s future liquidity needs, and ability to address
those needs, will largely be determined by the success
of its product candidates and key development and
regulatory events and its decisions in the future. Such
decisions could have a negative impact on the Group’s
business operations and financial condition.
25
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
Directors’ Report
continued
The accompanying consolidated financial statements
do not include any adjustments that would be required
if they were not prepared on a going concern basis.
Accordingly, the consolidated financial statements have
been prepared on a basis that assumes the Group will
continue as a going concern and which contemplates
the realization of assets and satisfaction of liabilities and
commitments in the ordinary course of business.
Post year end events
See note 26 to the Consolidated Financial Statements.
Independent Auditor
Following the conclusion of a competitive tender process
led by the Company’s Audit Committee, Ernst & Young
LLP were appointed on 3 June 2021 as the Company’s
Auditor for the financial year ending 30 September 2021.
A resolution to appoint Ernst & Young as Auditor for
the subsequent financial year will be proposed at the
forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on
behalf of the Board.
Lisa Anson
Chief Executive Officer
26 January 2022
Redx Pharma Plc
Block 33
Mereside
Alderley Park
Macclesfield
SK10 4TG
Company registration number: 07368089
26
Redx | Annual Report and Accounts for the year ended 30 September 2021 Directors’ Responsibilities Statement
The Directors are responsible for preparing the
Strategic Report, the Directors’ Report and the financial
statements in accordance with applicable United
Kingdom law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have elected to prepare the group financial
statements in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 (“IFRS”), and the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law),
including Financial Reporting Standard FRS 102 The
Financial Reporting Standard applicable in the UK and
Republic of Ireland (“FRS 102”). 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 and the company
for that period. The directors are also required to
prepare financial statements in accordance with the rules
of the London Stock Exchange for companies trading
securities on AIM.
In preparing these financial statements the directors are
required to:
• select suitable accounting policies in accordance with
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors and in respect of the parent
company financial statements, Section 10 of FRS 102
and then apply them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
Act 2006 (and IFRSs adopted pursuant to
Regulation(EC) No 1606/2002 as it applies in the
European Union) have been followed, subject to any
material departures disclosed and explained in the
financial statements;
•
in respect of the parent company financial
statements, state whether applicable UK Accounting
Standards, including FRS 102, have been followed,
subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going
concern basis unless it is appropriate to presume that
the company and/ or the group will not continue in
business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s and group’s transactions and
disclose with reasonable accuracy at any time the
financial position of the company and the group and
enable them to ensure that the company and the group
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the group and parent company and group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the directors
are also responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and
corporate governance statement that comply with that
law and those regulations. The directors are responsible
for the maintenance and integrity of the corporate and
financial information included on the company’s website.
The directors confirm, to the best of their knowledge:
• present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
•
• provide additional disclosures when compliance with
the specific requirements in IFRSs and in respect of
the parent company financial statements, FRS 102 is
insufficient to enable users to understand the impact
of particular transactions, other events and conditions
on the group and company financial position and
financial performance;
•
in respect of the group financial statements, state
whether international accounting standards in
conformity with the requirements of the Companies
that the consolidated financial statements, prepared
in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 (and IFRSs adopted pursuant
to Regulation(EC) No 1606/2002 as it applies in the
European Union), give a true and fair view of the
assets, liabilities, financial position and profit of the
parent company and undertakings included in the
consolidation taken as a whole;
•
that the annual report, including the strategic
report, includes a fair review of the development
and performance of the business and the position
of the company and undertakings included in the
27
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
Directors’ Responsibilities Statement
continued
consolidation taken as a whole, together with a
description of the principal risks and uncertainties
that they face; and
•
that they consider the annual report, taken as a
whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the company’s position, performance,
business model and strategy.
Lisa Anson
Chief Executive Officer
28
Redx | Annual Report and Accounts for the year ended 30 September 2021 Corporate Governance Statement
The Board believes in the importance of good 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 and complied with 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 development and
commercialisation of novel medicines for indications for
which there are no existing or only inadequate therapies.
The Group’s current focus continues to be 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 3 to 17 are appropriate given the stage of
development of the business. The Board also 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 three changes to the composition of the
Board during the year. James Mead resigned as a
Director on 2 March 2021, and Iain Ross resigned
as a Director on 31 May 2021. Natalie Berner was
appointed as an Non-Executive Director on 18 May
2021, representing Redmile Group, and is therefore
not considered to be independent. All other Directors
remained throughout the period under review. Post year
end, Dr Jane Griffiths was appointed as an independent
Non-Executive Director on 1 December 2021.
As of the date of this Report the Board comprises seven
Directors in total: an independent Non-Executive Chair,
one Executive Director and five Non-Executive Directors
(three 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 20 to 23. The experience and knowledge of
each of the Directors give them the ability to challenge
strategy constructively and to scrutinize performance.
The Board is responsible to the shareholders for the
proper management of the Group and meets typically
six-weekly to set the overall direction and strategy
of the Group, to review scientific, operational and
financial performance, and to advise on management
appointments. Whilst, as a result of restrictions caused
by COVID-19 measures, the majority of these meetings
have been held virtually via video conferencing, there
has been no reduction in their frequency, nor, in the
opinion of the Board, their effectiveness. 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 meetings
attended by each Director can be found on page 31.
29
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
• do not hold a significant shareholding or represent
any shareholder.
Whilst share options have been granted to the
independent Non-Executive Directors during the year,
these are not considered to be material in affecting their
independence.
Dr Thomas Burt represents Sofinnova Crossover 1 SLP
on the Board of Directors under the terms of a share
subscription agreement, and is therefore not considered
to be independent. Ms Natalie Berner represents
Redmile Group on the Board of Directors and is similarly
not considered to be independent.
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 a 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.
Board Committees
The Board does not maintain a separate Nominations
Committee or 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.
Corporate Governance Statement
continued
There is a clear separation of the roles of Chief Executive
Officer (CEO) and Non-Executive Chair. The Chair 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 Chair 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 Dr Bernhard Kirschbaum,
Mr Peter Presland and Mrs Sarah Gordon Wild 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 had 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; and
30
Redx | Annual Report and Accounts for the year ended 30 September 2021 Audit Risk & Disclosure Committee
• Overseeing the evaluation of executive officers;
Mr Peter Presland, Dr Bernd Kirschbaum and
Mrs Sarah Gordon Wild remained as members of the
Audit, Risk & Disclosure Committee throughout the
period under review. Mr Peter Presland is the Chairman
of the committee. During the period from 31 May 2021
to 1 December 2021, Mr Peter Presland also served
as Non-Executive Interim Chairman of the Company.
The Board believes it remained appropriate for him to
remain as Chair of the Audit Committee during this time
due to the temporary nature of the interim appointment
and his financial expertise. The responsibilities of the
committee include the following:
• Determining bonuses payable under the Group’s
cash bonus scheme; and
• 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 Directors and Chair.
The Directors’ Remuneration Report is presented on
pages 35 to 37.
• Monitoring the integrity of the financial statements of
the Group;
Attendance at meetings
• Reviewing accounting policies, accounting treatment
and disclosures in the financial reports;
• Reviewing the Group’s internal financial controls and
risk management systems; and
• 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 to review the interim Financial Statements.
In addition, it conducted a tendering process with
regard to the provision of independent audit services
to the Group, and on 3 June 2021, recommended the
appointment of Ernst & Young LLP to the position.
Remuneration Committee
Dr Bernd Kirschbaum, Mr Peter Presland and
Mrs Sarah Gordon Wild remained as members of the
Remuneration Committee throughout the period under
review. Dr Bernd Kirschbaum is the Chairman of the
Remuneration Committee. The responsibilities of the
Committee include the following:
• Determining and agreeing with the Board the
remuneration policy for all Directors;
• Within the terms of the agreed policy, determining
the total individual remuneration package for
Executive Directors;
The Board meets regularly on a six-weekly 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:
Board Audit Remuneration
Mr Iain Ross
9/10
Mrs Lisa Anson
15/15
Dr James Mead
7/7
Dr Bernd Kirschbaum
15/15
4/4
Mr Peter Presland
15/15
4/4
Mrs Sarah Gordon Wild 15/15
4/4
7/7
7/7
7/7
Dr Thomas Burt
15/15
Mrs Natalie Berner
6/6
Resigned
31 May 2021
Resigned
2 March 2021
Appointed
18 May 2021
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.
31
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021
Governance
The Independent Auditor does not perform a
comprehensive review or audit 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
controls, 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.
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 Redx 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 Chair
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 that of its committees) and
the performance of its individual Directors. During the
review, the Chair undertook a formal discussion with
each of the Directors regarding the performance of
the Board and its committees and the other Directors’
own individual contributions and performance to the
effectiveness of the Board. In preparation, the Chair
solicited the views of the other Directors, including
the completion by each Director of a confidential
questionnaire.
Corporate Governance Statement
continued
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 controls 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 significant
transactions by the Chief Financial Officer and Chief
Executive Officer at monthly review meetings.
32
Redx | Annual Report and Accounts for the year ended 30 September 2021 Whilst Executive officers other than the CEO are not
members of the Board, they attend and contribute to all
Board meetings.
In addition to the above, the Chair was evaluated on his:
• effective leadership of the Board;
With regard to the evaluation of the Board itself, the
discussions focused in particular on:
• management of relationships and communications
with shareholders;
• 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 relationships with other Board
members, management and advisers; and
• communication with and influence on other Board
members, management and key 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 Chair shared his observations
and any actions arising, where appropriate, with the
other 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
Chair reviews her performance on behalf of the Board.
The Chief Executive Officer reviews the performance of
any other Executive Director. The Executive Directors
and the other Non-Executive Directors are responsible
for evaluating the performance of the Chairman.
Following the 2021 evaluation process, the Company
considers that the Board and its individual members
continue to perform effectively, that the Chair performs
their role appropriately and that the process for
evaluation of his performance has been conducted in
a professional and rigorous manner. Actions the Board
intends to focus upon and where necessary strengthen in
the next 12 months were identified as follows:
•
•
Contingency Planning - In light of the recent
COVID-19 pandemic and the ramifications thereof,
it was agreed that in such circumstances the Board and
its Committees should pro-actively consider, review
and assess contingency scenarios on a regular basis.
Strategy - as the Company’s intention is to expand
its assets and capabilities it was agreed that more
emphasis at Board meetings should be put on
strategic discussions and risk analysis and that in
addition an Annual Strategy session for the Board
should be held in addition to regular Board meetings.
33
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Governance
During the period under review the Board believes that
the communication with the shareholders has been
effective in that Mr Iain Ross (prior to resignation),
Mr Peter Presland and/or Mrs Lisa Anson have had
meetings and/or calls with the majority of institutional
and high net worth shareholders and during the period
there have been several shareholder briefing sessions
involving Directors and senior managers.
Normally, shareholders are welcome to attend the
Group’s AGM, where they have the opportunity to meet
the Board. Due to the restrictions surrounding COVID-19
measures, shareholder meetings have been conducted
as closed meetings. However, all shareholders will have
at least 21 days’ notice of the AGM and are encouraged
to vote by proxy. The Board is committed to continued
engagement with its shareholders, and contact details
can be found on the website.
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
10 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 the Corporate
Governance Code for small and mid-sized companies
can be found on our website, www.redxpharma.com
Peter Presland - Interim Chair of the Board of
Directors – to 30 November 2021
Dr Jane Griffiths - Chair of the Board of Directors – from
1 December 2021
Corporate Governance Statement
continued
•
Succession Planning - as the Company expands it
was agreed that the Board needs to formalise its
approach to Board and management succession
planning in terms of skills, geography and diversity.
Corporate social responsibility
The Board recognises the growing awareness of social,
environmental and ethical matters and it endeavours
to take into account the interests 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 Chair 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.
34
Redx | Annual Report and Accounts for the year ended 30 September 2021 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.
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.
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.
Executive Directors service contracts
and termination provisions
The service contract of the Executive Director is
approved by the Board. The service contract may be
terminated by either party giving notice to the other. The
details of the Director’s contract are summarised below:
The remuneration of the Executive Directors during the
year 2020/21 is set out below.
Date of Contract
Notice period
Lisa Anson
1 June 2018
6 months
Mrs Lisa Anson was appointed CEO and an Executive
Director on 1 June 2018. She is paid £340,000 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. No remuneration is paid to Non-Executive
Directors who are not considered to be independent.
The Non-Executive Directors have not received any
pension, bonus, or benefits from the Group. Their Letters
of Appointment are reviewed by the Board annually.
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, set annually in advance
by the Remuneration Committee, and personal
performance objectives.
The Remuneration Committee 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 and retain the Executive
Directors and employees, and align their interests with
those of 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 37. Certain of the options as detailed
below have performance conditions relating to the
vesting of these options based on scientific, clinical and
commercial milestones. The remaining options have
no conditions attached to vesting other than service
conditions.
35
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021
Directors’ Remuneration Report
continued
Governance
Directors’ remuneration
The Directors received the following remuneration during the year:
Salaries,
bonuses and
fees
£
615,297
129,435
58,333
46,000
40,000
53,333
-
-
Executive
L Anson
Dr J Mead1
Non-Executive
P. Presland2
Dr B Kirschbaum
S Gordon Wild3
I. Ross4
Dr T Burt5
N. Berner6
Pension
contrib’s
£
Share based
payments
£
Total
2020/21
£
Salaries,
bonuses and
fees
£
Pension
contrib’s
£
Share based
payments
£
Total
2019/20
£
29,438
1,413,587
2,058,322
481,133
27,241
110,733
619,107
3,236
78,238
210,909
188,500
7,431
41,723
237,654
-
-
-
-
-
-
16,078
16,078
16,078
-
-
-
74,411
62,078
56,078
53,333
-
-
45,000
46,000
10,000
80,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45,000
46,000
10,000
80,000
-
-
942,398
32,674
1,540,059
2,515,131
850,633
34,672
152,456
1,037,761
1Dr J. Mead resigned as a Director on 2 March 2021.
2P. Presland was appointed as interim Chairman on 31 May 2021.
3S. Gordon Wild was appointed as a Director on 1 July 2020.
4I. Ross resigned as a Director on 31 May 2021.
5Dr T. Burt was appointed as a Director on 4 August 2020 under the terms of the subscription agreement with Sofinnova
Crossover 1 SLP, he is considered to be a non-independent Director and receives no remuneration.
6N. Berner was appointed as a Director on 18 May 2021, she represents Redmile Group and is considered to be a
non-independent Director and receives no remuneration.
