ANNUAL REPORT
AND ACCOUNTS
2014
2014
A TRANSFORMATIONAL YEAR
Stock symbol: LSE:SNG
www.synairgen.com
A drug discovery and
development company
focused on advancing
novel approaches
for severe respiratory
conditions
Strategy
Using our BioBank platform
(our human tissue models
of respiratory disease), and
our clinical trial capabilities,
Synairgen’s strategy is to
identify novel drug targets,
progress them through
early stage clinical trials and
out-license them to partners
for progression to market.
Contents
Introduction
Strategy
Highlights
Business Review
Strategic Report
Governance
Directors
Synairgen’s Founders
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
1
2
3
15
17
19
20
22
27
28
Financials
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the
members of Synairgen plc
Consolidated Statement of
29
Comprehensive Income
29
Consolidated Statement of Changes in Equity
30
Consolidated Statement of Financial Position
31
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements 32
43
Parent Company Balance Sheet
Notes to the Parent Company
Financial Statements
44
Other
Corporate Directory
Glossary
47
47
www.synairgen.com
Operational
highlights
Financial
highlights
• Global exclusive licence agreement signed in
June 2014 with AstraZeneca for SNG001
(inhaled interferon beta) for all respiratory
indications:
• $7.25 million up-front payment
• potential development, regulatory and
commercial milestones of up to $225 million
• tiered royalties of up to mid-teens on future
potential sales
• AstraZeneca responsible for all future costs
• SNG001 Phase II clinical data published in the
American Journal of Respiratory and Critical
Care Medicine in July 2014
• Screening of new development opportunities
using Synairgen’s proprietary “BioBank”
platform leveraging Synairgen’s world-class
founder and KOL respiratory drug discovery
and development expertise – several assets
identified as potential opportunities for
licensing into the Company
• Post-tax profit for the year of £1.2
million (2013: loss £2.0 million),
driven by initial receipt from
AstraZeneca of $7.25M (£4.25
million) received in June 2014
• Research and development
expenditure for the year was
£1.6 million (2013: £1.3 million)
• Cash and deposit balances of
£9.6 million at 31 December 2014
(2013: £1.3 million)
• Current funds support the pre-
clinical development of key
potential opportunities
$
7.25
Up-front payment from AstraZeneca for SNG001
m
£
1.2
Post-tax profit for 2014
m
1 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 2
Operational
highlights
Financial
highlights
• Global exclusive licence agreement signed in
June 2014 with AstraZeneca for SNG001
(inhaled interferon beta) for all respiratory
indications:
• $7.25 million up-front payment
• potential development, regulatory and
commercial milestones of up to $225 million
• tiered royalties of up to mid-teens on future
potential sales
• AstraZeneca responsible for all future costs
• SNG001 Phase II clinical data published in the
American Journal of Respiratory and Critical
Care Medicine in July 2014
• Screening of new development opportunities
using Synairgen’s proprietary “BioBank”
platform leveraging Synairgen’s world-class
founder and KOL respiratory drug discovery
and development expertise – several assets
identified as potential opportunities for
licensing into the Company
• Post-tax profit for the year of £1.2
million (2013: loss £2.0 million),
driven by initial receipt from
AstraZeneca of $7.25M (£4.25
million) received in June 2014
• Research and development
expenditure for the year was
£1.6 million (2013: £1.3 million)
• Cash and deposit balances of
£9.6 million at 31 December 2014
(2013: £1.3 million)
• Current funds support the
pre-clinical development of key
potential opportunities
$
7.25
Up-front payment from AstraZeneca for SNG001
m
£
1.2
Post-tax profit for 2014
m
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 2
Strategic Report
Principal activities
Synairgen plc is the holding company
for Synairgen Research Limited,
a respiratory drug discovery and
development company.
Strategic Report
The directors present their Strategic Report for the year ended 31 December 2014.
3 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Strategic Report
Operating Review
Summary
The year has been transformational for Synairgen.
The successful licensing of Synairgen’s inhaled
interferon beta (IFN-beta, formerly known as
SNG001) programme to AstraZeneca in June
demonstrates Synairgen’s competence in identifying
and developing early stage assets to a point of
commercial value and typifies the potential of our
business model.
During the year, Synairgen’s team, including its
world-leading respiratory drug discovery and
development experts, have screened approximately
30 new assets from around the globe. Some
of the assets have been identified as potential
opportunities for bringing into the Company for
development and then for future licensing out to
large pharmaceutical company partners for late
stage development and marketing. To support this
development activity Synairgen raised an additional
£5.3 million in July 2014.
Inhaled IFN-beta and the licensing agreement
with AstraZeneca
In June 2014, Synairgen signed a global exclusive
licence agreement with AstraZeneca, a major
franchise holder in the respiratory sector, for which
it received an upfront payment of $7.25 million,
and will receive potential further development,
regulatory and commercial milestones of up to $225
million. In addition, Synairgen will receive tiered
royalties on sales, which escalate to the mid-teens
percentage level. Being a novel therapy in an area
of respiratory disease where there is a great unmet
medical need, it is not possible at this stage to be
definitive about the potential size of the market,
however, the health economics and the size of the
target patient group indicate that an efficacious
therapy of this type could command peak sales in
excess of $1 billion per annum.
AstraZeneca is now responsible for all future
development activities and costs associated with this
programme. AstraZeneca’s reference for the inhaled
IFN-beta programme is AZD9412.
The need for AZD9412
Despite taking inhaled corticosteroids, asthmatics
are still susceptible to exacerbations (worsening
of asthma symptoms). Respiratory virus infections
(e.g. the common cold) are a major trigger for
exacerbations and there are limited satisfactory
treatments available to address this significant
unmet medical need, which is associated with a
significant proportion of healthcare spending on
asthma. Clinical data generated from trials to date
shows that this compound supports or boosts the
immune system by correcting a deficiency which
makes patients vulnerable to respiratory tract viral
infections. The clinical need for a drug that helps
chronic obstructive pulmonary disease (COPD)
patients during viral infections is perhaps even
greater due to the high morbidity associated with
exacerbations/hospitalisations of their disease.
IFN-beta deficiency
Asthmatics do not get more respiratory viral
infections (common colds) than non-asthmatics, but
infections are more likely to worsen inflammation
in the lungs and cause exacerbations. Professor
Donna Davies (one of the three Synairgen academic
founders) and colleagues at the University of
Southampton and Imperial College London found
that lung models using cells from asthmatic
volunteers were more vulnerable to virus infection.
In these models, lung cells from asthmatics
produced lower amounts of the key antiviral defence
protein IFN-beta during virus infections. This
offered a potential explanation for why the lungs of
asthmatics are affected more by respiratory virus
infections, and by simply adding a small amount of
IFN-beta to cultures of lung cells from asthmatics it
was shown that antiviral responses were improved.
This suggested that direct delivery of IFN-beta
to the lungs of asthmatics by inhalation during a
respiratory virus infection could limit the spread of
the virus to the lungs and also ultimately reduce the
number of asthma exacerbations and potentially
COPD exacerbations.
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Strategic Report (continued)
Steps completed by Synairgen
Pre-clinical development
Synairgen used its models of lung disease
to confirm the potential utility of inhaled
IFN-beta against many common respiratory
viruses including rhinovirus strains, RSV,
and influenza strains, and worked with
other groups to test IFN-beta against
highly pathogenic strains of influenza and a
coronavirus (MERS). Synairgen also used the
models to study various dosing regimens and
to develop biomarkers for clinical trials in
asthmatic patients.
Phase I clinical trials
Synairgen developed an inhaled form of
IFN-beta and progressed it into clinical trials.
Synairgen’s Phase I trials showed that inhaled
IFN-beta was well tolerated at varying dose
levels. Analysis of biomarkers showed that
inhaled IFN-beta successfully boosted the
immune system.
Phase II clinical trial
The Phase II trial recruited patients from a
broad spectrum of asthma patients and
patients were treated with IFN-beta or
placebo at the onset of cold symptoms. One
of the major findings from the trial was that
milder and moderate patients do not appear
to suffer the same degree of symptom
deterioration (measured with the Asthma
Control Questionnaire (ACQ)) as more severe
patients (characterised as those taking higher
doses of maintenance asthma therapy). The
ACQ was used as the primary end point for
the trial. A statistically significant difference
in ACQ (p=0.004) was evident in the more
severe patients (defined as Step 4 and Step 5
asthmatics according to the British Thoracic
Society classifications), which are estimated to
represent between 10% and 20% of all adult
asthma sufferers. In these patients, there
was also a lung function benefit in favour of
inhaled IFN-beta and there appeared to be
fewer severe exacerbations. Biomarkers of
lung inflammation were also lower in patients
receiving inhaled IFN-beta.
These results have now been published in the
American Journal of Respiratory and Critical
Care Medicine, a prestigious peer-reviewed
journal (Djukanovic R, Harrison T, Johnston
SL, Gabbay F, Wark P, Thomson NC, Niven R,
Singh D, Reddel HK, Davies DE, et al. The effect
of inhaled interferon-beta on worsening of
asthma symptoms caused by viral infections:
a randomised trial. Am J Respir Crit Care Med
2014;190:145–154).
We believe the inhaled IFN-beta programme
is considerably de-risked compared to many
programmes at this stage of development,
firstly because of its use by injection for the
last two decades in multiple sclerosis (thereby
accumulating a significant safety record),
and secondly because it is targeting what is
recognised to be the major cause of asthma
exacerbations.
AstraZeneca activities
AstraZeneca are due to commence an
international Phase II trial during 2015. This
Phase II trial is expected to recruit patients
from the Step 4 and 5 asthma population
who are at particular risk of experiencing
exacerbations caused by cold viruses.
Synairgen estimates that the trial is expected
to produce results in the early part of 2017.
AZD9412 also provides the opportunity to
expand the clinical programme into other
pulmonary diseases, including COPD.
5 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Key performance indicators
The Board considers that the most important
KPIs are non-financial and relate to the progress
of the scientific programmes which are discussed
in the preceding section of this report.
The most important financial KPIs are the cash
position and operating result of the Group. At
31 December 2014 cash and deposit balances
amounted to £9.60 million (2013: £1.29 million)
and were above budgeted levels. The operating
profit of £1.09 million (2013: loss of £2.28 million)
was also favourable to the budgeted result for
the year.
Synairgen’s new pipeline developments
As yet undisclosed programmes are
currently being assessed by Synairgen.
Synairgen is using its expertise, models,
and understanding of asthma, COPD
and respiratory biology to assess novel
opportunities to which our platform and
development experience can add significant
value. The team has screened approximately
30 new assets from around the globe during
the past 12 months and after deeper due
diligence, several assets have been identified
as potential opportunities for licensing into
the Company. Synairgen will use its BioBank
of clinical samples of blood, sputum, biopsies
and bronchial epithelial cells obtained from
a selection of well-characterised asthma and
COPD volunteers and healthy control subjects
in models of respiratory disease to validate
drug targets, tailor treatment approaches
to patient groups (personalised medicine),
and use the models to progress compounds
towards early stage clinical trials.
A number of the shortlisted programmes are
at a stage where initial clinical trials could be
commenced in 2016. They are all of a potential
market size and utility to be attractive to
large pharmaceutical companies – fitting with
Synairgen’s partnering model.
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Strategic Report (continued)
7 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
The successful licensing of Synairgen’s
inhaled interferon beta (IFN-beta,
formerly known as SNG001) programme
to AstraZeneca in June demonstrates
Synairgen’s competence in
IDENTIFYING &
DEVELOPING
early stage assets to a point
of commercial value and typifies the
potential of our business model
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 8
Strategic Report (continued)
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Financial Review
The Financial Review should be read in conjunction
with the consolidated financial statements of the
Company and Synairgen Research Limited (together
the ‘Group’) and the notes thereto on pages 29 to 42.
The consolidated financial statements are presented
under International Financial Reporting Standards
as adopted by the European Union. The financial
statements of the Company continue to be prepared
in accordance with UK Generally Accepted Accounting
Practice and are set out on pages 43 to 46.
