ReNeuron Annual Report 2023

Plain-text annual report

RENEURON GROUP PLC ANNUAL REPORT for the year ended 31 March 2023 R e N e u r o n G r o u p p l c A n n u a l R e p o r t f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 2 3 Creating a valuable and differentiated drug delivery platform 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 1 Contents Strategic Report Financial and Operational Highlights Executive Chairman’s Statement Technology Overview Financial Review Directors’ Duties Sustainability Risks and Uncertainties Governance Board of Directors Senior Management Directors’ Report for the year ended 31 March 2023 Corporate Governance Audit Committee Report Directors’ Remuneration Report Financial Statements Independent Auditors’ Report to the Members of ReNeuron Limited Group Statement of Comprehensive Income for the year ended 31 March 2023 Group and Company Statements of Financial Position as at 31 March 2023 Group and Company Statements of Changes in Equity for the year ended 31 March 2023 Group and Company Statements of Cash Flows for the year ended 31 March 2023 Notes to the Financial Statements for the year ended 31 March 2023 Other information Advisers Shareholder Information Glossary of Scientiﬁc Terms 01 Page 2 3 6 14 16 18 19 23 26 28 31 37 39 44 51 52 53 54 55 77 78 79 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 2 02 I S T R A T E G C R E P O R T Financial and Operational Highlights Financial Highlights l Revenue for the year of £0.5 million (2022: £0.4 million) from partner funded development activities and royalty income. l Cash, cash equivalents and bank deposits at 31 March 2023 of £7.2 million (31 March 2022: £14.5 million) with cash runway extended to 2024. l Reduced operating costs in the year of £7.6 million (2022: £11.6 million) primarily due to reduction in clinical trial related costs. Full beneﬁt of the January 2023 restructuring will be realised in FY24. l Loss for the year of £5.4 million (2022: loss of £9.7 million), driven by lower costs and increased revenue. Operational Highlights l The Company’s R&D team established CustomEX™, the ﬁrst scalable, consistent, targeted and customisable stem cell-derived exosome drug delivery platform. l Proof-of-concept studies established unique in vitro targeting and delivery characteristics for all seven exosome populations and demonstrated a signiﬁcant improvement in uptake and subsequent delivery of a therapeutic siRNA cargo using the CustomEX™ platform compared to current delivery methods and a HEK 293-derived exosome. l In vivo studies to generate data to further validate the cellular and tissue targeting capabilities and subsequent functional delivery of therapeutic payloads using the CustomEXTM platform are ongoing. l ReNeuron negotiated and signed the CTX Technology Transfer Supplemental Terms Agreement with Fosun Pharma (1 July 2022), underscoring Fosun Pharma’s continued commitment to the CTX stroke disability programme. l Senior leadership team changes: Appointment of Iain Ross as Executive Chairman, John Hawkins joined the Board as Chief Financial Ofﬁcer, Dr. Randolph Corteling assumed the role of Chief Scientiﬁc Ofﬁcer and Suzanne Hancock was appointed as Chief Operations Ofﬁcer and Simon Dew as Chief Business Ofﬁcer. Catherine Isted stepped down as Chief Executive Ofﬁcer. l Professor Stefano Pluchino assumed the role of Chair of the new Scientiﬁc Advisory Board (SAB) that has been established, composed of leading academics and industry executives, Prof. Giuseppe (Beppe) Battaglia, Prof. Edit I Buzás, Prof. Dr. rer. nat. Bernd Giebel and Prof. Kenneth W. Witwer. l Restructuring of the business with an internal operational re-alignment in line with the business needs resulting in a reduction of headcount of 40% and a lowering of the variable costs of the business. Executive Chairman, Iain Ross, commented: “During the last year the Company has undergone a complete transition including an organisational restructuring; a change in management and a strategic re-alignment, to create sustainable value for shareholders with the emphasis on the development, partnering and potential licensing of CustomEXTM, our proprietary drug delivery platform. During the year under review the underlying cost base has been reduced and resources re-aligned to meet the immediate needs of the business. I remain very excited about the Company’s potential as we are on course to generate validating data which would allow us to complete partnering and license deals in the coming year which will transform the Company.” ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 3 03 I S T R A T E G C R E P O R T Executive Chairman’s Statement Dear Shareholders, Our immediate strategic focus remains primarily on our CustomEXTM Exosome Technology Platform, producing exosomes with unique tissue targeting capabilities to deliver a payload of choice to a preferred cell type. Our mission is, in collaboration with academic and industry partners, to develop novel exosome therapeutics for diseases with signiﬁcant unmet needs. CustomEXTM provides a unique delivery mechanism for a variety of payloads including nucleic acids, proteins, and gene editing technologies. We use our conditionally immortalised induced pluripotent stem cell (CI-iPSC) platform to make allogeneic tissue cells of choice, which have the potential to produce exosomes with tissue speciﬁc targeting ability. Both platforms are supported by an extensive and proprietary intellectual property portfolio. Our overall strategic goal is to exploit the global drug delivery market opportunity by providing exosomes as a vector to facilitate the delivery of therapeutics. It is estimated that the supply of viral and non-viral vectors is worth c. $2.1 billion1 today increasing up to $3.9 billion1 by 2026 and there is considerable academic and industry interest in the development of next-generation delivery vectors such as exosomes. Over the past few years, peer companies have raised $403 million2 in support of exosome-based activities and secured exosome related license agreements with potential revenues in excess of $3 billion2. We believe our stem-cell derived exosomes can potentially overcome issues such as tissue speciﬁcity, crossing the blood-brain barrier and unwanted immune activation, which have hampered ﬁrst-generation drug delivery platforms. So, through the combination of our two proprietary platforms we are competitively well positioned to exploit this growing market opportunity. Financial highlights In January 2023, the Company undertook a restructuring of the business, reducing headcount by 40% and lowering variable costs of the business, with the latest forecasted cash runway now extending into mid-calendar year 2024. The full beneﬁt of the cost savings from this restructuring will not be seen until ﬁnancial year 2024. Revenue for the year was £0.5 million (2022: £0.4 million) related to income from partner funded development activities and royalty income. We also saw reduced operating costs of £7.6 million (2022: £11.6 million) primarily due to a reduction in clinical trial related costs following the strategic review in January 2022. This reduction was partly offset by additional investment made in the exosome technology platform. Net cash used in operating activities was £7.5 million (2022: £7.4 million). Cash used was higher than the loss for the year which is explained by changes in working capital and capital investment made to support exosome platform development. Cash, cash equivalents and bank deposits at 31 March 2023 were £7.2 million (31 March 2022: £14.5 million). Loss for the year was £5.4 million (2022: loss of £9.7 million), the reduction being driven by lower costs and increased revenue as noted above. Corporate and organisational development There have been several senior leadership team changes over the last 12 months. In September 2022, the Company announced that John Hawkins had been promoted to Chief Financial Ofﬁcer and joined the ReNeuron Board, Dr. Randolph Corteling assumed the role of Chief Scientiﬁc Ofﬁcer, Suzanne Hancock was appointed as Chief Operations Ofﬁcer and Simon Dew, an experienced business development professional with signiﬁcant track record of dealmaking in the exosome ﬁled, would be joining the Company as Chief Business Ofﬁcer. In December 2022, Catherine Isted stepped down as Chief Executive Ofﬁcer and Iain Ross was appointed as Executive Chairman. Subsequently the Company undertook a restructuring of the business with an internal operational re-alignment in line with the business needs resulting in a reduction of headcount of 40% and a lowering of the variable costs of the business. 1 Liberum estimates; Viral vector supply – Oxford Biomedica estimates of global viral sector supply (outsourced); LNP vector supply – Allied Market Research; 360 Research Reports 2 Liberum estimates ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 4 04 I S T R A T E G C R E P O R T Executive Chairman’s Statement continued Professor Stefano Pluchino assumed the role of Chair of the new Scientiﬁc Advisory Board (SAB) combining working with ReNeuron with his academic work in Exosomes and Regenerative Neuroimmunology at the University of Cambridge. The new exosome focused SAB has also been established composed of leading academics and industry executives, Prof. Giuseppe (Beppe) Battaglia, Prof. Edit I Buzás, Prof. Dr. rer. nat. Bernd Giebel and Prof. Kenneth W. Witwer and chaired by Prof. Stefano Pluchino. This new SAB brings a world-class breadth of expertise across the extracellular vesicle (EV) ﬁeld. Its role is to advise the Company on scientiﬁc matters relating to its exosome platform research and development strategy. Research & development In FY22 the Company’s R&D team established CustomEX™, the ﬁrst scalable, consistent, targeted and customisable stem cell-derived exosome drug delivery platform. This unique exosome platform is based upon the exosomes produced from different stem cells having the unique cellular targeting properties of the stem cells from which the exosomes were produced. Proof-of-concept studies have determined unique in vitro targeting and delivery characteristics for all seven exosome populations and demonstrated a signiﬁcant improvement in uptake and subsequent delivery of a therapeutic siRNA cargo using the CustomEX™ platform compared to current delivery methods and a HEK 293-derived exosome. Further proof-of-concept in vitro studies are ongoing to validate the beneﬁts observed in vitro of the CustomEXTM platform to deliver therapeutic cargoes To demonstrate the enhanced utility of the CustomEX™ drug delivery platform, the R&D team has made signiﬁcant improvements to the loading of nucleic acid cargos. In-house optimisation and further modiﬁcations to the downstream manufacturing process has led to increases in exosome concentration and purity, leading to an approximate 30-fold increase in siRNA being associated with CustomEX™ exosomes. In addition, further in vitro proof-of-concept for our engineered exosome product, Exo-BDNF was established through a collaboration with Cardiff University that demonstrated the products efﬁcacy to improve retinal ganglion cell survival in a model of glaucoma. The Group’s iPSC platform continues to support the expansion of the CustomEX™ platform and following Dr Pell’s presentation at the 2nd iPSC derived Cell Therapy Summit in December, there is growing interest in the platform in its own right. ReNeuron’s iPSCs were developed from the Group’s conditionally immortalised CTX stem cell line. This immortalisation characteristic is retained by the iPSCs (conditionally immortalised iPSCs or CI-iPSCs), allowing subsequent cell lines to be rapidly developed that beneﬁt from their highly stable and reproducible expansion. Investigation into the utility of CI-iPSCs continues with two groups at University College London (UCL), ﬁrstly investigating the potential use of CI-iPSCs to generate CAR-T / CAR-NK cells and secondly with a separate group at UCL investigating the ability to differentiate into Schwann cells for potential use in peripheral nerve damage repair. In July, ReNeuron negotiated and signed the CTX Technology Transfer Supplemental Terms Agreement with Fosun Pharma, underscoring Fosun Pharma’s continued commitment to the CTX stroke disability programme. The project to transfer both the CTX Drug Product and Working Cell Bank manufacturing processes and quality control testing know-how to Fosun Pharma has continued to make good progress. In addition to the £320k upfront payment received in January 2022 for services delivered in FY23, ReNeuron has received approximately a further £100k for supply of initial CTX working cell bank vials and additional ReNeuron resources and project related costs; with further milestone payments expected in accordance with deﬁned project milestones. Under the Technology Transfer agreement there is potential for the Group to receive up to £5 million over the medium to long term, with further potential milestone payments of up to £74 million linked to the main license agreement signed in 2019. In 2022, Dr Corteling was a guest speaker at two international conferences where he presented, for the ﬁrst time, the full breadth of the Group’s CustomEX™ exosome platform. Consisting of four distinct neural producer stem cell lines (cortical, striatal, hippocampal and mesencephalic), three non-neural stem cell lines (liver, retinal and pancreatic), and its conditionally immortalised induced pluripotent stem cell line (CI-iPSCs) which can be used to produce further exosome producer cell lines depending on the target required. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 5 Executive Chairman’s Statement continued Outlook As of today, ReNeuron has seven proprietary, conditionally immortalised exosome producer stem cell lines. We believe that our catalogue of proprietary stem cells, from neural and non-neural tissue, differentiates us from competitors in the ﬁeld and leads to a greater chance of success for optimised delivery of a payload to a particular target. The Company has years of experience and knowledge in the manufacture of consistent stem cell banks to good manufacturing practice (GMP), including two investigation new drugs (INDs), and is continuing to work with third parties to develop improvements in downstream processing and analytics. In summary, over the next 3-6 months the Company will continue to develop its exosomes platform, generating in vivo data exemplifying the cellular and tissue targeting capabilities of exosomes produced from its multiple conditionally immortalised producer cell lines and the subsequent functional delivery of therapeutic payloads. Favourable in vivo data will allow the Group to differentiate its exosome platform and progress ongoing partnering and licensing discussions. The Board has identiﬁed a number of potential sources of revenue and non-dilutive funding in order to maintain the business as a going concern and is conﬁdent it will be able to conclude third party transactions and/or issue new equity as required. Such transactions will further strengthen and differentiate our exosomes platform, highlighting our potential leadership in the ﬁeld. Finally, I would like to thank past and present members of the Board, Management team and staff for their continued commitment and hard work throughout what has been a tough and challenging year. I would especially like to thank Catherine Isted for her contribution as CFO and latterly as CEO and to wish her well in the future. I look forward to an exciting and rewarding year ahead and would like to thank the shareholders for their continued support. 05 I S T R A T E G C R E P O R T Iain Ross Executive Chairman ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 6 Technology Overview 06 I S T R A T E G C R E P O R T ReNeuron’s stem cell derived proprietary exosome technology platform CustomEX™ offers a delivery mechanism for a variety of potential payloads that could include siRNA, mRNA, proteins, small molecules and genes. What are exosomes? l Naturally occurring biological nano particles produced by every cell to mediate intercellular communication. l Can encapsulate various biological molecules within their lipid bilayer membrane or within the lumen of the Exosome. l Can be engineered to deliver drug cargos to target cells, offering an opportunity to treat diseases. The beneﬁts of exosomes l Proven ability to carry and deliver a variety of cargos including proteins and nucleic acids. l Potential to deliver more than one bio-active cargo simultaneously. l Target recipient cells via speciﬁc surface proteins that are determined by their cell of origin. l Low or no immunogenicity, thereby evading immune detection. Current delivery mechanisms have limitations l Viral vectors have been plagued by side effect issues and high costs, limitation on the type and size of cargo they can deliver. l Lipid nanoparticles (LNPs) have no natural tissue and cell targeting capabilities with delivery therefore untargeted and mainly to the liver. l Both have immunogenetic properties that can be problematic. CustomExTM: A customisable exosome platform l Seven proprietary conditionally immortalised* exosome producer stem cell lines producing unique exosome populations. l ReNeuron’s iPSC platform allows production of exosomes that have the functional properties based on parent stem cells. l Capable of delivering a variety of payloads including proteins and nucleic acids and the next generation for delivery of gene editing technologies. l Data highlights increased uptake and delivery of payload when compared to a conventional HEK exosome approach. l Our CustomExTM exosomes have distinct surface marker proﬁles (tropisms) enabling a greater tissue targeting capability. *Conditional immortalisation of stem cell exosome producer lines offers an elegant solution to not only consistently produce cell lines that are genetically stable and can be grown at scale, but also to produce a high yielding source of consistent exosomes for the delivery of complex drug modalities. The standard approach used by our competitors is to produce exosomes from a single generic cell line. A one-size-ﬁts-all approach. A single cell line, giving rise to a single outcome. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 7 Technology Overview continued At ReNeuron, we have a portfolio of stem cell exosomes that have distinct properties. This allows us to choose the most appropriate exosome delivery vehicle, not only based upon its tissue targeting but also upon the speciﬁc requirements of the therapeutic payload in terms of the cellular compartment that the cargo needs to reach to achieve a therapeutic effect (i.e. the ﬂuid that ﬁlls the cell (cytoplasm) for RNAi and the nucleus for DNA). The current portfolio of stem cell exosomes can also be rapidly expanded using ReNeuron’s proprietary CI-iPSC lines. Additional stem cell exosome producer lines from any cell lineage can be generated from our iPSCs if the speciﬁc exosome population does not already form part of our catalogue. EXOSOMES – The science in more detail Exosomes – a natural next-generation drug delivery vector Throughout the twentieth century, small molecule drugs made by medicinal chemists drove value in the pharmaceutical industry and comprised essentially all the world’s most innovative prescription medicines. As therapeutically relevant targets became harder to identify, the industry turned to drug targets that were unachievable using small molecules. More complex drug modalities such as monoclonal antibodies, therefore, became the predominant therapeutic class in several important disease areas and currently represent the fastest growing segment in the drug industry. More recently, various gene editing technologies such as RNAi and CRISPR have been used to modulate new classes of intracellular targets and will undoubtedly generate therapeutically useful drugs in the future. However, a major hurdle that continues to hold back the clinical development of many complex drug modalities is delivery. 07 I S T R A T E G C R E P O R T ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 8 Technology Overview continued 08 I S T R A T E G C R E P O R T Why stem cell exosomes? Stem cells naturally communicate with other cells by releasing exosomes, nano-sized delivery vehicles that carry biologically active molecules such as RNA and protein from one cell to another, thereby enhancing intracellular communication. The surface membrane of an exosome provides a protected and controlled internal microenvironment, allowing cargo within the exosome to travel long distances within tissues without degradation. Speciﬁc characteristics of the exosome (i.e. surface marker proﬁle and lipid composition), determined by their stem cell type of origin, facilitate the delivery of their cargo in a targeted manner. Charts on page 10 – ELISA surface marker proﬁle highlight the difference between exosomes produced from different cell types. The charts represent the surface marker proﬁle of four different exosome types; three from our proprietary stem cell lines, compared to a generic HEK 293 cell. While the size distribution for each exosome population is similar for all exosomes, the charts illustrate the unique surface marker proﬁle of the different exosome types. Even the classic markers of exosomes (CD9, CD63 and CD81) are expressed at different levels between the exosome types. This, coupled with the presence or absence of surface markers speciﬁc to the cell type of origin, facilitates interactions between the exosome and the target cell. Therefore, choosing the correct cell source is an important consideration when developing any exosome-based drug delivery vehicle. Interactions between the exosome and the target cell can occur through several different mechanisms, allowing active molecules on the surface or held within the exosome to deliver a functional effect. Studies have shown that entire exosomes can be internalised or can fuse directly with the cell surface to deliver their payload into the cytoplasm of the cell. Alternatively, proteins expressed on the surface of the exosome can activate speciﬁc receptors on the surface of the target cell. Either way, the net result of exosome-cell interactions is a functional change of the target cell, ultimately inﬂuencing the biology of the target tissue. A signiﬁcant advantage of an exosome-based delivery vehicle is its superior safety proﬁle. Exosomes have been shown to be non-toxic and non-immunogenic, potentially allowing for larger doses to be administrated and creating the possibility for re-administration, where existing delivery technologies such as lipid nanoparticles (LNPs) or viral vectors have failed. Other drug delivery systems Lipid nanoparticles and viral vectors such as lentivirus and adeno-associated virus (AAV) are recognised drug delivery systems for certain complex drug modalities (see table 1 overleaf which sets out the relative capabilities of four delivery technologies with +++ being highest and + the lowest). The use of LNPs was ﬁrst approved in 2018 for the delivery of small-interfering siRNA (Patisiran), however, they have become widely recognised following their use to deliver RNA-based COVID-19 vaccines in 2020. The ﬁrst AAV-based therapy was approved in 2017 (Luxturna) where the technology was used to deliver a replacement gene for the treatment of an inherited eye disorder causing progressive blindness. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 9 Technology Overview continued TABLE 1 Lipid nanoparticles Gene delivery in vivo ++ Safety proﬁle + Max payload size +++ Pre-existing immunity +++ Repeat-dose immunity + Permanent effect – Multiplex payload delivery (2+ payloads) ++ Ease of manufacture +++ Tissue targeting + (mainly liver) Tissue speciﬁcity – Payload presentation Internal Payload repertoire siRNA mRNA Soluble protein Small molecules Genes 09 I S T R A T E G C R E P O R T Lentivirus AAVs Exosomes +++ +++ +++ (ExoAAV) ++ ++ +++ ++ + ++ +++ – +++ + – +++ +++ + + ++ – +++ + ++ ++ + + +++* – – +++* Internal Internal Internal & external Genes Genes siRNA mRNA Soluble protein Membrane- assoc. protein Small molecules Genes Source: ReNeuron estimates. * ReNeuron predicts an advantage compared to exosomes derived from a single genetic cell line, when matching exosome source to target tissue. While both viral vectors and LNPs have demonstrated their use in certain situations, there are currently signiﬁcant limitations to both technologies. Certain components of viral vectors share similarities to their parent viruses, which the mammalian immune system has evolved to recognise as an infectious agent, and this can therefore, trigger an immune response or activate pre-existing immunity. Key advantages over existing delivery technology l Multiplex delivery (2 + payloads) l Tissue targeting l Safety proﬁle – re-administration possible Payload versatility of exosomes Based on clinically proven technology, ReNeuron has developed a platform to exploit the natural function of stem cell-derived exosomes to enable the delivery of complex therapeutics to speciﬁc cells and tissues, thereby potentially overcoming many of the challenges facing the drug delivery and targeted therapy ﬁelds. Typical types of therapeutic cargos: l siRNA l Soluble protein l Membrane-associated protein l Small molecules l Gene editing systems (i.e. CRISPR/Cas) Through either genetic modiﬁcation of the stem cell line or direct loading of therapeutic modalities onto puriﬁed exosomes, ReNeuron has developed and patented the technology to modify the cargo of stem cell-derived exosomes to load a range of payloads either on the exosome surface, into the centre (lumen), or both simultaneously. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 10 Technology Overview continued 10 I S T R A T E G C R E P O R T Genetic engineering of our proprietary stem cell lines allows us to not only insert (knock-in) different complex therapeutic molecules, such as proteins or nucleic acids, but also to permanently remove (knock-out) potentially unwanted components from stem cell-derived exosomes, reducing the possibility of off-target effects. This technique creates a stably modiﬁed stem cell line and highly consistent loaded exosomes for ease of manufacture at a scale relevant for clinical development. Furthermore, the same approach acts as a blueprint for loading a variety of therapeutic molecules, thus considerably reducing development timelines for other therapeutic candidates. Depending on the therapeutic modality, an alternative approach is to utilise the native stem cell-derived exosome and passively or actively load therapeutics into the centre or onto the surface of the exosomes. Depending upon the individual properties of the active molecule, loading can be achieved by simply mixing the two components or by utilising a concentration gradient. ELISA surface marker proﬁle The charts overleaf clearly demonstrate that each exosome population produced from a speciﬁc cell line is unique. The presence or absence of different surface markers will allow the exosome to bind to speciﬁc cells to achieve targeted delivery of a payload. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 11 Technology Overview continued Ability to load exosome through passive, active or genetic engineering Focus at ReNeuron is on speciﬁc loading of exosomes, either through passively loaded exosomes or engineered exosomes. For ‘passive loading’ (chemical) the exosomes are isolated ﬁrst, then the cargo is loaded afterwards. In ‘engineered’ (biological) exosomes you ﬁrst start by genetically modifying the producer cell line. These cells are instructed to produce and package molecules of interest during exosome generation. These ‘engineered’ exosomes are isolated as normal but now carry the intended additional cargo. It is also worth mentioning that the cargo can be placed either inside or outside the exosome, therefore, creating a vast number of possibilities for therapeutic agent delivery. 11 I S T R A T E G C R E P O R T RENEURON’S EXOSOMES PLATFORM – What makes us different? OUR TECHNOLOGY CustomEX™, A customisable exosome delivery platform optimised for speciﬁc delivery needs At ReNeuron, we have developed seven proprietary, conditionally immortalised exosome producer cell lines, each with a distinct surface marker proﬁle determined by their cell type of origin. We believe that this catalogue of exosome producing stem cell lines, from neural and non-neural tissue, differentiates us from others in the ﬁeld by giving us a truly customisable platform and a greater chance of success when targeting speciﬁc tissues within the body. An essential feature of any delivery vehicle is consistency. Conditional immortalisation of stem cell exosome producer lines offers an elegant solution to not only produce cell lines that are genetically stable and can be grown at scale, but also to produce a high yielding source of consistent exosomes for the delivery of complex drug modalities. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 12 Technology Overview continued 12 I S T R A T E G C R E P O R T The standard approach used by our competitors is to produce exosomes from a single generic cell line. A one-size-ﬁts-all approach. A single cell line, giving rise to a single outcome. At ReNeuron, we have developed the CustomEX™ platform, a portfolio of stem cell exosomes that have distinct cell and tissue targeting capabilities. This allows us to choose the most appropriate exosome delivery vehicle, not only based upon its tissue targeting but also upon the speciﬁc requirements of the therapeutic payload in terms of the cellular compartment that the cargo needs to reach to achieve a therapeutic effect (i.e. the ﬂuid that ﬁlls the cell (cytoplasm) for RNAi and the nucleus for DNA). The current portfolio of stem cell exosomes can also be rapidly expanded using ReNeuron’s proprietary CI-iPSC lines. Additional stem cell exosome producer lines from any cell lineage can be generated from our CI-iPSCs if the speciﬁc exosome population does not already form part of our catalogue. OUR KNOW-HOW The ReNeuron team has extensive know-how in the ﬁeld with our Chief Scientiﬁc Ofﬁcer having in excess of 15 years’ experience in stem cell and stem cell-based exosomes as well as extensive knowledge of the biology of the ﬁeld. Through the years of experience gained in the manufacture of consistent stem cell banks to enable the manufacture of drug product, in accordance with good manufacturing practice (GMP), for use in two clinical stem cell programmes, the team has become expert in process and analytical development as well as manufacturing and technology transfer. All of which is highly valuable for the exosomes platform, which involves many of the same upstream processes for exosomes production. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 13 Technology Overview continued 13 I S T R A T E G C R E P O R T OUR PATENTS ReNeuron believes it has the third largest patent estate globally in the ﬁeld of exosomes, highlighting its strength and depth in the ﬁeld. The Group has eight different patent families with patent lives in to the 2030s and beyond. One of our major patent families covers any neural stem cells that make exosomes. It has been granted in the EU and many other countries and is pending in the US. The Group already has a granted patent for the use of an exosome generated from any neural stem cell to treat Nestin positive cancers in the US, EU and other territories. The other key patent family surrounds ReNeuron’s conditional immortalisation technology and covers the use of a conditionally immortalised cell to produce exosomes. It encompasses a wide range of cell types including, but not limited to, mesenchymal stem cells (MSCs), haematopoietic stem cells, very small embryonic-like stem cells (VSELs), iPSCs, ﬁbroblasts and dendritic cells. OUR INDUCED PLURIPOTENT STEM CELLS (iPSCs) Human pluripotent stem cells (hPSCs) have great potential in cell therapy because of their unique ability to differentiate into all cell types found in the human body. They provide, at least in theory, an inexhaustible supply of cells to treat any condition caused by cell loss. The archetypal hPSC is the embryonic stem cell (hESC), derived from the preimplantation embryo. Ethical issues surrounding the use of hESCs for medical applications have, however, driven the search for an alternative cell source. In a method ﬁrst pioneered by Shinya Yamanaka in 2006, adult cells were reprogrammed to a pluripotent state generating induced pluripotent stem cells (iPSCs). This creates a cell source with all the beneﬁts associated with pluripotency without the associated ethical issues of hESCs. ReNeuron’s neural stem cell line, CTX, is a clinical grade stem cell line capable of generating several types of neural cells. It is immortalised with a transgene whose activity is easily controllable with a synthetic drug. ReNeuron have successfully reprogrammed CTX cells to pluripotency, to conditionally immortalised induced pluripotent stem cells (CI-iPSCs), and have demonstrated that CI-iPSCs display many features characteristic of pluripotent cells. Differentiation experiments show that CI-iPSCs can create cells from all three of the early cell lineages (endoderm, mesoderm and ectoderm), conﬁrming that they are truly pluripotent and hence able to create all cell types in the body. This includes clinically important cell types such as mesenchymal stem cells, beating heart muscle, cells of the immune system, including the T-cells used in modern anti-cancer cell therapy, and various types of neural cells. The preferred therapeutic cells for a given application are often adult stem cells or progenitors rather than the differentiated cells lost in disease. Such cells can be difﬁcult to manufacture, and their short lifespan limits their clinical use. ReNeuron’s unique conditionally immortalised iPSCs has the potential to resolve many of these issues. Following differentiation along a particular lineage, activation of the conditional immortalisation technology within CI-iPSCs allow the resulting cells to be puriﬁed, qualiﬁed, expanded and banked. Thus, enabling a large number of patients to be treated with CI-iPSC-derived cells or cell products (e.g. exosomes) as an “off-the-shelf” medicine. Furthermore, as these CI-iPSC-derived therapeutics are made from a cell line which has already passed clinical phase safety trials (CTX), their entry into clinical trials for new indications are likely to be more rapid. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 14 Financial Review 14 I S T R A T E G C R E P O R T During the ﬁnancial year costs continued to be closely controlled with spend primarily directed towards progressing the CustomEXTM proprietary exosome platform. In January 2023, the Company undertook a restructuring of the business with headcount reducing by 40% and the variable costs of the business lowered. The full beneﬁt of these cost savings will not be seen until the next ﬁnancial year, but the decision made in January 2022 to shift away from clinical development programmes to the exosome platform has enabled a reduction in costs of £4.0 million compared to the year ended 31 March 2022. As a result, the total comprehensive loss for the year reduced to £5.4 million (2022: £9.7 million). At 31 March 2023, the Group had cash, cash equivalents and bank deposits of £7.2 million with the latest base case forecast showing a cash runway to July 2024. This base case forecast includes assumed further revenues/funding. Without such revenues/funding, the forecast indicates a cash runway until February 2024. Details on the Directors’ assessment on going concern is provided in note 3 to the ﬁnancial statements. Year ended Year ended FINANCIAL HIGHLIGHTS (£’000) 31 March 2023 31 March 2022 Cash, cash equivalents & bank deposits 7,153 14,548 Net cash used in operating activities 7,484 7,411 Revenue 530 403 Operating expenses 7,645 11,631 Total comprehensive loss 5,408 9,689 Revenue and other operating income In the year to 31 March 2023, revenues, which relate to research and collaboration activities and royalty income, were £530,000 (2022: £403,000). Operating expenses Total operating expenses reduced in the year to £7.6 million (2022: £11.6 million). As noted above, this reduction in costs follows the strategic decision made in January 2022 to halt clinical development and instead focus resources on the exosome platform. Research and development costs in the year reduced to £4.5 million (2022: £8.1 million), primarily reﬂecting the refocussing of activities as described above, together with other cost reductions. General and administrative expenses also reduced in the year to £3.2 million (2022: £3.6 million). Finance income/expense Finance income represents income received from the Group’s cash and investments and gains from foreign exchange. Finance income was £478,000 in the year (2022: £195,000), the increase on the prior year being explained by an increase in both interest receivable and foreign exchange gains. In the year, ﬁnance expense solely comprises lease interest of £20,000 (2022: £25,000). Taxation Taxation for the year at £1.2 million primarily comprises an R&D tax credit (2022: £1.4 million). The amount of the R&D tax credit for the year has reduced as a result of the lower research and development spend in the year. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 15 Financial Review continued Cash ﬂow Net cash used in operating activities in the year increased to £7.5 million (2022: £7.4 million). Cash used was higher than the loss for the year explained by changes in working capital and capital investment made to support exosome platform development. The Group had cash, cash equivalents and bank deposits totalling £7.2 million as of 31 March 2023 (31 March 2022: £14.5 million). Statement of ﬁnancial position Non-current assets – Property, plant and equipment have increased as we invest in our exosome technology platform. Current assets – Corporation tax receivable of £1.2 million comprises the amount due from R&D tax credits for the full year ended 31 March 2023 (2022: £1.4 million). This debtor is lower than 2022 due to the reduction in research and development expenditure. Current liabilities – Trade and other payables at £4.2 million have reduced (2022: £6.9 million). This reduction primarily reﬂects changes in the level of accruals (mainly across the legacy clinical trials). 15 I S T R A T E G C R E P O R T John Hawkins Chief Financial Ofﬁcer ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 16 Directors’ Duties The Directors of ReNeuron Group plc and its subsidiary companies are required to act in accordance with a set of general duties which are detailed in the Companies Act 2006. As part of their induction, Directors are briefed on their duties and they are regularly updated by both the Company Secretary or external advisers. Directors may also seek advice on their duties at any time, either via the Company Secretary or externally. More details are set out in the Corporate Governance section on page 33. Section 172 Statement The Directors are required by the Companies Act 2006 to act in the way they consider, in good faith, would most likely promote the success of the Company for the beneﬁt of its shareholders as a whole and in doing so, are required to have regard to the following: 16 I S T R A T E G C R E P O R T l The likely consequences of any decision in the long term; l The interests of the Company’s employees; l The need to foster the Company’s business relations with suppliers, customers and others; l The impact of the Company’s operations on the community and the environment; l The Company’s reputation for high standards of business conduct; and l The need to act fairly as between members of the Company. The Group has 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 31 to 36. The Executive Chairman’s Statement and the rest of the Strategic Report describe the Group’s activities, strategy and future prospects including considerations for long-term decision making. The Board considers the Group’s major stakeholders to be its shareholders, its employees, suppliers, collaboration partners and those involved in clinical trials. Overview as to how the board performed its duties to shareholders The Board is committed to openly engaging with the Company’s shareholders and recognising the importance of an effective dialogue. It is important that shareholders understand the Group’s strategy and objectives, so these must be explained clearly and feedback received and issues raised carefully considered. Details of shareholder engagement are set out in sections 2 and 10 of the Corporate Governance Report on pages 31 and 36. Key decisions Key decisions taken by the Board included: l strategic realignment, focusing the Company’s resources on the exosome and iPSC research platforms. l organisational re-structuring to align with the needs of the business and to focus ﬁnancial and personnel resources accordingly ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 17 Directors’ Duties continued Employees The Group is a relatively small organisation and Directors have regular day-to-day contact with employees at all levels, both formal and informal. The Executive Chairman and CFO regularly brief employees on developments in the business and conduct 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. Business reputation The Group operates in a highly regulated sector and the Board is committed to maintaining the highest standards of conduct. Staff behaviour is governed by appropriate policies, including anti-bribery policies, supported by a whistle-blowing process. There were no reported incidents in relation to these policies in the year ended 31 March 2023. 17 I S T R A T E G C R E P O R T ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 18 Sustainability 18 I S T R A T E G C R E P O R T The Directors believe that operating the business responsibly is key to its long-term future and success. People The Group relies for its success on the intellectual qualities of its employees. Therefore, it seeks to recruit and retain highly skilled and well-qualiﬁed employees. Reward The Group recognises the importance of a fair and competitive reward package which seeks to incentivise high performance and align the interests of the employees and the Group. Salaries are competitive, and the bonus scheme is based upon the attainment of both personal and corporate objectives. The Group also offers pension entitlement and health insurance or gym membership. Details of the Group’s employee share schemes are set out in note 26 to the ﬁnancial statements. Diversity The Board believes in a diverse and gender balanced workforce and the Group’s Equal Opportunities Policy ensures the provision of equal opportunities in all areas of employment. At 31 March 2023 the Group employed 13 men and 13 women across a diverse range of backgrounds and had 20% female representation on the Board with 33% women on the Senior Management Team. Details of Board membership are on pages 23 to 25 and the Senior Management Team on pages 26 to 27. Employee engagement Employee engagement is described in the Section 172 Report on page 17. Development Employees have signiﬁcant opportunities for learning and development, often identiﬁed from the annual appraisal process. Examples include PhD studies, process management and quality management skills such as Six Sigma Black Belt, as well as soft skills courses and various formal training courses identiﬁed as part of employees’ annual personal development plans. Health and safety Keeping its employees safe is a priority for the Group. A Health and Safety (H&S) Committee meets regularly, monitors performance and drives improvements through H&S Committee representatives. A number of employees work in a laboratory environment and are trained and required to comply with the relevant regulations and best practice. The H&S Committee reports to the Group’s Senior Management Team and the Board. The Group also offers Employee Wellbeing support. Policies and procedures The Group has a comprehensive Employee Handbook and supporting policies which set standards for ensuring that the Group’s business activities are conducted in a responsible manner for the beneﬁt of its shareholders, employees, research partners and suppliers. The Board believes that ensuring employees understand their responsibilities and act in an ethical way is vital to the Group’s future success. Our social impacts The Group endeavours to maintain links with universities and local schools. University students and schoolchildren have visited the Pencoed site and been given an introduction to practical research based science. The Group has supported PhD research, and placements are provided from time to time. Environmental impact Due to the nature of the business, the Board considers that the Group has a low environmental impact. The Group seeks to minimise any environmental impact of its operations and complies with relevant regulations and legislation. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 19 Risks and Uncertainties Risk Potential impact Mitigation action/control 19 I S T R A T E G C R E P O R T Clinical and regulatory risk are signiﬁcant There inherent risks in developing stem cell or stem cell- based exosome therapies for commercialisation due to the long and complex development process. Any therapy that we or our partners/licensees wish to offer commercially in the future to the public must be put through extensive research, pre-clinical and clinical development, all of which takes several years and is extremely costly. The regulatory process is both complex and multi- jurisdictional. Clinical potential impact The Group or licensed partners may fail to successfully develop a drug candidate incorporating the Group’s stem cell or delivery technologies because it cannot be demonstrated in clinical trials that it is safe and efﬁcacious. The Group and its partners/licensees may fail to successfully out-license products that have been developed and/or products may be returned from partners. Delays in achieving regulatory approval of any product utilising the Group’s stem cell or delivery technology may impose substantial costs on the business. If a product is approved, the regulators may impose additional requirements, for example, restrictions on the therapy’s indicated uses or levels of the reimbursement receivable. Once approved, the product and its manufacture will continue to be reviewed by the regulators and may be withdrawn or restricted. Regulatory potential impact Reduction of an income stream through regulation could adversely affect the commercial viability of a drug product. Withdrawal of a drug product by a particular regulatory agency would prevent sale in that particular territory and may be followed by regulators in other territories. will expertise The Group’s internal drug delivery development and scientiﬁc knowledge in its targeted areas its partners/licensees to develop therapeutic products in a manner which will substantially mitigate, but which cannot eliminate this risk in the future. enable The Group looks to employ suitably qualiﬁed and experienced staff. It also consults, where necessary, with regulatory advisers and regulatory approval bodies to ensure that regulatory requirements are met. Additionally, the Group seeks to foster a culture where quality is a key priority. incorporating The Group will seek via its partners/licensees to take drug candidates, the Group’s stem cell or delivery technology, to the clinic by working in partnership with other parties. This will increase the pool of expertise available to the Group and mitigate further clinical and regulatory risks. Both the Group and its clinical and manufacturing partners comply with Good Clinical Practice and Good Manufacturing Practice and the Group employs rigorous processes in its research and development of therapeutic products. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 20 Risks and Uncertainties continued Risk Potential impact Mitigation action/control There is a risk that intellectual property may become invalid or expire before, or soon after, commercialisation of a drug product and the Group may be blocked by other companies’ patents and intellectual property. The Group invests signiﬁcantly in maintaining and protecting this intellectual property through the use of expert lawyers and patent agents to reduce the risks over the validity and enforceability of our patents. The protection of the Group’s intellectual property is a signiﬁcant the throughout consideration Group’s contracting activity. 20 I S T R A T E G C R E P O R T Intellectual property risk to for strategy property Intellectual remains protection the fundamental Group’s of developing novel delivery the technologies delivery of novel drug candidates. The Group’s ability to stop others making a drug, using it or selling the invention or proprietary by obtaining and maintaining protection is critical to our success. The Group manages a portfolio of patent patents and which applications underpin its research and development programmes. rights reputable The Group utilises manufacturing contract organisations, experienced in meeting the requirements of Good Manufacturing Practice. The Group maintains contractual relationships with key manufacturers and suppliers to ensure availability of supply and sufﬁcient notice of disruption. Additionally, the Group seeks to avoid reliance upon any single supplier or manufacturer. The Group continually develops its manufacturing processes and is building its in-house capabilities to reduce its reliance on third parties. and Manufacturing potential impact Could impact speed of development and the ability to sell a drug product on a commercially viable scale. is subject to Product manufacture continual control and regulatory products must be manufactured in accordance with Good Manufacturing Practice. Any changes to the approved process may require further regulatory approval. Availability of raw materials is extremely important to ensure that manufacturing campaigns are performed on schedule. Supply potential impact Substantial cost increases and delays in production, which could adversely the Group’s activities, impact on ﬁnancial results and cash liquidity. Manufacturing supply risk The Group’s and its partners’/licensees’ ability to successfully manufacture and scale up production processes is vital to the and development commercial viability of any product. ReNeuron Group plc 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 21 Risks and Uncertainties continued Risk Potential impact Mitigation action/control These risks may adversely affect the Group’s ﬁnancial results and cash liquidity. Financial risk The ﬁnancial risks faced by the Group include foreign currency risk, liquidity risk and risk associated with cash held on deposit with ﬁnancial institutions. The Board reviews and agrees policies for managing each of these risks. The Group’s main objectives in using ﬁnancial instruments are the maximisation of returns from funds held on deposit, balanced with the need to safeguard the business. The Group does not enter currency contracts. The Group holds currency in US dollars and euros to cover short and medium-term expenses in those currencies. the assets of forward into 21 I S T R A T E G C R E P O R T Fundraising risk and inception The Group has incurred considerable losses since its is dependent upon equity, partnerships and public grant ﬁnancing. It does not currently have any revenue approved generating products/technologies although it does generate from revenue some partner collaborations. The Group may not be able to raise additional funding that will be needed to support its delivery technologies’ development efforts. Any new equity funds raised may lead to dilution of existing investors. In the light of the strategic changes to the business in the year and the inability to raise additional funds in the latter part of the year, the Board considers this risk to have increased in comparison with previous years. The Group is continually seeking business development opportunities which enable it to support future costs of its exosomes development of platform and other proprietary drug delivery technologies. the emphasis Additionally, the Board places considerable on communication with shareholders and potential to maximise the chances of successful future fundraising. investors, Cyber risk There is risk that third parties may seek to disrupt the Group’s business or perpetrate acts of fraud using digital media. Loss of IT systems for a signiﬁcant period may result in delays in the development of drug products for ReNeuron or partners and for platform developments. Fraud may result in ﬁnancial loss. For further information, please refer to the Directors’ Report on the Corporate page 29 and Governance Section on pages 31 to 36. that protects focused on is The Group maintaining a robust and secure IT environment its corporate data and systems. IT systems continuously monitored and upgraded and employees are trained to be aware of the cyber associated risks. security and are Site disruption risk and system Unexpected events could disrupt the business by affecting its key facility, critical equipment, IT systems or a number of employees. Loss of IT systems for a signiﬁcant period or key employees may result in delays in the development of drug products for ReNeuron or partners and for platform developments. The Group has developed a business continuity plan to ensure that it can respond effectively to critical identiﬁed equipment will have active service contracts in place. risks. All Business continuity insurance is in place. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp01-pp22.qxp 15/06/2023 19:08 Page 22 Risks and Uncertainties continued Risk Potential impact Mitigation action/control Staff turnover risk The Group is dependent upon its ability to attract and retain highly qualiﬁed and skilled staff. Loss of key staff could delay the development of drug products for ReNeuron or partners and for platform developments. 22 I S T R A T E G C R E P O R T The Group offers attractive employment packages, including share incentive plans, and actively encourages employee engagement the business. in Employees also have signiﬁcant learning and for opportunities development as well as promotion opportunities born out of the Group’s and succession planning processes. appraisal staff Risks associated with a global pandemic and associated public health measures The Group’s research and development activities either for itself or partners may be delayed and additional costs incurred. The Group has demonstrated its ability to continue its research and development using modiﬁed working practices. activities In any future pandemic, governments may institute public health measures similar to those used in respect of COVID-19, which may constrain economic activity and Group’s the inhibit activities. Russia/Ukraine war The Russia/Ukraine war has stimulated surges in energy and raw material costs and also dampened investor conﬁdence. The Russia/Ukraine War could adversely affect the Group’s operations through increased costs, possible supply chain interruptions and reduced investor appetite. There is also increased risk of cyber-attacks. The Group is a low energy user and will seek to manage cost its normal pressure procurement processes. The Group’s cyber risk measures are described above. through In addition, and in common with other small biotechnology companies, the Group is subject to a number of other risks and uncertainties, which include: l the early stage of development of the business; l availability and terms of capital needed to sustain operations, and failure to secure partnerships that will fund further pre-clinical development; l competition from other companies and market acceptance of its products; and l its reliance on consultants, contractors and personnel at third-party research institutions. Pages 2 to 22 of this Annual Report and Accounts comprise the Strategic Report for the Group, which has been prepared in accordance with chapter 4A of part 15 of the Companies Act 2006. Approved by the Board and signed on its behalf by: Iain Ross Executive Chairman 15 June 2023 ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 23 Board of Directors Iain Ross Executive Chairman N&CG (Chair) John Hawkins Chief Financial Ofﬁcer & Company Secretary Appointed Iain Ross was appointed to the Board as Non- Executive Chairman in July 2021. He has assumed Executive responsibility in the absence of a CEO. Appointed John Hawkins joined ReNeuron in October 2014 and was appointed Chief Financial Ofﬁcer in September 2022. External Appointments Currently Iain is Non-Executive Chairman at Silence Therapeutics PLC (NASDAQ), Kazia Therapeutics Limited (ASX/NASDAQ) and a Non-Executive Director of BiVitriX Therapeutics plc. Experience and skills Iain Ross is a highly experienced board director with a career in the international life sciences and technology sectors that spans 40 years. He held senior commercial roles at Sandoz, Fisons and the Hoffman-La Roche before moving biotechnology sector where he has been chairman, CEO and director of international biotechnology companies including Celltech Group plc, Quadrant Healthcare plc and Redx Pharma plc. several into Mr Ross is a qualiﬁed Chartered Director, Fellow of the Institute of Directors and Honorary Fellow of Royal Holloway, London University. Experience and skills John is an experienced ﬁnance professional with a breadth of experience gained within a variety of businesses, from large PLCs to family-owned SMEs. He joined ReNeuron, after leaving his role as Finance Director of an insurance business, having previously worked for a number of years in the ﬁnancial services sector where he specialised in business partnering, helping to drive growth and proﬁtability. During this time, he played a lead role in a number of acquisitions and played a key role in the sale of a division of Standard Chartered Bank to The Lloyds Banking Group. John graduated from university with a 1st class honours degree in industrial chemistry and started his career with KPMG, where he qualiﬁed as a Chartered Accountant. 23 G O V E R N A N C E ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 24 Board of Directors continued 24 G O V E R N A N C E Barbara Staehelin Senior Independent Non-Executive Director Dr. Mike Owen Non-executive Director Audit (Chair), N&CG, Rem Rem (Chair), N&CG, Audit Appointed Barbara Staehelin was appointed to the Board as Senior Independent Non-Executive Director in July 2021. External Appointments Barbara is Non-Executive Chair for Resistell AG. She is a board member at Assura Group, a Swiss medical insurance company, where she is President of the Audit and Risk Committee. She is also co-founder and Chair at Axicos AG. Experience and skills Barbara Staehelin began her professional career in management consultancy, focusing on healthcare at McKinsey & Co., Inc. She has also served as a member of the Global Executive Committee at F. Hoffman-La Roche Diagnostics. Her wide experience both in senior leadership roles and in founding companies has given her extensive high-level exposure to commercial, regulatory and governance matters in the biotech sector. Ms. Staehelin holds a Directors Certiﬁcate from Harvard University, USA, an MBA from INSEAD Fontainebleau, France and an MSc in biochemistry from ETH Zurich. Appointed Dr Mike Owen was appointed to the Board in December 2015. External Appointments Mike currently serves as a Director of Zealand Pharma, Sareum Holdings plc and Ossianix Inc. He is also a member of the scientiﬁc advisory board at Avacta Group plc. Experience and skills Mike’s career in biotech, the pharmaceutical industry and academia spans more than 40 years. He was formerly senior vice president for biopharmaceuticals research at GlaxoSmithKline and was also a founder and chief scientiﬁc ofﬁcer of Kymab Ltd, an antibody- based biotech company. He has also previously served as a director for BLINK Biomedical SAS. For many years he held a research position at the Imperial Cancer Research Fund (now “CR-UK”) and he has previously served on the scientiﬁc advisory board of the CRT Pioneer Fund LP. He is also a member of the European Molecular Biology Organisation. He is a Fellow of the Academy of Medical Sciences. ReNeuron Group plc 25 G O V E R N A N C E 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 25 Board of Directors continued Martin Walton Non-executive Director Rem, N&CG, Audit Appointed Martin Walton was appointed to the Board in March 2022. External Appointments Martin currently serves as Chairman and CEO of Bradshaw Consulting Ltd. He is CEO of virtual biotech Excalibur Medicines Ltd, Board Director of Interrad Medical and a Board Member of the Liverpool Life Sciences Accelerator Partnership. Experience and skills Martin spent 25 years in global investment banking and asset management, culminating as vice chair in charge of Wholesale and Commercial Banking for Europe and Asia Paciﬁc at Toronto Dominion Bank. Martin is co-founder of LSE-listed Arix Bioscience plc (LSE: ARIX) and since 2010, he has been an active VC/PE investor, portfolio manager, and advisor in life sciences involving a number of executive and non executive positions, completing over 25 transactions (spinouts, ﬁnancings, M&A, IPOs and divestitures) and has raised over £1 billion in investment and co- investment capital. In addition to a wealth of experience in the life sciences sector, he also has extensive governance, oversight, audit committee and risk committee experience as well as speciﬁc experience in start-up, growth (organic and acquisition), turnaround and consolidation strategies. Key: Committees Audit - Audit committee Rem – Remuneration committee N&CG - Nominations and Corporate Governance committee ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 26 Senior Management 26 G O V E R N A N C E Randolph Corteling Chief Scientiﬁc Ofﬁcer Simon Dew Chief Business Ofﬁcer Appointed Dr Randolph Corteling rejoined ReNeuron as Vice President of Research in March 2022 and was appointed Chief Scientiﬁc Ofﬁcer in September 2022. Experience and skills Dr Randolph Corteling has 24 years’ experience in medical research and drug discovery, spanning academia, biotechnology and the pharmaceutical industry. He gained his PhD in Medical and Surgical Sciences at Nottingham University, followed by three years as a Heart and Stroke Foundation Postdoctoral Fellow at the University of Calgary, Canada. In 2007 he joined ReNeuron as a senior member of the research team where he established a deep understanding of stem cell biology and in particular the role of extracellular vesicles in cell to cell communication. In 2011 he was appointed Head of Cell Biology where he established the ﬁrst exosome programmes at ReNeuron, which are now a major commercial opportunity for the Company. He was later promoted to Head of Research at ReNeuron. At Evox Therapeutics, a private company focused on exosome-based therapeutics for rare diseases, Dr Corteling led its Disease Biology and Exosome Payloads teams. Appointed Simon Dew was appointed Chief Business Ofﬁcer in November 2022. Experience and skills Simon joined ReNeuron from Mereo BioPharma Plc, where he was Vice President Business and Corporate Development. Prior to that he was Vice President Business Development at Evox Therapeutics, where he was responsible for several transformative deals in the exosome space. in Simon has over 25 years’ experience pharmaceutical Business Development, Corporate Development and Corporate Strategy, responsible for multiple BD&L and M&A transactions. Over his career, he has held senior leadership roles in Pharma and Biotech, including VP Corporate Strategy at Gyroscope Therapeutics, prior to its acquisition by Novartis and as SVP Corporate Strategy and Business Development as Astellas Pharmaceuticals, as well as operational leadership roles in Quintiles (IQVIA), Parexel, Phytopharm plc and GSK/SB, in Europe and in international markets. He is currently on the Business Development Board of Sunstone Capital a Danish Venture Capital Company. He holds a degree in Pharmacy and is a member of the Royal Pharmaceutical Society of Great Britain. ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 27 Senior Management continued Suzanne Hancock Chief Operations Ofﬁcer Professor Stefano Pluchino Chair of the Scientiﬁc Advisory Board Appointed Suzanne Hancock was appointed Chief Operations Ofﬁcer in September 2022, having joined ReNeuron as a Programme Manager in 2017. Appointed Dr Stefano Pluchino was appointed Chair of the Scientiﬁc Advisory Board in September 2022 having previously served as Chief Scientiﬁc Ofﬁcer from May 2021. Experience and skills Suzanne has broad experience of both leadership and technical scientiﬁc roles. She joined ReNeuron from GE Healthcare, where she spent almost 12 years and held a number of managerial roles forming and leading global cross functional teams engaged in the development and delivery of new products in the Life Sciences and Cell Therapy industry. Suzanne began her career as a scientist with Amersham International where she was involved in developing cell-based assays and high content image analysis platforms for drug development. She holds a BSc in Applied Biological Sciences and in 2019 successfully completed an MSP Practitioner qualiﬁcation at Cardiff University. is of Professor Experience and skills Stefano Regenerative Neuroimmunology and Honorary Consultant at the University of Cambridge since 2010. He obtained his MD and PhD at the University of Siena, Italy and progressed to two consecutive post doctorate appointments at the San Raffaele Scientiﬁc Institute in Milan. in of the Stefano has more than 230 publications to his credit and is internationally recognised as a leader and pioneer regenerative ﬁeld neuroimmunology. He was the recipient of the 2003 European Charcot Foundation (ECF) Award, the 2006 Sorono Foundation Multiple Sclerosis Award, the 2007 Rita Levi-Montalcini Award, the 2009 Italian Ministry of Health Young Investigator Award and the 2010 International Royan Award for outstanding research in Stem Cell Biology and Technology. 27 G O V E R N A N C E ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 28 Directors’ Report For the year ended 31 March 2023 28 G O V E R N A N C E The Directors present their report and the audited consolidated ﬁnancial statements of the Company for the year ended 31 March 2023. Presentation of ﬁnancial statements The Group ﬁnancial statements include the ﬁnancial statements of the Company and its subsidiary undertakings made up to 31 March 2023. Future developments Future developments are set out in the Strategic Report on pages 2 to 22. Results and dividends The results for the year are given in the Group statement of comprehensive income set out on page 51. The Directors do not recommend the payment of a dividend (2022: £Nil). Research and development During the year, the Group incurred research and development costs of £4,463,000 (2022: £8,068,000) all charged to the statement of comprehensive income. Financial risk management Financial risk management is set out in note 23 to the ﬁnancial statements and also in risks and uncertainties on pages 19 to 22. Directors The Directors who held ofﬁce during the year and up to the signing of the ﬁnancial statements, unless otherwise stated, are listed below: Iain Ross Executive Chairman John Hawkins ACA (appointed 14 September 2022) Chief Financial Ofﬁcer Barbara Staehelin Senior Independent Non-Executive Director Dr Mike Owen Non-Executive Director Martin Walton Non-Executive Director Catherine Isted resigned on 31 December 2022. Qualifying third-party indemnity Certain Directors beneﬁted from qualifying third-party indemnity provisions in place during the year and to the date of signing the ﬁnancial statements. ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 29 Directors’ Report continued 29 G O V E R N A N C E Going concern The operations of the Group and Company are ﬁnanced from funds that have been raised from share placings, commercial partnerships and grants. The goal of the Group is to achieve the commercial validation of the CustomExTM platform by generating in vivo data aimed at differentiating the platform from that of the Group’s competitors. In addition, the plan is to realise value from the Group’s other assets via potential out-licencing and/or disposal. The Directors continue to seek opportunities to secure further revenues/funding sufﬁcient for the short to medium term future needs of the business and favourable in vivo data should enhance those opportunities. As previously noted, in January 2023, the Group undertook a restructuring of the business with the underlying cost base reduced and resources re-aligned to meet the immediate needs of the business. Based on the Directors base case assessment, the current cash runway is forecast to extend until July 2024, at which point a further capital injection would be required. The base case assessment includes assumed upfront payments over the next 6 to 12 months from potential future partners and collaborators on the Group’s exosome platform, intellectual property (IP) and legacy assets and potential further equity fund raising. The Directors recognise that not all of these assumed inﬂows are fully within the control of the Group and Company and have prepared a further plausible but downside scenario which excludes these inﬂows and indicates a cash runway until February 2024. Based on the forecasts prepared and considered by the Board, the Directors consider it appropriate to continue to adopt the going concern basis in the preparation of these ﬁnancial statements. However, there is no guarantee that attempts to secure adequate cash inﬂows from the Group’s exosome platform, IP and legacy assets or through equity fund raising with the timescales stated above will be successful. These conditions indicate the existence of a material uncertainty, which may cast signiﬁcant doubt about the Group’s and Company’s ability to continue as a going concern. These ﬁnancial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern. Engagement with suppliers, customers and others The Group and Company’s engagement with suppliers, customers and others is detailed in the Strategic Report. Energy and carbon reporting The Company and its subsidiaries are low energy users and also fall below Streamlined Energy and Carbon Reporting requirements, hence no energy usage information is provided. Statement of Directors’ responsibilities in respect of the ﬁnancial statements The Directors are responsible for preparing the Annual Report and Accounts 2023 and the ﬁnancial statements in accordance with applicable law and regulation. Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the Directors have prepared the Group and the Company ﬁnancial statements in accordance with UK-adopted international accounting standards. Under company law, 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 Company and of the proﬁt or loss of the Group for that period. In preparing the ﬁnancial statements, the directors are required to: l select suitable accounting policies and then apply them consistently; l state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial statements; l make judgements and accounting estimates that are reasonable and prudent; and l prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 30 Directors’ Report continued 30 G O V E R N A N C E The Directors are responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for keeping adequate accounting records that are sufﬁcient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Group and Company and enable them to ensure that the ﬁnancial statements comply with the Companies Act 2006. The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. Directors’ conﬁrmations In the case of each Director in ofﬁce at the date the Directors’ Report is approved: l so far as the Director is aware, there is no relevant audit information of which the Group’s and Company’s auditors are unaware; and l they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group’s and Company’s auditors are aware of that information. Independent auditors The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in ofﬁce and a resolution concerning their reappointment will be proposed at the Annual General Meeting. Annual General Meeting The date and location of the Annual General Meeting of the Company will be communicated separately. On behalf of the Board John Hawkins Chief Financial Ofﬁcer 15 June 2023 ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 31 Corporate Governance 31 G O V E R N A N C E The Directors remain committed to maintaining high standards of transparency, ethics and corporate governance. The Quoted Companies Alliance Corporate Governance Code (The QCA Code) ReNeuron has adopted, as far as possible, the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”). The QCA Code identiﬁes ten principles to be followed in order for companies to deliver growth in long-term shareholder value, encompassing an efﬁcient, effective and dynamic management framework accompanied by good communication to promote conﬁdence and trust. The following sections set out the ways in which the Group applies the ten principles of the QCA Code in support of the Group’s medium to long-term success. The Investor Centre (Corporate Governance section) on the Group’s website also contains an index setting out the locations of relevant disclosures on the website and/or in the Group’s Annual Report pertaining to the Group’s application of the QCA Code. 1. Establish a strategy and business model which promote long-term value for shareholders The strategy and business operations of the Group are set out in the Strategic Report on pages 2 to 22. The Group’s strategy and business model, and amendments thereto, are developed by the Executive Chairman, the Chief Financial Ofﬁcer and the rest of the senior management team, and approved by the Board. The senior management team, is responsible for implementing the strategy and managing the business at an operational level. The Group’s overall strategic objective is to develop a best-in-class exosomes delivery platform, harnessing its unique stem cell technologies to develop off-the-shelf treatments for diseases with signiﬁcant unmet needs, either alone or with partners. The Group deploys its ﬁnancial and other resources towards gaining collaborative development opportunities in areas of scientiﬁc and commercial interest for its exosome and induced pluripotent stem cell (iPSC) technology platforms. Concurrently, it continues to seek further out-licensing opportunities for its legacy CTX and hRPC therapeutic products, which have already been licensed to Fosun Pharma in China. Ultimately, the Directors believe that this approach will deliver signiﬁcant long-term value for shareholders if the data are compelling. The short term strategy of the Group is to realise monetary value in a platform technology or a therapeutic product via high-value out-licensing deals with pharmaceutical or biotechnology companies with interests in the relevant therapeutic ﬁeld and/or geographical territories. In the medium term, if resources permit, and with shareholder support, the Group may choose to advance a therapeutic candidate through early-stage clinical development unpartnered in order to increase value in the programme prior to out-licensing to a suitable partner to complete further clinical development. The Group operates in an inherently high risk and heavily regulated sector and this is reﬂected in the principal risks and uncertainties set out on pages 19 to 22. In executing the Group’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with these key risks and uncertainties, and will seek to deploy the identiﬁed mitigation steps to manage these risks as they manifest themselves. 2. Seek to understand and meet shareholder needs and expectations The Group seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Group’s strategy and progress and to understand the needs and expectations of shareholders. Beyond the Annual General Meeting, the Executive Chairman, Chief Financial Ofﬁcer and, where appropriate, other members of the senior management team meet regularly with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 32 Corporate Governance continued 32 G O V E R N A N C E The Group’s investor relations activities encompass dialogue with both institutional and private investors. The Company is a regular presenter at private investor events, providing an opportunity for those investors to meet with representatives from the Group in a more informal setting. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Group’s employees, partners, suppliers, regulatory authorities and the patients that have been involved in the Group’s clinical development activities. The Group’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups, while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the beneﬁt of its members as a whole. The Group endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with the Group’s longer-term strategy. The Group takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible. Through the various procedures and systems it operates, the Group ensures full compliance with health and safety and environmental legislation relevant to its activities. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are appropriate to a business of this size and complexity and are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually. Key elements of the system of internal control include: l setting and communicating clear strategic goals; l a comprehensive budgeting process is completed once a year and is reviewed and approved by the Board; l the Group’s results, compared with the budget, are reported on a monthly basis; l the Group reforecasts the budget as necessary during the ﬁnancial year, with the results reviewed and approved by the Board; l working within a deﬁned set of delegated authorities, approved by the Board; and l all material contracts are reviewed by an Executive Director of the Company and external legal advice is taken as appropriate. The Group’s regulated activities are governed by appropriate Standard Operating Procedures. Staff behaviour is governed by appropriate policies including an Anti-Bribery Policy. 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. The senior management team meet at least twice monthly to consider new risks and opportunities presented to the Group, making recommendations to the Board and/or Audit Committee as appropriate. A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 19 to 22. ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 33 Corporate Governance continued 33 G O V E R N A N C E 5. Maintain the Board as a well-functioning, balanced team led by the Chair At 31 March 2023, the Board comprised the Executive Chairman, three Non-Executive Directors, and one Executive Director. Directors’ biographies are set out on pages 23 and 25. All of the Directors are subject to election by shareholders at the ﬁrst Annual General Meeting after their appointment to the Board and will continue to seek re-election at least once every three years. The Board is responsible to the shareholders for the proper management of the Group and meets at least six times a year to set the overall direction and strategy of the Group, to review scientiﬁc, operational and ﬁnancial performance and to advise on management appointments. All key operational and investment decisions are subject to Board approval. A schedule of Matters Reserved for the Board may be found in the Corporate Governance Policies on the Group’s website. There were 13 formal Board meetings held in the year ended 31 March 2023. 11 of these meetings were held remotely. A summary of Board and Committee meetings attended in the year ended 31 March 2023 is set out below: Board meetings Nominations and Corporate Governance Committee Audit Committee Remuneration Committee Director Attended Eligible Attended Eligible Attended Eligible Attended Eligible I Ross J Hawkins B Staehelin M Owen M Walton C Isted 13 8 13 11 13 9 13 10 13 13 13 11 – – – – – – – – – – – – – – 2 2 2 – – – 2 2 2 – – – 4 4 4 – – – 4 4 4 – The Board considers itself to be sufﬁciently independent. The QCA Code suggests that a board should have at least two independent Non-Executive Directors. Barbara Staehelin is Senior Independent Non-Executive Director (SINED). She, Dr Mike Owen and Martin Walton are regarded as independent Non-Executive Directors under the QCA’s Code’s guidance for determining such independence. The Board has deemed that Iain Ross who is Executive Chairman, is not independent because his remuneration package includes eligibility to receive share options with a performance condition. Non-Executive Directors receive their fees in the form of a basic cash fee. Non-Executive Directors do not receive share options as part of their remuneration package. The current remuneration structure for the Board’s Non-Executive Directors is deemed to be proportionate and in line with general market practice. The Executive Chairman has received share options which are set out in the Directors’ Remuneration Report on page 41. 6. Ensure that between them, the Directors have the necessary up-to-date experience, skills and capabilities The Board considers that all of 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. Directors’ biographies are set out on pages 23 to 25. The Board regularly reviews its composition to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group. The Executive Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational environment and to ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 34 Corporate Governance continued 34 G O V E R N A N C E the Directors’ responsibilities as members of the Board. During the course of the year, Directors received updates from various external advisers on a number of corporate governance matters. Directors’ service contracts or appointment letters make provision for a Director to seek personal advice in furtherance of their duties and responsibilities, normally via the Company Secretary. 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board has a process for evaluation of its own performance, that of its committees and individual Directors, including the Executive Chairman. This process is conducted biennially and last took place in April 2021 and is scheduled to be completed in June 2023. The Executive Chairman and SINED are managing the 2023 evaluation process. Evaluation criteria include Controls and Procedures, Strategic Aims, Entrepreneurial Leadership and Communications and Relationships and will be conducted through a series of questionnaires and face to face interviews. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning. 8. Promote a corporate culture that is based on ethical values and behaviours The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations. These values are enshrined in the written policies and working practices adopted by all employees in the Group. An open culture is encouraged within the Group, with regular communications to staff regarding progress and staff feedback regularly sought. Regular meetings are held with an opportunity for anonymous Q&A and suggestions on any aspect of the business. The Executive Committee regularly monitors the Group’s cultural environment and seeks to address any concerns that may arise, escalating these to Board level as necessary. The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility in this area. The Group operates a Health and Safety Committee, which meets bi- monthly to monitor, review and make decisions concerning health and safety matters. The Group’s health and safety policies and procedures are enshrined in the Group’s documented quality systems, which encompass all aspects of the Group’s day-to-day operations. 9. Maintain governance structures and processes that are ﬁt for purpose and support good decision-making by the Board The Board has overall responsibility for promoting the success of the Group. The Non-Executive Directors are responsible for bringing independent and objective judgement to Board decisions. Following the departure of the CEO, the Chairman has assumed executive responsibility for the running of the business and has regular meetings (at least every two weeks) with the SINED to discuss key developments and ongoing plans. The Chairman is also 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 Chairman has overall responsibility for corporate governance matters in the Group. Senior Independent Non-Executive Director The principal role of the SINED is to support the Executive Chairman in their role; to act as an intermediary for other Non-Executive Directors when necessary; to lead the Non-Executive Directors in the oversight of the Executive Chairman; and to ensure there is an appropriate division of responsibility between the Executive Chairman and the CFO and leadership team. The SINED provides an alternative to the Executive Chairman or CFO for communication with shareholders, providing an additional conduit for issues, concerns or observations to be expressed. Additionally, the SINED ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 35 Corporate Governance continued 35 G O V E R N A N C E will lead the Non-Executive Directors in the annual performance evaluation of the Executive Chairman, including the working relationship between the Executive Chairman, the CFO and the leadership team. The Executive Chairman is responsible for implementing the strategy of the Board and managing the day-to- day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with. Board committees The Board has established an Audit Committee, Remuneration Committee and Nominations and Corporate Governance Committee with formally delegated duties and responsibilities. Audit Committee The Audit Committee comprises Barbara Staehelin (Chair), Dr Mike Owen and Martin Walton. It normally meets twice a year, which the Board deems to be sufﬁciently frequent in order for the Committee to discharge its responsibilities in the normal course of annual events. It has responsibility for, amongst other things, planning and reviewing the Annual Report and Accounts and interim statements involving, where appropriate, the external auditors. The Committee also approves external auditors’ fees and ensures the auditors’ independence, as well as focusing on compliance with legal requirements and accounting standards. It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for reviewing and approving the annual ﬁnancial statements and interim statements remains with the Board. The Audit Committee Report is set out on pages 37 to 38. Remuneration Committee The Remuneration Committee comprises Dr Mike Owen (Chair), Barbara Staehelin and Martin Walton. It meets as required, but at least once a year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the speciﬁc remuneration packages for each of the Executive Directors. It also supervises the Company’s share incentive schemes and sets performance conditions for share options granted under the schemes. During the year ended 31 March 2023, the Remuneration Committee met 4 times. The Committee reviewed and approved: l the degree of achievement of objectives for the year ended 31 March 2022; l the corporate and personal objectives for the Group and Executive Directors for the year ended 31 March 2023; l the exercise of share options; l Executive and senior management remuneration; and l the granting of share options to Directors and employees. Award of share options Following the award of share options during the year ended 31 March 2023, the total outstanding options exceeded 10% of the total shares in issue. Whilst the 10% ﬁgure is regarded as best practice, the Board is conscious of the need to incentivise and retain valued employees in order to generate value for shareholders and is also mindful that many of the extant options are unlikely to become exercisable in the foreseeable future. Having consulted with several key investors, the Board therefore approved the award of options as set out in note 26. The Directors’ Remuneration Report is set out on pages 39 to 43. The Directors believe that this, together with the above mentioned summary of the work of the Remuneration Committee, constitutes sufﬁcient disclosure to meet the QCA Code’s requirement for a Remuneration Committee Report. Consequently, a separate Remuneration Committee Report is not presented. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 36 Corporate Governance continued 36 G O V E R N A N C E Nominations and Corporate Governance Committee The Nominations and Corporate Governance Committee comprises Iain Ross (Chair), Barbara Staehelin, Dr Mike Owen and Martin Walton. It meets as required and has responsibility for reviewing the size and composition of the Board, the appointment of replacement or additional Directors, the monitoring of compliance with applicable laws, regulations and corporate governance guidance and making appropriate recommendations to the Board. During the year ended 31 March 2023, the Nominations and Corporate Governance Committee did not meet, primarily because matters within its remit have been discussed by the full Board. Corporate Governance Policies The terms of reference of the above Committees are set out in the Company’s Corporate Governance Policies document, which is regularly updated and can be found in the Investors (Corporate Governance) section on the Group’s website. The Corporate Governance Policies also contain a schedule of matters speciﬁcally reserved for Board decision or approval and sets out the Company’s share dealing code and its public interest disclosure (“whistle-blowing”) policy and procedures. The background to the Corporate Governance Policies is set out in the Corporate Governance Memorandum. 10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group’s activities are clear, fair and accurate. The Group’s website is regularly updated and users can register to be alerted when announcements or details of presentations and events are posted onto the website. Historical Annual Reports and other governance-related material can be found on the Group’s website in the relevant sections in the Investor Centre section of the site. The results of voting on all resolutions in future General Meetings will be posted to the Group’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20% of independent shareholders. By order of the Board. Iain Ross Executive Chairman 15 June 2023 ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 37 37 G O V E R N A N C E Audit Committee Report For the year ended 31 March 2023 As Chair of the Audit Committee, I am pleased to present the Committee’s Report for the year ended 31 March 2023. The Audit Committee is a subcommittee of the Board and is responsible for ensuring effective governance over ﬁnancial reporting and internal controls. The Committee represents the interests of the shareholders in relation to the integrity of information and the effectiveness of audit processes in place. The Audit Committee consists of three Non-Executive Directors. It is chaired by me and its other members are Dr Mike Owen and Martin Walton. I am an independent Director and have relevant ﬁnancial experience. Audit Committee meetings are also attended, by invitation, by the Chief Financial Ofﬁcer and, where appropriate, other members of the Board. Representatives of the external auditors also attend by invitation and meet with the Audit Committee at least twice a year, with time allowed for discussion without any members of the Executive team being present, to allow the external auditors to raise any issues of concern. The Audit Committee acts independently of management to ensure that the interests of shareholders are protected in relation to the ﬁnancial reporting and internal controls. The principal duties of the Committee are to: l monitor the integrity of the Group’s ﬁnancial reporting including the review of signiﬁcant ﬁnancial reporting issues and judgements; l review and challenge whether appropriate accounting policies have been adopted, in particular for signiﬁcant or unusual transactions where different approaches are possible; l review the content of the Annual Report and ﬁnancial statements and advise the Board on whether, taken as a whole, it is fair, balanced, understandable and provides the information for shareholders to assess the Group’s performance, business model and strategy; l keep under review the adequacy and effectiveness of the internal ﬁnancial controls and internal control and risk management systems; l review and challenge, if appropriate, any signiﬁcant related party transactions; l oversee the external audit process including monitoring the external auditors’ independence, objectivity, effectiveness and performance; l review the Group’s systems and controls for detecting fraud and preventing bribery; and l monitor and review the Group’s whistle-blowing arrangements. The Audit Committee has primary responsibility for the relationship between the Group and the external auditors. This includes: l considering and recommending to the Board, to be put to shareholders for approval at the Annual General Meeting, in relation to the appointment, reappointment and removal of the Group’s external auditors; l considering the auditors’ independence, objectivity, qualiﬁcations and effectiveness; l reviewing the audit plan presented by the auditors and considering the risks identiﬁed therein; l reviewing the auditors’ ﬁndings reports on the Group’s Annual Report and Financial Statements; and l approving the level of fees paid to the auditors for audit and non-audit services. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 38 38 G O V E R N A N C E Audit Committee Report continued During the year ended 31 March 2023, the Audit Committee met twice. The Committee reviewed and approved the ﬁnancial statements and the auditors’ ﬁndings report for the year ended 31 March 2022, the interim results for the six months to 30 September 2022 and the external auditors’ plan and fee for the 2023 external audit. The Audit Committee considers risk areas in the ﬁnancial statements throughout the year and before the audit commences. It also approved an updated Whistle Blowing Policy. The Committee considered the following items to be areas of risk. The Group is expected to incur further costs as it continues to develop its technologies through the research and pre-clinical development pathway. The Group recognises this expenditure in line with the management’s best estimation of the stage of completion of each research and development project. This includes the calculation of accrued costs at each period end to account for expenditure that has been incurred. This requires management to estimate full costs to complete for each project and also to estimate its current stage of completion. The Committee pays particular attention to management’s estimates of these items, its analysis of any unusual movements and their impact on cost recognition. The Committee reviews the going concern basis upon which the accounts are prepared. The Group is in pre- clinical-stage development and suffers signiﬁcant planned operating losses from expenses incurred in research and development of its platform and therapeutic programmes, as well as from general and administrative costs. The Group expects to continue to incur signiﬁcant operating losses for the foreseeable future as it furthers its exosome platform and therapeutic programmes. The Committee has reviewed cash balances and short and long-term cashﬂow forecasts as well as plans to raise funding and considers the going concern basis to be appropriate, whilst highlighting a material uncertainty as further referenced in note 3 to the ﬁnancial statements. The Audit Committee has satisﬁed itself that the external auditor is independent. The Audit Committee has concluded that the external audit process was effective, that the scope of the audit was appropriate and that signiﬁcant judgements have been robustly challenged. A resolution for the reappointment of PricewaterhouseCoopers LLP as the statutory auditor will be proposed at the forthcoming Annual General Meeting. No formal recommendations other than the approval of the Interim Results and Annual Report and Financial Statements have been made to the Board by the Audit Committee and no external reports have been commissioned on ﬁnancial control processes during the year ended 31 March 2023. By order of the Board. Barbara Staehelin Chair – Audit Committee 15 June 2023 ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 39 39 G O V E R N A N C E Directors’ Remuneration Report For the year ended 31 March 2023 This report sets out the remuneration policy operated by the Company in respect of the Executive and Non-Executive Directors, as of the date of this report. No Director is involved in discussions relating to their own remuneration. Remuneration policy for Executive Directors The Remuneration Committee sets the remuneration policy that aims to align Executive Director remuneration with shareholders’ interests and to attract and retain the best talent for the beneﬁt of the Group. The Committee has sought independent advice when setting the remuneration policy. Executive Directors are appointed under service contracts with notice periods not exceeding 6 months. The basic contractual working week is 37.5 hours, but contracts stipulate that Executive Directors are required to work whatever hours are necessary in order for them to fulﬁl their Executive responsibilities. Remuneration for Executive Directors is composed of the following elements: Basic salary Basic salaries are reviewed annually and revised salaries take effect from the start of the ﬁnancial year. The review process is managed by the Remuneration Committee with reference to market salary data and the Executive’s performance during the year. Bonuses Annual bonuses are based on achievement of Group strategic and operational objectives, and personal performance objectives. The maximum annual bonus that may be payable in cash is set at 50% of base salary for the Executive Directors. This may be paid in cash or share options under the Company’s Long-Term Incentive Plan. Longer-term incentives In order to further incentivise Executive Directors and align their interests with shareholders, the Company operates a Long-Term Incentive Plan under which share options may be granted from time to time. The quantum of these awards is approved by the Remuneration Committee and are considered in line with market levels and consistent with positions held. Executive Directors are expected to build a direct stake in the Company’s shares over time, either through the purchase of shares in the market from time to time and/or through the future exercise of share options. The Company has the ability to grant share options under its active share option schemes which in accordance with best practice are ordinarily granted subject to a cap of up to 10% of total issued share capital in any ten- year period. The rules of the share options scheme give the Board the ﬂexibility to exceed this 10% limit. During the year, in accordance with the rules of the share option schemes, the Board approved the grant of share options to the Executive Chairman, Executive Director, senior management and staff which led to the 10% cap being exceeded. The Board took the decision following consultation with several key shareholders being conscious of the need to incentivise and retain valued employees in order to generate value for shareholders whilst also being mindful of the fact that many of the extant options were unlikely to become exercisable in the foreseeable future. Pension The Group operates a deﬁned contribution pension scheme, which is available to all employees. The Company contribution in respect of Executive Directors (excluding the Executive Chairman) is currently set at 10% of base salary. An Executive Director may choose to take some or all of this beneﬁt as a cash alternative, subject to the Company remaining cash neutral after relevant payroll taxes. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 40 40 G O V E R N A N C E Directors’ Remuneration Report continued Other beneﬁts Other beneﬁts provided are life assurance, private medical insurance and professional subscriptions, where relevant to the duties of the Executive Director (disclosed as part of Salaries and fees in the following remuneration table). Non-Executive Directors’ remuneration The remuneration of the Non-Executive Directors is set at a level that is sufﬁcient to attract and retain high-calibre non-executives who contribute to the business. Fee levels are determined by the Remuneration Committee with regard to market comparatives, Board Committee responsibilities and ongoing time commitments. Non-Executive Directors are appointed for an initial three-year term via an appointment letter from the Company, with a three months’ notice period, with the exception of the Executive Chairman who has a six months’ notice period. The appointment term is renewable for further three-year terms after the initial term has expired. Appointment letters stipulate that the Non-Executive Director is expected to commit sufﬁcient time to the role to meet the Company’s expectations. Non-Executive Directors receive their fees in the form of a basic cash fee. The Executive Chairman receives share options as part of his remuneration package. Details are set out below. Non-Executive Directors do not receive any pension, bonus or other beneﬁts from the Company. The remuneration of the Non-Executive Directors is reviewed by the Board annually. Directors’ emoluments The Directors received the following remuneration during the year: Executive Directors Iain Ross3,4,5 Catherine Isted2 John Hawkins1,5 Non-Executive Directors Barbara Staehelin Dr Mike Owen Martin Walton Salary and fees £'000 255 103 202 109 98 0 60 43 48 48 50 2 Year 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Bonus £'000 175 0 0 85 0 0 0 0 0 0 0 0 Payment in lieu of notice £'000 Beneﬁts in Kind £'000 Pension contributions £'000 Total £'000 0 0 150 0 0 0 0 0 0 0 0 0 0 0 2 1 2 0 0 0 0 0 0 0 0 0 20 10 10 0 0 0 0 0 0 0 430 103 374 205 110 0 60 43 48 48 50 2 1 Appointed as Chief Financial Ofﬁcer on 14 September 2022 on a base salary of £180,000. 2 Resigned 31 December 2022. 3 From February 2022, Iain Ross assumed temporary Executive responsibility which continued until the appointment of Catherine Isted as CEO. Mr Ross then resumed his role as Non-Executive Chairman. In recognition of the additional responsibility and in addition to his monthly Chairman/Director fees of £8,333 per month Mr Ross was paid an additional remuneration of £17,500 per month. Iain Ross continued to be paid £17,500 on a monthly basis until one month following the appointment of a new CEO in September 2022. Following appointment of a new CEO or after achievement of certain corporate objectives, Iain was eligible to receive a bonus of £175,000 on the understanding that he invested £75,000 of the net amount in Company shares. ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 41 41 G O V E R N A N C E Directors’ Remuneration Report continued 4 Following the departure of the CEO on 31 December 2022, Iain Ross was appointed as Executive Chairman, Iain Ross’s fees were increased to £250,000 per annum, together with a discretionary bonus available in each ﬁnancial year to a maximum of 50% of annual fees. 5 Additionally, in the event the shareholders approve a corporate merger or acquisition of the Company, Iain Ross and John Hawkins are eligible to receive a bonus equivalent to 100% of annual fees and 75% of annual salary respectively. The Directors, who held ofﬁce at the end of the year, and/or at the date of signing of the ﬁnancial statements, held the following interests in the Ordinary shares of the Company. Ordinary shares of 1p each 31 March 2023 31 March 2022 Number Number Iain Ross 400,000 – John Hawkins 147,668 – Barbara Staehelin 300,000 43,000 Dr Mike Owen 11,379 11,379 Martin Walton 15,000 15,000 During the year ended 31 March 2023, Iain Ross and John Hawkins received share options as set out in the tables below. At the date of grant, no gains arose. The Directors, who held ofﬁce at the end of the year, held the following interests in options over shares of the Company. Iain Ross Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Note 2 2 1 1 2 At 1 April 2022 Number 100,000 100,000 – – – 200,000 Lapsed during the year Number Granted during the year Number At 31 March 2023 Number Exercise price Exercise period* – – – – – – – – 100,000 £0.01 November 2021 – October 2031 100,000 £1.07 November 2021 – 300,000 300,000 October 2031 £0.315 August 2022 – July 2032 250,000 250,000 £0.50 March 2023 – 750,000 750,000 1,300,000 1,500,000 February 2033 £0.1025 March 2023 – February 2033 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 42 Directors’ Remuneration Report 42 G O V E R N A N C E continued John Hawkins Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved At 14 September 2022 Number Note Lapsed during the year Number Granted during the period Number At 31 March 2023 Number Exercise price Exercise period* 4 4 4 4 4 4 4 3 3 4 4,000 4,000 4,000 4,000 4,000 20,0001 50,000 250,000 – – 340,000 – – – – – – – – – – – – – – – – – – – 4,000 £3.45 September 2017 – 4,000 September 2024 £1.00 October 2018 – October 2025 4,000 £1.00 July 2019 – 4,000 July 2026 £1.00 September 2020 – September 2027 4,000 £1.00 September 2021 – September 2028 20,000 £0.01 April 2022 – 50,000 April 2029 £0.01 February 2024 – February 2031 250,000 £0.315 July 2023 – 250,000 250,000 July 2032 £0.315 February 2024 – February 2033 250,000 250,000 £0.1025 February 2024 – February 2033 500,000 840,000 1 12,288 of these shares are parallel options exercisable either as a non-tax advantaged option at an exercise price of £0.01 or as a tax-advantaged option at an exercise price of £2.22 Dr. Mike Owen At 1 April 2022 Number Note Lapsed during the year Number Granted during the year Number At 31 March 2023 Number Exercise price Exercise period* Options – unapproved Options – unapproved Options – unapproved Options – unapproved Options – unapproved 1 1 1 1 1 3,000 5,000 17,700 6,000 13,500 45,200 – – – – – – – – – – – – 3,000 £1.00 August 2016 – 5,000 17,700 July 2026 £1.00 October 2017 – September 2027 £0.01 October 2018 – September 2028 6,000 £0.01 May 2019 – April 2029 £0.01 March 2021 – February 2031 13,500 45,200 * The exercise periods indicate the earliest dates for which the options are exercisable subject to meeting the performance conditions disclosed in the following notes. Note 1: These options were issued under the Group’s Non-Executive Share option Scheme. They vest monthly over three years on a straight-line basis and carry no performance conditions. Note 2: These options were issued under the Group’s Non-Executive Share option Scheme. They vest monthly over three years on a straight-line basis and carry a performance condition based upon a share price target. ReNeuron Group plc 266079 ReNeuron AR_pp23-pp43.qxp 15/06/2023 19:08 Page 43 Directors’ Remuneration Report continued Note 3: These options were issued under the Group’s Long-Term Incentive Plan. They carry no performance conditions. Note 4: These options were issued subject to performance conditions. These performance conditions may be market related or relating to clinical, scientiﬁc or commercial targets. Certain options issued from 2018 on, were issued as a parallel option, exercisable either as a tax-advantaged option (with an exercise price equal to the market price on the date of grant) or as a non-tax advantaged option (with an exercise price of one pence. By order of the Board. 43 G O V E R N A N C E Dr Mike Owen Chair – Remuneration Committee 15 June 2023 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 44 Independent Auditors’ Report to the Members of ReNeuron Group Plc Report on the audit of the ﬁnancial statements 44 Opinion In our opinion, ReNeuron Group plc’s group ﬁnancial statements and company ﬁnancial statements (the “ﬁnancial statements”): I I F N A N C A L S T A T E M E N T S • • • give a true and fair view of the state of the group’s and of the company’s affairs as at 31 March 2023 and of the group’s loss and the group’s and company’s cash ﬂows for the year then ended; have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the provisions of the Companies Act 2006; and have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the ﬁnancial statements, included within the Annual Report, which comprise: the Group and Company Statements of Financial Position as at 31 March 2023; the Group Statement of Comprehensive Income, the Group and Company Statements of Changes in Equity, the Group and Company Statements of Cash Flows for the year then ended; and the notes to the ﬁnancial statements, which include a description of the signiﬁcant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the ﬁnancial statements section of our report. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements. Material uncertainty related to going concern In forming our opinion on the ﬁnancial statements, which is not modiﬁed, we have considered the adequacy of the disclosure made in note 3 to the ﬁnancial statements concerning the group’s and the company’s ability to continue as a going concern. Based on the current ﬁnancial forecasts, the directors expect that upfront payments from future partners and collaborators on their IP and legacy assets will enable a cash runway to July 2024, at which point further capital injection would be required. If those upfront payments, which are not wholly within the control of the Group and Company, are not received then the cash runway would extend until February 2024. These conditions, along with the other matters explained in note 3 to the ﬁnancial statements, indicate the existence of a material uncertainty which may cast signiﬁcant doubt about the group’s and the company’s ability to continue as a going concern. The ﬁnancial statements do not include the adjustments that would result if the group and the company were unable to continue as a going concern. In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. ReNeuron Group plc 45 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 45 Independent Auditor’s Report continued Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting included: • • • • • we evaluated the directors’ model supporting their going concern assessment and considered whether the assumptions made supported their conclusion; we tested the mathematical accuracy of the model and considered the reasonableness of the assumptions made and the availability of cash throughout the going concern period; we compared underlying base assumptions against comparable costs incurred in the year to 31 March 2023; we veriﬁed certain assumptions to supporting documentation; and we considered whether the key matters in relation to going concern are appropriately disclosed within 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. Our audit approach Overview Audit scope • We have performed full-scope audit procedures in respect of the Company, ReNeuron Group plc and it’s • • subsidiary ReNeuron Limited Our audit scope included limited desktop audit procedures on the subsidiary, ReNeuron Inc., which were performed by the Group engagement team Our audit procedures, all of which have been performed by the Group engagement team and which included the Group ﬁnance consolidation and ﬁnancial statement disclosures, covered 100% of the Group’s loss before tax for the year ended 31 March 2023. Our audit scope provided sufﬁcient appropriate audit evidence as a basis for our opinion on the Group ﬁnancial statements as a whole. Key audit matters • • • Material uncertainty related to going concern (group and company) Completeness of research and development accruals (group) Valuation of the Company’s investment in ReNeuron Limited (company) Materiality • • • Overall group materiality: £332,900 (2022: £552,000) based on 5% of loss before tax. Overall company materiality: £282,000 (2022: £300,000) based on 5% of loss before tax, restricted to 85% of group materiality. Performance materiality: £249,600 (2022: £414,675) (group) and £211,500 (2022: £225,000) (company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements. Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most signiﬁcance in the 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) identiﬁed by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 46 Independent Auditor’s Report continued 46 In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identiﬁed by our audit. I I F N A N C A L S T A T E M E N T S The key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter Completeness of research and development accruals (group) Due to the nature of the clinical trials and general research, it is often difﬁcult to estimate the amount of time a particular trial is going to take. The Group outsources most of its research and development to third parties which restricts visibility and the ability to monitor the progression of a piece of research, or a trial’s stage of completion. As a result, it can be difﬁcult for the Group to measure which costs have been incurred in relation to a trial at a particular point in time and as such, based on billings received, whether project accruals are reasonably estimated. Our audit risk is focussed on whether the relevant accruals have been appropriately calculated and reﬂected on the balance sheet including assessing whether any releases have appropriate justiﬁcation. As at 31 March 2023, the Accruals and deferred income balance for the group amounted to £3.8m. Valuation of the Company’s investment in ReNeuron Limited (company) The Group’s market capitalisation as at 31 March 2023 was £5.2m compared to investments in its subsidiary, ReNeuron Limited, of £23.3m pre any impairment. Accordingly, management has identiﬁed that an impairment indicator exists and an impairment assessment has been undertaken. The impairment assessment compares the carrying value to the recoverable amount, which is calculated as the higher of the value in use and the fair value less costs to sell. Management has performed a value in use calculation, based on its forecasts for the next ﬁve years. In the absence of other information, management has used the market capitalisation of the Company at 31 March 2023 as a proxy for the fair value less costs to sell. The recoverable amount, based on using the higher of these two models, is £nil, after taking into account the other assets that are held by the Company and which are considered as part of the Group’s market capitalisation. Accordingly an impairment of £23.3m has been recorded. There is complexity and judgement involved in calculating the valuation of the investments. The key judgement in regard to this balance is using market capitalisation as a proxy for fair value less costs to sell. The key estimate in regards to the value in use calculation is the revenue growth and R&D expenditure over the next 5 years. We performed the following procedures: • We veriﬁed the status of projects through a meeting with the Chief Operations Ofﬁcer where the progress and status of each project was discussed. • We obtained management’s calculations that support the research and development costs incurred during the year and veriﬁed the mathematical formulae used. • We sampled management’s calculations back to invoices and contracts • We obtained management’s calculation of the accrual and veriﬁed the mathematical formulae. • We reviewed invoices received and payments post 31 March 2023 and performed analytical procedures to identify any costs not included in management’s schedules We concluded that management’s recording of the accruals balance as at 31 March 2023 was appropriate. We have performed the following procedures: • Assessed whether market capitalisation is appropriate, recalculated the exercise and concluded that the exclusion of costs to sell and control premium in the fair value less costs to sell calculation was reasonable. • Considered any post year-end movements in share price and concluded that none were indicative of conditions existing before year end and should not therefore be reﬂected in the year- end fair value less costs to sell calculation. • We have conﬁrmed the mathematical accuracy of the value in use model, conﬁrmed the growth forecasts are in line with the Board-approved plan and that the growth assumptions are in line with IAS 36. We have concluded that management’s assessment that an impairment of £23.3m is required in relation to the carrying value of the investment is appropriate. ReNeuron Group plc 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 47 Independent Auditor’s Report continued How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. 47 I I F N A N C A L S T A T E M E N T S ReNeuron Group plc’s shares are admitted to trading on the Alternative Investment Market (“AIM”) of the London Stock Exchange and its principal activities are research and clinical development of cell-based therapeutics. The Group’s accounting function is structured around a local ﬁnance function based in the United Kingdom. There are three active entities in the Group; ReNeuron Group plc (which raises the equity to support the principal activity of the Group), ReNeuron Limited (which records the majority of Group activity) and ReNeuron, Inc. (which incurs certain operating costs and recharges these back to ReNeuron Limited). For each active entity we determined whether we required an audit of their complete ﬁnancial information (“full scope”) or whether speciﬁed procedures addressing speciﬁc risk characteristics of particular ﬁnancial statement line items would be sufﬁcient. It was assessed that ReNeuron Group plc and ReNeuron Limited required full scope audit procedures whilst ReNeuron, Inc. did not as it contributed less than 1% of the loss before tax and 1% of Group total assets and contain no ﬁnancial statement items that comprise more than 15% of the Group total. The impact of climate risk on our audit As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and company’s ﬁnancial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and company’s ﬁnancial statements. Materiality The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole. Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows: Financial statements - group Financial statements - company Overall materiality How we determined it Rationale for benchmark applied £332,900 (2022: £552,000). £282,000 (2022: £300,000). 5% of loss before tax 5% of loss before tax, restricted to 85% of group materiality Based on the benchmarks used in the Annual Report, loss before tax is the most relevant measure in assessing the performance of the Group and is a generally accepted auditing benchmark. Based on the benchmarks used in the Annual Report, loss before tax is the most relevant measure in assessing the performance of the group and company and is a generally accepted auditing benchmark. In the prior year total assets was the most appropriate measure for the company since the principal activity of the company was to hold the investment in subsidiary. However in the current year, this investment has been fully impaired and the primary activity is now expense based. Materiality has been restricted in line with Group scoping in 2023 and 2022. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was £282,000 and £316,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 48 48 I I F N A N C A L S T A T E M E N T S Independent Auditor’s Report continued We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Speciﬁcally, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £249,600 (2022: £414,675) for the group ﬁnancial statements and £211,500 (2022: £225,000) for the company ﬁnancial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with those charged with governance that we would report to them misstatements identiﬁed during our audit above £16,645 (group audit) (2022: £27,600) and £14,100 (company audit) (2022: £15,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Reporting on other information The other information comprises all of the information in the Annual Report other than the ﬁnancial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the ﬁnancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the ﬁnancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the year ended 31 March 2023 is consistent with the ﬁnancial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ Report. Responsibilities for the ﬁnancial statements and the audit Responsibilities of the directors for the ﬁnancial statements As explained more fully in the Statement of Directors’ responsibilities in respect of the ﬁnancial statements, the directors are responsible for the preparation of the ﬁnancial statements in accordance with the applicable framework and for being satisﬁed that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnancial statements, the directors are responsible for assessing the group’s and the 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 company or to cease operations, or have no realistic alternative but to do so. ReNeuron Group plc 49 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 49 Independent Auditor’s Report continued Auditors’ 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 auditors’ 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identiﬁed that the principal risks of non-compliance with laws and regulations related to product safety (including but not limited to drug regulation) and employment legislation (including health & safety regulation), and we considered the extent to which non- compliance might have a material effect on the ﬁnancial statements. We also considered those laws and regulations that have a direct impact on the ﬁnancial statements such as tax legislation and the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the ﬁnancial statements (including the risk of override of controls), and determined that the principal risks were related to inappropriate journal entries and management bias in accounting entries. Audit procedures performed by the engagement team included: • • • • Discussions with management, including consideration of known or suspected instances of non- compliance with laws and regulations and fraud; Reviewing Board minutes and legal expenses; Identifying and testing journal entries, in particular those having unusual account combinations; and Designing audit procedures to incorporate unpredictability around the nature, extent and timing of our testing. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reﬂected in the ﬁnancial statements. Also, 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. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the ﬁnancial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 50 Independent Auditor’s Report continued Other required reporting 50 Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: I I F N A N C A L S T A T E M E N T S • • • • we have not obtained all the information and explanations we require for our audit; or adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or certain disclosures of directors’ remuneration speciﬁed by law are not made; or the company ﬁnancial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Stuart Couch (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Cardiff 15 June 2023 ReNeuron Group plc 51 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 51 Group Statement of Comprehensive Income For the year ended 31 March 2023 Revenue Research and development costs General and administrative costs Operating loss Finance income Finance expense Loss before income tax Taxation Loss and total comprehensive loss for the year Loss and total comprehensive loss attributable to equity owners of the Company Basic and diluted loss per Ordinary share Note 5 6 6 7 8 11 13 2023 £’000 530 (4,463) (3,182) (7,115) 478 (20) (6,657) 1,249 (5,408) (5,408) (9.5p) 2022 £’000 403 (8,068) (3,563) (11,228) 195 (25) (11,058) 1,369 (9,689) (9,689) (17.0p) ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 52 Group and Company Statements of Financial Position As at 31 March 2023 Group Company 52 2023 2022 2023 2022 Note £’000 £’000 £’000 £’000 I I F N A N C A L S T A T E M E N T S Assets Non-current assets Property, plant and equipment 14 338 288 – – Right-of-use asset 15 283 373 278 373 Intangible assets 16 186 186 – – Investment in subsidiaries 17 – – – 17,500 807 847 278 17,873 Current assets Trade and other receivables 18 500 536 26 5 Income tax receivable 1,185 1,392 – – Investments – bank deposits 19 1,000 5,000 1,000 5,000 Cash and cash equivalents 20 6,153 9,548 5,616 8,153 8,838 16,476 6,642 13,158 Total assets 9,645 17,323 6,920 31,031 Equity Equity attributable to owners of the Company Share capital 24 572 571 572 571 Share premium account 24 113,925 113,925 113,925 113,925 Capital redemption reserve 40,294 40,294 40,294 40,294 Merger reserve 2,223 2,223 1,858 1,858 Accumulated losses At 1 April (147,125) (138,085) (126,182) (62,311) Loss for the year attributable to the owners (5,408) (9,689) (24,539) (64,520) Other changes in accumulated losses 576 649 576 649 At 31 March (151,957) (147,125) (150,145) (126,182) Total equity 5,057 9,888 6,504 30,466 Liabilities Current liabilities Trade and other payables 21 4,167 6,873 – 3 Lease liabilities 22 153 146 151 146 4,320 7,019 151 149 Non-current liabilities Lease liabilities 22 268 416 265 416 268 416 265 416 Total liabilities 4,588 7,435 416 565 Total equity and liabilities 9,645 17,323 6,920 31,031 The ﬁnancial statements on pages 51 to 76 were approved by the Board of Directors on 15 June 2023 and were signed on its behalf by: John Hawkins Director Company registered number: 05474163 ReNeuron Group plc 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 53 Group and Company Statements of Changes in Equity For the year ended 31 March 2023 Share Capital Share premium redemption Merger Accumulated Total capital account reserve reserve losses equity Group £’000 £’000 £’000 £’000 £’000 £’000 53 I I F N A N C A L S T A T E M E N T S As at 1 April 2021 569 113,904 40,294 2,223 (138,085) 18,905 Exercise of employee share options 2 21 – – – 23 Credit on share-based payment – – – – 649 649 Loss and total comprehensive loss for the year – – – – (9,689) (9,689) As at 31 March 2022 571 113,925 40,294 2,223 (147,125) 9,888 Exercise of employee share options 1 – – – – 1 Credit on share-based payment – – – – 576 576 Loss and total comprehensive loss for the year – – – – (5,408) (5,408) As at 31 March 2023 572 113,925 40,294 2,223 (151,957) 5,057 Share Capital Share premium redemption Merger Accumulated Total capital account reserve reserve losses equity Company £’000 £’000 £’000 £’000 £’000 £’000 As at 1 April 2021 569 113,904 40,294 1,858 (62,311) 94,314 Exercise of employee share options 2 21 – – – 23 Credit on share-based payment – – – – 649 649 Loss and total comprehensive loss for the year – – – – (64,520) (64,520) As at 31 March 2022 571 113,925 40,294 1,858 (126,182) 30,466 Exercise of employee share options 1 – – – – 1 Credit on share-based payment – – – – 576 576 Loss and total comprehensive loss for the year – – – – (24,539) (24,539) As at 31 March 2023 572 113,925 40,294 1,858 (150,145) 6,504 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp44-pp54.qxp 15/06/2023 19:09 Page 54 Group and Company Statements of Cash Flows For the year ended 31 March 2023 Group Company 54 2022 2022 2023 Restated 2023 Restated Note £’000 £’000 £’000 £’000 I I F N A N C A L S T A T E M E N T S Cash ﬂows from operating activities Cash used in operations 27 (8,920) (9,196) (1,147) (1,104) Overseas taxes paid (5) (52) – – Income tax credit received 1,461 1,862 – – Interest paid (20) (25) (19) (24) Net cash used in operating activities (7,484) (7,411) (1,166) (1,128) Cash ﬂows from investing activities Capital expenditure (220) (302) – – Investment in subsidiaries – – (5,684) (5,338) Bank deposit matured 2 4,000 2,500 4,000 2,500 Interest received 131 26 131 26 Net cash generated from/(used in) investing activities 3,911 2,224 (1,553) (2,812) Cash ﬂows from ﬁnancing activities Proceeds from the issue of ordinary shares 1 23 1 23 Principal element of lease payments (148) (157) (146) (140) Net cash used in ﬁnancing activities (147) (134) (145) (117) Net decrease in cash and cash equivalents (3,720) (5,321) (2,864) (4,057) Effect of foreign exchange movements on cash 325 166 327 161 Cash and cash equivalents at the start of the year 9,548 14,703 8,153 12,049 Cash and cash equivalents at the end of the year 6,153 9,548 5,616 8,153 ReNeuron Group plc 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 55 Notes to the Financial Statements For the year ended 31 December 2023 1. General information ReNeuron Group plc (the Company or ReNeuron) and its subsidiaries (together, the Group or ReNeuron) research and develop therapies using stem cells. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered ofﬁce is Pencoed Business Park, Pencoed, Bridgend CF35 5HY. Its shares are admitted to trading on the AIM Market of the London Stock Exchange. 55 I I F N A N C A L S T A T E M E N T S 2. Accounting policies and basis of preparation The principal accounting policies adopted in the preparation of these ﬁnancial statements are set out below. These policies have been consistently applied to all of the ﬁnancial years presented for both the Group and the Company. The accounting policies relate to the Group unless otherwise stated. Basis of preparation The ﬁnancial statements have been prepared in accordance with UK adopted International Accounting Standards (IFRS) and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. These ﬁnancial statements have been prepared on a historical cost basis unless otherwise speciﬁed. As permitted by Section 408 of the Companies Act 2006, the Parent Company’s statement of comprehensive income has not been presented in these ﬁnancial statements. Basis of consolidation The consolidated ﬁnancial statements include the ﬁnancial statements of the Company and its subsidiary undertakings made up to 31 March 2023. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identiﬁable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identiﬁable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Group statement of comprehensive income. Intercompany transactions and balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The Group elected not to apply IFRS 3 Business Combinations retrospectively to business combinations which took place prior to 1 April 2006 that have been accounted for by the merger accounting method. Signiﬁcant accounting judgements, estimates and assumptions The preparation of ﬁnancial statements in conformity with IFRS requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the ﬁnancial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRS also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁcant to the consolidated ﬁnancial statements are as follows: ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 56 56 I I F N A N C A L S T A T E M E N T S Notes to the Financial Statements continued Recognition of research and development expenditure The Group incurs research and development expenditure from third parties. The Group recognises this expenditure in line with the management’s best estimation of the stage of completion of each research and development project. This includes the calculation of accrued costs at each period end to account for expenditure that has been incurred. This requires management to estimate full costs to complete for each project and also to estimate its current stage of completion. Costs relating to clinical research organisation expenses in the year were £0.1 million, none of which met the criteria for capitalisation. The related accruals were £1.1 million. Estimated future recoverability of investment in subsidiary companies The Company holds an investment balance with its subsidiary companies. This is reviewed for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. The directors have considered the Group’s market capitalisation at 31 March 2023 and the carrying value of other assets held by the Parent Company when making an assessment of the fair value less costs to sell of its investment in subsidiaries. Consequently, this has been written down to £nil, giving rise to an impairment charge of £23.3 million (2022: £62.9 million). Foreign currency translation The consolidated ﬁnancial statements are presented in pounds sterling (£), which is the Company’s functional and presentational currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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 Group statement of comprehensive income in the year in which they occur. Revenue Revenue is accounted for in line with the principles of IFRS 15 Revenue from Contracts with Customers. It is measured at the fair value of the consideration received or receivable, net of discounts and sales-related taxes. Licensing agreements may contain a number of elements and provide for varying consideration terms, such as initial fees, sales, development and regulatory milestones together with sales-based royalties and similar payments. Such arrangements are within the scope of IFRS 15 and are assessed under its ﬁve-step model to determine revenue recognition. The distinct performance obligations within the contract and the arrangement transaction price are identiﬁed. The fair value of the arrangement transaction price is allocated to the different performance obligations based upon the relative stand-alone selling price of those obligations together with the performance obligation activities to which the terms of the payments speciﬁcally relate. The allocated transaction price is recognised over the respective performance period of each performance obligation. Initial fees relating to the immediate transfer of intellectual property are non-refundable and are recognised as revenue upon signature of the contract. Development and regulatory approval milestone payments are recognised as revenue when the respective milestones are achieved. Sales-based royalty income and related milestone payments are recognised in the period when the related sales occur or when the relevant milestone is achieved. Agreements that are related to development activities or technology transfer can contain a number of elements and provide for varying consideration terms such as payment for utilisation of staff resources and for the purchase of cell line related products. Such arrangements are within the scope of IFRS 15 and are assessed under its ﬁve-step model to determine revenue recognition. The distinct performance obligations (that can include agreed assigned staff resources) within the contract and the arrangement transaction price are identiﬁed. The fair value of the arrangement transaction price is allocated to the different performance obligation based on the stand-alone selling price of that obligation together with the performance obligation activity to which the terms of payment speciﬁcally relate. The allocated transaction price relating to the utilisation of staff is recognised over time and that relating from the sale of cell lines is at a point in time. Where the Group acts as principal in a transaction, it recognises the gross revenue to which it is entitled. If the Group acts as agent in a transaction, it recognises the fee or commission received. ReNeuron Group plc 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 57 Notes to the Financial Statements continued Research and development expenditure Capitalisation of expenditure on product development commences from the point at which technical feasibility and commercial viability of the product can be demonstrated and the Group is satisﬁed that it is probable that future economic beneﬁts will result from the product once completed. No such costs have been capitalised to date, given the early stage of the Group’s intellectual property. 57 I I F N A N C A L S T A T E M E N T S Expenditure on research and development activities that do not meet the above criteria, including ongoing costs associated with acquired intellectual property rights and intellectual property rights generated internally by the Group, is charged to the Group statement of comprehensive income as incurred. Pension beneﬁts The Group operates a deﬁned contribution pension scheme. Contributions payable for the year are charged to the Group statement of comprehensive income. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Group and Parent Company statements of ﬁnancial position. The Group has no further payment obligations once the contributions have been paid. Leases IFRS 16 Leases applies a single recognition and measurement approach for all applicable leases under which the Group is the lessee. A lease is deﬁned as “a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration”. To apply this deﬁnition, the Group assesses whether the contract meets two key evaluations, which are whether: l l the contract contains an identiﬁable asset; and the Group has the right to obtain substantially all of the economic beneﬁts from use of the identiﬁed asset throughout the period of use. At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost. The Group depreciates the right-of-use assets on a straight- line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of ﬁxed payments (including in substance ﬁxed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense in proﬁt or loss. Short-term leases are leases with a lease term of 12 months or less without a purchase option. Low-value assets comprise IT equipment. Government and other grants Revenue grants are credited to other income within the Group statement of comprehensive income, assessed by the level of expenditure incurred on the speciﬁc grant project, when it is reasonably certain that amounts will not need to be repaid. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 58 58 I I F N A N C A L S T A T E M E N T S Notes to the Financial Statements continued Share-based payments The Group operates a number of equity-settled share-based compensation plans. The fair value of share-based payments under such schemes is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of market-based vesting conditions. Vesting periods are estimated to be two years for options issued under the deferred bonus and four years for other schemes. The fair value calculation of share-based payments requires several assumptions and estimates as disclosed in note 26. The calculation uses the Black-Scholes model. At each balance sheet date, the Group reviews its estimate of the number of options that are expected to vest and recognises any revision to original estimates in the Group statement of comprehensive income, with a corresponding adjustment to equity. For equity-settled share-based payments, where employees of subsidiary undertakings are rewarded with shares issued by the Parent Company, a capital contribution is recorded in the subsidiary, with a corresponding increase in the investment in the Parent Company. Warrants Where warrants have been issued together with Ordinary shares, the proportion of the proceeds received that relates to the warrants is credited to reserves. Where warrants have been issued as recompense for services supplied, the fair value of warrants is charged to the Group statement of comprehensive income over the period the services are received and a corresponding credit is made to reserves. Intangible assets Intangible assets relating to licence fees have inﬁnite lives and are not amortised but are tested for impairment annually. Intangible assets relating to intellectual property rights acquired through licensing or assigning patents and know-how are carried at historical cost less accumulated amortisation and any provision for impairment. Milestone payments associated with these rights are capitalised when incurred. Where a ﬁnite useful life of the acquired intangible asset cannot be determined, the asset is not subject to amortisation but is tested for impairment annually or more frequently, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No amortisation other than historical impairment has been charged to date as the products underpinned by the intellectual property rights are not yet available for commercial use. Property, plant and equipment Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. 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. Depreciation is calculated so as to write off the cost less their estimated residual values on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual periods used for this purpose are: Plant and equipment Computer equipment 3–8 years 3–5 years The residual values and estimated useful lives are reviewed annually. Proﬁts or losses on disposal of property, plant and equipment reﬂect the difference between net selling price and carrying amount at the date of disposal and are recognised in the consolidated income statement. Investments in subsidiaries Investments in subsidiaries are shown at cost less any provision for impairment. Any monies paid to subsidiaries are deemed to be a capital contribution. Current income tax The credit for current income tax is based on the results for the year, adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the ﬁnancial year-end. ReNeuron Group plc 59 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 59 Notes to the Financial Statements continued Deferred tax Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁnancial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁt or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable proﬁt will be available, against which the temporary differences can be utilised. 