Share based payments remuneration represents the relevant proportion for each Director of the total charge to
Comprehensive Income made in the year.
Dr Burt and Mrs Berner 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
Dr J Mead
Non-Executive
S Gordon Wild
P Presland
Dr B Kirschbaum
I Ross
36
At 30 September
2021
At 1 October
2020
129,284
-
892,858
146,225
-
-
-
-
-
118,849
-
215,870
Redx | Annual Report and Accounts for the year ended 30 September 2021 Executive Directors share options
Of the options granted, a number have performance conditions relating to the vesting of these options based on
scientific, clinical and commercial milestones. There are no performance conditions attached to the vesting of the
remaining options other than service conditions.
Non-Executive Directors share options
During the year, the Board agreed to the adoption of the Redx Pharma plc Directors Share Option Scheme, and options
were granted to Independent Non-Executive Directors. There are no performance conditions attached to the vesting of
the options other than service conditions.
Details of the options are as follows:
Date of grant
At
1 October
2020
Granted during
the period
At
30 September
2021
Price per share
(p)
Date from which
exercisable
Expiry date
Director
Executive
L Anson
1-Jul-20
1-Jul-20
1-Jul-20
1,000,000
1,000,000
1,000,000
1-Jul-20
*5,300,000
2-Dec-20
2-Dec-20
2-Dec-20
2-Dec-20
-
-
-
-
1,000,000
1,000,000
1,000,000
*5,300,000
451,145
451,145
451,144
451,145
451,145
451,144
*2,030,152
*2,030,152
8,300,000
3,383,586
11,683,586
*vesting subject to performance conditions
Non-Executive
P Presland
Dr B Kirschbaum
S Gordon Wild
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
1-Jul-21
-
-
-
-
-
-
-
-
-
-
-
-
66,666
66,667
66,667
66,666
66,667
66,667
200,000
200,000
66,666
66,667
66,667
66,666
66,667
66,667
200,000
200,000
66,666
66,667
66,667
66,666
66,667
66,667
200,000
200,000
Dr Bernd Kirschbaum
Chairman of the Remuneration Committee
15.5
15.5
15.5
15.5
56
56
56
56
61.5
61.5
61.5
61.5
61.5
61.5
61.5
61.5
61.5
1-Jul-21
1-Jul-22
1-Jul-23
1-Jul-23
2-Dec-21
2-Dec-22
2-Dec-23
2-Dec-23
1-Jul-2022
1-Jul-2023
1-Jul-2024
1-Jul-2022
1-Jul-2023
1-Jul-2024
1-Jul-2022
1-Jul-2023
1-Jul-2024
1-Jul-30
1-Jul-30
1-Jul-30
1-Jul-30
2-Dec-30
2-Dec-30
2-Dec-30
2-Dec-30
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
1-Jul-31
37
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Independent Auditor’s report to the members of Redx
Pharma Plc
Governance
Opinion
In our opinion:
• Redx Pharma plc’s group financial statements and parent company financial statements (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 2021 and
of the group’s loss for the year then ended;
•
•
the group financial statements have been properly prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006;
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.
We have audited the financial statements of Redx Pharma plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 September 2021 which comprise:
Group
Parent company
Consolidated statement of financial position as at
30 September 2021
Consolidated statement of comprehensive income for the
year then ended
Statement of financial position as at 30 September 2021
Statement of changes in equity for the year then ended
Consolidated statement of changes in equity for the year
then ended
Related notes 1 to 14 to the financial statements
including a summary of significant accounting policies
Consolidated statement of cash flows for the year then
ended
Related notes 1 to 26 to the 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 accounting standards in conformity with the requirements of the Companies Act 2006.
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 FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
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 in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed 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.
38
Redx | Annual Report and Accounts for the year ended 30 September 2021 Material uncertainty in relation to going concern
We draw attention to the accounting policies note in the financial statements, which indicates the group and parent
company need to raise further capital from either existing or new investors within the next 12 months or shortly
thereafter. The group’s ability to raise further funding is uncertain which, along with the other matters as set forth in the
accounting policies note, indicate that a material uncertainty exists that may cast significant doubt on the group and
parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group
and parent company’s ability to continue to adopt the going concern basis of accounting included:
•
•
•
•
•
In conjunction with our walkthrough of the group’s financial close process, we confirmed our understanding of
management’s going concern assessment process and also performed our own risk assessment over going concern
to ensure the management assessment was appropriate.
We checked the mathematical integrity of management’s going concern assessment, including the cash forecast for
the going concern period which covers a period to 31 January 2023 (the going concern review period).
We assessed whether the group had modelled sufficiently severe downside scenarios in their cash forecasts which
included where further external funding is not obtained within 12 months and mitigating actions are taken to
preserve cash necessary to extend the group’s liquidity to the end of the going concern review period.
We considered the appropriateness of the methods used to calculate the cash forecasts and determined through
inspection and testing of the methodology and calculations that the methods utilised were appropriately
sophisticated to be able to make an assessment for the entity.
We considered the mitigating factors included in the cash forecasts that are within control of the group.
This includes review of the group’s non-operating cash outflows and evaluating the group’s ability to control these
outflows as mitigating actions if required.
•
We reviewed the group’s going concern disclosures included in the annual report in order to assess that the
disclosures were appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have identified a material uncertainty relating to events or conditions
that, individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a
going concern for a period to 31 January 2023 as described above and in the accounting policies note to the financial
statements.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the company’s or group’s ability to continue as a going concern.
Going concern has been determined to be a key audit matter.
39
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Independent Auditor’s report to the members of Redx Pharma Plc
continued
Governance
Overview of our audit approach
Audit scope
Key audit matters
Materiality
•
•
We performed an audit of the complete financial information of three
components and audit procedures on specific balances for a further one
component.
The components where we performed full or specific audit procedures
accounted for 99% of Loss before tax, 99% of Operating expenses and
100% of Total assets.
Group
• Revenue recognition on long-term contracts
• Research and development contract accrued expenses
• Convertible loan accounting
• Going concern
Parent company
•
Recoverability of investments in subsidiaries and intercompany receivables
•
Overall group materiality of £560,000 which represents 2% of Operating
expenses (excluding share based payments).
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-
wide controls and changes in the business environment.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial statements, of the five reporting components of the Group,
we selected four components covering entities within the United Kingdom and United States, which represent the
principal business units within the Group.
Of the four components selected, we performed an audit of the complete financial information of three components
(“full scope components”) which were selected based on their size or risk characteristics. For the remaining specific
scope components, we performed audit procedures on specific accounts within that component that we considered
had the potential for the greatest impact on the significant accounts in the financial statements either because of the
size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 99% of the Group’s Loss before tax,
99% of the Group’s Operating expenses and 100% of the Group’s Total assets. The full scope components contributed
99% of the Group’s Loss before tax, 99% of the Group’s Operating expenses and 98% of the Group’s Total assets.
The specific scope component contributed less than 1% of the Group’s Loss before tax and Operating expenses and
2% of the Group’s Total assets. The audit scope of these components may not have included testing of all significant
accounts of the component but will have contributed to the coverage of significant tested for the Group.
Changes from the prior year
This is the first year as the group auditor having been appointed in June 2021.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
40
Redx | Annual Report and Accounts for the year ended 30 September 2021 Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Key observations communicated to
the Audit Committee
Based on the procedures performed,
we concluded that the revenue
recorded on the group’s long
term contract for the year ended
30 September 2021 is materially
correct.
Risk
Revenue recognition on long-term
contracts (2021: £2,751k;
2020: £516k)
For the fiscal year ended 30 September
2021, revenue from the group’s
long term research collaboration
contract amounted to £2,751k. As at
30 September 2021, related contract
liabilities, representing deferred
revenue, amounted to £4,318k.
Revenue recorded in respect of long
term contracts is significant and
requires estimates of total contract
costs and the transaction price, as
disclosed in the accounting policies
note of the consolidated financial
statements.
We believe that the measurement of
revenue and related contract assets
and liabilities on the group’s long-
term research collaboration contract
is a key audit matter, because of the
degree of required estimates and
judgments which significantly impact
the determination of the extent of
progress towards completion.
Key judgments and estimates related
to contract costs at completion are
forecasts for labour hours and costs,
consumables, specific costs, and the
probability of additional costs from
delays.
Our response to the risk
As part of our audit, we obtained
an understanding of the Group’s
controls for managing and
monitoring its long-term contract.
More specifically, we assessed the
design and operating effectiveness
of internal controls related to the
measurement of revenues and costs
and the stage of completion.
In auditing the contract, we
•
•
•
•
Obtained an understanding of
contract performance through
discussion with project managers;
Examined the terms and
conditions of the contract
and assessed management’s
proposed accounting treatment
of the contract with reference to
IFRS 15, Revenue;
Performed inquiries of project
managers with respect to the
reasons for deviations between
planned and actual costs, and
corroborated such information
by comparing to other available
information;
Assessed, through discussions
with project managers, the past
performance of the contract
to determine the accuracy of
management’s forecasting;
41
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Independent Auditor’s report to the members of Redx Pharma Plc
continued
Governance
Risk
Our response to the risk
Key observations communicated to
the Audit Committee
Key judgments and estimates related
to the transaction price relate to the
achievement of future milestones not
yet achieved which are considered to
be highly probable by management.
We have determined the risk of
improper estimation of costs and
related misstatement of revenue
recorded is a fraud and significant risk.
•
•
•
Assessed the inclusion of certain
forecast milestones in the contract
price by comparing the basis for
their inclusion against historical
scientific records.
Recalculated stage of completion of
the contract based on costs incurred
to date and estimated total costs;
Evaluated the information
presented in notes 2 and 16 of
the notes to the consolidated
financial statements.
Convertible loan accounting
(2021: £14,247k; 2020: £16,758k)
In the period, the note holders
converted a proportion of convertible
loan notes into ordinary shares.
A proportion of the liability at the date
of conversion is derecognised and is
recognised as equity. No gain or loss
on conversion has been recorded.
We understood and recorded the
process over the group’s accounting
for the partial conversion.
We challenged management’s
proposed accounting treatment and
analysis prepared to determine if
it is in accordance with IFRS which
included consultation with our
technical accounting group.
Based on the procedures we
performed and after consideration
of adjustments identified by us
and recorded by management, we
consider the carrying amount of the
remaining convertible loan note and
the amounts transferred to equity to
be fairly stated.
We read and inspected underlying
agreements to substantiate the
accounting treatment proposed
by management and obtained
external confirmation of the principal
converted and other key terms
impacting the accounting entries.
We performed an independent
recalculation of the expected liability
and entries to be recorded on
conversion.
We performed full scope audit
procedures over this risk area in two
locations, which covered 100% of the
risk amount.
We obtained an understanding, of
the design effectiveness of controls
in place over the Group’s process to
record costs of R&D contracts.
The partial conversion of the
loan note in period represents a
significant transaction for which the
accounting treatment is complex.
The presentation and disclosure
of equity amounts is subject to
judgement.
Research and development
contract accrued expenses
(2021: £634k; 2020: £nil)
Certain of the Group’s R&D expenses
paid to Contract Research Organisations
(CROs) require estimation. The related
accruals and any prepayments include
estimates of the amount of work
performed by third parties as at the
period end. There is a risk that estimates
made by management in respect of the
level of service rendered at period end
are incorrect.
42
Based on procedures performed,
R&D contract costs, including
accrued balances, are fairly stated.
Redx | Annual Report and Accounts for the year ended 30 September 2021 Risk
Our response to the risk
Key observations communicated to
the Audit Committee
We have determined the risk of
improper estimation and recording of
accrued expenses incurred related to
research and development expenses
that have not yet been invoiced or
paid is a significant risk.
Our audit procedures, among others,
included:
•
•
•
•
•
reviewing the disclosures made
in the annual report and the
group’s press releases on the
progress of clinical trials to help
inform our work on assessing the
completeness of CRO costs.
making inquiries of internal clinical
personnel outside of finance
to understand the status and
progress related to all ongoing
and expected clinical trials and to
corroborate assumptions used in
management estimates.
inspecting correspondence
between the Group and the third
parties involved in the clinical trials
as to specific services rendered
through the balance sheet date.
performing a test of detail by
obtaining a sample of underlying
invoices received during the year
and agreeing to the Group’s
analysis. We also inspected vendor
invoices received subsequent to
year-end and compared to the
Group’s accruals for completeness.
obtaining external confirmations
from the Group’s key vendors,
and compared total spend as
reported by the vendors to the
amount recorded by the Group.
Recoverability of investments in
subsidiaries and intercompany
receivables
At the 30 September 2021, the carrying
value of investments in subsidiary
undertakings amounted to £653k
(2020: £411k), and amounts due
from group undertakings amounted
to £42,636k (2020: £19,513k) in the
Company Statement of Financial
Position.
We understood and recorded
the process over the Company’s
assessment of the carrying value of
investments and receivable balances.
No impairment of amounts due
from subsidiaries was identified by
management. We concurred with the
management’s assessment.
We are satisfied that the disclosures
in the Annual Report and financial
statements are appropriate.
We obtained management’s
impairment reviews and underlying
calculations prepared to support
the carrying value of the Company’s
assets. We tested the integrity of
management’s calculations and
reconciled inputs to the general
ledger.
43
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Independent Auditor’s report to the members of Redx Pharma Plc
continued
Governance
Key observations communicated to
the Audit Committee
Risk
The subsidiary undertakings are
currently, and have been historically,
loss making. As a consequence, there
is a significant risk that the investments
or related receivables are impaired
and need to be written down.
Our response to the risk
We reviewed the forecasts and
challenged the assumptions therein
and considered whether they were
consistent with our understanding
of the business of the group and its
future strategic plans. We compared
the results of the calculations
prepared by management to the
market capitalisation of the group
to determine if the results were
reasonable.
We assessed the completeness and
appropriateness of management’s
disclosures in the Parent company’s
financial statements in accordance
with FRS 102.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining
the nature and extent of our audit procedures.
We determined materiality for the Group to be £560,000, which is approximately 2% of Operating expenses (excluding
share based payment charges). We believe that operating expenses provides us with an appropriate basis considering the
group is loss making and generates only modest revenues such that common earnings-based measures are not appropriate
to determine materiality as these would result in an amount that does not appropriately reflect what we believe users of the
financial statements would consider important. Considering the fact that the group incurs operating expenses, associated
primarily with research and development which are financed by equity contributions from its investors, we believe that an
activity-based measure is a more appropriate basis for determining materiality. We determined materiality for the Parent
Company to be £149,000, which is 2% of operating expenses (excluding share based payments).