Statement of Comprehensive Income
The profit from operations for the year ended
31 December 2014 was £1.09 million (2013: loss
£2.28 million). Revenues of £4.29 million (2013:
£nil) comprised the upfront payment from
AstraZeneca (as discussed above) of £4.25 million
and £0.04 million of scientific fee for service work
for AstraZeneca. Research and development
expenditure for the year amounted to £1.65 million
(2013: £1.29 million) and was incurred in relation to
the interferon beta programme and research into
the new opportunity candidates.
Other administrative costs for the year amounted to
£1.55 million (2013: £0.99 million), with the increase
over the prior year being attributable to business
development costs and staff costs. On account of
the Group being in profit, there was a reduction in
the research and development tax credit from £0.22
million to £0.06 million. The profit after tax for the
year was £1.19 million (2013: loss of £2.04 million)
and the basic earnings per share amounted to 1.42p
(2013: loss of 2.72p).
Fundraisings
During the year, there were two fundraisings. In
March 2014, the Company raised £1.50 million (gross)
through the issue of 3.13 million shares at a price of
48p to provide working capital to progress its out-
licensing discussions through to a conclusion. Costs
of the issue amounted to £0.08 million. In July 2014,
the Company raised a further £5.31 million (gross)
through the issue of 10.63 million shares at a price
of 50p to enable it to progress new development
opportunities. Costs of this issue were £0.33 million.
Statement of Financial Position and cash flows
At 31 December 2014, net assets amounted to £9.44
million (2013: £1.58 million), including net funds, as
detailed below in Capital structure and funding, of
£9.60 million (2013: £1.29 million).
The principal elements of the £8.31 million increase
over the year ended 31 December 2014 (2013: £1.80
million decrease) in net funds were:
• Cash generated from operations of £1.61 million
(2013: £2.04 million outflow);
• Research and development tax credits received of
£0.20 million (2013: £0.24 million);
• Share issue proceeds (net of costs) £6.51 million
(2013: £nil).
Capital structure and funding
The Group is funded by equity capital, reflecting the
early stage nature of its discovery and development
programmes.
The Group considers its capital to be its total equity,
which at 31 December 2014 amounted to £9.44
million (2013: £1.58 million). The Group’s objectives
when managing capital are to safeguard the Group’s
ability to continue as a going concern in order to
provide returns to equity holders of the Company
and benefits to other stakeholders and to maintain
an optimal capital structure to reduce the cost of
capital. The Group manages this objective through
tight control of its cash resources and, upon reaching
significant drug development programme milestones
(to decrease investment risk), by raising additional
equity from shareholders to meet its forecast future
cash requirements.
Net funds held by the Group at 31 December 2014
amounted to £9.60 million and comprised cash and
cash equivalents, short-term deposits (with original
maturities of greater than three months and less
than one year) as shown below:
Short-term deposits
31 Dec
2014
£m
6.75
2013
£m
0.46
2012
£m
1.43
2011
£m
2.45
Cash and cash equivalents
2.85
0.83
1.66
0.90
Net funds
9.60
1.29
3.09
3.35
The Group did not have any bank borrowings as at
31 December 2014 (2013: £nil).
There have been seven significant issues of shares
with the following amounts (net of costs) raised:
£0.62 million (August 2003); £8.98 million (from IPO
on AIM in October 2004); £6.20 million ( June 2009);
£2.50 million ( June 2011); £2.35 million ( July 2012);
£1.42 million (March 2014); and £4.98 million ( July
2014). The other major sources of funding received
by the Group from the formation of the business
until 31 December 2014 have been: revenues from
licensing transactions of £4.25 million, research
and development tax credits of £2.66 million,
bank interest of £1.63 million, and revenues from
collaborative work of £0.64 million.
Treasury policy and financial risk management
Credit risk
The Group follows a risk-averse policy of treasury
management. Sterling deposits are held with one
or more approved UK-based financial institutions
and in the Institutional Cash Series plc Institutional
Sterling Liquidity Fund managed by BlackRock
Investment Management (UK) Limited. The Group’s
primary treasury objective is to minimise exposure
to potential capital losses whilst at the same time
securing prevailing market rates.
Interest rate risk
The Group’s cash held in current bank accounts
is subject to the risk of fluctuating base rates. An
element of the Group’s financial assets is placed on
fixed-term interest deposits. The interest rate profile
of financial assets is illustrated in note 16 to the
financial statements.
Currency risk
During the year under review, the Group was
exposed to US dollar currency movement as the
AstraZeneca upfront payment was made in dollars
and to Euro currency movement as a small element
of its research and development expenditure is
denominated in this currency. The US dollars from
AstraZeneca were converted into Sterling upon
receipt. The Group does not routinely hedge against
its exposure in Euros as the amounts involved have
not been significant.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 10
Strategic Report (continued)
Principal risks
and uncertainties
The Board considers that the principal risks and
uncertainties facing the Group may be summarised
as follows:
• Reliance on the interferon beta programme
The Group’s most significant drug development
programme is the interferon beta programme, which
is now being developed by AstraZeneca, following
the significant investment by the Group.
The Group is reviewing a number of additional
development opportunities which it hopes to
in-license and thereby broaden and diversify its
portfolio.
• Failure to generate innovative discoveries
There can be no guarantee that the Group will
successfully develop new pharmaceutical products.
• Loss of the BioBank
The Group’s BioBank of well-characterised human
tissue, which has been built up over several years, is
a key element of its technology platform and is very
important in relation to the development of future
opportunities.
The Group follows a defined policy to minimise the
chances of loss of the BioBank, including storing it
in a number of different locations at Southampton
General Hospital and monitoring the storage
temperature 24 hours a day.
• Clinical development and regulatory risk
The development of pharmaceutical drugs
requires the necessary safety and efficacy to be
demonstrated in clinical programmes in order to
meet the requirements of the appropriate regulatory
bodies. There can be no guarantee that the
necessary safety or efficacy will be demonstrated or
that the clinical trials will not be delayed or extended.
There can be no guarantee that any of the Group’s
therapies will be able to obtain or maintain the
necessary regulatory approvals.
The Group seeks to reduce this risk by closely
monitoring the progress of recruitment on its clinical
trials, drawing on the experience of its Founders,
seeking advice from regulatory advisers, and holding
consultations with the appropriate regulatory bodies.
• Intellectual property risk
The commercial success of the Group depends
on its ability to obtain patent protection for its
pharmaceutical discoveries in the US, Europe and
other countries and to preserve the confidentiality
of its know-how. There is no guarantee that patent
applications will succeed or be broad enough to
provide protection for the Group’s intellectual
property rights and exclude competitors with similar
pharmaceutical products. The success of the Group
is also dependent on non-infringement of patents,
or other intellectual property rights, held by third
parties. Competitors and third parties may hold
intellectual property rights which the Group may not
be able to license upon favourable terms, potentially
inhibiting the Group’s ability to develop and exploit
its own business. Litigation may be necessary to
protect the Group’s intellectual property which may
result in substantial costs.
The Group seeks to reduce this risk by seeking
patent attorney advice that patent protection
will be available prior to investing in a project, by
seeking patent protection where appropriate and by
minimising disclosure to third parties.
• Commercial risk
There can be no guarantee that the Group will
succeed in securing and maintaining the necessary
contractual relationships with licensing partners
for its programmes under development. Even if
the programmes are successfully out-licensed and
pharmaceutical products are brought to market by
a partner, there is no guarantee that such products
will succeed in the marketplace.
The Group seeks to reduce this risk by structuring
its development programmes to meet the needs
and requirements of its potential partners and by
engaging with partners who have the appropriate
experience, resource and interest to bring such
pharmaceutical products to the global marketplace.
• Competition risk
The Group’s current and potential competitors
include pharmaceutical and biotechnology
companies and academic institutions, many of whom
have significantly greater financial resources than the
Group. There can be no assurance that competitors
will not succeed in developing products that are
more effective or economic than any developed
by the Group, or which would render the Group’s
products non-competitive or obsolete.
11 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Outlook
We are delighted with the progress Synairgen has
made this year with the licensing deal of our novel
therapeutic, inhaled IFN-beta, for development and
commercialisation at AstraZeneca.
We are engaged in due diligence on a number of novel
development opportunities to which Synairgen’s
platform could add significant value in the near and
medium term and we expect a number of these to enter
our development pipeline during the coming period.
By order of the Board
John Ward
Company Secretary
2 March 2015
• Funding risk
The Group continues to consume cash resources.
Until the Group generates positive net cash
inflows from successful out-licensing transactions
and commercialisation of its products, it remains
dependent upon securing additional funding
through the injection of capital from share issues.
The Group may not be able to generate positive net
cash flows in the future or attract such additional
funding required at all, or on suitable terms. In
such circumstances, the Group’s discovery and
development programmes may be delayed or
cancelled and the business operations curtailed.
The Group seeks to reduce this risk through tight
financial control, prioritising programmes which will
generate the best returns and keeping shareholders
informed on progress.
• Dependence on Founders, senior management
and key staff
The Founders and certain members of staff are
highly skilled scientists and clinicians. The Group
has deliberately pursued a lean headcount policy to
conserve financial resources. Failure to continue to
attract and retain such individuals could adversely
affect operational results.
The Group seeks to reduce this risk by appropriate
incentivisation of staff through participation in long
term equity incentive schemes.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 12
Our proven business model and
the ability to successfully recreate
the human lung in the laboratory, is
unlocking the potential in a number of
other drug development opportunities
BioBank samples are
obtained from volunteer
patients attending
specialist clinical
research facilities at
Southampton General
Hospital
Synairgen’s BioBank
contains blood, sputum,
lung cells and tissue
samples collected from
subjects with asthma
and COPD and controls
BioBank samples are
used to create in vitro
human respiratory cell
and tissue models to
discover, develop and
validate novel drug
targets
Cultured epithelial cells
grown at an air-liquid
interface showing cilia
and mucus-secreting cells
1
3
2
4
13 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Synairgen is licensed by the
Human Tissue Authority to store
and use its BioBank of human
tissue for its research
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 14
Simon Shaw
Non-executive Chairman
Richard Marsden
Chief Executive Officer
Dr Phillip Monk
Chief Scientific Officer
John Ward
Finance Director
Simon Shaw joined Synairgen
as executive Chairman on
its inception in June 2003
and became non-executive
Chairman in October of
that year. He is Group Chief
Financial Officer of Savills
plc. He was Chief Financial
Officer of Gyrus Group PLC
from 2003 until its sale
to Olympus Corporation
in 2008, having previously
been Chief Operating Officer
of Profile Therapeutics plc
between 1998 and 2003.
Between 1991 and 1997 he
was a corporate financier,
latterly at Hambros Bank
Limited. He is a chartered
accountant.
Richard Marsden joined
Synairgen in a consulting
role as General Manager
in November 2003, was
appointed to the Board
as Managing Director in
June 2004 and appointed
Chief Executive Officer in
September 2009. Between
1998 and 2003 he worked
as Projects Manager and
Cystic Fibrosis Business
Development Manager at
Profile Therapeutics plc,
where he managed the
Cystic Fibrosis business
and played a major role
in the development of its
proprietary pharmaceutical
unit, Profile Pharma Limited.
Prior to this, he worked for
Zimmer Limited, Genentech
(UK) Limited and Roche
Products Limited.
Phillip Monk joined Synairgen
in October 2006 as Head
of Bioscience Development
and was appointed to the
Board as Chief Scientific
Officer in September 2009.
Phillip was previously
Director of the Respiratory
and Inflammation Biology
group at Cambridge Antibody
Technology (‘CAT’) and led
the scientific development
of CAT-354, an anti-IL-13
antibody being developed
for the treatment of severe
asthma. Prior to joining
CAT, he worked at Bayer AG
within the respiratory disease
therapeutic area, focusing
on the development of novel
therapies for asthma, COPD
and cystic fibrosis.
John Ward joined Synairgen
in October 2004 as Finance
Director. From December
1999 to July 2004 he was
Chief Financial Officer and
Company Secretary of Profile
Therapeutics plc and was
appointed to the Profile
Therapeutics board in March
2003. From 1996 to 1999
he was Finance Director of
Rapid Deployment Group
Limited, the UK holding
company for the healthcare
operations of Ventiv
Health, Inc. Prior to joining
Rapid Deployment he was
a Director of Corporate
Finance at Price Waterhouse.