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 loss allowance. The Group assesses, on a forward-looking basis, the expected credit losses associated with its trade and other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a signiﬁcant increase in credit risk. Bank deposits, cash and cash equivalents Cash and cash equivalents in the Group and Parent Company statements of cash ﬂows and the Group and Parent Company statements of ﬁnancial position include cash in hand and deposits with banks with original maturities of three months or less. Bank deposits with original maturities in excess of three months are classed as investments and measured at amortised cost using the effective interest rate method. Bank deposits with maturities between four and 12 months are disclosed within current assets and those with maturities greater than 12 months are disclosed within non-current assets. The prior year statement of cash ﬂows has been restated due to a reclassiﬁcation from ﬁnancing activities to investing activities of a £2.5m cash inﬂow relating to the maturity of short term investments. This restatement does not impact the opening or closing cash balances. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the ﬁnancial year, which are unpaid. The amounts are unsecured and are, when correctly submitted, usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Capital redemption reserve Section 733 of the Companies Act 2006 provides that where shares of a company are redeemed or purchased wholly out of the Company’s proﬁts, or by a fresh issue, the amount by which the Company’s issued share capital is diminished on cancellation of the shares shall be transferred to a reserve called the “capital redemption reserve”. It also provides that the reduction of the Company’s share capital shall be treated as if the capital redemption reserve were paid-up capital of the Company. Provisions Provisions are recognised when the Group has a contractual or constructive obligation as a result of past events, for which it is probable that an outﬂow of resources will be required to settle the obligation and the amount can be reliably estimated. Contractual milestone payments The Group is expected to incur future contractual milestone payments linked to the future development of its therapeutic programmes. These costs will be recognised as and when a contractual milestone is expected to be achieved. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 60 Notes to the Financial Statements continued 60 Accounting developments The following new standards, new interpretations and amendments to standards and interpretations are applicable for the ﬁrst time for the ﬁnancial year ended 31 March 2022. None of them have any impact on the ﬁnancial statements of the Group: I I F N A N C A L S T A T E M E N T S l l Amendments to IFRS 3 ‘business combinations’ IAS 16 ‘property, plant and equipment’ and IAS 38 ‘provisions, contingent liabilities and contingent assets’; and Annual improvements make minor amendments to IFRS 1, ‘First-time Adoption of IFRS’, IFRS 9, ‘Financial instruments’, IAS 41, ‘Agriculture’ and the Illustrative Examples accompanying IFRS 16, ‘Leases’. There are a number of new standards, interpretations and amendments to existing standards that are not yet effective and have not been adopted early by the Group. The future introduction of these standards is not expected to have a material impact on the ﬁnancial statements of the Group. l l l l l IFRS 17, ‘Insurance contracts’ as amended in December 2021 (effective 1 January 2023); Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8 (effective 1 January 2023); Amendment to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction (effective 1 January 2023); Amendment to IAS 1 – Non current liabilities with covenants (effective 1 January 2024); and Amendment to IFRS 16 – Leases on sale and leaseback (effective 1 January 2024). 3. Going concern The operations of the Group and Company are ﬁnanced from funds that have been raised from share placings, commercial partnerships and grants. The goal of the Group is to achieve the commercial validation of the CustomExTM platform by generating in vivo data aimed at differentiating the platform from that of the Group’s competitors. In addition, the plan is to realise value from the Group’s other assets via potential out-licencing and/or disposal. The Directors continue to seek opportunities to secure further revenues/funding sufﬁcient for the short to medium term future needs of the business and favourable in vivo data should enhance those opportunities. As previously noted, in January 2023, the Group undertook a restructuring of the business with the underlying cost base reduced and resources re-aligned to meet the immediate needs of the business. Based on the Directors’ base case assessment, the current cash runway is forecast to extend until July 2024, at which point a further capital injection would be required. The base case assessment includes assumed upfront payments over the next 6 to 12 months from potential future partners and collaborators on the Group’s exosome platform, IP and legacy assets and potential further equity fund raising. The Directors recognise that not all of these assumed inﬂows are fully within the control of the Group and Company and have prepared a further severe but plausible downside scenario which excludes these inﬂows and indicates a cash runway until February 2024. Based on the forecasts prepared and considered by the Board, the Directors consider it appropriate to continue to adopt the going concern basis in the preparation of these ﬁnancial statements. However, there is no guarantee that attempts to secure adequate cash inﬂows from the Group’s exosome platform, IP and legacy assets or through equity fund raising with the timescales stated above will be successful. These conditions indicate the existence of a material uncertainty, which may cast signiﬁcant doubt about the Group’s and Company’s ability to continue as a going concern. These ﬁnancial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern. ReNeuron Group plc 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 61 Notes to the Financial Statements continued 4. Segment analysis The Group has identiﬁed the Executive Chairman, as the Chief Operating Decision Maker (CODM). The CODM manages the business as one segment, the development of cell-based therapies, and activities and assets are predominantly based in the UK. Since this is the only reporting segment, no further information is included. The information used internally by the CODM is the same as that disclosed in the ﬁnancial statements. 61 I I F N A N C A L S T A T E M E N T S 5. Revenue Royalty income Income associated with development activities Total 2023 £’000 136 394 530 2022 £’000 119 284 403 Royalty income is derived from the licensed sale of the Group’s products to customers in the USA. Income associated with development activities relates to fees received under research agreements and is generated in the United Kingdom, the USA, the People’s Republic of China and South East Asia. At 31 March 2023, an amount of £227,000 (31 March 2022: £320,000) is included in deferred revenue in relation to development contracts, with £320,000 being released from deferred income in the year. 6. Operating expenses Loss before income tax is stated after charging: Research and development costs: Employee beneﬁts (note 10) Depreciation of property, plant and equipment (note 14) Other expenses Total research and development costs General and administrative costs: Employee beneﬁts (note 10) Legal and professional fees Depreciation of property, plant and equipment (note 14) Depreciation of right-of-use asset (note 15) Loss on disposal of ﬁxed assets Other expenses Total general and administrative costs Total research and development costs and general and administrative costs 2023 £’000 2,162 160 2,141 4,463 1,943 596 10 97 – 536 3,182 7,645 2022 £’000 2,530 199 5,339 8,068 2,308 504 25 100 3 623 3,563 11,631 During the year, the Group obtained services from the Group’s auditors and its associates as detailed below: Services provided by the Group’s auditors Fees payable to the Group’s auditors: – for the audit of the Company and consolidated ﬁnancial statements – for the audit of the Company’s subsidiaries pursuant to legislation Total 2023 £’000 56 46 102 2022 £’000 25 26 51 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 62 Notes to the Financial Statements continued 7. Finance income 62 Interest receivable on short-term and investment bank deposits Foreign exchange gains Total 8. Finance expense Total: Lease interest I I F N A N C A L S T A T E M E N T S 2023 £’000 153 325 478 2023 £’000 20 2022 £’000 29 166 195 2022 £’000 25 9. Directors’ emoluments The Directors of the Company have authority and responsibility for planning, directing and controlling the activities of the Group and they, therefore, comprise key management personnel as deﬁned by IAS 24 Related Party Disclosures. Aggregate emoluments of Directors: Salaries and other short-term employee beneﬁts Termination costs Pension contributions Share-based payments Directors’ emoluments including share-based payments 2023 £’000 892 150 30 1,072 105 1,177 2022 £’000 863 483 43 1,389 293 1,682 One director (2022: one) had retirement beneﬁts accruing to them under deﬁned contribution pension schemes in respect of qualifying services. The Directors exercised no share options during the year (2022: Nil). For detailed disclosure of Directors’ emoluments, including highest paid Director, please refer to the Directors’ Remuneration Report on pages 39 to 43. Directors’ emoluments include amounts payable to third parties as described in note 32. ReNeuron Group plc 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 63 Notes to the Financial Statements continued 10. Employee information The monthly average number of persons (including Executive Directors) employed by the Group during the year was: 63 I I F N A N C A L S T A T E M E N T S By activity: Research and development Administration Total 2023 Number 2022 Number 27 7 34 29 7 36 The headcount reduction following the January 2023 restructuring does not have a material effect on the average headcount for the year. Staff costs: Wages and salaries Termination costs Social security costs Share-based payment charge Other pension costs Total 2023 £’000 2,808 192 375 576 154 4,105 2022 £’000 3,164 483 414 649 128 4,838 The Company holds the employment contracts for the Executive Directors but all employment costs relating to these individuals are incurred by ReNeuron Limited. At 31 March 2023 there were two (2022: one) Executive Directors in ofﬁce. The Group operates deﬁned contribution pension schemes for UK employees and Directors. The assets of the schemes are held in separate funds and are administered independently of the Group. The total pension cost during the year was £154,000 (2022: £128,000). There were no prepaid or accrued contributions to the scheme at the year-end (2022: £Nil). 11. Taxation UK research and development tax credit at 14.5% (2022: 14.5%) Overseas taxation Adjustments in respect of prior years Total tax credit 2023 £’000 1,185 (5) 69 1,249 2022 £’000 1,392 (53) 30 1,369 No UK corporation tax liability arises on the results for the year due to the loss incurred. As a loss-making small and medium sized enterprise, the Group is entitled to research and development tax credits at 14.5% (2022: 14.5%) on 230% (2022: 230%) of qualifying expenditure for the year to 31 March 2023. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 64 Notes to the Financial Statements continued The tax credit compares with the loss for the year as follows: 64 I I F N A N C A L S T A T E M E N T S Loss before income tax Loss before income tax multiplied by the small companies rate of corporation tax of 19% (2022: main rate of 19%) Effects of: – difference between depreciation and capital allowances – expenses not deductible for tax purposes – losses not recognised – adjustments in respect of prior year Overseas taxes paid 2023 £’000 6,657 1,265 13 (143) 50 69 (5) 2022 £’000 11,058 2,101 42 (108) (643) 30 (53) Total tax credit 1,249 1,369 No deferred tax asset has been recognised by the Group or Company as there are currently no foreseeable trading proﬁts. Following the enactment of the Finance Act 2021, potential deferred taxation has been calculated at 25% (2022: 25%). The potential deferred tax assets/(liabilities) of the Group are as follows: Tax effect of timing differences because of: Accelerated capital allowances Losses carried forward Total The potential deferred tax assets of the Company are as follows: Tax effect of timing differences because of: Losses carried forward Amount not recognised 2023 £’000 Amount not recognised 2022 £’000 53 28,304 28,357 53 27,694 27,747 Amount not recognised 2023 £’000 Amount not recognised 2022 £’000 2,342 2,181 12. Loss for the ﬁnancial year As permitted by Section 408 of the Companies Act 2006, the Parent Company’s statement of comprehensive income for the current year has not been presented in these ﬁnancial statements. The Parent Company’s loss and total comprehensive loss for the ﬁnancial year was £24,539,000 (2022: £64,520,000). The loss in the current year was primarily derived from the impairment of investment in subsidiaries. ReNeuron Group plc 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 65 Notes to the Financial Statements continued 13. Basic and diluted loss per ordinary share The basic and diluted loss per share is calculated by dividing the loss for the ﬁnancial year of £5,408,000 (2022: £9,689,000) by 57,125,960 shares (2022: 56,975,677 shares), being the weighted average number of one pence ordinary shares in issue during the year. 65 Potential dilutive ordinary shares relating to share options are anti-dilutive as they would have decreased the loss per share and are excluded from the calculation of diluted loss per share. Therefore, the weighted average shares outstanding used to calculate both the basic and diluted loss per share are the same. The weighted average number of diluted one pence ordinary shares (including potential dilutive ordinary shares related to share options) is 58,607,176 shares (2022: 58,751,314 shares). 14. Property, plant and equipment Plant and Computer equipment equipment Group £’000 £’000 I I F N A N C A L S T A T E M E N T S Cost At 1 April 2021 Additions Reclassiﬁcation Disposals At 31 March 2022 Accumulated depreciation At 1 April 2021 Charge for the year Reclassiﬁcation Disposals At 31 March 2022 Net book amount: At 31 March 2022 Cost At 1 April 2022 Additions Disposals At 31 March 2023 Accumulated depreciation At 1 April 2022 Charge for the year Disposals At 31 March 2023 Net book amount: At 31 March 2023 1,277 294 343 (29) 1,885 1,071 200 367 (29) 1,609 240 9 62 (94) 217 233 24 39 (91) 205 Total £’000 1,517 303 405 (123) 2,102 1,304 224 406 (120) 1,814 276 12 288 1,885 201 – 2,086 1,609 161 – 1,770 217 19 (20) 216 205 9 (20) 194 2,102 220 (20) 2,302 1,814 170 (20) 1,964 316 22 338 The Company had no property, plant or equipment at 31 March 2023 (2022: £Nil). ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 66 Notes to the Financial Statements continued 15. Right-of-use asset 66 Group I I F N A N C A L S T A T E M E N T S At beginning of the year Additions Depreciation charge At end of the year The depreciation charge relating to the Right-of use asset is as follows: Land and buildings Computer and ofﬁce equipment At end of the year The net book value of the underlying assets is as follows: Group Land and buildings Computer and ofﬁce equipment At end of the year Company At beginning of the year Depreciation charge At end of the year 2023 £’000 373 7 (97) 283 2023 £’000 95 2 97 2022 £’000 473 – (100) 373 2022 £’000 96 4 100 31 March 2023 £’000 31 March 2022 £’000 278 5 283 373 – 373 31 March 2023 £’000 31 March 2022 £’000 373 (95) 278 469 (96) 373 The above comprises land and buildings. The associated lease liabilities are set out in note 22. 16. Intangible assets Intellectual property Licence rights not fees amortised Group £’000 £’000 At 1 April 2021 and 1 April 2022 Cost Impairment 2,070 (1,884) 6,143 (6,143) Net book amount at 31 March 2022 and 31 March 2023 186 – The Company holds no intangible assets (2022: £Nil). ReNeuron Group plc Total £’000 8,213 (8,027) 186 67 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 67 Notes to the Financial Statements continued 17. Investment in subsidiaries Company At the beginning of the year Increased investment in subsidiaries Capital contribution arising from share-based payments Impairment of investments in subsidiaries Net book amount at 31 March 2023 £’000 17,500 5,684 151 (23,335) – 2022 £’000 75,000 5,338 115 (62,953) 17,500 The Company has invested in ReNeuron Limited to allow it to carry on the trade of the Group. A capital contribution arises where share-based payments are provided to employees of subsidiary undertakings settled with equity to be issued by the Company. The main element of the Group’s funds are raised by ReNeuron Group plc, with funds then being passed to subsidiary companies via intercompany transactions. The resultant intercompany debtor is reclassiﬁed to investment in subsidiaries as a capital contribution. At 31 March 2023 the Group’s market capitalisation was £5.2 million as determined by the closing share price, which, when taking into account other assets held by the Parent Company, resulted in a further impairment of £23,335,000. The directors consider this to be a reasonable representation of fair value less costs to sell. The Company’s investments comprise interests in Group undertakings, details of which are shown below: Name of undertaking Country of incorporation Description of shares held ReNeuron Holdings Limited England and Wales £0.10 Ordinary shares ReNeuron Limited ReNeuron (UK) Limited England and Wales £0.001 Ordinary shares England and Wales £0.10 Ordinary shares ReNeuron, Inc. Delaware, USA $0.001 Common stock ReNeuron Ireland Limited Republic of Ireland €1 Ordinary shares Proportion of nominal value of shares held by the Company 100% 100% 100% 100% 100% ReNeuron Limited is the principal trading company in the Group. ReNeuron Inc provides a point of contact with the FDA in the USA and ReNeuron Ireland Limited has been incorporated to enable the Group to maintain a presence in the EU after the United Kingdom’s exit, and to mitigate the risks and uncertainties surrounding future relations between the EU and the UK. The other subsidiaries are dormant. ReNeuron Limited, ReNeuron Holdings Limited and ReNeuron, Inc. are held directly by ReNeuron Group plc. ReNeuron (UK) Limited is held directly by ReNeuron Holdings Limited. ReNeuron Ireland Limited is held directly by ReNeuron Limited. The registered ofﬁce address for the UK subsidiaries is Pencoed Business Park, Pencoed, Bridgend CF35 5HY. The registered ofﬁce addresses of the non-UK subsidiaries are: l l ReNeuron Inc., 21/2 Beacon Street, Concord, New Hampshire 03301-4447; and ReNeuron Ireland Limited, The Black Church, St Mary’s Place, Dublin 7, Ireland D07 P4AX. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 68 68 I I F N A N C A L S T A T E M E N T S Notes to the Financial Statements continued 18. Trade and other receivables Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Current Other receivables 226 164 26 5 Prepayments and accrued income 274 372 – – Total trade and other receivables 500 536 26 5 The classes within trade and other receivables do not include impaired assets. Due to the short-term nature of the trade and other receivables, their carrying amount is considered to be the same as their fair value. 19. Investments – bank deposits Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Deposits with an original maturity at four to 12 months: Current asset investments 1,000 5,000 1,000 5,000 The £1,000,000 bank deposit at 31 March 2023 matured in May 2023 and is now deemed to be classiﬁed as cash and cash equivalents. 20. Cash and cash equivalents Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Cash at bank and in hand 6,153 9,548 5,616 8,153 21. Trade and other payables Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Trade payables 319 734 – 3 Taxation and social security 96 103 – – Accruals and deferred income 3,752 6,036 – – Total payables falling due within one year 4,167 6,873 – 3 Amounts owed by the Company to Group undertakings were not interest-bearing and had no ﬁxed repayment date. Trade payables are unsecured and are usually paid within 35 days of recognition. Included within accruals and deferred income are government grants of £457,000 (2022: £457,000). The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. ReNeuron Group plc 69 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp55-pp69.qxp 15/06/2023 19:09 Page 69 Notes to the Financial Statements continued 22. Lease liabilities Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Current lease liabilities 153 146 151 146 Non-current lease liabilities 268 416 265 416 Total lease liability 421 562 416 562 The associated right-of-use asset is set out in note 15. Maturity of lease liabilities The maturity proﬁle of the Group’s lease liabilities based upon contractual undiscounted payments is set out below: Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Less than one year 168 165 165 165 One year to two years 168 165 165 165 Two years to three years 110 165 110 165 Three years to four years – 110 – 110 The interest expense on lease liabilities in the years ended 31 March 2023 and 31 March 2022 is shown in note 8. Other information The principal lease commitment is in respect of the lease of ofﬁces and laboratories in Pencoed. The ten-year lease was signed by the Company with the Welsh Ministers on 11 February 2016 for the ofﬁces and laboratory space in new premises in Pencoed, South Wales, with the initial rent being reduced over the ﬁrst three years. The incremental borrowing rate for the lease is 3.8%. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 70 70 I I F N A N C A L S T A T E M E N T S Notes to the Financial Statements continued 23. Financial risk management Capital management The Group’s key objective in managing its capital is to safeguard its ability to continue as a going concern. In particular, it has sought and obtained equity funding alongside non-dilutive grant support commercial partnerships and collaborations to pursue its programmes. The Group strives to optimise the balance of cash spend between research and development and general and administrative expenses and, in so doing, maximise progress for all pipeline products. Risk The ﬁnancial risks faced by the Group include liquidity and credit risk, interest rate risk and foreign currency risk. Liquidity and credit risk The Group seeks to maximise the returns from funds held on deposit balanced with the need to safeguard the assets of the business. The agreed policy is to invest surplus cash in interest-bearing current/liquidity accounts and term deposits and to spread the credit risk across a number of counterparties, the selection criteria being as follows: l UK-based banks; l minimum credit rating with Fitch and/or Moody’s (long-term A-/A3; short-term F1/P-1); and l familiar and respected names. At 31 March 2023 and 31 March 2022, no current asset receivables were aged over three months. No receivables were impaired or discounted. The Group’s cash and cash equivalents and bank deposits are analysed below according to the credit ratings of the deposit holding ﬁnancial institutions: Group Company Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 F1/P-1 4,153 9,548 3,616 8,153 F2/P-1 3,000 5,000 3,000 5,000 Ageing proﬁle of the Group’s and the Company’s ﬁnancial liabilities The Group’s and the Company’s ﬁnancial liabilities consist of: Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Trade and other payables due within 12 months 4,071 6,770 – 3 Current lease liabilities – due within one year 153 146 151 146 Non-current lease liabilities – due after more than one year 268 416 265 416 4,492 7,332 416 565 The undiscounted cash ﬂows for leases are shown in note 22, trade and other payables exclude taxation and social security and are not discounted. ReNeuron Group plc Notes to the Financial Statements continued Interest rate risk A portion of the Group’s cash resources are placed on ﬁxed deposit, with an original term of between three and 12 months, to secure ﬁxed and higher interest rates. The Directors do not currently consider it necessary to use derivative ﬁnancial instruments to hedge the Group’s exposure to ﬂuctuations in interest rates. 71 I I F N A N C A L S T A T E M E N T S Foreign currency risk The Group holds part of its cash resources in US dollars and euros to cover payments committed in the immediate future. At 31 March 2023, cash of £1,114,000 (2022: £4,213,000) was held in these currencies. Creditors of the Group include £1,400,000 (2022: £429,000) denominated in US dollars and £66,000 (2022: £149,000) denominated in euros. Of the Group’s debtors, £nil (2022: £6,000) is denominated in euros. The remainder are denominated in pounds sterling. At 31 March 2023, if pounds sterling had weakened/strengthened by 5% against the US dollar with all other variables held constant, the recalculated post-tax loss for the year would have been £31,000 (2022: £156,000) higher/lower. At 31 March 2023, if pounds sterling had weakened/strengthened by 5% against the euro with all other variables held constant, the recalculated post-tax loss for the year would have been £14,000 (2022: £25,000) higher/lower. The Group has not entered into forward currency contracts. Currency proﬁle of the Group’s and the Company’s cash and cash equivalents Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 Currency £’000 £’000 £’000 £’000 Pounds sterling 5,039 5,335 4,828 2,999 US dollars 778 3,548 523 4,645 Euros 336 665 265 509 6,153 9,548 5,616 8,153 Currency proﬁle of the Group’s and the Company’s bank deposit investments Group Company 31 March 31 March 31 March 31 March 2023 2022 2023 2022 Currency £’000 £’000 £’000 £’000 Pounds sterling 1,000 5,000 1,000 5,000 Fair values of ﬁnancial assets and ﬁnancial liabilities The following table provides a comparison by category of the carrying amounts and the fair value of the Group’s and the Company’s ﬁnancial assets and liabilities measured at amortised cost at 31 March. Fair value is the amount at which a ﬁnancial instrument could be exchanged in an arm’s length transaction between informed and willing parties, other than a forced or liquidation sale, and excludes accrued interest. 31 March 2023 31 March 2022 Book value Fair value Book value Fair value Group £’000 £’000 £’000 £’000 Investments – bank deposits 1,000 1,000 5,000 5,000 Cash at bank and in hand 6,153 6,153 9,548 9,548 Trade and other receivables excluding prepayments and accrued income 226 226 164 164 Trade and other payables excluding taxation and social security and accruals and deferred income 319 319 734 734 Lease liabilities 421 421 562 562 ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 72 Notes to the Financial Statements continued 31 March 2023 31 March 2022 72 Book value Fair value Book value Fair value Company £’000 £’000 £’000 £’000 I I F N A N C A L S T A T E M E N T S Investments – bank deposits 1,000 1,000 5,000 5,000 Cash at bank and in hand 5,616 5,616 8,153 8,153 Receivables: current 26 26 5 5 Trade and other payables – – 3 3 Lease liabilities 416 416 562 562 24. Share capital and share premium Issued and fully paid Number share capital Authorised share capital At 1 April 2021 shares of 1 pence each Issue of new shares – exercise of employee share options As at 31 March 2022 At 1 April 2022 shares of 1 pence each Issue of new shares – exercise of employee share options of shares Unlimited 56,855,705 207,918 57,063,623 57,063,623 110,137 At 31 March 2023 shares of 1 pence each 57,173,760 25. Warrants £’000 569 2 571 571 1 572 Share premium £’000 Total £’000 113,904 114,473 21 113,925 113,925 23 114,496 114,496 – 1 113,925 114,497 Warrant instrument with Novavest Growth Fund Limited Novavest Growth Fund Limited (“Novavest”) has the right to subscribe for 58,239 ReNeuron Limited Ordinary shares at a price of £17.16 per Ordinary share. Pursuant to a put/call agreement dated 6 November 2000, on exercise of such warrant, shares acquired by Novavest in ReNeuron Limited will be exchanged for 582,390 Ordinary shares of ReNeuron (UK) Limited. The Company intends in due course to enter into an agreement with Novavest whereby, if the warrant is exercised, the ReNeuron (UK) Limited shares acquired by Novavest are exchanged directly for 5,823 Ordinary shares of the Company. 26. Share options The Group operates share option schemes for Directors and employees of Group companies and speciﬁc consultants. Options have been issued through a combination of an Inland Revenue-approved Enterprise Management Incentive (EMI) scheme and Company Share Option Scheme (CSOP). Awards to Non-Executive Directors are made in accordance with the Group’s Non-Executive Share Option Scheme. The awards of share options to Executive Directors and employees of the Group are made in accordance with the Group’s previous Deferred Share-based Bonus Plan, its Long-Term Incentive Plans and US Incentive Stock Option Plan. Total options existing over one pence Ordinary shares in companies in the Group as at 31 March 2023 are summarised below. At 31 March 2023, the total outstanding options represented 15.4% of the total shares in issue. ReNeuron Group plc 73 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 73 Notes to the Financial Statements continued Number of Number of Granted Exercised options Weighted options at during during Lapsed as at average Weighted 1 April the the during 31 March exercise average Scheme name 2022 year year the year 2023 Note price life Non-Executive Director Scheme 20,000 – – (20,000) – 1 – – 2009 Employees’ Share Option Plan (EMI) 116,195 – – (5,752) 110,443 2 £1.17 1.50 2009 Employees’ Share Option Plan 1,256,906 – – (234,620) 1,022,286 2 £1.00 1.85 2016 Non-Executive Director Scheme 314,225 1,300,000 (27,867) (41,158) 1,545,200 3 £0.27 3.46 2018 Employees’ Share Option Plan 2,014,628 5,680,000 (82,270) (1,463,127) 6,149,231 2 £0.20 3.3 3,721,954 6,980,000 (110,137) (1,764,657) 8,827,160 Note 1: These options were issued under the Non-Executive Directors’ Scheme and were subject to clinically related performance targets. Note 2: With the exception of 388,400 options held by current and former Executive Directors, these options were issued subject to performance conditions. These performance conditions may be market related or relating to clinical, scientiﬁc or commercial targets. Certain options issued from 2018 on were issued as a parallel option, exercisable either as a tax-advantaged option (with an exercise price equal to the market price on the date of grant) or as a non-tax advantaged option (with an exercise price of one pence). Note 3: These options were issued under the Group’s 2016 Non-Executive Share option Scheme. They vest over three years on a straight-line basis and with the exception of 750,000 options held by Mr Iain Ross, they carry no performance conditions. 750,000 of the options held by Mr. Ross are subject to share price based performance targets. Fair value charge Fair value charges for share options have been prepared based on a Black-Scholes model with the following key assumptions: September 2018 UK Plan February 2019 UK Plan April 2019 UK plan July 2019 UK Plan February 2021 UK Plan October 2021 UK Plan October 2021 UK Plan July 2022 UK Plan February 2023 UK Plan February 2023 UK Plan February 2023 UK Plan Exercise price £ Share price at date of grant £ Risk-free rate % Assumed time to exercise Years Assumed Fair value volatility per option £ % 0.01* 0.01* 0.01* 0.01* 0.01* 0.01 1.07 0.315 0.1025 0.315 0.50 0.68 0.53 2.16 2.45 1.10 1.14 1.14 0.315 0.1025 0.1025 0.1025 1.60 1.18 1.10 0.82 0.49 1.20 1.20 2.06 3.54 3.54 3.54 5 5 5 5 5 5 5 5 5 5 5 58.9 57.7 84.6 86.8 80.4 66.6 66.6 85.3 70.5 70.5 70.5 0.67 0.52 2.15 2.44 1.09 1.13 0.65 0.21 0.06 0.04 0.03 * Certain of these non-tax advantaged options were issued in parallel with tax advantaged CSOP options, either of which lapses upon the exercise of the other. The risk-free rate is taken from the average yields on government gilt edged stock. No dividends are assumed. The assumed vesting period is four years. No lapses are assumed until they take place. Assumed volatility is based on historical experience up to the date of the grant. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 74 Notes to the Financial Statements continued The weighted average exercise prices for options were as follows: 74 2023 2022 I I F N A N C A L S T A T E M E N T S Weighted Weighted Number of average Number of average options exercise price options exercise price ’000 £ ’000 £ Outstanding at 1 April 3,722 0.51 4,340 0.40 Granted 6,980 0.25 748 0.47 Exercised (110) 0.01 (208) 0.11 Lapsed (1,765) 0.45 (1,158) 0.35 Outstanding at 31 March 8,827 0.32 3,722 0.51 Exercisable at 31 March 1,139 0.88 1,354 0.97 The share price on 31 March 2023 was 9.05 pence (2022: 30.5 pence). The pattern of exercise price and life is shown below: 2023 Weighted average remaining life (years) 2022 Weighted average remaining life (years) Weighted Weighted average average exercise Number Contrac- exercise Number Contrac- tual Range of exercise prices price of options Expected tual price of options Expected Up to £1.00 £0.31 8,719,410 3.13 8.40 £0.47 3,588,452 2.09 From £1.01 to £10.00 £1.24 107,750 3.36 8.27 £1.65 133,502 3.09 7.41 8.15 Total 8,827,160 3,721,954 27. Cash used in operations Group Company Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Loss before income tax (6,657) (11,058) (24,539) (64,520) Adjustments for: Finance income (478) (195) (479) (191) Finance expense 20 25 19 24 Depreciation of property, plant and equipment 170 224 – – Depreciation of right-of-use asset 97 100 95 96 Loss on disposal of ﬁxed assets – 3 – – Share-based payment charges 576 649 425 534 Impairment of investment in subsidiary companies – – 23,335 62,953 Changes in working capital: Receivables 58 (90) – – Payables (2,706) 1,146 (3) – Cash used in operations (8,920) (9,196) (1,147) (1,104) ReNeuron Group plc 75 I I F N A N C A L S T A T E M E N T S 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 75 Notes to the Financial Statements continued 28. Reconciliation of net cash ﬂow to movement in net debt Group Company Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Decrease in cash and cash equivalents (3,720) (5,321) (2,864) (4,057) Effect of foreign exchange differences 325 166 327 161 Cash inﬂow from increase in lease liability (7) – – – Lease repayments 168 182 165 165 Lease interest (20) (25) (19) (24) Net funds at start of year 8,986 13,984 7,591 11,346 Net funds at end of year 5,732 8,986 5,200 7,591 29. Analysis of net funds Group Company Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Cash and cash equivalents 6,153 9,548 5,616 8,153 Lease liabilities (421) (562) (416) (562) Net funds 5,732 8,986 5,200 7,591 30. Financial commitments The Company had no other ﬁnancial commitments at 31 March 2023 (2022: £Nil). The Group is expected to incur future contractual milestone payments linked to the future development of its legacy therapeutic programmes. These costs will be recognised when each contractual milestone has been achieved. 31. Contingent liabilities The Group and Company had no contingent liabilities as at 31 March 2023 (2022: £Nil). 32. Related party disclosures The following transactions were carried out with some of the Directors of the Company who are key management personnel as deﬁned by IAS 24 Related Party Disclosures: Services provided Aesclepius Consulting Limited charged fees of £nil (2022: £16,000) in respect of services provided as a Non-Executive Director by Dr Tim Corn. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 76 76 I I F N A N C A L S T A T E M E N T S Notes to the Financial Statements continued Directors’ purchases of shares Ordinary shares of 1p each 31 March 2023 31 March 2022 Consideration Consideration Number £ Number £ Iain Ross 400,000 55,838 – – John Hawkins 147,668 14,878 N/A N/A Barbara Staehelin 257,000 51,733 43,000 49,950 Catherine Isted 50,000 15,950 – – All the above purchases were made on the open market. Subsequent to the year-end, Barbara Staehelin purchased a further 50,000 shares at an open market price of 8.7p per share, giving total consideration of £4,350. Parent Company and subsidiaries The Parent Company is responsible for ﬁnancing and setting Group strategy. ReNeuron Limited carries out the Group strategy, employs all UK-based staff, excluding the Directors, and owns and manages all of the Group’s intellectual property. Funds are passed by the Parent Company when required to ReNeuron Limited and treated as an investment. ReNeuron Limited makes payments including the expenses of the Parent Company. ReNeuron Inc. employed US-based staff who supervised the Group’s clinical trials in the USA. ReNeuron Limited ﬁnances the activities of ReNeuron Inc. via investments in the US subsidiary. Company: transactions with subsidiaries Purchases and staff: Parent Company expenses paid by subsidiary Transactions involving Parent Company shares: Share options Cash management: Capital contribution to subsidiary Company Year-end balance of investment in subsidiary after impairment 2023 £’000 1,000 151 5,684 2023 £’000 – 2022 £’000 1,100 115 5,338 2022 £’000 17,500 ReNeuron Group plc 77 O T H E R I N F O R M A T O N I 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 77 Advisers COMPANY SECRETARY AND REGISTERED OFFICE John Hawkins Pencoed Business Park Pencoed Bridgend CF35 5HY PRINCIPAL BANKER Barclays Bank plc PO Box 326 28 Chesterton Road Cambridge CB4 3UT PATENT AGENTS Elkington & Fife Prospect House 6 Pembroke Road Sevenoaks TN13 1XR NOMINATED ADVISER AND SOLE BROKER Allenby Capital Limited 5 St Helen’s Place London EC3A 6AB FINANCIAL PR CONSULTANTS Walbrook PR Ltd 75 King William Street London EC4N 7BE REGISTRARS Computershare Services plc The Pavilions Bridgwater Road Bristol BS13 8AE SOLICITORS Covington & Burling LLP 22 Bishopsgate London EC2N 4BQ INDEPENDENT AUDITORS PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 1 Kingsway Cardiff CF10 3PW ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 78 Shareholder Information Shareholder enquiries Any shareholder with enquiries should, in the ﬁrst instance, contact our registrar, Computershare Services plc, using the address provided above in the Advisers section. Share price information London Stock Exchange AIM (“AIM”) symbol: RENE Information on the Company’s share price is available on the ReNeuron website at www.reneuron.com 78 O T H E R I N F O R M A T O N I Financial calendar Financial year-end Full year-end results announced Annual General Meeting 31 March 2023 25 May 2023 To be conﬁrmed (prior to 30 September 2023) Investor relations ReNeuron Group plc Pencoed Business Park Pencoed Bridgend CF35 5HY General enquiries: info@reneuron.com Phone: +44 (0) 20 3819 8400 Media/investor enquiries: reneuron@walbrookpr.com Phone: +44 (0) 20 7933 8780 Website: www.reneuron.com ReNeuron Group plc 79 O T H E R I N F O R M A T O N I 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 79 Glossary of Scientiﬁc Terms Adeno associated virus (AAV): AAV based vectors are small and are generally administered directly to patients into target tissues or into the blood. They allow expression of the therapeutic protein in cells that generally do not divide such as in the liver, the brain or eye. Allogeneic: Where a tissue donor and recipient of the cells are from different individuals. CAR-T/CAR-NK Cells: These are T-cells or NK cells that have been modiﬁed or engineered to produce proteins on their surface called chimeric antigen receptors (CARs). CAR-T cells main use is as a cancer therapy. Cell line: A well characterised cell culture that has been demonstrated to be consistent. Cell lines may comprise a family of cells isolated from a single tissue or organ, or may be clonally derived from a single ancestor cell. Cell therapy: A process by which healthy cells are introduced into a tissue or an organ to reconstruct or promote regeneration in order to treat disease. CMC: To appropriately manufacture a pharmaceutical or biologic product, speciﬁc manufacturing processes, product characteristics and product testing must be deﬁned in order to ensure that the product is safe, effective and consistent between batches. These activities are known as chemistry, manufacturing and controls (CMC). Cryopreservation: Maintenance of the viability of cells using agents to protect them from damage that can occur during cooling and storage at very low temperatures. Cytoplasm: Clear, gel-like substance that ﬁlls the inside of a cell but excluding the nucleus. Differentiation: Development of a stem cell into a more specialised cell type. DNA: Deoxyribonucleic acid (DNA) is a molecule that carries genetic information. Ectoderm: One of the three primary germ layers formed in early embryonic development. It is the outermost layer and differentiates to form epithelial and neural tissues (spinal cord, peripheral nerves and brain). Endocytosis: A cellular process in which substances are brought into the cell. The material to be internalised is surrounded by an area of cell membrane, which then buds off inside the cell to form a vesicle containing the ingested material. Endoderm: The innermost of the three germ layers, or masses of cells (lying within ectoderm and mesoderm), which appears early in the development of an animal embryo. ReNeuron Group plc Annual Report and Accounts 2023 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 80 Glossary of Scientiﬁc Terms continued 80 O T H E R Exosomes: These are nanoparticles secreted from many different types of cells, including the Company’s proprietary CTX stem cell line. They play a key role in cell-to-cell signalling. FDA: US Food and Drug Administration (FDA) is responsible for protecting the public health by assuring the safety, effectiveness, quality, and security of human and veterinary drugs, vaccines and other biological products, and medical devices. I N F O R M A T O N I Good Manufacturing Practice (GMP): Regulations, codes and guidelines to ensure that products are consistently produced and controlled according to quality standards appropriate to their intended use and as required by the product speciﬁcation (GMP refers to current good manufacturing practice). Immortalised cell line: A population of cells from a multicellular organism, which would normally not proliferate indeﬁnitely but, due to mutation, have evaded normal cellular senescence and instead can keep undergoing division. The cells can, therefore, be grown for prolonged periods in vitro. Immunogenicity: Immunogenicity can be stated as the ability of a substance to provoke an immune response or the degree to which it provokes an immune response. Immunosuppressants: An agent that can suppress or prevent the body’s immune response. Induced pluripotent stem cells (iPSC): iPSCs are cells that are reprogrammed back into an embryonic-like pluripotent state that enables the development of an unlimited source of any type of human cell needed for therapeutic purposes. In vitro vs in vivo: “In vitro” is in an artiﬁcial environment whereas “in vivo” is in a more natural environment (animal model). Lentivirus: Lentiviral based vectors integrate into patients’ cells and give rise to long term expression and can be used in both dividing and non-dividing cells. Ligand: A substance that forms a complex with a biomolecule to serve a biological purpose. Lipid nanoparticles: Lipid nanoparticles (LNPs) are a mixture of lipids manufactured in the laboratory to a speciﬁc size and density to mimic low-density lipoproteins, which allow them to be taken up into living cells. Mesoderm: One of the three primary germ layers in the very early embryo. The other two layers are the ectoderm (outside layer) and endoderm (inside layer), with the mesoderm as the middle layer between them. MHRA: Medicines and Healthcare products Regulatory Agency (MHRA) is an Executive agency of the Department of Health and Social Care in the United Kingdom which is responsible for ensuring that medicines and medical devices work and are acceptably safe. ReNeuron Group plc 81 O T H E R I N F O R M A T O N I 266079 ReNeuron AR_pp70-end.qxp 15/06/2023 19:10 Page 81 Glossary of Scientiﬁc Terms continued miRNA: A short segment of RNA that regulates gene expression by binding to complementary segments of messenger RNA to down regulate the subsequent formation of protein. Monoclonal antibodies: Identical antibodies derived from a group of identical cloned cells or from an expression vector. Monoclonal antibodies recognise only one kind of antigen, i.e. they bind to the same site on a protein. mRNA: Messenger RNA is a type of single stranded RNA that carries codes from the DNA in a cell’s nucleus to the sites of protein synthesis in the cell’s cytoplasm. One of the uses of synthetic mRNA is in the development of vaccines. Nano-sized: Between One–1000nm in size. Peptides: Short chains of between two and 50 amino acids, linked by peptide bonds. Plasmid: A small circle of DNA, which can be engineered to introduce genes of interest into cells. Pluripotency: Pluripotency describes the ability of a cell to develop into the three primary germ cell layers of the early embryo and, therefore, into all cells of the adult body. Proprietary technology: This technology is the property of a business or an individual. Proteins: Large, complex molecules made up of amino acids. Proteins are required for the structure, function and regulation of the body’s tissues and organs. RNA: Ribonucleic acid (RNA) is a polymeric molecule essential in various biological roles in coding, decoding, regulation and expression of genes. siRNA (small interfering RNA): siRNA is a class of double-stranded RNA and non-coding RNA molecules with a length of 18–25 base pairs. Stem cell: A cell that is both able to reproduce itself and, depending on its stage of development, to generate all or certain other cell types within the body or within the organ from which it is derived. TM Domain: Transmembrane domain. Viral vectors: Tools commonly based on viruses used by molecular biologists to deliver genetic material into cells. ReNeuron Group plc Annual Report and Accounts 2023 R e N e u r o n G r o u p p l c A n n u a l R e p o r t f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 2 3 ReNeuron Group plc Pencoed Business Park Pencoed Bridgend CF35 5HY t: +44 (0) 20 3819 8400 e: info@reneuron.com Registered number: 05474163 www.reneuron.com

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