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment,
our judgement was that performance materiality was 50% of our planning materiality, namely £280,000 (Parent
company: £148,000). We have set performance materiality at this percentage due to the fact that this is our first year as
auditor of the group.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement
accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for
44
Redx | Annual Report and Accounts for the year ended 30 September 2021 each component is based on the relative scale and risk of the component to the Group as a whole and our assessment
of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to
components was £209,000 to £84,000.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of
£28,000, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and
in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 37, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information within the
annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon. 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 course of 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 themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of the 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 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 its 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 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
45
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Independent Auditor’s report to the members of Redx Pharma Plc
continued
Governance
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 27, 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 and parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with
governance of the company and management.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and
determined that the most significant are those that relate to the reporting framework (IFRS and UK GAAP), the
Companies Act 2006 and the relevant tax compliance regulations in the jurisdictions in which the company operates.
We understood how Redx Pharma plc is complying with those frameworks by making enquiries of management
and those responsible for legal and compliance, including external legal counsel. We corroborated these enquiries
through our review of board meeting minutes. We assessed management’s entity level controls to understand the
company culture of honest and ethical behaviour, including the emphasis on fraud prevention.
We assessed the susceptibility of the group’s and parent company’s financial statements to material misstatement,
including how fraud might occur through our discussions with management through various parts of the business
to understand where there is susceptibility for fraud. We also considered management performance targets and
how these could influence any attempts to manage earnings. We also gained an understanding of internal controls
designed by the company to prevent, deter and detect fraud.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures involved testing journal entries, with an emphasis placed on manual journal entries
recorded to revenue, obtaining independent confirmations to verify the existence of significant contracts and
balances with third parties, and testing any other large or unusual transactions to gain reasonable assurance that the
accounts were free from fraud and error. Furthermore, we performed procedures to conclude on the compliance of
disclosures made in the annual report and accounts with all applicable requirements.
•
•
•
•
46
Redx | Annual Report and Accounts for the year ended 30 September 2021 A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at https://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.
Adrian Bennett (Senior Statutory Auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
Cambridge
26 January 2022
47
GovernanceRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
4848
Consolidated Statement of Comprehensive Loss
For the year ended 30 September 2021
Continuing operations
Revenue
Research and Development expenses
General and Administrative expenses
Other operating income
Loss from operations
Finance income
Finance costs
Loss before taxation
Income tax
Loss attributable to owners of Redx Pharma Plc
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Exchange difference from translation of foreign operations
Total comprehensive loss for the year attributable to
owners of Redx Pharma Plc
Loss per share
From continuing operations
Basic & diluted (pence)
Year ended
30 September
2021
£’000
Year ended
30 September
2020
£’000
Note
2
3
3
5
6
6
7
10,035
(24,445)
(6,455)
1,120
(19,745)
13
(1,711)
5,685
(10,460)
(4,238)
812
(8,201)
7
(974)
(21,443)
(9,168)
(133)
(21,576)
(45)
(9,213)
29
-
(21,547)
(9,213)
8
(8.4)
(5.4)
49
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Consolidated Statement of Financial Position
At 30 September 2021
Company No. 07368089
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Current assets
Trade and other receivables
Current tax
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Derivative financial instrument
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Share-based payment
Capital redemption reserve
Exchange translation reserve
Convertible note reserve
Retained deficit
Equity attributable to shareholders
Note
10
11
13
14
15
16
18
17
18
21
22
22
22
22
17
22
As restated
2020
£’000
1 October
2019
£’000
2021
£’000
3,325
405
3,730
6,231
32
29,552
35,815
39,545
4,699
4,318
-
575
-
-
3,048
411
3,459
1,923
32
27,513
29,468
32,927
3,362
7,069
-
503
-
-
9,592
10,934
14,247
2,574
26,413
13,132
2,753
66,299
4,752
1
29
3,524
(64,226)
13,132
16,758
3,209
30,901
2,026
1,952
37,184
1,191
1
-
4,572
(42,874)
2,026
3,648
417
4,065
1,232
871
3,704
5,807
9,872
2,784
-
468
463
648
306
4,669
-
3,712
8,381
1,491
1,265
33,263
1,104
1
-
-
(34,142)
1,491
The financial statements were approved and authorised for issue by the Board on 26 January 2022 and were signed on
its behalf by
Lisa Anson
Chief Executive Officer
50
Redx | Annual Report and Accounts for the year ended 30 September 2021 Consolidated Statement of Changes in Equity
For the year ended 30 September 2021
Share
capital
£’000
1,265
Share
premium
£’000
33,263
Share based
payment
£’000
1,104
-
-
Capital
Redemption
Reserve
£’000
Exchange
translation
Reserve
£’000
Convertible
Note
Reserve
£’000
As restated
Retained
Deficit
£’000
As restated
Total
Equity
£’000
(34,142)
1,491
(9,213)
(9,213)
At 1 October 2019
Loss and total comprehensive
loss for the year
Transactions with owners of
the Company
Issue of ordinary shares
687
4,144
Transaction costs on issue of
ordinary shares
Transaction costs on the
conversion of loan instruments
into ordinary shares
Recognition of equity element
of convertible loan notes
Transaction costs on the issue of
convertible loan notes
Share based compensation
Release of share options lapsed
in the year
-
-
-
-
-
-
(93)
(130)
-
-
-
-
Movement in year
687
3,921
-
-
-
-
-
-
568
(481)
87
1
-
-
-
-
-
-
-
-
-
At 30 September 2020
1,952
37,184
1,191
1
Loss for the year
Other comprehensive income
Total comprehensive loss for
the year
Transactions with owners of
the Company
-
-
-
-
-
-
Issue of ordinary shares
473
25,508
Transaction costs on issue of
ordinary shares
Partial conversion of the
convertible loan notes
Share based compensation
Release of share options lapsed
in the year
-
(1,051)
328
4,658
-
-
-
-
Movement in year
801
29,115
At 30 September 2021
2,753
66,299
-
-
-
-
-
-
3,785
(224)
3,561
4,752
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
29
29
-
-
-
-
-
29
29
-
-
-
-
-
4,815
(243)
-
-
-
-
-
-
-
-
481
4,831
(93)
(130)
4,815
(243)
568
-
535
2,026
4,572
(8,732)
4,572
(42,874)
-
-
-
-
-
(1,048)
-
-
(21,576)
(21,576)
-
29
(21,576)
(21,547)
-
-
-
-
25,981
(1,051)
3,938
3,785
224
-
(1,048)
(21,352)
11,106
3,524
(64,226)
13,132
51
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Consolidated Statement of Cash Flows
For the year ended 30 September 2021
Year ended
30 September
2021
£’000
Year ended
30 September
2020
£’000
Note
(21,576)
(9,213)
133
1,711
(13)
633
3,785
-
-
-
(4,651)
(1,414)
(21,392)
-
13
(21,379)
-
(754)
(754)
25,980
(1,051)
-
-
-
-
(786)
-
24,143
2,010
27,513
29
29,552
45
974
(7)
665
568
(67)
(6)
(4)
(905)
7,330
(620)
1,008
7
395
4
(59)
(55)
2,099
(223)
5,000
23,680
(1,117)
(5,000)
(788)
(182)
23,469
23,809
3,704
-
27,513
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
Profit on disposal of assets
Movements in working capital
Increase in trade and other receivables
(Decrease)/increase in trade and other payables and contract liabilities
Cash used in operations
Tax credit received
Interest received
Net cash (used in) / generated by operations
Cash flows from investing activities
Sale of property, plant and equipment
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds of share issues
Share issue costs
Short term loan
Loan notes issued
Loan note costs
Repayment of short term loan
Payment of lease liabilities
Interest paid
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Foreign exchange difference
Cash and cash equivalents at end of the year
14
52
Redx | Annual Report and Accounts for the year ended 30 September 2021 Notes to the Financial Statements
For the year ended 30 September 2021
Accounting Policies
General information
Redx Pharma Plc (‘‘Redx” or “the Company”) is a public company limited by shares incorporated in England and Wales as
Redx Pharma Ltd on 7 September 2010, and domiciled in the UK. The registered office is located at Block 33, Mereside,
Alderley Park, Macclesfield, SK10 4TG. Redx shares are listed on AIM, a market operated by The London Stock Exchange.
These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the ‘Group’).
The principal activity of the Group is drug discovery, pre-clinical development and licensing.
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) in conformity with the requirements of the Companies Act 2006. They were authorised for issue by the Company’s
Board of Directors on 26 January 2022.
The consolidated financial statements are presented in GBP, which is the Group’s presentational currency, and all values are
rounded to the nearest thousand (£000) except where indicated otherwise.
Going concern
The Board have adopted the going concern basis in preparing these accounts after assessing the Group’s cash flow forecasts
and principal risks.
At September 30, 2021 the Group held £29.6 million of cash and cash equivalents. The Group has a history of recurring losses
from operations, including a net loss of £21.5 million for the year ended September 30, 2021 and an accumulated deficit of
£64.2 million. Operational cash outflows continue to be driven by the ongoing focus on the research, development and clinical
activities to advance the programs within the Group’s pipeline. The Group recorded a net increase in cash and cash equivalents
of £2.0 million for the year ended September 30, 2021 primarily from the proceeds of the placing and open offer in December
2020, in which the Group closed the sale of 45,833,641 Ordinary shares, resulting in gross proceeds of £25.7 million. As at
December 31, 2021, the Group held sufficient cash and cash equivalents to provide a cash runway through to January 31, 2023
at currently budgeted levels of expenditure and including certain forecast milestone receipts.
In undertaking the going concern review, the Board has reviewed the Group’s cash flow forecasts to January 31, 2023 (the
going concern period). Accounting standards require that the review period covers at least 12 months from the date of
approval of the financial statements, although they do not specify how far beyond 12 months a Board should consider. Under
its base case, the Group plans to raise significant further finance within the next 12 months, either from existing or new
investors. Further funding is required under the Board’s plans to continue to develop its product candidates and conduct
clinical trials. Given these plans and requirements, a review period of 12 months is considered appropriate and the Group and
Company plan to raise further funding within this period to continue with its current strategy.
The Board has identified and assessed downside risks and mitigating actions in its review of the Group’s cash flow forecasts.
Raising further capital is outside the control of the directors. Accordingly, the downside risks include a severe but plausible
scenario where external fund raising is not successful and is coupled with underperformance against the business plan.
Mitigating actions include the delay of operating expenditure for research activities and restriction of certain discretionary
expenditure including capital expenditure. Even if its mitigating actions are successful, the Group and Company will need to
raise further capital.
Based on these conditions, the Group has concluded that the need to raise further capital from either existing or new investors
represents a material uncertainty regarding the Group’s ability to continue as a going concern.
Notwithstanding the existence of the material uncertainty, the Board believes that the adoption of the going concern basis of
accounting is appropriate for the following reasons:
–
–
–
based on plans and discussions with its advisors and investors the directors have an expectation that further funding will be
obtained.
the Group has a track record and reasonable near-term visibility of meeting expectations under its collaboration
agreements and receiving the associated milestone payments.
the Group retains the ability to control capital and other discretionary expenditure and lower other operational spend,
as necessary.
53
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Accounting Policies – continued
While the Group has successfully accessed equity and debt financing in the past, there can be no assurance that it will be
successful now or in the future. If the Group is unable to secure the planned additional financing, it may not be able to
generate sufficient cash flows to support its current level of activities beyond the going concern period. In the event financing
is not obtained, the Group will need to consider
– new commercial relationships to help fund future clinical trial costs (i.e., licensing and partnerships); and/or
–
–
reducing and/or deferring discretionary spending on one or more research and development programs; and/or
restructuring operations to change its overhead structure.
The Group’s future liquidity needs, and ability to address those needs, will largely be determined by the success of its product
candidates and key development and regulatory events and its decisions in the future. Such decisions could have a negative
impact on the Group’s business operations and financial condition.
The accompanying consolidated financial statements do not include any adjustments that would be required if they were
not prepared on a going concern basis. Accordingly, the consolidated financial statements have been prepared on a basis
that assumes the Group will continue as a going concern and which contemplates the realization of assets and satisfaction of
liabilities and commitments in the ordinary course of business.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention and in accordance with IFRS in
conformity with the requirements of the Companies Act 2006.
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.
New and amended standards adopted by the Group
The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on
October 1, 2020:
– Amendments to References to Conceptual Framework in IFRS Standards
– Definition of a Business (Amendments to IFRS 3)
– Definition of Material (Amendments to IAS 1 and IAS 8)
–
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
– COVID-19-Related Rent Concessions (Amendment to IFRS 16)
The adoption of these amendments has had no material effect on the Group’s consolidated financial statements.
Standards and amendments to existing standards that are not yet effective
There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in a subsequent
accounting period. The Group has evaluated these changes and none are expected to have a significant impact on these
consolidated financial statements.
Prior year restatement
The Group has identified an error within its accounting entries recorded on the adoption of IFRS 16 – Leases, which was
adopted on 1 October 2019. The error identified was an overstatement of the right of use asset recorded on transition of
£661,000 due to an incorrect reversal of the rent-free period accrual recognised under IAS 17 through retained earnings rather
than as a reduction of the right of use asset. This resulted in a corresponding understatement of the retained deficit recorded
in the Statement of changes in equity on transition. In accordance with IAS 1, a third balance sheet has been presented at
1 October 2019.
54
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 Accounting Policies – continued
The financial impact of the error identified is as follows:
Right of use asset
Retained deficit
As at 1 October 2019
As at 30 September 2020
Reported
£’000
4,175
33,4811
Adjustment
£’000
(661)
661
Restated
£’000
3,514
34,1421
Reported
£’000
3,573
42,213
Adjustment
£’000
(661)
661
Restated
£’000
2,912
42,874
1The Group adopted IFRS 16 from 1 October 2019 and did not restate comparatives for the 2019 reporting period, as permitted under the specific
transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules were therefore recognised in the
opening balance sheet on 1 October 2019.
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 Loss from the date the Company gains control until the date when the Company ceases to control the
subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into
line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members
of the Group are eliminated on consolidation.
Business Combinations
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to the Group. 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.
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.
Foreign Currency
(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 GBP (£). Whilst revenue is invoiced and
received in US dollars, the majority of expenditure remains in GBP as does the receipt of financing for the Group. Directors
periodically review the appropriateness of the functional currency for the Group. The consolidated financial statements are
presented in GBP.