He is a chartered accountant.
Directors
15 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Iain Buchanan
Non-executive Director
Dr Bruce Campbell
Non-executive Director
Paul Clegg
Non-executive Director
Prof. Stephen Holgate CBE
Non-executive Director
Iain Buchanan was
appointed as a non-
executive director in June
2010 and is currently Chief
Executive Officer of NOXXON
Pharma AG based in Berlin.
Previously he was Chief
Executive Officer of Novexel
SA (‘Novexel’), a specialty
pharmaceutical company
focused on novel anti-
infectives, from its formation
in 2004 until 2010, when
it was sold to AstraZeneca.
He has some 35 years’
commercial experience in
the pharmaceutical and
biotech industries. He
joined Novexel from Vertex
Pharmaceuticals (Europe)
Limited, where he was
Managing Director. Prior to
Vertex, Iain was the Regional
Licensing Director of Cilag
A.G. International, a division
of Johnson & Johnson
based in Switzerland,
where he managed Cilag's
international licensee
business from 1987
to 1994.
Bruce Campbell joined
Synairgen as a non-executive
Director in April 2006.
He has 40 years of drug
development experience
and has developed many
drugs in a wide range of
indications which are now
on the market. He currently
acts as a consultant to
various companies including
Proximagen Limited.
Formerly he was Senior VP of
International Development at
Neurocrine Biosciences, Inc.
('Neurocrine'). Prior to joining
Neurocrine he worked for
27 years at Servier (United
Kingdom), latterly as Scientific
Director. In addition, he has
also been a director and
European Chairman of the
Drug Information Association,
a member of the European
ICH Safety Working Party
and a scientific advisor to
IP Group plc. He is a visiting
Professor in Pharmacology at
King's College, London.
Paul Clegg was appointed
as a non-executive
director of Synairgen in
September 2009. He is Chief
Executive Officer of Accsys
Technologies PLC, Chairman
of Tricoya Technologies
Ltd and a non-executive
director of Peel Hunt
LLP. Paul was previously
Managing Director and
Chief Executive Officer
of Cowen International
Limited and director of
Cowen Asset Management
Limited until June 2008.
After over twenty years
working in the investment
banking industry, Paul
joined Accsys Technologies
PLC, a UK publicly quoted
company in the chemical
sector, which has developed
the process and the
commercial industrialisation
of wood acetylation. He has
successfully turned around,
refinanced and repositioned
the company.
Stephen Holgate is a co-founder
of Synairgen and was appointed
a non-executive director in
June 2003. After qualifying
in Medicine at Charing Cross
Hospital Medical School, London
he has pursued an academic
career leading to his appointment
in 1987 to his current
position as Medical Research
Council Clinical Professor of
Immunopharmacology at the
University of Southampton. His
research interests have been
largely focused on the cellular
and molecular mechanisms of
asthma that has involved use of
both epidemiological and genetic
approaches. He has published
over 1,000 papers in peer-
reviewed literature.
He is currently: Chairman of
the MRC Translational Research
Group; Member of the MRC
Strategy Board; Member of the
Science Europe Medical Science
Committee and Horizon 2020
Health Science Panel; Chairman
of the European Respiratory
Society Scientific Council; Board
Chair of the National Centre for
the Replacement, Refinement
and Reduction of Animals in
Research (NC3Rs); Chairman of
Defra’s Hazardous Substances
Advisory Committee; Trustee
of Cancer Research UK, the
British Lung Foundation and The
Kennedy Trust for Rheumatology
Research; and a scientific board
member or advisor to a number
of companies, including Amgen,
Takeda, Merck, and Novartis. In
2010, he was appointed by the
Higher Education Funding Council
for England to be the Chair of the
Research Excellence Framework
(REF2014) Main Panel A covering
Medicine, Health and Life
Sciences.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 16
Synairgen’s
Founders
17 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Prof. Stephen Holgate
CBE
is MRC Clinical Professor
of Immunopharmacology
at the University of
Southampton
Prof. Ratko Djukanovic
is Professor of Medicine
at the University of
Southampton and Director
of the Southampton
NIHR Respiratory Biomedical
Research Unit
Prof. Donna Davies
is Professor of Respiratory Cell
and Molecular Biology at the
University of Southampton
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 18
Directors’ Report
The directors present their report and the audited financial statements for
Synairgen plc (the ‘Company’) and its subsidiary (together the ‘Group’) for
the year ended 31 December 2014.
Directors’ interests in ordinary shares
The directors, who held office at 31 December 2014, had the
following interests in the ordinary shares of the Company:
There are a number of items required to be included in the Directors’
Report, which are covered elsewhere in the annual report.
The following are covered in the Strategic Report:
• Principal activities
• Review of the business and future developments
• Key performance indicators
• Principal risks and uncertainties
• The use of financial instruments and financial risk management
policies (also in note 16 to the financial statements)
Details of directors’ remuneration and share options are given in the
Directors’ Remuneration Report.
Research and development
During the year ended 31 December 2014, the Group has invested
£1,649,000 (2013: £1,292,000) in research and development activities
and a review of this expenditure is included in the Strategic Report.
Dividends
The directors do not propose the payment of a dividend.
Substantial shareholdings
As at 2 March 2015, the Company had been advised of the following
shareholders with interests of 3% or more in its ordinary share capital:
Name of shareholder
Number of
ordinary
shares
% of share
capital
Richard Marsden
Dr Phillip Monk
John Ward
Simon Shaw (i)
Iain Buchanan
Dr Bruce Campbell (ii)
Paul Clegg (iii)
Prof. Stephen Holgate (iv)
31 December 2014
Number of shares
1 January 2014
Number of shares
110,972
161,710
243,912
1,408,879
112,741
294,259
204,244
858,360
110,972
28,592
243,912
1,408,879
112,741
294,259
204,244
858,360
(i) Simon Shaw’s shareholding includes 40,299 shares held in his pension plan.
(ii) Dr Bruce Campbell’s shareholding includes 40,299 owned by his wife,
Susan Campbell.
(iii) Paul Clegg’s shareholding includes 180,149 shares held in his pension plan.
(iv) Prof. Stephen Holgate’s shareholding includes 1,923 shares owned by his
wife, Elizabeth Holgate.
Between 31 December 2014 and the date of this report there has
been no change in the interests of directors in shares or share
options as disclosed in this report.
Directors’ and officers’ liability insurance
Qualifying indemnity insurance cover has been arranged in respect
of the personal liabilities which may be incurred by directors and
officers of the Group during the course of their service with the
Group. This insurance has been in place during the year and on the
date of this report.
Woodford Investment Management LLP
18,286,651
20.0%
Lansdowne Partners International Ltd
16,923,111
18.5%
Political donations
During the year ended 31 December 2014, the Group made no
political donations (2013: £nil).
Standard Life Investments (Holdings) Ltd
5,591,000
Southampton Asset Management Ltd
3,600,000
6.1%
3.9%
Directors
The directors of the Company during the year ended 31 December
2014 were:
Auditors
All of the current directors have taken all the steps that they ought
to have taken to make themselves aware of any information needed
by the Company's auditors for the purposes of their audit and
to establish that the auditors are aware of that information. The
directors are not aware of any relevant audit information of which
the auditors are unaware.
Executive directors:
Richard Marsden (Chief Executive Officer)
Dr Phillip Monk (Chief Scientific Officer)
John Ward (Finance Director)
Non-executive directors:
Simon Shaw (Chairman)
Iain Buchanan
Dr Bruce Campbell
Paul Clegg
Prof. Stephen Holgate CBE
By order of the Board
John Ward
Company Secretary
2 March 2015
19 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Corporate Governance
The Board is accountable to the Company’s shareholders for good
corporate governance and it is the objective of the Board to attain a
high standard of corporate governance. As an AIM-quoted company,
full compliance with The UK Corporate Governance Code (the ‘Code’)
is not a formal obligation. The Company has not sought to comply with
the full provisions of the Code, however it has sought to adopt the
provisions that are appropriate to its size and organisation and establish
frameworks for the achievement of this objective. This statement sets
out the corporate governance procedures that are in place.
Board of Directors
On 31 December 2014 the Board of directors (the ‘Board’) consisted
of a non-executive Chairman (Simon Shaw), three executive directors
(Richard Marsden, Dr Phillip Monk and John Ward), and four non-
executive directors (Iain Buchanan, Dr Bruce Campbell, Paul Clegg and
Prof. Stephen Holgate). Brief details about the directors are given on
pages 15 and 16. The responsibilities of the non-executive Chairman
and the Chief Executive Officer are clearly divided. The non-executive
directors bring relevant experience from different backgrounds and
receive a fixed fee for their services and reimbursement of reasonable
expenses incurred in attending meetings.
The Board retains full and effective control of the Group. This includes
responsibility for determining the Group’s strategy and for approving
budgets and business plans to fulfil this strategy. The full Board ordinarily
meets seven times a year (‘Scheduled Board meetings’). It also meets
on any other occasions it considers necessary. During the year ended
31 December 2014, the Board met seven times for Scheduled Board
meetings, with each member attending as follows:
Director
Simon Shaw
Richard Marsden
Dr Phillip Monk
John Ward
Iain Buchanan
Dr Bruce Campbell
Paul Clegg
Prof. Stephen Holgate
Number of meetings held
whilst a Board member
Number of
meetings attended
7
7
7
7
7
7
7
7
6
7
7
7
7
6
7
5
In addition there were seven other meetings, to which Board members
were invited, during the year.
It is the duty of the Chairman to ensure that all directors are properly
briefed on issues arising at Board meetings. Prior to each Board meeting,
directors are sent an agenda and Board papers for each agenda item to
be discussed. Additional information is provided when requested by the
Board or individual directors.
The Company Secretary is responsible to the Board for ensuring that
Board procedures are followed and that the applicable rules and
regulations are complied with. All directors have access to the advice
and services of the Company Secretary, and independent professional
advice, if required, at the Company’s expense. Removal of the Company
Secretary would be a matter for the Board.
As appropriate, the Board has delegated certain responsibilities to Board
committees.
Audit Committee
The Audit Committee currently comprises Simon Shaw (Chairman),
Iain Buchanan and Dr Bruce Campbell. Whilst it is not normal in
larger companies for the chairman of the Company to chair the Audit
Committee, the Company considers it appropriate for Simon Shaw to be
Chairman as he is considered to have the most significant, recent and
relevant financial experience of the non-executive directors.
The committee has primary responsibility for ensuring that the financial
performance of the Group is properly measured and reported on and it
reviews the interim financial information and annual financial statements
before they are submitted to the Board. The committee reviews
accounting policies and material accounting judgements. The committee
also reviews, and reports on, reports from the Group’s auditors relating
to the Group’s accounting controls. It makes recommendations to the
Board on the appointment of auditors and the audit fee. The committee
monitors the scope, results and cost-effectiveness of the audit. It has
unrestricted access to the Group’s auditors. In certain circumstances it
is permitted by the Board for the auditors to supply non-audit services
(in the provision of tax advice, or on specific projects where they can add
value). The committee has approved and monitored the application of
this policy in order to safeguard auditor objectivity and independence.
The overall fees paid to the auditors are not deemed to be of such
significance to them as to impair their independence. The Group does
not have an internal audit function, but the Board considers that this
is appropriate, given the size of the Group. The committee keeps this
matter under review annually. During the year ended 31 December 2014,
the committee met four times with each member attending all meetings.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee currently comprises Paul
Clegg (Chairman), Dr Bruce Campbell and Simon Shaw. The committee is
responsible for making recommendations to the Board on remuneration
policy for executive directors and the terms of their service contracts,
with the aim of ensuring that their remuneration, including any share
options and other awards, is based on their own performance and
that of the Group generally. The committee administers the Long-Term
Incentive Plan, the staff share option scheme and the Qualifying Non-
Employee Option Scheme and approves grants under all three schemes.
It also advises on the remuneration policy for the Group’s employees.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 20
Corporate Governance (continued)
The committee is responsible for all senior appointments that are
made within the Group. During the year ended 31 December 2014, the
committee met six times with each member attending as follows:
Director
Paul Clegg
Dr Bruce Campbell
Simon Shaw
Number of meetings held
whilst a Committee member
Number of
meetings attended
6
6
6
6
4
5
Investor relations
The directors seek to build a mutual understanding of objectives
between the Company and its shareholders by meetings with major
institutional investors and analysts after the Company’s preliminary
announcement of its year-end results and its interim results. The
Company also maintains investor relations pages on its website (www.
synairgen.com) to increase the amount of information available to
investors. During the year the Company has presented at a number
of meetings and conferences aimed primarily at private investors to
broaden awareness of the Company.
There is an opportunity at the Annual General Meeting for individual
shareholders to question the Chairman, the Chairmen of the Audit
and Remuneration and Nomination committees, and the executive
directors. Notice of the meeting is sent to shareholders at least 21
clear days before the meeting. Shareholders are given the opportunity
to vote on each separate issue. The Company counts all proxy votes
and will indicate the level of proxies lodged on each resolution, after it
has been dealt with by a show of hands. Details of the resolutions and
explanations thereto are included with the notice.
Internal control
The directors are responsible for establishing and maintaining the
Group’s system of internal control and reviewing its effectiveness. The
system of internal control is designed to manage, rather than eliminate,
the risk of failure to achieve business objectives and can only provide
reasonable but not absolute assurance against material misstatement
or loss.
The main features of the internal control system are as follows:
• a control environment exists through the close management of
the business by the executive directors. The Group has a defined
organisational structure with delineated approval limits. Controls
are implemented and monitored by personnel with the necessary
qualifications and experience;
• a list of matters reserved for board approval;
• monthly management reporting and analysis of variances;
• financial risks for each major transaction are identified and evaluated
by the Board; and
• standard financial controls operate to ensure that the assets of the
Group are safeguarded and that proper accounting records are
maintained.
By order of the Board
John Ward
Company Secretary
2 March 2015
21 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
21 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Directors’ Remuneration Report
This report is non-mandatory for AIM-quoted companies and has
been produced on a voluntary basis. It includes and complies with the
disclosure obligations of the AIM Rules.
Remuneration Committee
The Company’s remuneration policy is the responsibility of the
Remuneration and Nomination Committee (the ‘Committee’), which was
established in October 2004. The terms of reference of the Committee
are outlined in the Corporate Governance Statement on page 20.
The members of the Committee are Paul Clegg (Chairman), Dr Bruce
Campbell and Simon Shaw.
The Committee, which is required to meet at least twice a year, met six
times during the year ended 31 December 2014. The Chief Executive
Officer and certain executives may be invited to attend meetings of the
Committee to assist it with its deliberations, but no executive is present
when his or her own remuneration is discussed.
During the year, the Committee has been advised on director
remuneration by its retained independent remuneration adviser, FIT
Remuneration Consultants LLP. No other advice has been provided to
the Group by this firm during the year.
Remuneration policy
(i) Executive remuneration
The Committee has a duty to establish a remuneration policy which will
enable it to attract and retain individuals of the highest calibre to run the
Group. Its policy is to ensure that the executive remuneration packages
of executive directors and the fee of the Chairman are appropriate given
performance, scale of responsibility, experience, and consideration of
the remuneration packages for similar executive positions in companies
it considers to be comparable. Packages are structured to motivate
executives to achieve the highest level of performance in line with
the best interests of shareholders. A significant element of the total
remuneration package, in the form of bonus and long term incentive
plan (‘LTIP’) awards, is performance driven.
Executive remuneration currently comprises a base salary, an annual
performance-related bonus, LTIP participation, a pension contribution
to the executive director’s individual money purchase scheme (at 9%
of base salary), family private health cover, permanent health and life
assurance.
Salaries and benefits were reviewed during the third quarter of 2014,
following the completion of the AstraZeneca out-licensing transaction,
and taking into account Group and individual performance, external
benchmark information and internal relativities. The previous review was
in July 2012.
As a consequence of the 2014 review, the following changes were made
with effect from 1 December 2014:
Changes will also be implemented for LTIP awards made to executive
directors following the review, with such changes having effect for
LTIP awards made from 2015. The effect of the changes will reduce
the salary multiples for LTIP awards from a standard 100% to a range
(dependent on pre-grant criteria to be established) of 50-75% of
salary. We shall also take the opportunity for grants from 2015 to
adopt the more normal approach of the Company bearing its own
employers’ NICs on any awards. This makes the proposed grant levels
more comparable with a previous headline award level of 87% of
salary (taking account of the impact of employers’ NICs on awards)
and, assuming an award at the middle of the 50-75% range, keeps the
pound value of the shares being awarded unchanged for the CEO.
For completeness, a final LTIP award on the pre-review policy (awards
over shares worth 100% of base salary) and reflecting pre-review
salaries was made in November 2014.
The rationale for the 2014 review was that as the Company has moved
to the next stage of its evolution through the AstraZeneca deal, it was
appropriate to re-balance executive packages by:
• Reviewing salaries from levels which were previously largely
unchanged from July 2007, but to set the revised salaries at levels
which remain modestly below median in comparison to peer
companies;
• Taking the opportunity of this review to reduce bonus opportunity
to a market median level of 100% and to normalise the level of LTIP
awards.
The next review of salaries and benefits will take place during the first
quarter of 2016 with any change taking effect from 1 January 2016.
Directors’ remuneration for the year ended 31 December 2014 is
set out on page 26 of this document.
In addition to the 2014 review of remuneration, it should be
noted that the Company’s standard 10 year authority to operate
its current LTIP plan will expire in late 2015, and accordingly the
Company intends to seek authority from its shareholders to
introduce a new LTIP plan at the 2015 AGM. The terms of the new
LTIP plan (which will be summarised in the notice of AGM for the
2015 AGM) will retain a very high degree of consistency with the
terms of the current LTIP plan (as described in paragraph (iv) on
page 23), with only minor changes being made, such as clarifying
that if an individual holding a performance-vested award leaves
the group, he should have a period in which to exercise that vested
award (other than in cases of misconduct).
July 2012 to November 2014
From 1 December 2014
Salary per annum
(£000)
Employer pension
contribution as a % of
salary
Maximum bonus
as a % of salary
Salary per annum
(£000)
Employer pension
contribution as a %
of salary
Maximum bonus
as a % of salary
Richard Marsden
Dr Phillip Monk
John Ward
130
97
118
9%
9%
9%
200%
200%
200%
180
130
140
9%
9%
9%
100%
100%
100%
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 22
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 22
Directors’ Remuneration Report (continued)
The policy for future LTIP awards from 2015 is as described above.
Long term incentives remain an important element of the overall
remuneration package and it is important for the Company to have a
further 10 year period of authority from its shareholders in which to be
able to offer LTIP awards.
Executive directors are expected to retain no fewer than 50% of shares
acquired upon vesting of awards under the LTIP, net of taxes, until such
time as, in combination with any other shares the executives may have
acquired, they hold shares with a value equivalent to 100% of base
salary.
(ii) Chairman and non-executive director remuneration
The Chairman and the non-executive directors receive a fixed fee
of £25,000 per annum (prior to 1 December 2014, Dr Campbell and
Professor Holgate received a fixed fee of £15,000 per annum). The fixed
fee covers preparation for and attendance at meetings of the full Board
and committees thereof. A fee of £5,000 per annum is also paid for
chairing each of the audit and remuneration committees. The Chairman
and the executive directors are responsible for setting the level of
non-executive remuneration. The non-executive directors are also
reimbursed for all reasonable expenses incurred in attending meetings.
(iii) Annual bonus plan
The Company operates a discretionary bonus scheme for executive
directors for delivery of exceptional performance against personal and
corporate objectives. As a consequence of the AstraZeneca transaction,
the following bonuses were paid for the year ended 31 December 2014:
Richard Marsden: £260,000; Dr Phillip Monk: £194,000; and John Ward:
£237,000.
These payments represented awards at the then maximum level of 200%
of base salary, but were calculated by reference to salary levels before
the late 2014 review.
(iv) Equity-based incentive schemes
The Committee strongly believes that equity-based incentive schemes
increase the focus of employees in improving Group performance, whilst
at the same time providing a strong incentive for retaining and attracting
individuals of a high calibre.
Long-Term Incentive Plan (LTIP)
The Synairgen Long-Term Incentive Plan, comprising conditional
(performance-related) share awards (technically structured as nominal
cost options pursuant to which participants must pay 1p per share on
the exercise of their awards), was introduced in 2005 as the sole on-going
long-term incentive vehicle for executive directors. Senior executives
and other employees may be granted an award which will normally vest
if demanding performance conditions are achieved over a three-year
period and if the grantee remains an employee of the Group.
Grants under the LTIP in any financial year are capped at a maximum of
100% of base salary.
As explained above, in November 2014, Richard Marsden, Dr Phillip Monk
and John Ward were granted awards over shares worth 100% of base
salary, being the final award made under the allocation policy before the
late 2014 remuneration review.
All awards will lapse at the end of the applicable performance period to
the extent that the applicable performance criteria conditions have not
been satisfied with no opportunity for retesting. In the event of a good
leaver event or a change of control of the Company, the LTIP awards may
vest early, but only to the extent that, in the opinion of the Committee,
the performance conditions have been satisfied at that time. The awards
will generally also be subject to a time pro-rated reduction to reflect the
reduced period of time between the grant of the awards and the time of
vesting although this reduction may not be applied in certain cases.
Performance conditions for the 2010, 2011, 2013 and 2014 LTIP awards
The performance conditions for all four awards were the same. The
awards are subject to two conditions. Firstly, awards will only vest to
the extent that the percentage increase in the total shareholder return
(‘TSR’, being the return earned by a shareholder over the performance
period in terms of change in the share price and assuming re-investment
of any dividends in more shares at the prevailing price on the relevant
ex-dividend date) of the Company over the three year performance
period is equal or greater than the percentage increase in the techMARK
mediscience™ index over the same period as follows:
TSR growth over the performance period
less percentage increase in the techMARK
mediscience™ index over the same
period
Vesting percentage
of total number of shares
subject to award
Less than 0%
0%
10%
20%
0%
25%
50%
100%
Performance between the steps
Pro-rata on a straight-line basis
Secondly, no award will vest unless the average annual growth in the TSR
of the Company over the performance period is equal to or greater than
RPI plus 2% or, for more than 75% of an award to vest, annual average
TSR must exceed RPI by at least 5% rather than 2%.
Vesting of 2011 LTIP awards
In September 2014, the awards granted in 2011 vested in full. The TSR
growth over the three year performance period amounted to 114.00%
and the percentage increase in the techMARK mediscience index over
the same period was 83.14%, resulting in an outperformance by 30.86%,
thus meeting in full the first performance condition. Similarly, this
significantly exceeded the RPI plus 2% to 5% growth underpin.
23 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Qualifying Non-Employee Option Scheme (QNEOS)
On 12 June 2009 shareholders in General Meeting approved the
adoption of the QNEOS. This plan is a discretionary share scheme
which enables the Committee to grant market value share options to
consultants and non-executive directors who, in the opinion of the
Committee, make, or, in the case of new appointments, will make,
a significant contribution to the Group and where the Committee
considers it to be in the interests of shareholders to make such grants.
During the year under review, options over 250,000 shares granted
under the QNEOS in 2009 to a consultant of the Group were exercised
at a price of 20p. During the year no options were granted under the
QNEOS, and the ability to make further option grants (without a renewal
of shareholders’ authority to operate this plan) expired in June 2014.
In 2015, the Committee intends to review whether to seek further
shareholder authority to operate this plan.
(v) Service contracts and letters of appointment
The executive directors have entered into service agreements which can
be terminated on six months’ notice by either party.
For the period ended 5 March 2014, Richard Marsden continued to act
as a non-executive director of Southampton Asset Management Limited
but did not receive any fees with regards to this appointment. None of
the other executive directors held non-executive directorships with
other companies.
The Chairman and non-executive directors have entered into letters of
appointment for an initial fixed period of twelve months, which renew
automatically for a further twelve month period on the anniversary of
commencement. The appointment can be terminated on three months’
notice by either party.