55
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Accounting Policies – continued
(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
Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(c) Foreign operations
The assets and liabilities of foreign operations, are translated into GBP at the exchange rates at the reporting date. The
income and expenses of foreign operations are translated into GBP at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in OCI and accumulated in the translation reserve.
Revenue from contracts with customers
The Group generates revenue from the sale or outlicensing of scientific programmes, the provision of research on collaboration
programmes and the provision of research and preclinical development services under partnership agreements.
Revenue from contracts with customers is recognised at an amount that reflects the consideration to which the Group is
expected to be entitled in exchange for transferring goods or services to a customer. An assessment is performed on each
contract to determine the separate performance obligations and whether these are distinct, and where they are not distinct,
they are combined.
Where the Group provides ongoing services, revenue in respect of this element is recognised over the duration of those
services. Where the arrangement meets the definition of a license agreement, sales milestones and sales royalties are
recognised when achieved by applying the royalty exemption under IFRS15.B63.
All other milestones and sales royalties are recognised when considered it is highly probable there will not be a significant
reversal of income which in the case of clinical success milestones is taken to be when the results of the relevant trial is passed.
(a) Sale and outlicensing of scientific programmes
Customers obtain control of the scientific programmes when the scientific research is transferred to the customer to enable
them to continue research and development. Invoices are generated at the point of sale and are usually payable within
30 days. There are no obligations on the Group for returns or refunds for sales or outlicensing of scientific programmes.
Revenue is recognised when the scientific research license is transferred to the customer.
(b) Revenue from research collaboration
Collaborations and other arrangements with multiple performance obligations including licenses are assessed to determine
whether the license and any services or other performance obligations in the agreement are distinct. Where the license is
not distinct it is combined with the associated services and recognised as a single performance obligation.
Generally, performance obligations for research collaboration are satisfied over time as services are rendered. Payment
is due with reference to contractual milestones and payment is typically received in advance of services being delivered.
These arrangements establish contract liabilities that are then released to match the provision of services. Consideration
for research collaboration contracts contains an upfront payment (fixed) and subsequent milestone payments (variable).
Variable milestone payments are estimated using the expected value method. Revenue is recognised over the duration
of the contract based on an input method based on cost to complete. The related costs are recognised in profit and loss
when they are incurred.
(c) Revenue from research and preclinical development services
Performance obligations for research and preclinical development services are satisfied over time as services are rendered.
Invoices are presented monthly and are typically payable within 30 days. There are no obligations on the Group for refunds
regarding the provision of research and preclinical development services. Consideration is made up of multiple elements,
being an agreed full-time equivalent (‘FTE’) charge out rate and recharges of direct costs, both of which are variable based
on the amount of time and cost incurred.
Revenue is recognised over the duration of the contract based on the delivery of FTE services and actual incurrence of
rechargeable costs.
56
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021
Accounting Policies – continued
(d) Revenue from milestones on scientific programmes and research collaboration
There may be significant uncertainty over whether it is highly probable that there would not be a significant reversal of
revenue in respect of specific milestones if they are recognised before they are triggered as a result of them being subject
to the actions of third parties. Where the triggering of a milestone is subject to the decisions of third parties (including
partners and regulators), the Group does not consider that the threshold for recognition is met until that decision is made.
(e) Contract assets and liabilities
Contract assets relate to the Group’s rights to receive consideration in respect of milestones. The contract assets are
transferred to receivables when the rights become unconditional which usually occurs at the point at which the Group
issues an invoice to the customer.
Contract assets are treated as financial assets for impairment purposes and an impairment of £nil (2020: £nil) was
recognised in the year.
Contract liabilities relate to advance consideration received from customers for research collaboration projects for which
revenue is recognised over time. Contract liabilities are recognised when advance consideration is received or when the
Group establishes its unconditional right to receive consideration (whichever is earlier) before the Group has satisfied its
performance obligations under the contract.
Other income
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 Loss.
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.
Finance income and finance costs
The Group’s finance income and finance costs include interest income and expense. Interest income or expense is recognised
using the ‘effective interest’ method. The effective interest rate is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument to:
–
–
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset
(when the asset is not credit-impaired) or to the amortised cost of the liability.
Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a
business combination, or items recognised directly in equity or in OCI. 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.
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Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Accounting Policies – continued
(b) Deferred tax
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 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 Loss, except when it relates to items credited or charged directly to equity, in which case it is
also dealt with in equity.
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.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against which they can be used.
Deferred tax assets and liabilities are offset when there is a right to offset current tax assets and liabilities and when the
deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
Impairment of non-current assets
At each reporting date, the Group reviews the carrying amounts of property, plant and equipment assets, right of use assets,
Intellectual property 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). Goodwill is assessed annually regardless of any indication of impairment.
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 (“CGU”) to which the asset belongs. Recoverable amount is the higher of fair value less
costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. An
impairment is first allocated to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the
carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
58
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021
Accounting Policies – continued
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 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
– Right of use assets – over the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
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 Loss.
Intangible assets and goodwill
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.
Research and development expenses include costs arising from research and clinical development activities including
employee costs for research and development personnel (i.e. salaries, bonuses, employer contributions to pension schemes,
share-based compensation), legal expenses related to the protection, defence and enforcement of the Company’s intellectual
property, as well as depreciation on right-of-use assets associated with facilities and equipment used for research and
development purposes.
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.
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
59
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Accounting Policies – continued
Employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount
expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.
(a) 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 are expensed 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 and performance based conditions.
The impact of any revision is recognised in the Consolidated Statement of Comprehensive Loss, 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 are vested and expire, a corresponding credit is recognised through reserves. Where they are unvested,
an acceleration of charge occurs.
(b) Defined contribution plans
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 Loss and consist of the contributions payable to the scheme
in respect of the period.
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 (see note 19).
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as fair value
through profit and loss:
–
–
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
(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 expected credit losses (“ECL”). 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 with a maturity of more than three months but less than a year that are readily convertible to a known amount
of cash and are subject to insignificant risk of changes in value.
60
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021
Accounting Policies – continued
(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) Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
(e) Compound financial instruments
Compound financial instruments issued by the Group comprised convertible notes denominated in GBP that can be
converted to ordinary shares at the option of the holder, based on a fixed conversion ratio.
The convertible notes have been bifurcated into their liability and equity components and presented net of the relevant
proportion of transaction costs.
The fair value of the liability component is determined using a market rate of an equivalent non-convertible bond and this
amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption.
The increase in the liability due to the passage of time is recognised as a finance cost.
Where it meets the definition of equity, the remainder of the proceeds are allocated to the conversion option that is
recognised and included in shareholders’ equity as a convertible note reserve, net of the relevant proportion of transaction
costs.
The convertible loan notes are considered ‘American-style’ since they can be converted at the option of the note holder
at any point before the maturity date. Any such conversions are treated as ‘maturity’ events and result in a remeasurement
of the remaining liability component at the original effective interest rate, with the reduction being adjusted within equity.
No gain or loss is recognised in the Consolidated Statement of Comprehensive Loss.
The calculation of interest on the convertible notes by reference to the USD prime rate gives rise to a potential derivative
financial instrument, however in accordance with IFRS 9 Financial instruments, as this cannot be quantified, no amount is
recognised. The carrying amount of the equity component of the conversion option is not remeasured in the subsequent
years. The corresponding interest on the liability component of convertible notes is charged to the income statement using
the effective interest rate. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is
recognised.
Impairment of financial assets
The Group measures loss allowances at an amount equal to lifetime ECLs. When determining whether the credit risk of a
financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable
and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group’s historical experience and informed credit assessment, that includes
forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
The Group considers a financial asset to be in default when:
the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as
–
realising security (if any is held); or
–
the financial asset is more than 90 days past due.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
The loss allowance recognised at the end of the year was £nil (2020: £nil).
The Group recognised a loss allowance for expected credit losses 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 (2020: £nil).
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Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Accounting Policies – continued
Share Capital
Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax
relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
(a) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration
in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property
the Group has elected not to separate non-lease components and account for the lease and non-lease components as a
single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end
of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or
the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset
will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property
and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for
certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the Group’s incremental borrowing rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources
and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise fixed payments, including in-substance fixed
payments;
The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate,
if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the
Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term
leases (leases with a duration of less than 12 months), including IT equipment. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
62
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021
Accounting Policies – continued
(b) As a lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating
lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks
and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then
it is an operating lease. As part of this assessment, Group considers certain indicators such as whether the lease is for the
major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately.
It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease,
not with reference to the underlying asset.
The Group recognises lease payments received under operating leases as income on a straight line basis over the lease
term as part of ‘other income’.
Critical accounting estimates and judgements
(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, assessment of the satisfaction of performance criteria, 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 4 and 23.
(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 11.
(c) Convertible loan notes
In the year ended 30 September 2020, the Group issued an aggregate of £22.2m of convertible loan notes to RM Special
Holdings 3, LLC (‘Redmile’) and Sofinnova Crossover 1 SLP (‘Sofinnova’) resulting in the recognition of a compound
financial instrument. On December 2, 2020 the Group announced that Redmile and Sofinnova would convert £3.33m and
£1.75m respectively of the principal amount of the convertible loan notes into Ordinary shares. Judgement was required in
determining the correct accounting treatment for this partial conversion. Management considered any partial conversion
to be treated as a maturity event. Under this accounting, the movement in the carrying value of the liability element of the
convertible loan notes as a result of the partial conversion is reclassified to equity, and no gain or loss is recognised in the
Consolidated Statement of Comprehensive Loss. See note 17.
(d) Lease liability
In valuing the lease liability on implementation of IFRS 16 Leases, the Directors were required to use their judgement in
determining an appropriate incremental borrowing rate (IBR).
The Group determined the IBR by obtaining borrowing rates from external financing sources and making certain
adjustments to reflect the terms of the lease and type of the asset leased. A rate of 8.5% was calculated for the Group’s
single lease. See note 18.
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Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Accounting Policies – continued
(e) Revenue from research collaborations
In determining the percentage of completion of the research collaboration projects, the Group estimates the total future
costs expected to be incurred through the life of the contract, and compares this to the actual costs incurred to date.
Certain costs are incurred with Clinical Research Organisations (CROs) such that the group has to estimate the stage of
completion of the CRO in determining its own costs. The stage of completion is then applied to the contracted revenue
receivable to determine the amount of revenue to be recognised. There is no significant judgement in determining actual
costs to date. Costs to complete are an estimate based on the detailed project budget. If the costs to complete were
estimated as being 10% higher, this would result in a change in revenue recognised to date of £297k. See note 2.
In determining the total contract price on its collaboration projects the directors assess whether future milestones should
be included. These are generally excluded from the transaction price in the percentage of completion accounting except
where they are not contingent on clinical trial success and an assessment can be made they are highly probable of not
reversing based on a supportable, historical track record of the relevant milestone event.
1. Segmental information
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision
Maker (“CODM”). The Board of Directors and the Chief Financial Officer are together considered the CODM and as such are
responsible for allocating resources and assessing performance of operating segments.
The CODM 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 CODM, for the purposes of resource allocation and assessment of performance, is
based wholly on the overall activities of the Group. Therefore, the CODM have determined that there is only one reportable
segment under IFRS 8.
The geographic information analyses the Group’s revenue and non-current assets by the company’s country of domicile and
all other countries. In presenting the geographic information, segment revenue has been based on the geographic location
of customers and segment assets based on the geographic location of the assets. All assets are based in the UK (2020: UK).
The Group has two customers, both of whom contribute more than 10% of revenue.
Revenue analysis for the year ended 30 September 2021
Revenue from milestones on scientific programmes and research
collaboration
Research collaboration
Research and preclinical development services
Revenue analysis for the year ended 30 September 2020
Sale & outlicensing of scientific programmes
Research collaboration
Research and preclinical development services
UK
£’000
2,828
-
-
2,828
3,142
-
-
3,142
Ireland
£’000
2,181
2,751
2,275
7,207
-
516
2,027
2,543
Total
£’000
5,009
2,751
2,275
10,035
3,142
516
2,027
5,685
64
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021
2. Revenue
Sale & outlicensing of scientific programmes
Revenue from milestones on scientific programmes and research collaboration
Revenue from research collaboration
Revenue from research and preclinical development services
2021
£’000
-
5,009
2,751
2,275
10,035
Information regarding contract assets and liabilities from contracts with customers can be found in note 16.
3. Operating expenses
Research and development:
Staff Costs
Depreciation
Amortisation
Property costs
Other research and development expenses
Selling, general and administrative expenses:
Staff Costs
Depreciation
Property costs
Other general and administrative expenses
Exchange gains on translation
Onerous lease credit
Derivative financial instrument
Auditors’ remuneration:
Audit of subsidiaries
Audit of parent company and consolidation
Other services – interim review
Note
4, 9
10
11
4, 9
10
2021
£’000
5,198
536
6
1,437
17,268
24,445
3,940
91
287
2,010
(37)
-
-
24
140
-
6,455
30,900
2020
£’000
3,142
-
516
2,027
5,685
2020
£’000
2,321
552
6
1,086
6,495
10,460
1,845
107
217
2,143
(51)
(6)
(67)
15
24
11
4,238
14,698
65
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
4. 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. 18,270,779 of the options outstanding are subject to
performance conditions based on scientific, clinical and commercial milestones. There are no further conditions attached to the
vesting of other options other than employment service conditions. Further information on options is given in Note 23.
Outstanding at the beginning of the year
Options granted and vested in period
Options exercised in period
Options surrendered and lapsed in period
Options granted and vesting in future periods
Outstanding at the end of the year
Weighted average exercise price information is given in Note 23.
Charge to Statement of Comprehensive Loss in period
2021
Number
2020
Number
23,930,800
10,888,963
-
(1,394,992)
(226,668)
11,267,964
33,577,104
-
-
(8,924,894)
21,966,731
23,930,800
2021
£’000
3,785
2020
£’000
568
Assumptions used were an option life of 5 years, a risk free rate of 0.6%-7.1% and no dividend yield. Other inputs were as
follows:
Volatility (based on historic information)
Assumed share price at grant date
Exercise price
40% - 141%
40% - 124%
£
£
0.25 to 0.85
0.1375 to 0.85
0.155 to 0.85
0.1375 to 0.85
Volatility has been determined by reference to the historic share price of the Group over a period coterminous with the vesting
period for the options.
Of the variable assumptions, term is considered to be the most sensitive. Applying a variable term of 3-5 years across the
various tranches for options granted in the year would result in a reduction in the lifetime charge of the options granted in the
year of £170,000.