Directors’ interests in share options
The interests of directors in share options over ordinary shares during the year were as follows:
Synairgen Long-Term Incentive Plan
Date of grant
At 1 January 2014
Granted during
the year
Exercised
during the year
At 31 December 2014
Market price on
date of exercise
Exercise
price
Earliest
exercise date
Expiry date
Richard Marsden
7 September 2009
8 September 2010
21 September 2011
11 March 2013
3 November 2014
Dr Phillip Monk
7 September 2009
8 September 2010
21 September 2011
11 March 2013
3 November 2014
John Ward
7 September 2009
8 September 2010
21 September 2011
11 March 2013
3 November 2014
605,000
246,889
538,063
245,732
–
414,625
183,637
400,212
182,776
–
–
–
–
313,827
–
–
–
–
–
233,425
550,000
224,445
489,148
223,393
–
–
–
–
–
285,297
–
–
–
–
–
414,625
183,637
–
–
–
450,000
–
–
–
–
605,000
246,889
538,063
245,732
313,827
–
–
400,212
182,776
233,425
100,000
224,445
489,148
223,393
285,297
–
–
–
–
–
50p
50p
–
–
–
50p
–
–
–
–
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
7 Sept 2012
8 Sept 2013
21 Sept 2014
11 Mar 2016
3 Nov 2017
6 Sept 2019
7 Sept 2020
20 Sept 2021
10 Mar 2023
2 Nov 2024
7 Sept 2012
6 Sept 2019
8 Sept 2013
7 Sept 2020
21 Sept 2014
20 Sept 2021
11 Mar 2016
10 Mar 2023
3 Nov 2017
2 Nov 2024
7 Sept 2012
8 Sept 2013
21 Sept 2014
11 Mar 2016
3 Nov 2017
6 Sept 2019
7 Sept 2020
20 Sept 2021
10 Mar 2023
2 Nov 2024
Options over 1,048,262 shares granted under the LTIP were exercised by directors during the year.
The total gain (before tax and brokers’ fees) on LTIP options exercised by directors during the year was £513,648.
Dr Phillip Monk retained 133,118 ordinary shares following the exercise of LTIP options in 2014 in line with the Company’s policy described above
whereby 50% of shares acquired upon vesting of awards under the LTIP, net of taxes, must be retained until such time as executives hold shares with
a value equivalent to 100% of base salary.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 24
Directors’ Remuneration Report (continued)
Other options granted on or before the IPO or under the Synairgen plc Staff Option Scheme
Date of grant
Richard Marsden
11 October 2004
11 October 2004
26 October 2004
26 October 2004
Dr Phillip Monk
2 October 2006
John Ward
26 October 2004
26 October 2004
At 1 January
2014
Exercised
during the year
Lapsed
during the year
At 31 December
2014
Market price on
date of exercise
Exercise
price
Earliest
exercise date
Expiry date
280,000
140,000
140,000
140,000
50,000
140,000
140,000
280,000
140,000
–
–
–
–
140,000
140,000
–
–
–
–
–
–
–
–
50,000
140,000
140,000
–
–
50p
50p
–
–
–
–
–
10p
10p
130p
130p
11 Oct 2004
30 June 2005
30 June 2006
30 June 2007
10 Oct 2014
10 Oct 2014
25 Oct 2014
25 Oct 2014
85.5p
2 Oct 2009
1 Oct 2016
130p
130p
30 June 2005
30 June 2006
25 Oct 2014
25 Oct 2014
Options over 420,000 shares granted before the IPO were exercised by directors during the year, resulting in a total gain (before tax and brokers’ fees)
of £168,000.
Accordingly, the aggregate gains (before tax and brokers’ fees) made by directors on the exercise of share options in 2014 was £681,648.
The vesting and exercise of these other options is generally subject to the relevant option holder continuing to be an employee or director of a
company in the same Group as the Company at the relevant time. There are no further performance criteria.
Synairgen Qualifying Non-Employee Option Scheme
Date of grant
Iain Buchanan
28 June 2010
Paul Clegg
7 September 2009
At 1 January and 31
December 2014
Exercise price
Earliest exercise date
Expiry date
212,765
250,000
23.5p
20p
28 June 2013
27 June 2020
7 Sept 2012
6 Sept 2019
The exercise of the options awarded in September 2009 (which vested in 2012) and in June 2010 (which vested in 2013) is subject to the rules of
the scheme.
There were no other options granted to directors or which were exercised or lapsed during the year.
The mid-market price of the Company’s shares at 31 December 2014 was 32.5p. During the year then ended, the mid-market price ranged from
32.5p to 71.0p. On 2 March 2015 the closing price was 27.5p.
Audited information
The following section (Directors’ remuneration) contains the disclosures required by Schedule 5 to the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, forms part of the financial statements for the year ended 31 December 2014 and has been audited by the
Company’s auditor, BDO LLP.
25 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Directors’ remuneration
The aggregate remuneration received by directors who served during the years ended 31 December 2014 and 2013 was as follows:
Note
Salary/
fee
Bonus
Benefits
Year ended 31 December 2014
Total (incl.
pension)
Pension
Total (excl.
pension)
Year ended 31 December 2013
Total (incl.
pension)
Pension
Total (excl.
pension)
£000
Executive Directors
Richard Marsden
Dr Phillip Monk
John Ward
Non-executive Directors
Simon Shaw
Iain Buchanan
Dr Bruce Campbell
Paul Clegg
Prof. Stephen Holgate
(i)
(ii)
134
100
120
30
25
16
30
16
260
194
237
–
–
–
–
–
Total
471
691
2
-
2
–
–
–
–
–
4
396
294
359
30
25
16
30
16
12
9
11
–
–
-
-
-
408
303
370
30
25
16
30
16
1,166
32
1,198
132
97
120
30
25
15
30
15
464
12
9
11
–
–
–
–
–
32
144
106
131
30
25
15
30
15
496
(i) Dr Phillip Monk was the highest paid director during the year ended 31
(ii) £15,000 was paid to IP2IPO Limited for the services of Dr Bruce Campbell.
(iii) The total amount paid to third parties amounted to £15,000 (2013: £15,000).
December 2014 earning a total of £596,000, comprising emoluments as set out
above of £303,000 and gains (before tax and brokers’ fees) on the exercise of
options amounting to £293,000. Richard Marsden was the highest paid director
during the year ended 31 December 2013. He did not exercise any options
during 2013.
In addition to the amounts shown above, the share-based payment
charge for the period was:
Richard Marsden
Dr Phillip Monk
John Ward
Iain Buchanan
2014
£000
46
35
42
–
2013
£000
58
43
53
2
Total share-based payment in respect of key management personnel
amounted to £123,000 for the year ended 31 December 2014 (2013:
£154,000).
By order of the Board
Paul Clegg
Chairman of the Remuneration and Nomination Committee
2 March 2015
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 26
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
Website publication
The directors are responsible for ensuring the annual report and
financial statements are made available on a website. Financial
statements are published on the Group's website in accordance with
AIM rules for companies and legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance and
integrity of the Group's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Going concern
The directors have prepared and reviewed financial forecasts. After
due consideration of these forecasts and current cash resources, the
directors consider that the Company and the Group have adequate
financial resources to continue in operational existence for the
foreseeable future (being a period of at least twelve months from the
date of this report), and for this reason the financial statements have
been prepared on a going concern basis.
By order of the Board
John Ward
Company Secretary
2 March 2015
The directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial period. Under that law the directors have elected to
prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and the Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss of the Group for that
period. The directors are also required to prepare financial statements
in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with IFRSs as
adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.
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27 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Independent Auditor’s Report
to the members of Synairgen plc
We have audited the financial statements of Synairgen plc for the
year ended 31 December 2014 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Financial Position, the
Consolidated Statement of Cash Flows, the Parent Company Balance
Sheet and the related notes. The financial reporting framework that has
been applied in the preparation of the group financial statements is
applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union. The financial reporting framework
that has been applied in preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical Standards for
Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial
statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the
group’s and the parent company’s affairs as at 31 December 2014 and
of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company’s financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion the information given in the strategic report and the
directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not
made; or
• we have not received all the information and explanations we require
for our audit.
Paul Anthony (senior statutory auditor)
For and on behalf of
BDO LLP, statutory auditor
Southampton
United Kingdom
2 March 2015
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127)
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Consolidated Statement
of Comprehensive Income
for the year ended 31 December 2014
Year ended
31 December 2014
£000
Year ended
31 December 2013
£000
Notes
Revenue
Research and development expenditure
Other administrative expenses
Total administrative expenses
Profit/(Loss) from operations
Finance income
Profit/(Loss) before tax
Tax
Profit/(Loss) and total comprehensive income/(loss)
for the period attributable to equity holders of the parent
Earnings/(Loss) per ordinary share
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
4,290
(1,649)
(1,547)
(3,196)
1,094
31
1,125
63
1,188
1.42p
1.35p
4
6
7
8
Consolidated Statement of Changes in Equity
for the year ended 31 December 2014
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Retained
deficit
£000
Note
At 1 January 2013
Issuance of ordinary shares
Recognition of share-based payments
Total comprehensive loss for the year
At 31 December 2013
Issuance of ordinary shares
Transaction costs in respect of share issues
Recognition of share-based payments
Total comprehensive income for the year
At 31 December 2014
29 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
18a
752
–
–
–
752
161
–
–
–
18b
19,422
–
–
–
19,422
6,761
(412)
–
–
18d
(17,241)
–
206
18c
483
–
–
–
483
(19,078)
–
–
–
–
–
–
159
1,188
913
25,771
483
(17,731)
(2,043)
(2,043)
–
(1,292)
(986)
(2,278)
(2,278)
11
(2,267)
224
(2,043)
(2.72p)
(2.72p)
Total
£000
3,416
–
206
1,579
6,922
(412)
159
1,188
9,436
Consolidated Statement of Financial Position
as at 31 December 2014
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Current tax receivable
Trade and other receivables
Other financial assets – bank deposits
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Equity
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Merger reserve
Retained deficit
Total equity
Notes
31 December 2014
£000
31 December 2013
£000
9
10
11
12
13
14
15
17
17
18
18
102
17
119
56
55
102
6,752
2,847
9,812
9,931
(495)
(495)
9,436
297
15
312
199
190
43
458
834
1,724
2,036
(457)
(457)
1,579
913
25,771
483
(17,731)
9,436
752
19,422
483
(19,078)
1,579
The financial statements on pages 29 to 42 were approved and authorised for issue by the Board of directors on 2 March 2015 and signed on its
behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 30
Consolidated Statement of Cash Flows
for the year ended 31 December 2014
Year ended
31 December 2014
£000
Year ended
31 December 2013
£000
1,125
(2,267)
(31)
12
35
164
159
1,464
143
(40)
38
1,605
198
1,803
12
(14)
(4)
(6,294)
(6,300)
6,922
(412)
6,510
2,013
834
2,847
(11)
15
47
4
206
(2,006)
(127)
32
66
(2,035)
244
(1,791)
15
(3)
(16)
973
969
–
–
–
(822)
1,656
834
Cash flows from operating activities
Profit/(Loss) before tax
Adjustments for:
Finance income
Depreciation
Amortisation
Loss on derecognised intangible asset
Share-based payment charge
Cash flows from operations before changes in working capital
Decrease/(Increase) in inventories
(Increase)/Decrease in trade and other receivables
Increase in trade and other payables
Cash generated from/(used in) operations
Tax credit received
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
Purchase of intangible assets
(Increase)/Decrease in other financial assets
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Transaction costs in respect of share issues
Net cash generated from financing activities
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
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Notes to the Consolidated Financial Statements
for the year ended 31 December 2014
1. Accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively ‘IFRSs’) as adopted by the European Union (‘Adopted IFRSs’) and with those parts of the Companies
Act 2006 applicable to companies preparing their financial statements under IFRSs.
The accounting policies adopted are consistent with those of the previous financial year.
The following amendments to standards and IFRIC interpretation have been adopted and are effective for the current year:
IFRS 10
IFRS 11
IFRS 12
IAS 32
IAS 36
IAS 39
IFRIC 21
Consolidated Financial Statements (Amendments – Investment Entities)
Joint arrangements
Disclosure of interests in other entities
Financial Instruments: Presentation (Amendments – Offsetting)
Impairment of Assets (Amendments – Recoverable Amount Disclosures)
Financial Instruments: Recognition and Measurement (Amendments – Novation of Derivatives)
Levies
The adoption of these pronouncements has not impacted the classification or measurement of the Group’s assets and liabilities. However, as
the result of the adoption of IFRS 12, additional disclosure is required in relation to interests in other entities.
New standards and interpretations not applied
IASB and IFRIC have issued the following relevant standards and interpretations with an effective date for periods commencing after 1 January 2014:
Standard or
interpretation
Title
IFRS 1
IFRS 2
IFRS 3
IFRS 3
IFRS 7
IFRS 9
IFRS 10
IFRS 13
IFRS 15
IAS 16
IAS 24
IAS 27
IAS 34
IAS 38
First-time Adoption of International Financial Reporting Standards (Annual improvements to IFRSs
2011-2013 Cycle – Meaning of effective IFRSs)
Share-based Payment (Annual Improvements to IFRSs 2010-2012 Cycle
– Definition of vesting condition)
Business Combinations (Annual Improvements to IFRSs 2010-2012 Cycle
– Accounting for contingent consideration)
Business Combinations (Annual Improvements to IFRSs 2011-2013 Cycle
– Scope exceptions for joint ventures)
Financial Instruments: Disclosures (Annual Improvements to IFRSs 2012-2014 Cycle – Servicing
contracts and applicability of offsetting amendments in condensed interim financial statements)
Financial Instruments (2014) provides option to early adopt the ‘own credit’ provisions
Consolidated Financial Statements (Amendments – Sale or Contribution of Assets)
Fair Value Measurement (Annual Improvements to IFRSs 2010-2012 Cycle – short-term receivables
and payables)
Revenue from Contracts with Customers
Property, Plant and Equipment (Amendments – Acceptable Methods of Depreciation)
Related Party Disclosures (Annual Improvements to IFRSs 2010-2012 Cycle – entities providing key
management personnel services)
Separate Financial Statements (Amendments – Equity Method in Separate Financial Statements)
Interim Financial Reporting (Annual Improvements to IFRSs 2012-2014 Cycle – disclosure of information
‘elsewhere in interim financial report’)
Intangible Assets (Amendments – Acceptable Methods of Amortisation)
Effective for periods
beginning on or after
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 January 2016
Can be applied until
31 December 2017
1 January 2016
1 July 2014
1 January 2017
1 January 2016
1 July 2014
1 January 2016
1 January 2016
1 January 2016
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Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
1. Accounting policies (continued)
The directors do not anticipate that the adoption of the remaining standards and interpretations will have a material impact on the Group’s financial
statements in the period of initial application.
The effective dates stated here are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial
statements in accordance with IFRS as adopted by the European Union (EU), the application of new standards and interpretations will be subject
to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date
consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group’s discretion to early adopt
standards.
The Group financial statements are presented in Sterling.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to the
reporting date. Control is achieved when power can be exercised over the investee; there is exposure, or rights, to variable returns from involvement
with the investee; and the ability to exercise power over the investee affects returns. All intra-group transactions, balances, income and expenses
are eliminated on consolidation. Business combinations that took place prior to 1 July 2006, the date of transition to IFRS, have not been restated as
permitted by IFRS 1 “First-time Adoption of International Financial Reporting”. The consolidated financial statements have been prepared using the
merger method of accounting.
Revenue
Revenue is stated net of value added tax and is recognised when products or services are supplied. Revenues from licensing agreements, including
up-front and milestone payments, are recognised where the milestone has been accomplished, the payments are non-refundable, the Group’s
obligations to the revenues have been discharged and their collection is reasonably assured, and the transfer of risk has occurred.
Research and development
All ongoing research expenditure is currently expensed in the period in which it is incurred. Due to the regulatory and other uncertainties inherent
in the development of the Group’s products, the criteria for development costs to be recognised as an asset, as set out in IAS 38 “Intangible Assets”,
are not met until a product has been submitted for regulatory approval and it is probable that future economic benefit will flow to the Group. The
Group currently has no such qualifying expenditure.
Employee benefits
All employee benefit costs, notably salaries, holiday pay, bonuses and contributions to Group stakeholder or personal defined contribution pension
schemes are charged to the consolidated statement of comprehensive income on an accruals basis.
Share-based payments
Option awards and awards made under the Group’s Long-Term Incentive Plan (‘LTIP’) granted after 7 November 2002 which had not vested by 1 July
2006 are fair valued and charged to the consolidated statement of comprehensive income over the period from grant to vesting. The Group has fair-
valued option and LTIP awards using appropriate share valuation models. Options granted to non-employees are measured at the fair value of the
goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity
instrument granted. At each reporting date, the Group revises its estimate of the number of options that are expected to become exercisable. The
credit for any charge is taken to equity.
Intangible assets
Intangible assets are stated at cost less any accumulated amortisation and any accumulated impairment losses. Patent and licence costs are
amortised over ten years on a straight-line basis and the amortisation cost is charged to research and development expenditure in the consolidated
statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is
provided on a straight-line basis at rates calculated to write off the cost of property, plant and equipment, less their estimated residual value over
their expected useful lives, which are as follows:
Computer equipment:
Laboratory and clinical equipment:
3 years
5 years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying
value may not be recoverable.
Inventories
Inventories are stated at the lower of cost and net realisable value.
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Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
1. Accounting policies (continued)
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s consolidated statement of financial position when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets
The Group classifies its financial assets as loans and receivables. These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or
default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable; the amount of
such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the
impaired receivable.
The Group’s loans and receivables comprise trade and other receivables, other financial assets and cash and cash equivalents in the consolidated
statement of financial position. Other financial assets comprise short-term deposits not meeting the IAS 7 definition of a cash equivalent. Cash and
cash equivalents includes cash in hand, deposits held at call with banks and other short-term bank deposits with a maturity period of three months
or less from the date of initial deposit.
Financial liabilities
The Group classifies its financial liabilities as financial liabilities held at amortised cost. Trade payables are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest rate method.
Leased assets
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an ‘operating lease’), the total rentals
payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term.
Taxation
Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or
substantively enacted at the reporting date. Research and development tax credits are included as an income tax credit under current assets.
Deferred tax balances are recognised in respect of all temporary differences that have originated but not reversed by the reporting date except for
differences arising on:
• investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference could
not reverse in the foreseeable future; and
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither
accounting or taxable profit.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Recognition of deferred tax assets is restricted to those instances where it is probable that a taxable profit will be available against which the
temporary difference can be utilised. Deferred tax balances are not discounted.
Foreign currencies
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their
"functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated
at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised
immediately in the consolidated statement of comprehensive income.
The functional currency of all entities in the Group is Sterling.
2. Critical accounting estimates and judgements
Critical accounting estimates, assumptions and judgements are continually evaluated by management based on available information and
experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.
Share-based payment
The critical accounting estimates, assumptions and judgements underpinning the valuation of the option and LTIP awards are disclosed in note 17.
3. Segmental analysis
The Group operates in one area of activity, namely drug discovery and development. All assets of the Group are located within the United Kingdom and
all profits were generated in that territory.
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Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
4. Profit/(Loss) from operations
The profit/(loss) from operations has been arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Loss on derecognised intangible asset
Research and development expenditure
Operating lease rentals payable
Land and buildings
Other operating lease rentals
The fees of the Group’s auditor, BDO LLP, for services provided are analysed below:
Fees payable to the Company’s auditor for the audit of the Group and Company
financial statements
Fees payable to the Company’s auditor for other services:
The audit of the Company’s subsidiary, pursuant to legislation
Audit-related assurance services
Tax compliance services
Tax advisory services
Total fees
5. Employee benefit expense
The average monthly number of employees (including executive directors) was:
Research
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Total cash-settled remuneration
Accrued holiday pay
Share-based payment
Total remuneration
2014
£000
12
35
164
1,649
81
93
2014
£000
11
10
5
6
9
41
2014
11
2
13
2014
£000
1,361
170
47
1,578
(4)
159
1,733
2013
£000
15
47
4
1,292
81
93
2013
£000
10
10
5
6
7
38
2013
13
3
16
2013
£000
727
83
51
861
3
204
1,068
For the purpose of presentation in the Consolidated Statement of Comprehensive Income, remuneration costs of £767,000 (2013: £624,000)
are included in research and development expenditure and £966,000 (2013: £444,000) are included in other administrative expenses.
Key management compensation
The directors represent the key management personnel and details of their remuneration are given in the Directors’ Remuneration Report.
In respect of directors’ remuneration, the disclosures required by Schedule 5 to the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 are included in the detailed disclosures in the audited section of the Remuneration Report on page 26, which are ascribed
as forming part of these financial statements.
35 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
6. Finance income
For the years ended 31 December 2014 and 2013 Finance income represents bank interest receivable.
7. Taxation
Current tax
UK corporation tax credit on profit/loss for the year
Adjustment in respect of prior years
Total income tax credit
The tax assessed on the profit/loss on ordinary activities for the year is different to the standard
rate of corporation tax in the UK of 21.50% (2013: 23.25%). The differences are reconciled below:
Profit/(Loss) on ordinary activities before tax
Profit/(Loss) on ordinary activities before tax multiplied by the standard rate of corporation tax
in the UK
Effects of:
Tax relief on share option exercises
Expenses not deductible for tax purposes
Enhanced research & development relief
Variable rates on tax losses surrendered for research & development tax credit
Movement in unrecognised losses and temporary differences
Overprovision in respect of previous years
Total tax credit for the current year
Deferred taxation
2014
£000
(55)
(8)
(63)
2014
£000
1,125
242
(221)
34
(234)
27
97
(8)
(63)
2013
£000
(190)
(34)
(224)
2013
£000
(2,267)
(527)
–
48
(235)
212
312
(34)
(224)
Changes in tax rates and factors affecting the future tax charge
Finance Act 2013 included provision for the main rate of corporation tax to reduce from 23% to 21% on 1 April 2014, and to 20% on 1 April 2015. This will
reduce the Company’s future tax charge accordingly. The rate changes were substantially enacted on the 17 July 2013. Accordingly, deferred tax balances
have been recognised at 20%, being the rate of corporation tax expected to be in force at the time these timing differences are expected to reverse.
Recognised deferred taxation
Accelerated capital allowances
Other temporary differences
Charge for the year
2014
£000
2
(2)
–
2013
£000
1
(1)
–
Unrecognised deferred taxation
At 31 December 2014 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to
£10,599,000 (2013: £10,676,000) and non-trading losses of £1,338,000 (2013: £1,084,000). At 31 December 2014 the Group has an unrecognised
deferred tax asset in respect of these losses of £2,388,000 (2013: £2,352,000). The full utilisation of these losses in the foreseeable future is
uncertain and no deferred tax asset has therefore been recognised.
In addition to the deferred tax asset on losses, the Group has a potential future tax deduction on share options of £1,151,000 (2013: £2,774,000) and
a deferred tax asset of £230,000 (2013: £555,000) thereon. The additional tax deduction will crystallise at the point the options are exercised. As the
utilisation of this additional deduction against taxable profits in the Group is uncertain, no deferred tax asset has been recognised in respect of the
future tax deduction on share options.
The movement on the unrecognised deferred tax asset comprises the following:
Unrecognised deferred tax asset at the start of the year
Movement in year
Unrecognised deferred tax asset at the year-end
2014
£000
(2,907)
289
(2,618)
2013
£000
(2,840)
(67)
(2,907)
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 36
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
8. Earnings/(Loss) per ordinary share
Basic earnings/(loss) per share (‘EPS’ or ‘LPS’) is calculated by dividing the profit/(loss) attributable to ordinary equity holders of the parent company
by the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary
shares, being share options where the exercise price is less than the average market price of the Company’s ordinary shares during the year and
where performance conditions have been met or, in the case of options where the performance period is not completed, are being met.
Where there is a loss (as for the year ended 31 December 2013), the loss attributable to ordinary shareholders and weighted average number of
ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic loss per share. This is
because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore antidilutive under the terms
of IAS 33.