During the year, the Group introduced the Redx Pharma plc Directors Share Option Scheme. Of the options granted during the
year, 600,000 were granted under this Scheme, the remainder under the 2020 All employee Share Option Scheme.
At 30 September 2021 the Group operates three Share Options schemes: the 2015 Enterprise Management Incentive Scheme,
the 2020 All Employee Share Option Scheme and the 2021 Directors Share Option Scheme. Non-plan share options may also
be granted from time to time.
2015 Enterprise Management Incentive Scheme (‘EMI scheme’)
In 2015, the Group established the EMI scheme. The EMI Scheme provides for the grant of options to acquire our ordinary
shares to all eligible employees. Under the EMI scheme, the Board of Directors may determine if the vesting of the option will
be subject to the satisfaction of a performance condition. The vesting schedule for the options is determined by the Board of
Directors at the grant date. With regard to an option that is subject to the satisfaction of a performance condition, the option
will vest at the date at which the Board of Directors determine that the performance condition has been satisfied. Once an
option has vested, it may be exercised during the period ending on the tenth anniversary of the grant date, after which it
will lapse. The options granted under the EMI scheme are exercisable at a price that is above the share price at the date of
the grant.
66
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 4. Share-based compensation – continued
2020 All Employee Share Option Scheme (‘All employee scheme’)
In 2020, the Group established the All employee scheme. The All employee scheme provides for the grant of options to
acquire our ordinary shares to all eligible employees at the discretion of the Board of Directors. The Board of Directors may
determine if the vesting of the option will be subject to the satisfaction of a performance condition. The options vest over
3 years where the first third of the options vest over one year, the second third vest over two years and the final third vesting
over three years. With regard to an option that is subject to the satisfaction of a performance condition, the option will vest
at the date at which the Board of Directors determine that the performance condition has been satisfied, and not before the
third anniversary of the grant date. Once an option has vested, at may be exercised during the period ending on the tenth
anniversary of the grant date, after which it will lapse. Options are granted at the market price of Redx securities at grant date.
2021 Redx Directors Share Option Scheme (‘Directors scheme’)
In 2021, the Group established the Directors scheme. The Directors scheme mirrors the terms of the All employee scheme but
the scheme is only open to eligible directors of the Company.
Non-plan Share Options
In 2021, the Group granted a number of non-plan share options. The options vest over 3 years where the first third of the
options vest over one year, the second third vest over two years and the final third vesting over three years. Options that are
subject to the satisfaction of performance conditions vest at the later of the date at which the Board of Directors determine
that the performance conditions have been satisfied, and three years after the grant date. Once an option has vested, it may
be exercised during the period ending on the tenth anniversary of the grant date, after which it will lapse. Options are granted
at the market price of Redx securities at grant date.
5. Other operating income
Reimbursement of costs
RDEC income
Other grant income
Other income
There is no contingent liability attaching to repayment of other grant income.
2021
£’000
364
700
56
-
1,120
2020
£’000
263
422
90
37
812
67
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
2021
£’000
13
13
1,428
283
-
1,711
2021
£’000
135
(2)
133
2020
£’000
7
7
620
325
29
974
2020
£’000
78
(33)
45
Note
17, 19
18, 19
6. Finance income and expense
Finance income
Bank and other short term deposits
Finance expense
Loan interest
Interest on lease liabilities
Other interest and similar charges
7. Income tax
Current income tax
Corporation tax
Adjustment in respect of previous periods
Income tax charge
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%
(2020: 19%)
Effects of:
R&D expenditure credits
Expenses not deductible for tax purposes
Use of losses brought forward not recognised
Adjustment in respect of previous periods
Deferred tax losses not recognised
Total taxation
2021
£’000
(21,443)
(4,074)
135
853
(550)
(2)
3,771
133
2020
£’000
(9,168)
(1,742)
78
353
-
(33)
1,389
45
For the year ended 30 September 2021, the entire income tax charge (2020: charge) was recorded in the Consolidated
Statement of Comprehensive Loss.
The March 2021 budget announced that the UK corporation tax rate will increase to 25% from 1 April 2023. This will have
a consequential effect on the Group’s future UK corporation tax charge and the measurement of deferred tax, including the
unrecognised brought forward losses in note 20 which are likely to be recognised at the higher rate.
Redx Anti-Infectives Ltd entered a solvent liquidation process during the year. As a result of this process, unrecognised
deferred tax assets arising on losses incurred in that company will no longer be available to the Group.
68
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 8. Loss per share
Basic loss per share is calculated by dividing the 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 and diluted
Loss per share – basic and diluted
2021
£’000
(21,576)
2020
£’000
(9,213)
Number
Number
256,430,270
170,050,369
Pence
(8.4)
Pence
(5.4)
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”.
The Group operates a number of share option schemes (see note 23) which could potentially dilute basic earnings per share in
the future. In addition, the convertible loans could result in the issuance of 110,288,888 ordinary shares that could potentially
dilute basic earnings per share on conversion (see note 17).
9. Employees and key management
Staff costs (including directors) comprise
Wages and salaries
Social security costs
Pension costs
Share based compensation (note 4)
Total employee related costs
Number of employees
Average number of employees (including Directors)
Management & Admin
R&D – Chemistry
R&D – Biology
R&D – Analytical
2021
£’000
4,635
536
182
3,785
9,138
2020
£’000
3,119
352
127
568
4,166
2021
Number
2020
Number
18
30
19
4
71
14
13
11
2
40
69
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 9. Employees and key management – continued
Key management (including directors)
Wages & salaries
Social security costs
Pension costs
Share based compensation
Financial Statements
2021
£’000
1,621
201
53
2,661
4,536
2020
£’000
1,095
144
44
102
1,385
Key management comprised 9 people (2020: 8 people) and are considered to be the Directors and other members of the
Executive Management Team. Payments to Directors consist of basic salaries, fees, pension contributions and share-based
compensation.
Directors’ remuneration
Wages & salaries
Pension costs
2021
£’000
942
33
975
2020
£’000
851
35
886
Retirement benefits are accruing to 1 Director (2020: 2)
Of the total balance on the share option reserve of £4.75m, £1.66m relates to options granted to Directors in the current and
previous periods. Further information relating to Directors’ remuneration can be found in the Remuneration Report on page 35.
The amounts in respect of the highest paid Director are as follows:
Short term employment benefits
Pension contributions
Share based payments
2021
£’000
615
29
1,414
2,058
2020
£’000
481
27
111
619
70
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 10. Property, plant and equipment
Leasehold
Improvements
£’000
As restated
Right of Use
Asset
£’000
Laboratory
equipment
£’000
Computer
equipment
£’000
As restated
Total
£’000
Cost
At 1 October 2019
Additions
Disposals
At 30 September 2020
At 1 October 2020
Additions
Remeasurement
At 30 September 2021
Depreciation
At 1 October 2019
Charge for the year
Disposals
At 30 September 2020
At 1 October 2020
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020
114
3,514
-
-
114
114
-
-
114
36
11
-
47
47
11
58
56
67
-
-
3,514
3,514
-
150
3,664
-
602
-
602
602
421
901
8
(8)
901
901
661
-
1,562
846
34
(8)
872
872
143
1,023
1,015
2,641
2,912
547
29
262
51
-
313
313
93
-
406
261
12
-
273
273
52
325
81
40
The right of use asset relates to the lease of laboratories and offices, for a term of ten years, of which five years remain.
11. Intangible Assets and goodwill
Cost
At 1 October 2019, 30 September 2020 and 30 September 2021
121
309
Intellectual property
£’000
Goodwill
£’000
Amortisation
At 1 October 2019
Charge for the year
At 30 September 2020
At 1 October 2020
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020
13
6
19
19
6
25
96
102
-
-
-
-
-
-
309
309
4,791
59
(8)
4,842
4,842
754
150
5,746
1,143
659
(8)
1,794
1,794
627
2,421
3,325
3,048
Total
£’000
430
13
6
19
19
6
25
405
411
71
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
11. Intangible Assets and goodwill – continued
The goodwill arose on the original purchase of the business and assets of Bradford Pharma in 2012. Management 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 cash generating unit (CGU).
The Directors undertook a detailed review by preparing a risk adjusted net present value (rNPV) model using inputs from
the Board approved budget and corporate strategy. This is considered to be an accurate method of valuation for early stage
biotech companies. The key variables that were used a pre-tax discount rate of 12.5%, which the Directors believe to be
appropriate given the Group’s historic capital costs, and rNPV. Future projections carry an inherent degree of uncertainty
around profitability and progress of clinical trial.
The valuation suggested by the modelling was compared to the carrying value of both intangible fixed assets, property, plant
and equipment and right of use 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 of which 16 remain.
Amortisation is shown within research and development expenses in the Consolidated Statement of Comprehensive Loss.
12. Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership
interest is given in note 5 to the Company’s separate financial statements.
13. Trade and other receivables
Trade receivables
VAT recoverable
Prepayments & other receivables
Accrued income
2021
£’000
2,730
650
2,782
69
6,231
2020
£’000
83
261
1,524
55
1,923
The carrying value of other receivables approximates their fair value. Included within prepayments & other receivables is an
other receivable of £0.4m (2020: £nil) which is due after more than one year.
The Group measures the loss allowance for trade and other receivables at lifetime or 12 month expected credit losses (”ECL”).
The ECL is estimated using a probability-weighted analysis of all possible outcomes 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 (2020: £nil) against these receivables.
Details of the Group’s credit risk management policies are shown in Note 19. The Group does not hold any collateral as
security for its other receivables.
14. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2021
£’000
21,052
8,500
29,552
2020
£’000
27,513
-
27,513
No interest is earned on immediately available cash balances. Short-term deposits are made for varying periods of up to
95 days, and earn interest at the respective short-term deposit rates. No cash is restricted at September 30, 2021 (2020: £nil).
72
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 15. Trade and other payables
Trade payables
Employee taxes and social security
Other payables
Accruals
2021
£’000
1,789
194
24
2,692
4,699
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.
16. Contract liabilities
Contract liabilities
Reconciliation
Brought forward
Recognised in the year (net)
Transfer to revenue
Carried forward
2021
£’000
4,318
4,318
7,069
-
(2,751)
4,318
2020
£’000
1,845
142
5
1,370
3,362
2020
£’000
7,069
7,069
-
7,585
(516)
7,069
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of
the reporting period was £11.73m as at 30 September 2021 (2020: £14.65m) and is expected to be recognised as revenue in
future periods as follows:
Within 1 year
In the second to fifth years
The contract liability (net of contract asset) relates to a single research collaboration contract.
2021
£’000
4,438
7,297
11,735
2020
£’000
3,594
11,060
14,654
73
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 17. Borrowings
Non-current
Convertible loan notes
Financial Statements
2021
£’000
14,247
14,247
2020
£’000
16,758
16,758
On August 4, 2020 Redx Pharma plc issued convertible loan notes with a value of £22.2m. No interest is payable during the
first 3 years, thereafter it is payable at a maximum rate equal to the US prime rate at that time. The notes are convertible into
Ordinary shares of Redx Pharma plc, at any time at the option of the holder, or repayable on the third anniversary of the issue.
The conversion rate is 1 Ordinary share for each £0.155 of convertible loan note held. The convertible loan notes are secured
by a fixed and floating charge over all the assets of the Group.
Initial measurement
In accordance with IAS 32 Financial instruments, the convertible loan notes have been assessed as compound financial
instruments containing equity and liability components. The Group has calculated the value of the liability component using
a discount rate for an equivalent bond without an equity component, of 8.5%. The Group determined this rate by obtaining
interest rate from external financing sources and making certain adjustments to reflect the terms of the instrument; specifically
to adjust the interest rate to account for the expected term of the convertible loan notes, its value and the conditions attached
to it. The value of the conversion feature of £4.57m was calculated as the residual value of the loan after calculating the fair
value of the liability component and has been recognised as an equity component within the Convertible note reserve in the
Consolidated Statement of Financial Position. Total transaction costs of £1.1m have been allocate between the equity and
liability components. An increase in discount rate to 9.5% would decrease the debt element by £248k and a decrease to 7.5%
would increase the debt element by £262k.
Partial conversion
On December 2, 2020 the Group announced that RM Special Holdings 3 LLC and Sofinnova Crossover 1 SLP would convert
£3.33m and £1.75m respectively of the principal amount of the convertible loan notes into Ordinary shares. Under the terms of
the convertible loan notes, the conversion took place at 15.5p per new Ordinary share. Accordingly, 32,806,159 new Ordinary
shares were issued and admitted to trading on AIM on December 22, 2020. As of September 30, 2021, an aggregate of
£17.1m in principal amount was outstanding under the convertible loan notes. This equates to 110,288,887 ordinary shares at
£0.155 per share.
The remaining gross principal of £17.1m has been discounted at the effective interest rate determined on initial measurement,
resulting in a discounted liability of £14.2m. The reduction in the liability has been offset by adjusting entries to equity
representing the issuance of share capital and associated share premium, and the reduction of the relevant proportion of the
convertible note reserve. There is no impact on the Consolidated Statement of Loss as this is a no gain, no loss transaction.
74
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 18. Lease liabilities
The Group leases its head office facility. The lease runs for a period of 10 years and had a rent review in the year, representing
the mid-point of the lease. As a result of the rent review and in accordance with IFRS 16, the lease liability was remeasured
to reflect the revised cash flows, with the remeasurement adjustment presented below. The associated right of use asset is
included in note 10.
Recognised at 1 October
Related interest expense
Repayment of lease liabilities
Remeasurement
Current
Non-current
2021
£’000
3,712
283
(786)
(60)
3,149
575
2,574
3,149
2020
£’000
4,175
325
(788)
-
3,712
503
3,209
3,712
Amounts recognised in the Consolidated Statement of Comprehensive Loss and the Consolidated Statement of Cash Flows
are as follows:
Amounts recognised in profit and loss:
Interest on lease liabilities
Depreciation charge on right of use asset
Amounts recognised in statement of cash flows:
Payment of lease liabilities
2021
£’000
283
421
786
2020
£’000
325
602
788
A portion of the head office facility is sub-let by the Group. The Group classified the sub-let as an operating lease, since it does
not transfer substantially all of the risks and rewards incidental to the head lease. The associated income is presented within
other income in these financial statements as part of ‘Reimbursement of costs’ and was £118,000 for the year. (2020: £114,000).