The earnings/losses and number of weighted average number of shares used in the calculations are as follows:
Basic earnings/(loss) per share
Effect of additional shares under option
Diluted earnings/(loss) per share
9. Intangible assets
Cost
At 1 January 2013
Externally-acquired additions
Derecognised assets
At 31 December 2013
Externally-acquired additions
Derecognised assets
At 31 December 2014
Amortisation
At 1 January 2013
Derecognised assets
Charge for the year
At 31 December 2013
Derecognised assets
Charge for the year
At 31 December 2014
Net book amount
At 31 December 2014
At 31 December 2013
At 1 January 2013
Earnings
£000
1,188
–
1,188
Shares
000
83,899
4,279
88,178
2014
EPS
pence
1.42
(0.07)
1.35
Losses
£000
(2,043)
–
Shares
000
75,187
–
(2,043)
75,187
2013
LPS
pence
(2.72)
–
(2.72)
Patent and licence costs
£000
484
16
(23)
477
4
(269)
212
152
(19)
47
180
(105)
35
110
102
297
332
At 31 December 2014 £102,000 of the net book amount relates to interferon beta patent costs, which have a remaining average amortisation period
of 5 years. At 31 December 2013 £119,000 of the net book amount related to interferon beta patent costs and £178,000 to interferon lambda patent
and licence costs, with remaining amortisation periods of 6 and 7 years respectively. During 2014 as a consequence of the AstraZeneca transaction
the Company terminated the interferon lambda licence and accordingly has derecognised the interferon lambda intangible assets.
37 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
10. Property, plant and equipment
Computer
equipment
£000
Laboratory and
clinical equipment
£000
Cost
At 1 January 2013
Additions
At 31 December 2013
Additions
Derecognised assets
At 31 December 2014
Depreciation
At 1 January 2013
Charge for the year
At 31 December 2013
Derecognised assets
Charge for the year
At 31 December 2014
Net book value
At 31 December 2014
At 31 December 2013
At 1 January 2013
11. Inventories
Raw materials
Raw materials at 31 December 2014 comprises the Group’s BioBank.
12. Trade and other receivables
Amounts receivable within one year:
Other tax and social security
Prepayments and accrued income
13. Other financial assets – bank deposits
Amounts receivable within one year:
Sterling fixed rate deposits of greater than three months’ maturity at inception
14. Cash and cash equivalents
Cash available on demand
42
2
44
12
(25)
31
30
6
36
(25)
7
18
13
8
12
132
1
133
2
(9)
126
117
9
126
(9)
5
122
4
7
15
2014
£000
56
2014
£000
18
84
102
2014
£000
6,752
2014
£000
2,847
Total
£000
174
3
177
14
(34)
157
147
15
162
(34)
12
140
17
15
27
2013
£000
199
2013
£000
6
37
43
2013
£000
458
2013
£000
834
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 38
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
15. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
16. Financial instruments
2014
£000
78
33
384
495
2013
£000
20
25
412
457
An explanation of the Group’s objectives, policies and strategies for financial instruments and analysis of the capital structure and capital funding of
the Group can be found on page 10 in the Financial Review.
Financial assets
Loans and receivables
Trade and other receivables
Other financial assets (less than one year)
Cash and cash equivalents (less than one year)
Total
Financial liabilities
Other financial liabilities
Notes
(i)
2014
Book and
fair value
£000
2013
Book and
fair value
£000
51
6,752
2,847
9,650
6
458
834
1,298
Trade and other payables (less than one year)
(ii)
450
417
(i) Trade and other receivables shown above excludes prepayments, which are not a contractual obligation to receive cash, amounting to £51,000 (2013: £37,000).
(ii) Trade and other payables shown above excludes amounts due in respect of social security and other taxes and deferred income, which are not a contractual
obligation to pay cash, amounting to £45,000 (2013: £40,000).
The objective of holding financial instruments is to have access to finance for the Group’s operations and to manage related risks. The main risks
arising from holding these instruments are interest rate risk, liquidity risk, and credit risk.
Interest rate risk
Interest rate risk profile of financial assets, excluding short-term debtors:
Euro
Sterling
US Dollar
Total
2014
Floating-rate
financial assets
£000
2013
Floating-rate
financial assets
£000
93
9,491
15
9,599
–
1,292
–
1,292
Short-term deposits are placed with banks for periods of up to twelve months and are categorised as floating-rate financial assets. Contracts in
place at 31 December 2014 had a weighted average period to maturity of 33 days and a weighted average annualised rate of interest of 0.65%
(2013: 31 days, 0.52%).
39 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
16. Financial instruments (continued)
Sensitivity analysis
It is estimated that a decrease of quarter of one percentage point in interest rates would have decreased the Group’s profit before taxation by
approximately £15,000 (2013: £5,000).
Liquidity risk
The Group’s policy is to maintain adequate cash resources to meet liabilities as they fall due. All Group payable balances as at 31 December
2014 and 31 December 2013 fall due for payment within one year. Cash balances are placed on deposit for varying periods with reputable
banking institutions to ensure there is limited risk of capital loss. The Group does not maintain an overdraft facility.
Credit risk
The Group’s credit risk is attributable to its banking deposits. The Group places its deposits with reputable financial institutions to minimise
credit risk.
17. Share capital and premium
At 1 January 2013
Issuance of ordinary shares
At 31 December 2013
Note
(i)
Issuance of ordinary shares
(ii) - (vi)
Costs of issuance of shares
At 31 December 2014
Number
of shares
75,184,336
11,555
75,195,891
16,120,780
–
91,316,671
Ordinary shares
of 1p each
£000
752
–
752
161
–
913
Share
premium
£000
19,422
–
19,422
6,761
(412)
25,771
Total
£000
20,174
–
20,174
6,922
(412)
26,684
(i) 11,555 ordinary shares of 1p were issued on 17 October 2013 at par following the exercise of share options under the Company’s long term incentive plan (LTIP).
(ii) 3,125,000 ordinary shares of 1p were issued on 10 March 2014 at a premium of 47p to provide working capital to progress the out-licensing of SNG001 through to a
conclusion.
(iii) 266,363 ordinary shares of 1p were issued on 18 June 2014 at par following the exercise of share options under the Company’s LTIP.
(iv) 10,627,299 ordinary shares of 1p were issued on 11 July 2014 at a premium of 49p to enable the progression of new development opportunities. On the
same day the following ordinary shares of 1p were issued following the exercise of share options: 1,285,819 at par (LTIP); 420,000 at a premium of 9p
(options granted on 11 October 2004); and 250,000 at a premium of 19p (QNEOS).
(v) 4,712 ordinary shares of 1p were issued on 13 October 2014 at par following the exercise of share options under the Company’s LTIP.
(vi) 141,587 ordinary shares of 1p were issued on 17 November 2014 at par following the exercise of share options under the Company’s LTIP.
The total authorised number of ordinary shares is 125 million shares (2013: 125 million shares) with a par value of 1p per share
(2013: 1p per share). All issued shares are fully paid.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 40
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
17. Share capital and premium (continued)
Options
At 31 December 2014 there were options outstanding over 5,467,644 un-issued ordinary shares, equivalent to 6.0% of the issued share capital,
as follows:
Date of grant
Approved EMI scheme
12 May 2005
2 October 2006
29 October 2007
Unapproved schemes
7 September 2009 (LTIP)
7 September 2009 (QNEOS)
28 June 2010 (QNEOS)
8 September 2010 (LTIP)
21 September 2011 (LTIP)
11 March 2013 (LTIP)
3 November 2014 (LTIP)
Number of shares
Exercise price
Earliest exercise date
Latest exercise date
14,000
109,023
17,792
705,000
250,000
212,765
471,334
1,742,550
858,183
1,086,997
5,467,644
136.5p
85.5p
61.5p
1p
20p
23.5p
1p
1p
1p
1p
12 May 2008
11 May 2015
2 October 2009
1 October 2016
29 October 2010
28 October 2017
7 September 2012
6 September 2019
7 September 2012
6 September 2019
28 June 2013
27 June 2020
8 September 2013
7 September 2020
21 September 2014
20 September 2021
11 March 2016
10 March 2023
3 November 2017
2 November 2024
The Group has no legal or constructive obligation to repurchase or settle the options in cash. The movement in the number of share options is set
out below:
Outstanding at start of year
Granted during the year
Exercised during the year
Lapsed during the year
Number of outstanding options at year-end
Number
7,393,272
1,086,997
(2,368,481)
(644,144)
5,467,644
2014
Weighted average
exercise price
15.6p
1.0p
4.6p
121.6p
5.0p
2013
Weighted average
exercise price
15.6p
1.0p
1.0p
2.6p
15.6p
Number
7,511,635
906,343
(11,555)
(1,013,151)
7,393,272
At 31 December 2014, 3,522,464 share options were capable of being exercised, with exercise prices ranging from 1p to 136.5p (2013: 4,608,808, with
exercise prices ranging from 1p to 136.5p). The options outstanding at 31 December 2014 had a weighted average remaining contractual life of 7.0
years (2013: 6.0 years). Vesting conditions are disclosed in the Directors’ Remuneration Report.
41 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2014 (continued)
17. Share capital and premium (continued)
The Group uses a number of share-based incentive schemes as detailed opposite. The fair value per award granted and the assumptions
are as follows:
Date of grant
Type of award
Number of
shares
Exercise
price (p)
Share price at
date of grant (p)
Fair value per
option (p)
Award life
(years)
Risk
free rate
Expected
volatility rate
Performance
conditions
12 May 2005
2 Oct 2006
29 Oct 2007
7 Sept 2009
7 Sept 2009
28 June 2010
8 Sept 2010
21 Sept 2011
11 Mar 2013
3 Nov 2014
EMI
EMI
EMI
LTIP
QNEOS
QNEOS
LTIP
LTIP
LTIP
LTIP
14,000
136.5p
135.5p
109,023
17,792
705,000
250,000
85.5p
61.5p
1p
20p
212,765
23.5p
471,334
1,742,550
858,183
1,086,997
5,467,644
1p
1p
1p
1p
85.5p
61.5p
18.5p
18.5p
23.5p
24.25p
22.5p
53p
41.5p
36.9p
24.4p
17.8p
7.1p
4.0p
5.6p
12.1p
13.4p
30.9p
22.4p
5
5
5
3
5
5
3
3
3
3
4.35%
4.75%
4.95%
2.09%
2.67%
2.09%
0.92%
0.79%
0.36%
1.11%
20%
20%
20%
30%
30%
30%
40%
56%
44%
46%
None
None
None
Market
Market
Market
Market
Market
Market
Market
In accordance with IFRS 2, the Company has applied IFRS 2 to all share-based payments granted after 7 November 2002 which had not vested by 1
July 2006. The following comments apply to those options which have been fair valued in accordance with IFRS 2:
(i) Stochastic valuation methodology was used for the LTIP awards and the QNEOS awards with market performance conditions
and Black-Scholes methodology for the other awards.
(ii) Expected dividend yield is nil, consistent with the directors’ view that the Group’s model is to generate value through capital
growth rather than payment of dividends.
(iii) The risk free rate is equal to the prevailing UK Gilts rate at grant date that most closely matches the expected term of the grant.
(iv) The fair value charge is spread evenly over the expected vesting period.
(v) The charge for the year ended 31 December 2014 for share-based payment amounted to £159,000 (2013: £206,000).
18. Capital and reserves
18a Share capital
Share capital represents the nominal value of shares issued.
18b Share premium
Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues.
18c Merger reserve
The merger reserve represents the reserve arising on the acquisition of Synairgen Research Limited on 11 October 2004 via a share for share
exchange accounted for as a Group reconstruction using merger accounting under UK GAAP.
18d Retained deficit
The retained deficit represents cumulative net gains and losses recognised in the consolidated statement of comprehensive income, adjusted for
cumulative recognised share-based payments.
19. Related party transactions and balances
Details of key management personnel and their compensation are given in note 5 and on page 26 of the Directors’ Remuneration Report.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 42
Parent Company Balance Sheet
as at 31 December 2014
Company number: 5233429
Fixed assets
Investments
Current assets
Debtors
Investments: short-term deposits
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Shareholders’ funds
Notes
31 December 2014
£000
31 December 2013
£000
5
6
7
8
8
9
9
17,763
19,557
39
6,752
2,709
9,500
(69)
9,431
27,194
913
25,771
510
27,194
4
458
789
1,251
(29)
1,222
20,779
752
19,422
605
20,779
The financial statements on pages 43 to 46 were approved and authorised for issue by the Board of directors on 2 March 2015 and signed on its
behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
43 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
43 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Parent Company Financial Statements
for the year ended 31 December 2014
1. Basis of preparation
Synairgen plc’s Parent Company balance sheet has been prepared under the historical cost convention and in accordance with UK
Generally Accepted Accounting Practice (‘UK GAAP’).