The following table sets out a maturity analysis of lease payments, showing the undiscounted payments to be received after
the reporting date.
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
2021
£’000
118
118
118
118
118
-
590
2020
£’000
114
114
114
114
114
114
684
75
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
19. Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, and various items such as other receivables (excluding
prepayments), convertible loan notes 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 of financial instruments are as follows:
Note
13
13
14
Note
17
15
15
Note
13
13
14
17
15
15
Financial assets
at amortised
cost
£’000
Other financial
liabilities
£’000
2,730
205
29,552
32,487
-
-
-
-
Financial assets
at amortised
cost
£’000
Other financial
liabilities
£’000
-
-
-
-
14,247
1,789
24
16,060
Financial assets
at amortised
cost
£’000
Other financial
liabilities
£’000
83
66
27,513
27,662
-
-
-
-
-
-
-
-
16,758
1,845
5
18,608
Total
£’000
2,730
205
29,552
32,487
Total
£’000
14,247
1,789
24
16,060
Total
£’000
83
66
27,513
27,662
16,758
1,845
5
18,608
At 30 September 2021
Financial assets not measured at fair value:
Trade receivables
Other receivables
Cash and cash equivalents
At 30 September 2021
Financial liabilities not measured at fair value:
Non-current borrowings
Trade payables
Other payables
At 30 September 2020
Financial assets not measured at fair value:
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities not measured at fair value:
Non-current borrowings
Trade payables
Other payables
76
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 19. Financial instruments – continued
Fair values
For trade and other receivables / payables measured at amortised cost, the carrying value is deemed to reflect the fair value.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
•
•
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
The fair values of all financial instruments in both years are considered to be equal to the carrying values.
Risk management
The Group’s operations expose it to a variety of financial risks that include the effects of changes in exchange rates, interest
rates, credit risk and its liquidity position. The principal financial risks faced by the Group are:
Currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies
in which sales, purchases, receivables and borrowings are denominated and the respective functional currencies of Group
companies. The functional currencies of Group companies are primarily GBP. The currencies in which these transactions are
primarily denominated are GBP and US dollars.
The Group’s exposure to foreign currency risk is limited, as most of its invoicing and payments are denominated in GBP. There
are some transactions denominated in US dollars, however neither GBP or US dollars are considered to be volatile and any
risk is classed as low. Accordingly, no sensitivity analysis is presented in this area as it is considered immaterial. The Directors
regularly review the situation.
Market risk
Market risk is the risk that changes in market prices – e.g. foreign exchange rates, interest rates and equity prices – will affect
the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising the return.
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
Credit risk arises from the possibility of customers and counterparties failing to meet their obligations to the Group. Receivable
balances are monitored on an ongoing basis and a provision is made for impairment where amounts are not thought to be
recoverable (see Note 13).
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. At the reporting date
there were no significant concentrations of credit risk and receivables which are not impaired are believed to be recoverable.
The Group considers its maximum exposure to credit risk to be equivalent to total trade and other receivables of £2,935,000
(2020: £149,000) and cash and cash equivalents of £29,552,000 (2020: £27,513,000).
77
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
19. Financial instruments – continued
Liquidity risk and capital management
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial Liabilities
that are settled by delivering cash or another financial asset. The Group’s objective when managing liquidity is to ensure, as
far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
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.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and
undiscounted, and include contractual interest payments and exclude the impact of netting agreements.
Carrying
amount
£’000
14,247
1,789
24
3,149
Total
£’000
17,095
1,789
24
3,825
2 months
or less
£’000
-
1,789
24
-
19,209
22,733
1,813
Carrying
amount
£’000
16,758
1,845
5
Total
£’000
22,179
1,845
5
3,712
4,470
2 months
or less
£’000
-
1,845
5
-
22,320
28,499
1,850
Contractual cash flows
2-12 months
£’000
1-2 years
£’000
2-5 years
£’000
5 plus years
£’000
-
-
-
816
816
17,095
-
-
816
17,911
-
-
-
2,193
2,193
-
-
-
-
-
Contractual cash flows
2-12 months
£’000
1-2 years
£’000
2-5 years
£’000
5 plus years
£’000
-
-
-
786
786
-
-
-
786
786
22,179
-
-
2,358
24,537
-
-
-
540
540
As at 30 September 2021
Non-current Borrowings
Trade payables
Other payables
Lease liabilities
As at 30 September 2020
Non-current Borrowings
Trade payables
Other payables
Lease liabilities
Capital management
The directors consider the Group’s capital to be its equity. The Group monitors its capital using a number of measures
including cash flow projections, working capital ratios, the cost to achieve pre-clinical and clinical milestones and potential
revenue from existing partnerships and ongoing licensing activities. 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.
78
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 19. Financial instruments – continued
Reconciliation of changes in liabilities arising from financing activities
IFRS 16 Lease liability
Balance b/fwd
Remeasurement
Payment of lease liabilities
Interest on lease liabilities
Balance c/fwd (disclosed as current and non-current lease liabilities)
Convertible loan notes
Balance b/fwd
Amount converted into Ordinary shares
Remeasurement on conversion
Interest
Transaction expenses
Balance c/fwd (disclosed as non-current borrowings)
20. Deferred tax
Note
18
17
2021
£’000
3,712
(60)
(786)
283
3,149
16,758
(5,086)
1,147
1,428
-
14,247
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25% (2020:19%).
The following are the major deferred tax assets and liabilities recognised by the Group:
As at 30 September 2020
Deferred tax liability in respect of fixed asset timing differences
Deferred tax assets
2021
£’000
169
(169)
-
2020
£’000
24
(24)
-
The company has recognised deferred tax assets of £169,000 (2020: £24,000) to offset its deferred tax liability resulting from
fixed asset timing differences.
Due to the uncertainty of future profits, a deferred tax asset in respect of trading losses was not recognised at September 30,
2021 (2020: £nil). The Group had the following unrecognised deferred tax assets as at September 30, 2021:
Trading losses
Short term differences
2021
£’000
13,429
5
13,434
2020
£’000
9,240
2
9,242
Deferred tax assets are recognised where it is probable that future taxable profit will be available to utilise the losses.
On May 18, 2021 Redx Anti-Infectives Limited and Redx MRSA Limited were placed into members voluntary liquidation. Redx
Anti-Infectives Limited had historic tax losses of £12.7m resulting in an unrecognised deferred tax assets of £2.4m. These losses
will be lost as a result of the liquidation and are no longer presented within the unrecognised deferred tax assets above.
79
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Note
2021
Numbers
2020
Numbers
17
23
195,247,413
126,477,914
45,833,641
-
32,806,159
1,394,992
16,738,710
52,030,789
-
-
275,282,205
195,247,413
£’000
£’000
2,753
1,952
21. Share Capital
Number of shares in issue
In issue at 1 October
Issued for cash
Issued in consideration for a loan
Loan note conversion
Exercise of share options
In issue at 30 September
Share Capital at par, fully paid
Ordinary shares of £0.01
All ordinary shares rank equally with regard to the Company’s residual assets. Holders of these shares are entitled to dividends
as declared from time to time and are entitled to one vote per share at general meetings of the Company. All rights attached
to the Company’s shares held by the Group are suspended until those shares are reissued.
Share issues
On December 2, 2020, the Group announced that it had conditionally raised £25.5m by way of a Placing of Ordinary shares
at 56p per share, and up to a further £2.2m by way of an Open Offer at the same price. All resolutions required to accomplish
this were passed at a general meeting of shareholders on December 21, 2020. The final gross amount raised was £25.7m and
accordingly 45,833,641 new Ordinary shares were issued and admitted to trading on AIM on December 22, 2020.
On the same date the Group announced that, subject to successful admission of the above shares, RM Special Holdings 3, LLC
and Sofinnova Crossover 1 SLP would convert £3.33m and £1.75m respectively of the principal amount of the convertible loan
notes into Ordinary shares. Under the terms of the convertible loan notes, the conversion took place at 15.5p per new Ordinary
share. Accordingly, 32,806,159 new Ordinary shares were issued and admitted to trading on AIM on December 22, 2020.
On July 8, 2021, the Group announced the exercise of share options over 894,992 Ordinary shares, The exercise took place
at 15.5p per Ordinary share. The gross amount received was £0.1m and the shares were admitted to trading on AIM on
July 9, 2021.
On September 27, 2021, the Group announced the exercise of share options over 500,000 Ordinary shares, the exercise took
place at prices between 22p and 50p per new Ordinary share. The gross amount received was £0.2m and the shares were
admitted to trading on AIM on September 28, 2021.
80
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 22. Share premium
Brought forward
Share issue
Partial conversion of loan notes
Share issue costs
2021
£’000
37,184
25,508
4,658
(1,051)
66,299
2020
£’000
33,263
4,144
-
(223)
37,184
Description of other reserves:
Share premium
Amount subscribed for share capital in excess of nominal value.
Share based payment
The share based payment reserve arises as an offsetting credit to the expense of issuing
share-based payments which are recognised over the relevant vesting period (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.
Exchange translation reserve Exchange gains and losses arising from the translation of Subsidiary companies whose functional
currency is different from the Groups presentational currency.
Convertible note reserve
The convertible note reserve recognises the equity component of convertible loan notes issued
by the Group.
Retained deficit
The retained deficit records the accumulated profits and losses, less any subsequent elimination
of losses, of the Group since inception.
81
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Lapsed/
Cancelled
-
-
-
-
-
-
-
-
-
-
-
-
-
(63,334)
(63,334)
-
(16,666)
(16,667)
(16,667)
-
-
-
-
-
-
-
-
-
(16,666)
(16,667)
(16,667)
-
-
-
-
-
-
-
(226,668)
30 September
2021
30,000
30,000
30,000
78,875
78,875
78,875
1,198,250
162,125
153,800
-
-
-
2,101,674
2,933,333
2,933,333
12,600,000
1,115,729
1,115,728
1,115,728
3,070,779
100,000
100,000
100,000
1,200,000
100,000
100,000
100,000
1,200,000
216,667
216,666
216,667
200,000
200,000
200,000
100,000
100,000
100,000
200,000
33,577,104
Date from
which
exercisable
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
22.12.2019
22.12.2019
22.12.2019
01.07.2021
01.07.2022
01.07.2023
01.07.2023
02.12.2021
02.12.2022
02.12.2023
02.12.2023
01.03.2022
01.03.2023
01.03.2024
01.03.2024
05.05.2022
05.05.2023
05.05.2024
05.05.2024
01.07.2022
01.07.2023
01.07.2024
01.07.2022
01.07.2023
01.07.2024
13.09.2022
13.09.2023
13.09.2024
13.09.2024
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
22.12.2027
22.12.2027
22.12.2027
30.06.2030
30.06.2030
30.06.2030
30.06.2030
01.12.2030
01.12.2030
01.12.2030
01.12.2030
28.02.2031
28.02.2031
28.02.2031
28.02.2031
04.05.2031
04.05.2031
04.05.2031
04.05.2031
30.06.2031
30.06.2031
30.06.2031
30.06.2031
30.06.2031
30.06.2031
12.09.2031
12.09.2031
12.09.2031
12.09.2031
23. Share based payments
Movements on share options during the year were as follows:
Exercise Price per share
30 September
2020
Granted
Exercised
50p
50p
50p
56p
56p
56p
85p
85p
85p
22p
33p
50p
15.5p
15.5p
15.5p
15.5p**
56p
56p
56p
56p**
66p
66p
66p
66p**
65p
65p
65p
65p **
61.5p
61.5p
61.5p
61.5p
61.5p
61.5p
88.5p
88.5p
88.5p
88.5p**
Total
Weighted average
exercise price
30,000
30,000
30,000
78,875
78,875
78,875
1,198,250
162,125
153,800
166,666
166,667
166,667
2,996,666
2,996,667
2,996,667
12,600,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,930,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,132,395
1,132,395
1,132,395
3,070,779
100,000
100,000
100,000
1,200,000
100,000
100,000
100,000
1,200,000
233,333
233,333
233,334
200,000
200,000
200,000
100,000
100,000
100,000
200,000
11,267,964
-
-
-
-
-
-
-
-
-
(166,666)
(166,667)
(166,667)
(894,992)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,394,992)
** These options are subject to performance conditions as detailed in note 4.
82
20.84p
60.61p
22.49p
34.58p
34.02p
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 23. Share based payments – continued
The number of exercisable share options at 30 September 2021 was 3,942,474 and their weighted average exercise price
was 45.41p
During the prior year:
Exercise Price per share
30 September
2019
Granted
Exercised
Lapsed/
Cancelled
30 September
2020
50p
50p
50p
50p
50p
50p
56p
56p
56p
85p
85p
85p
33.2p
22p
33p
50p
13.75p
20p
27p
35p
42.5p
50p
13.75p
20p
27p
35p
42.5p
50p
9.2p*
13.3p*
18p*
23.3p*
28.3p*
33.3p*
15.5p
15.5p
15.5p
15.5p**
Total
Weighted average
exercise price
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,788*
62,789*
62,788*
62,789*
62,788*
62,789*
2,996,666
2,996,667
2,996,667
12,600,000
21,966,731
39.48p
15.05p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(36,675)
(36,675)
(36,675)
(71,650)
(71,650)
(71,650)
-
-
-
(25,050)
(24,975)
(24,975)
(208,188)
(796,656)
(796,671)
(796,673)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(200,000)
(200,000)
(200,000)
(200,000)
(200,000)
(200,000)
(187,788)
(187,789)
(187,788)
(187,789)
(187,788)
(187,789)
-
-
-
-
(8,924,894)
-
-
-
30,000
30,000
30,000
78,875
78,875
78.875
1,198,250
162,125
153,800
-
166,666
166,667
166,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,996,666
2,996,667
2,996,667
12,600,000
23,930,800
32.24p
20.84p
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
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
01.07.2021
01.07.2022
01.07.2023
01.07.2023
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
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
30.06.2030
30.06.2030
30.06.2030
30.06.2030
* Under the terms of the warrant agreement with Alderley Park Ltd, the share issues on 21 January 2020 and 28 February 2020 were adjustment events,
and the exercise price and number of options were adjusted accordingly.
** These options are subject to performance conditions as detailed in note 4.
83
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
23. Share based payments – continued
The number of exercisable share options at 30 September 2020 was 2,340,800 and their weighted average exercise price
was 70.04p.
Outstanding and exercisable share options by scheme as of 30 September 2021:
Plan
2015 Scheme
2020 all employee Share Options Scheme
2021 Directors Share options Scheme
Non-plan Share Options
Outstanding
Number
Exercisable
Number
Exercise price
range for
Outstanding
£
Weighted average
exercise price for
Exercisable
£
1,840,800
29,636,304
600,000
1,500,000
1,840,800
0.50 to 0.85
2,101,674
0.155 to 0.885
-
-
0.615
0.65
33,577,104
3,942,474
0.796
0.155
-
-
The options outstanding at 30 September 2021 had a weighted average contractual life of 8.7 years (2020: 9.3 years). Other
than as previously noted, the share options are exercisable with no further conditions to be met.
24. 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:
As a result of the divestment of its entire shareholding in the Group in March 2020, Moulton Goodies Ltd ceased to be a
related party at that date. Transactions have been disclosed to the date that the criteria ceased to be met.
On the same date, as a result of the purchase of shares by RM Special Holdings 3, LLC (“Redmile”), it became a significant
shareholder and related party. Redmile provided short term loan funding of £5 million during the 2020 financial year, which was
repaid together with accrued interest of £0.2 million on 5 August 2020. Further the Group issued £14.5 million convertible loan
notes to Redmile on 4 August 2020 on terms summarised in note 17.
Under the terms of the agreement for its subscription for shares on 20 July 2020, Sofinnova Crossover 1 SLP (“Sofinnova”)
appointed a director to the Board of Redx Pharma plc. The Board believes that this satisfies the criteria for Sofinnova to be
considered a related party. On 4 August 2020 the Group issued £7.6 million convertible loan notes to Sofinnova, the terms of
which can be seen in note 17.
On December 2, 2020 the Group announced that RM Special Holdings 3, LLC and Sofinnova Crossover 1 SLP would convert
£3.33m and £1.75m respectively of the principal amount of the convertible loan notes into Ordinary shares. Under the terms of
the convertible loan notes, the conversion took place at 15.5p per new Ordinary share. Accordingly, 32,806,159 new Ordinary
shares were issued and admitted to trading on AIM on December 22, 2020. As of September 30, 2021, an aggregate of
£17.1m in principal amount was outstanding under the convertible loan notes. This equates to 110,288,888 ordinary shares at
£0.155 per share.
84
Redx | Annual Report and Accounts for the year ended 30 September 2021Notes to the Financial Statements – continuedFor the year ended 30 September 2021 24. Related Parties – continued
The remaining gross principal of £17.1m has been discounted at the effective interest rate determined on initial measurement,
resulting in a discounted liability of £14.2m. (note 17).
The reduction in the liability has been offset by credit entries to equity representing the issuance of share capital and
associated share premium. There is no impact on the Consolidated Statement of Loss as this is a no gain, no loss transaction.
The interest charge in the period relates to the unwinding of the discount at the effective interest rate on the convertible loan
balances held by Redmile and Sofinnova respectively.
Charges from related parties
Moulton Goodies Ltd – loan interest (to 13 March 2020)
RM Special Holdings 3, LLC – loan interest
RM Special Holdings 3, LLC – Convertible loan note interest
Sofinnova Crossover 1 SLP – Convertible loan note interest
Amounts owed to related parties
RM Special Holdings 3, LLC – loan note
Sofinnova Crossover 1 SLP – loan note
2021
£’000
-
-
954
474
1,428
2021
£’000
9,289
4,958
14,247
2020
£’000
183
171
178
88
620
2020
£’000
14,532
7,648
22,180
Amounts owed to/by related parties are disclosed in borrowings (see note 17) and the convertible note reserve.
25. Contingent liability
During the course of the members’ voluntary liquidation of Redx Anti-Infectives Ltd, a counterparty submitted a proof of debt
relating to a contract signed in 2013 that was rejected by the joint liquidators. The counterparty has issued an application at
the High Court of Justice to reverse the joint liquidators’ decision. The joint liquidators are opposing the application.
No provision has been made in these accounts, because the Company believes that the potential claim is without foundation.
26. Events after the reporting period
On 9 December 2021 the Group announced that it had earned a $10m milestone payment from Jazz Pharmaceuticals and on
23 December 2021 announced that it had earned a $9m milestone payment from AstraZeneca.
85
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Company Statement of Financial Position
At 30 September 2021
Company registration number 07368089
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Creditors: amounts falling due within one year
Net current assets
Creditors: amounts falling due in more than one year
Net assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Share based payments reserve
Convertible note reserve
Profit and loss account
Shareholders’ funds
Notes
3
4
5
6
7
8
9
2021
£’000
236
482
653
1,371
42,665
27,810
70,475
(5,800)
64,675
(14,247)
51,799
2,753
66,299
1
4,752
3,524
(25,530)
51,799
2020
£’000
258
109
411
778
20,234
27,326
47,560
(8,322)
39,238
(16,758)
23,258
1,952
37,184
1
1,191
4,572
(21,642)
23,258
The Company has taken advantage of s408 of the Companies Act 2006 and has not included its own profit and loss
account in these financial statements. The Company’s result for the year was a loss of £3,888,000 (2020 loss: £3,244,000).
The financial statements were approved and authorised for issue by the Board and signed on its behalf by:
Lisa Anson
Executive Director
26 January 2022
86
Redx | Annual Report and Accounts for the year ended 30 September 2021 Company Statement of Changes in Equity
For the year ended 30 September 2021
Share
capital
£’000
1,265
Share
premium
£’000
33,263
Share based
payment
£’000
1,104
-
-
At 1 October 2019
Loss and total comprehensive
loss for the year
Transactions with owners in
their capacity as owners
Share issues
687
4,144
Transaction costs on issue of
ordinary shares
Transaction costs on the
conversion of loan instruments
into ordinary shares
Recognition of equity element of
convertible loan notes
Transaction costs on the issue of
convertible loan notes
Share based compensation
Release of share options lapsed
in the year
Movement in year
At 30 September 2020
Loss and total comprehensive loss
for the period
Transactions with owners in
their capacity as owners
Share issues
Share issue costs
Partial conversion of convertible
loan notes
Share based compensation
Release of share options lapsed
in the year
Movement in year
At 30 September 2021
-
-
-
-
-
-
687
1,952
-
473
-
328
-
-
(93)
(130)
-
-
-
-
3,921
37,184
-
25,508
(1,051)
4,658
-
-
801
2,753
29,115
66,299
-
-
-
-
-
-
568
(481)
87
1,191
-
-
-
-
3,785
(224)
3,561
4,752
Capital
Redemption
Reserve
£’000
Convertible
Note Reserve
£’000
Profit & loss
account
£’000
Total
Equity
£’000
1
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
1
-
-
-
-
-
4,815
(243)
-
-
(18,398)
17,235
(3,244)
(3,244)
-
-
-
-
-
-
-
4,831
(93)
(130)
4,815
(243)
568
(481)
4,572
4,572
(3,244)
6,023
(21,642)
23,258
(3,888)
(3,888)
-
-
-
(1,048)
-
-
-
-
-
-
-
(1,048)
(3,888)
3,524
(25,530)
25,981
(1,051)
3,938
3,785
(224)
28,541
51,799
87
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
Notes to the individual Financial Statements
of Redx Pharma Plc
1. Accounting Policies
(i) Basis of preparation
The Company’s financial statements have been prepared in accordance with Financial Reporting Standard 102 “The
Financial Reporting Standard applicable in the UK and Republic of Ireland” and in conformity with the requirements of 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 Loss on a straight-line basis over the term of the relevant lease.
The minimum term of the lease is estimated if it is not explicitly stated in the contract.
(iv) Goodwill
Goodwill, being the amount paid in connection with the acquisition of a business in 2010, is being amortised evenly over
its estimated useful life of twenty years. It is reviewed annually by the Directors for potential impairment.
Purchased intangible assets
The cost of a purchased intangible asset is the purchase price plus any cost directly attributable to bringing the asset
to the location and condition necessary for it to be capable of operating in the manner intended. Purchased intangible
assets are capitalised even if they have not yet demonstrated technical feasibility. The intangible asset relating to
intellectual property rights for the programme purchased from Amakem is estimated to have a useful life of 20 years, and
it will be amortised over this period, commencing on 31 October 2017.
(v) Going Concern
The Board have adopted the going concern basis in preparing these Company accounts after assessing the cash flow
forecasts and principal risks of the Group for which it is the ultimate parent.
At September 30, 2021 the Group held £29.6 million of cash and cash equivalents. The Group has a history of
recurring losses from operations, including a net loss of £21.5 million for the year ended September 30, 2021 and an
accumulated deficit of £64.2 million. Operational cash outflows continue to be driven by the ongoing focus on the
research, development and clinical activities to advance the programs within the Group’s pipeline. The Group recorded
a net increase in cash and cash equivalents of £2.0 million for the year ended September 30, 2021 primarily from the
proceeds of the placing and open offer in December 2020, in which the Group closed the sale of 45,833,641 Ordinary
shares, resulting in gross proceeds of £25.7 million. As at December 31, 2021, the Group held sufficient cash and cash
equivalents to provide a cash runway through to January 31, 2023 at currently budgeted levels of expenditure and
including certain forecast milestone receipts.
88
Redx | Annual Report and Accounts for the year ended 30 September 2021
1. Accounting Policies – continued
In undertaking the going concern review, the Board has reviewed the Group’s cash flow forecasts to January 31, 2023 (the
going concern period). Accounting standards require that the review period covers at least 12 months from the date of
approval of the financial statements, although they do not specify how far beyond 12 months a Board should consider.
Under its base case, the Group plans to raise significant further finance within the next 12 months, either from existing
or new investors. Further funding is required under the Board’s plans to continue to develop its product candidates and
conduct clinical trials. Given these plans and requirements, a review period of 12 months is considered appropriate and
the Group and Company plan to raise further funding within this period to continue with its current strategy.
The Board has identified and assessed downside risks and mitigating actions in its review of the Group’s cash flow
forecasts. Raising further capital is outside the control of the directors. Accordingly, the downside risks include a severe
but plausible scenario where external fund raising is not successful and is coupled with underperformance against the
business plan. Mitigating actions include the delay of operating expenditure for research activities and restriction of
certain discretionary expenditure including capital expenditure. Even if its mitigating actions are successful, the Group
and Company will need to raise further capital.
Based on these conditions, the Company has concluded that the need to raise further capital from either existing or new
investors represents a material uncertainty regarding the Company’s ability to continue as a going concern.
Notwithstanding the existence of the material uncertainty, the Board believes that the adoption of the going concern
basis of accounting is appropriate for the following reasons:
•
•
•
based on plans and discussions with its advisors and investors the directors have an expectation that further funding
will be obtained.
the Group has a track record and reasonable near-term visibility of meeting expectations under its collaboration
agreements and receiving the associated milestone payments.
the Group retains the ability to control capital and other discretionary expenditure and lower other operational
spend, as necessary.
While the Group has successfully accessed equity and debt financing in the past, there can be no assurance that it will
be successful now or in the future. If the Group is unable to secure the planned additional financing, it may not be able
to generate sufficient cash flows to support its current level of activities beyond the going concern period. In the event
financing is not obtained, the Group will need to consider
•
•
•
new commercial relationships to help fund future clinical trial costs (i.e., licensing and partnerships); and/or
reducing and/or deferring discretionary spending on one or more research and development programs; and/or
restructuring operations to change its overhead structure.
The Group’s future liquidity needs, and ability to address those needs, will largely be determined by the success of its
product candidates and key development and regulatory events and its decisions in the future. Such decisions could have
a negative impact on the Group’s business operations and financial condition.
The accompanying financial statements of the Company do not include any adjustments that would be required if they
were not prepared on a going concern basis. Accordingly, the financial statements have been prepared on a basis that
assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction
of liabilities and commitments in the ordinary course of business.
(vi) Revenue
The Group generates revenue from the sale or outlicensing of scientific programmes, the provision of research on
collaboration programmes and the provision of research and preclinical development services under partnership
agreements.
Revenue from contracts with customers is recognised at an amount that reflects the consideration to which the Group
is expected to be entitled in exchange for transferring goods or services to a customer. An assessment is performed on
each contract to determine the separate performance obligations and whether these are distinct, and where they are not
distinct, they are combined.
89
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
1. Accounting Policies – continued
Where the Group provides ongoing services, revenue in respect of this element is recognised over the duration of those
services. Where the arrangement meets the definition of a license agreement, sales milestones and sales royalties are
recognised when achieved by applying the royalty exemption under IFRS15.B63.
All other milestones and sales royalties are recognised when considered it is highly probable there will not be a significant
reversal of income which in the case of clinical success milestones is taken to be when the results of the relevant trial is passed.
(a) Sale and outlicensing of scientific programmes
Customers obtain control of the scientific programmes when the scientific research is transferred to the customer
to enable them to continue research and development. Invoices are generated at the point of sale and are usually
payable within 30 days. There are no obligations on the Group for returns or refunds for sales or outlicensing of
scientific programmes. Revenue is recognised when the scientific research license is transferred to the customer.
(b) Revenue from research collaboration
Collaborations and other arrangements with multiple performance obligations including licenses are assessed
to determine whether the license and any services or other performance obligations in the agreement are
distinct. Where the license is not distinct it is combined with the associated services and recognised as a single
performance obligation.
Generally, performance obligations for research collaboration are satisfied over time as services are rendered.
Payment is due with reference to contractual milestones and payment is typically received in advance of services
being delivered. These arrangements establish contract liabilities that are then released to match the provision of
services. Consideration for research collaboration contracts contains an upfront payment (fixed) and subsequent
milestone payments (variable). Variable milestone payments are estimated using the expected value method.
Revenue is recognised over the duration of the contract based on an input method based on cost to complete.
The related costs are recognised in profit and loss when they are incurred.
(c) Revenue from research and preclinical development services
Performance obligations for research and preclinical development services are satisfied over time as services are
rendered. Invoices are presented monthly and are typically payable within 30 days. There are no obligations on the
Group for refunds regarding the provision of research and preclinical development services. Consideration is made
up of multiple elements, being an agreed full-time equivalent (‘FTE’) charge out rate and recharges of direct costs,
both of which are variable based on the amount of time and cost incurred.
Revenue is recognised over the duration of the contract based on the delivery of FTE services and actual incurrence
of rechargeable costs.
(d) Revenue from milestones on scientific programmes and research collaboration
There may be significant uncertainty over whether it is highly probable that there would not be a significant reversal
of revenue in respect of specific milestones if they are recognised before they are triggered as a result of them being
subject to the actions of third parties. Where the triggering of a milestone is subject to the decisions of third parties
(including partners and regulators), the Group does not consider that the threshold for recognition is met until that
decision is made.
(vii) Tangible fixed assets
All tangible fixed assets 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 - Over the term of the lease
2 or 3 years
2 or 3 years
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to
its recoverable amount.
90
Redx | Annual Report and Accounts for the year ended 30 September 2021 Notes to the individual Financial Statements of Redx Pharma Plc – continued
1. Accounting Policies – continued
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.
(viii) 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 Loss 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
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) Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
(e) Compound financial instruments
Compound financial instruments issued by the Group comprised convertible notes denominated in GBP that can be
converted to ordinary shares at the option of the holder, based on a fixed conversion ratio. The convertible notes
have been bifurcated into their liability and equity components and presented net of the relevant proportion of
transaction costs.
The fair value of the liability component is determined using a market rate of an equivalent non-convertible bond
and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or
redemption. The increase in the liability due to the passage of time is recognised as a finance cost.
Where it meets the definition of equity, the remainder of the proceeds are allocated to the conversion option that
is recognised and included in shareholders’ equity as a convertible note reserve, net of the relevant proportion of
transaction costs.
The calculation of interest on the convertible notes by reference to the USD prime rate gives rise to a potential
derivative financial instrument, however as this cannot be quantified, no amount is recognised. The carrying amount
of the equity component of the conversion option is not remeasured in the subsequent years.
The corresponding interest on the liability component of convertible notes is charged to the income statement using
the effective interest rate. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss
is recognised.
(ix) Investments
Investments in subsidiaries are stated at cost less provision for impairment in value, and are detailed in Note 5.
91
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
1. Accounting Policies – continued
(x) Share-based compensation
The Company issues share-based payments to certain employees and Directors. Equity-settled share-based payments are
measured at fair value at the date of grant and if material are expensed immediately or on a straight-line basis over any
vesting period, along with a corresponding increase in equity.
Where such payments are made to employees of subsidiary undertakings, but relate to the shares of the parent, they are
recognised as additional investments 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 and performance based conditions. The impact of any revision
is recognised in the Statement of Comprehensive Income, with a corresponding adjustment to equity reserves.
The fair value of share options is determined using a Black-Scholes model, taking into consideration the best estimate of
the expected life of the option and the estimated number of shares that will eventually vest. The cost of each option is
spread evenly over the period from grant to expected vesting.
When options expire or are cancelled, a corresponding credit is recognised.
(xi) Critical accounting estimates and judgements
Details of significant accounting judgements and critical accounting estimates are set out in this Financial Information and
include:
(a) Share-based compensation
The Company has issued a number of share options to certain employees. The Black-Scholes model was used to
calculate the appropriate charge for the period of issue and subsequent periods.
The use of this model to calculate a charge involves using a number of estimates and judgements to establish the
appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate
and dividend rate, assessment of the satisfaction of performance criteria, 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 4 and 23 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) 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. 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 11 to the Consolidated Financial Statements.
(d) Convertible loan notes
In the year ended 30 September 2020, the Group issued an aggregate of £22.2m of convertible loan notes to
RM Special Holdings 3, LLC (‘Redmile’) and Sofinnova Crossover 1 SLP (‘Sofinnova’) resulting in the recognition of
a compound financial instrument. On December 2, 2020 the Group announced that Redmile and Sofinnova would
convert £3.33m and £1.75m respectively of the principal amount of the convertible loan notes into Ordinary shares.
Judgement was required in determining the correct accounting treatment for this partial conversion. In particular,
management considered the convertible loan notes to be ‘American-style’, meaning any partial conversion is
treated as a maturity event. Under this accounting, the movement in the carrying value of the liability element of the
convertible loan notes as a result of the partial conversion is reclassified to equity, and no gain or loss is recognised
in the Consolidated Statement of Comprehensive Income. Accounting literature is silent on the component
of equity against which this reclassification is made, and there is additional judgement applied in making this
determination. See note 17.
92
Redx | Annual Report and Accounts for the year ended 30 September 2021 Notes to the individual Financial Statements of Redx Pharma Plc – continued
1. Accounting Policies – continued
(e) Revenue from research collaborations
In determining the percentage of completion of the research collaboration projects, the Group estimates the total
future costs expected to be incurred through the life of the contract, and compares this to the actual costs incurred
to date. Certain costs are incurred with Clinical Research Organisations (CROs) such that the group has to estimate
the stage of completion of the CRO in determining its own costs. The stage of completion is then applied to the
contracted revenue receivable to determine the amount of revenue to be recognised. Given the relatively early
stage of the projects in comparison to their lifecycle, the impact of a change of the estimated costs to complete
is restricted. If the costs to complete had been estimated as being 10% higher, this would result in a change in
revenue recognised to date of £297,000.
2. Staff Costs
Staff costs (including Directors) comprise
Wages and salaries
Social security costs
Pension costs
Total employee related costs
Number of employees
Average number of employees (including Directors)
Management & Admin
R&D - Chemistry
R&D - Biology
R&D - Analytical
2021
£’000
3,308
396
135
3,839
2020
£’000
1,644
196
65
1,905
2021
Number
2020
Number
14
22
13
4
53
8
3
3
1
15
Directors remuneration is disclosed in note 9 of the Group accounts and the Directors’ Remuneration Report beginning on
page 35.
3. Intangible fixed assets
Cost
At 1 October 2020
Additions
At 30 September 2021
Amortisation
At 1 October 2020
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020
Intellectual property
£’000
Goodwill
£’000
121
-
121
18
6
24
97
103
309
-
309
154
16
170
139
155
Total
£’000
430
-
430
172
22
194
236
258
93
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Laboratory
equipment
£’000
Computer
equipment
£’000
Leasehold
Improvements
£’000
77
438
515
76
86
162
353
1
149
78
227
108
46
154
73
41
114
-
114
47
11
58
56
67
Total
£’000
340
516
856
231
143
374
482
109
4. Tangible fixed assets
Cost
At 1 October 2020
Additions
At 30 September 2021
Depreciation
At 1 October 2020
Charge for the year
At 30 September 2021
Net book value
At 30 September 2021
At 30 September 2020
5. 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. On 19 April 2021 the Company purchased 11,609,205 Ordinary shares in
Redx Anti-Infectives Limited at £1 per share.
On 7 April 2021, the Company purchased 100 shares of common stock in Redx Inc. at $0.001 per share on its incorporation,
representing 100% of its issued stock.
At 1 October
Additional capital contribution – Redx Oncology Ltd
Additional capital contribution – Redx Immunology Ltd
Ordinary shares of Redx Anti-Infectives Ltd
Impairment of investment in Redx Anti-Infectives Ltd
At 30 September
2021
£’000
411
291
86
11,609
(11,744)
653
2020
£’000
368
43
-
-
-
411
Following the entry in to solvent liquidation of Redx Anti-Infectives on 18 May 2021 with assets of £1,391. Investments in the
company were fully impaired.
94
Redx | Annual Report and Accounts for the year ended 30 September 2021 Notes to the individual Financial Statements of Redx Pharma Plc – continued 5. Investments in subsidiaries – continued
At 30 September 2021 the Company held share capital in the following subsidiaries:
Name
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
Redx Inc
847 Walker Road, Suite C,
City of Dover, County of Kent,
19904 Delaware, USA
Country of incorporation
England & Wales
Percentage
held
100%
Nature of business
Pre-clinical drug
development licensing
Direct/Indirect
holding
Direct
England & Wales
100%
In liquidation
Direct
England & Wales
100%
Pre-clinical drug
development licensing
Direct
England & Wales
100%
In liquidation
Indirect
United States
100%
Management services
Direct
Redx Inc was incorporated on 7 April 2021 It has one employee and provides management services to the group.
At 30 September 2021 both Redx Anti-Infectives Limited and Redx MRSA limited were in Members (solvent) voluntary liquidation
as part of a simplification of the group structure. Accordingly all investments in these companies have been fully impaired.
6. Debtors
Amounts falling due within one year:
Trade debtors
VAT recoverable
Amounts due from Group undertakings
Other debtors
Prepayments and accrued income
Amounts due from Group undertakings are repayable on demand and do not carry interest.
7. Creditors: Amounts falling due within one year
Trade creditors
Deferred income (Including contract liabilities)
Social security and other taxes
Other creditors
Accruals
2021
£’000
2,730
190
38,685
641
419
42,665
2021
£’000
381
4,367
146
15
891
5,800
2020
£’000
83
90
19,513
190
358
20,234
2020
£’000
547
7,069
102
5
599
8,322
95
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
8. Creditors: Amounts falling due after more than one year
Convertible loan notes
2021
£’000
14,247
14,247
2020
£’000
16,758
16,758
On August 4, 2020 Redx Pharma plc issued convertible loan notes with a value of £22.2m. No interest is payable during the
first 3 years, thereafter it is payable at a maximum rate equal to the US prime rate at that time. The notes are convertible into
Ordinary shares of Redx Pharma plc, at any time at the option of the holder, or repayable on the third anniversary of the issue.
The conversion rate is 1 Ordinary share for each £0.155 of convertible loan note held. The convertible loan notes are secured
by a fixed and floating charge over all the assets of the Group.
Initial measurement
The notes have been assessed as compound instruments containing equity and liability components. The Group has calculated
the value of the liability component using a discount rate for an equivalent bond, without an equity component, of 8.5%.
The Group determined this rate by obtaining interest rate from external financing sources and making certain adjustments to
reflect the terms of the instrument; specifically to adjust the interest rate to account for the expected term of the convertible loan
notes, its value and the conditions attached to it. The value of the conversion feature £4.57m (2020: £4.57m) calculated as the
residual value of the loan after calculating the fair value of the liability component has been recognised as an equity component
within the Convertible note reserve in the Consolidated Statement of Financial Position. Total transaction costs of £1.1m have
been allocate between the equity and liability components. An increase in discount rate to 9.5% would decrease the debt
element by £248k and a decrease to 7.5% would increase the debt element by £262k.
Partial conversion
On December 2, 2020 the Group announced that RM Special Holdings 3, LLC and Sofinnova Crossover 1 SLP would convert
£3.33m and £1.75m respectively of the principal amount of the convertible loan notes into Ordinary shares. Under the terms of
the convertible loan notes, the conversion took place at 15.5p per new Ordinary share. Accordingly, 32,806,159 new Ordinary
shares were issued and admitted to trading on AIM on December 22, 2020. As of September 30, 2021, an aggregate of
£17.1m in principal amount was outstanding under the convertible loan notes. This equates to 110,288,888 ordinary shares at
£0.155 per share.
The remaining gross principal of £17.1m has been discounted at the effective interest rate determined on initial measurement,
resulting in a discounted liability of £14.2m. The reduction in the liability has been offset by credit entries to equity
representing the issuance of share capital and associated share premium. There is no impact on the Consolidated Statement of
Loss as this is a no gain, no loss transaction.
9. Share Capital
Number of shares in issue
In issue at 1 October
Issued for cash
Issued in consideration for a loan
Loan note conversion
Exercise of share options
In issue at 30 September
Share Capital at par, fully paid
Ordinary shares of £0.01
96
2021
Numbers
2020
Numbers
195,247,413
126,477,914
45,833,641
-
32,806,159
1,394,992
16,738,710
52,030,789
-
-
275,282,205
195,247,413
£’000
£’000
2,753
1,952
Redx | Annual Report and Accounts for the year ended 30 September 2021 Notes to the individual Financial Statements of Redx Pharma Plc – continued 9. Share Capital – continued
Share issues
On December 2, 2020, the Group announced that it had conditionally raised £25.5m by way of a Placing of Ordinary shares
at 56p per share, and up to a further £2.2m by way of an Open Offer at the same price. All resolutions required to accomplish
this were passed at a general meeting of shareholders on December 21, 2020. The final gross amount raised was £25.7m and
accordingly 45,833,641 new Ordinary shares were issued and admitted to trading on AIM on December 22, 2020.
On the same date the Group announced that, subject to successful admission of the above shares, RM Special Holdings 3, LLC
and Sofinnova Crossover 1 SLP would convert £3.33m and £1.75m respectively of the principal amount of the convertible loan
notes into Ordinary shares. Under the terms of the convertible loan notes, the conversion took place at 15.5p per new Ordinary
share. Accordingly, 32,806,159 new Ordinary shares were issued and admitted to trading on AIM on December 22, 2020.
On July 8, 2021, the Group announced the exercise of share options over 894,992 Ordinary shares, The exercise took place at 15.5p
per Ordinary share. The gross amount received was £0.1m and the shares were admitted to trading on AIM on July 9, 2021.
On September 27, 2021, the Group announced the exercise of share options over 500,000 Ordinary shares, the exercise took
place at prices between 22p and 50p per new Ordinary share. The gross amount received was £0.2m and the shares were
admitted to trading on AIM on September 28, 2021.
10. Operating lease arrangements – minimum lease payments
Outstanding commitments for future minimum lease payments under non-cancellable
operating leases expiring:
Within one year
In the second to fifth years
In greater than five years
11. Related Parties
Property
2021
£’000
816
3,009
-
3,825
2020
£’000
786
3,144
721
4,651
Related party information disclosed in note 24 to the Group accounts is also applicable to the Company.
12. 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 £34m.
13. Ultimate controlling party
In the opinion of the Directors, the Company’s ultimate parent company is Redmile Group LLC, a company incorporated in
Delaware, United States of America.
14. Post balance sheet events
On 9 December 2021 the Company announced that it had earned a $10m milestone payment from Jazz Pharmaceuticals and
on 23 December 2021 that it had earned a $9m milestone payment from AstraZeneca.
97
Financial StatementsRedx | Annual Report and Accounts for the year ended 30 September 2021 Financial Statements
98
Redx | Annual Report and Accounts for the year ended 30 September 2021 Redx | Annual Report and Accounts for the year ended 30 September 2021
Financial Statements
Company Information
Directors
Secretary
Company number
Principal place of business
& registered office
Auditor
Nomad
Joint Broker
Joint Broker
Dr Jane Griffiths (Chair)
Lisa Anson (Chief Executive Officer)
Peter Presland (Non-Executive Director)
Dr Bernhard Kirschbaum (Non-Executive Director)
Sarah Gordon Wild (Non-Executive Director)
Dr Thomas Burt (Non-Executive Director)
Natalie Berner (Non-Executive Director)
Andrew Booth
07368089
Block 33
Mereside
Alderley Park
SK10 4TG
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Block 33
Mereside
Alderley Park
SK10 4TG
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