As permitted by FRS 1 “Cash Flow Statements”, no cash flow statement for the Company has been included on the grounds that
the Group includes the Company in its own published consolidated financial statements. The Company has taken advantage of the
exemption in FRS 8 “Related Party Disclosures” not to disclose related party transactions with wholly-owned subsidiaries.
2. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material to the
Company’s financial statements.
Investment in subsidiary undertakings
Investments in subsidiary undertakings where the Company has control are stated at cost less any provision for impairment. Control is
achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits
from its activities.
Short-term deposits
Short-term deposits comprise deposits with UK banks for periods of up to twelve months. Short-term deposits are measured initially at
cost and subsequently at cost or recoverable amount if lower. Interest is accrued evenly on an accruals basis.
Share-based payments
When the Company grants options over equity instruments directly to the employees of a subsidiary undertaking, the effect of the share-
based payment is capitalised as part of the investment in the subsidiary as a capital contribution, with a corresponding increase in equity.
Taxation
The charge for taxation is based on the loss for the period and takes into account taxation deferred.
Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted
by the balance sheet date. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed
by the balance sheet date, except that the recognition of deferred tax assets is limited to the extent that the Company anticipates making
sufficient taxable profits in the future to absorb the reversal of the underlying timing differences.
Deferred tax balances are not discounted.
3. Loss attributable to members of the Parent Company
As permitted by Section 408 of the Companies Act 2006, the Company’s profit and loss account has not been included in these financial
statements. The loss dealt with in the financial statements of the Parent Company for the year ended 31 December 2014 was £254,000
(2013: loss of £224,000).
4. Directors’ remuneration
The only employees of the Company are the executive directors and all their costs are borne by its subsidiary undertaking.
In respect of directors’ remuneration, the disclosures required by Schedule 5 to the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 are included in the detailed disclosures in the audited section of the Directors’ Remuneration
Report on page 26, which are ascribed as forming part of these financial statements.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 44
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 44
Notes to the Parent Company Financial Statements
for the year ended 31 December 2014 (continued)
5. Investments
At 1 January 2014
(Repayments)/Additions
At 31 December 2014
Investment in
subsidiary
undertaking
£000
140
-
140
Loan to
subsidiary
undertaking
£000
18,296
(1,953)
16,343
Capital
contribution
£000
1,121
159
1,280
Total
£000
19,557
(1,794)
17,763
At 31 December 2014, the Company has an investment in the following subsidiary undertaking:
Name of company
Country of
incorporation
Proportion of voting rights
and ordinary share capital held
Nature of business
Synairgen Research Limited
England
100%
Drug discovery and development
6. Debtors
Other tax and social security
Prepayments and accrued income
All amounts fall due for payment within one year.
7. Creditors: amounts falling due within one year
Trade creditors
Accruals and deferred income
8. Share capital and share premium
2014
£000
7
32
39
2014
£000
27
42
69
2013
£000
2
2
4
2013
£000
5
24
29
Details of the Company’s share option schemes and LTIP can be found in note 17 to the Group accounts on pages 41 and 42.
45 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
45 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
Notes to the Parent Company Financial Statements
for the year ended 31 December 2014 (continued)
9. Reconciliation of movements in reserves and shareholders’ funds
At 1 January 2013
Issuance of ordinary shares
Loss for the year
Share-based payment credit
At 31 December 2013
Issuance of ordinary shares
Transaction costs in respect of share issues
Loss for the year
Share-based payment credit
At 31 December 2014
Share
capital
£000
752
Share premium
account
£000
19,422
–
–
–
752
161
–
–
–
–
–
–
19,422
6,761
(412)
–
–
913
25,771
Profit and loss
account
£000
Shareholders’
funds
£000
623
–
(224)
206
605
–
–
(254)
159
510
20,797
–
(224)
206
20,779
6,922
(412)
(254)
159
27,194
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 46
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 46
Corporate
Directory
Glossary
Company number
5233429
Directors
Executive: Richard Marsden,
Dr Phillip Monk, John Ward
Non-executive: Simon Shaw (Chairman),
Iain Buchanan, Dr Bruce Campbell,
Paul Clegg, Prof. Stephen Holgate
Secretary
John Ward
Head office and Registered office
Mailpoint 810, Level F, South Block,
Southampton General Hospital,
Tremona Road, Southampton SO16 6YD
Telephone and fax: +44 (0) 2380 512 800
Website
www.synairgen.com
E-mail
info@synairgen.com
Advisers
Independent auditor
BDO LLP
Arcadia House, Maritime Walk,
Ocean Village, Southampton SO14 3TL
Bankers
HSBC Bank plc
165 High Street, Southampton SO14 2NZ
Financial public relations
Consilium Strategic Communications
41 Lothbury, London EC2R 7HG
Nominated adviser and broker
FinnCap Limited
60 New Broad Street, London EC2M 1JJ
Registrars
Capita Asset Services
The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU
Solicitors
Fasken Martineau LLP
17 Hanover Square, London W1S 1HU
Acute
An acute disease is a disease with a
rapid onset and/or a short course
Adenovirus
A virus that can cause respiratory
disease (e.g. the common cold),
conjunctivitis and gastroenteritis
Airways (or bronchial tubes)
The tubes that carry air in and out of the
lungs
Allergen
A type of antigen that produces an
abnormally vigorous immune response
Antibiotic
A drug that inhibits bacterial
growth or kills bacteria
Anti-viral
Any substance that can either destroy
viruses or suppress their growth
Apoptosis
A naturally-occurring form of
programmed cell death
Assay
A laboratory test to determine
parameters such as the strength of a
solution, the proportion of a compound
in a mixture, the potency of a drug or
the purity of a preparation
Asthma
A disorder in which the airways become
episodically narrowed, leading to
wheeze, shortness of breath, cough and
chest tightness
BioBank
A collection of samples from clinically-
characterised volunteers, comprising
blood, induced sputum, bronchial
biopsies and epithelial cells. These
samples are used to develop the
complex in vitro human disease models
Biomarker
A biomarker is a biochemical feature
or facet that can be used to measure
the progress of disease or the effects of
treatment
British Thoracic Society (BTS)
Step classification system
A stepwise treatment regime (from steps
1 to 5, with 5 being the most severe)
for treating asthma in Britain, aiming
to achieve optimum control without
excessive medication
Broad spectrum antibiotic
An antibiotic that acts against a wide
range of disease-causing bacteria
Bronchodilators
Medicines which relax the muscles
around the airways, helping the
airways to open up, so making it easier
to breathe. There are several types
of bronchodilators, of which short-
acting beta-agonist drugs are the most
commonly used
Bronchospasm
A sudden contraction of airway smooth
muscle resulting in a narrowing of the
airways
Chronic bronchitis
An inflammation of the airways
accompanied by coughing and
production of phlegm. The symptoms
are present for at least three months in
each of two consecutive years.
See COPD
Chronic disease
A persistent or long-lasting condition
Clinical Trial Authorisation or CTA
An authorisation from the MHRA to
conduct a clinical trial
COPD
Chronic obstructive pulmonary
disease covers two conditions: chronic
bronchitis and emphysema. COPD
usually results from long-term exposure
to irritants to the lungs, of which the
most prevalent is tobacco smoke. Unlike
asthma, where airflow obstruction
varies, in COPD airflow obstruction is
usually irreversible
Coronavirus
A virus that can cause respiratory
disease such as the common cold
or SARS (depending on the type of
coronavirus) and gastroenteritis
47 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
DNA
Nucleic acid that carries genetic
information in the cell
Emphysema
A destructive process involving
the air spaces (alveoli) of the lungs,
which leads to over-inflation of
the lung and, when sufficiently
advanced, causes breathlessness
and lack of oxygenation of blood.
See COPD
Eosinophil
A type of white blood cell that has a
role in allergy and asthma
Epithelium
In the lung, the epithelium is a thin
layer of cells which lines the airway
tubes in order to protect and
regulate the tissue underneath
Exacerbation
A rapid deterioration of a chronic
disease that makes the symptoms
worse
Long acting beta agonist
An asthma drug that acts to relax
(open) the airways for 12 or more
hours
Lower airway
The airway tubes in the lung
running from the throat down,
ending in the air spaces (alveoli)
where gas exchange occurs
Macrophages
Phagocytic (i.e. cells that can engulf
other cells and cell components)
white blood cells involved in cellular
clearance and inflammation
MHRA
The Medicines and Healthcare
Products Regulatory Agency;
a UK government body tasked
with ensuring that medicines and
medical devices work and are safe
Morbidity
Incidence or prevalence
of a disease
Gene
A hereditary unit consisting of a
sequence of DNA that determines
a particular characteristic of a living
organism
Mucus
A gelatinous substance normally
produced by the airway cells to
protect and hydrate the airway
surface from harmful agents
Multiple sclerosis (MS)
A disease affecting nerves in the
brain and spinal cord, causing
problems with muscle movement,
balance and vision
Pandemic influenza
An influenza pandemic occurs
when a new influenza virus
appears against which the human
population has no immunity,
resulting in epidemics worldwide
with enormous numbers of deaths
and illness
Parainfluenza
A virus that can cause the
common cold. Parainfluenza is also
responsible for 75% of croup cases
in children
IFN-β
Interferon beta is a natural protein
found in the body which helps
to regulate the immune system
and fight off viruses. IFN-β is
currently marketed by a number of
companies as an injectable therapy
for the treatment of multiple
sclerosis
Influenza
A contagious viral infection of the
respiratory tract, leading to fever,
headaches, sore throat, congestion
of the nose and body aches
In vitro
Carried out in the laboratory, e.g. in
a test tube or culture plate
In vitro model (complex)
A research model which contains
more than one cell type and allows
the study of interactions between
different cell types and ‘test’ agents
relevant to the disease or a therapy
Patent Cooperation Treaty
or PCT
A system by which a patent
application can be filed in many
different countries at once. A
single international application is
filed initially at a receiving office.
After a search and publication, the
application may be converted to
a series of national applications in
different countries
Pathway
A signalling pathway is a group of
molecules that work together in
a cell to control one or more cell
functions
Peak expiratory flow
A lung function test that measures
a person's ability to breathe out air
Personalised/P4/stratified
medicine
The customisation of healthcare to
the individual patient
Phase I Clinical Trial
A study conducted in volunteers
to determine the biological effects
of a drug, especially safety and
tolerability
Phase II Clinical Trial
A study in patients with the
aim of making a preliminary
determination of the efficacy of a
drug to provide proof of concept
and/or to study drug dose ranges
Phase IIa Clinical Trial
Used to describe a Phase II clinical
trial evaluating efficacy, adverse
effects and safety risks
Phase IIb Clinical Trial
Used to describe a subsequent
Phase II clinical trial that also
evaluates dosage tolerance and
optimal dosage frequency in a
larger number of patients than
enrolled in a Phase IIa trial
Phase III Clinical Trial
A full scale clinical trial to determine
drug efficacy and safety prior to
seeking marketing approval
Phlegm
See Sputum
Placebo
An inactive substance or
preparation used as a control/
comparator (in a clinical trial
for example) to determine the
effectiveness of a medicinal drug
Primary endpoint
The most important measure
(endpoint) assessed in a clinical
trial
Prognostic biomarker
A biomarker that can predict the
future course of a disease or
response to a therapy
Prophylaxis
A measure taken for the prevention
of a disease or condition
Protein
Large molecules made of smaller
biological units known as ‘amino
acids’. Proteins are responsible for
the majority of the function and
much of the structure of living
things, including humans
Pulmonary
Relating to, functioning like,
or associated with the lungs
Rhinovirus
Rhinoviruses are the most
common viral infective agents in
humans. The most well known
disease caused
by rhinoviruses is the
common cold
RNA
Nucleic acid that is involved in
protein synthesis and transmission
of genetic information
RSV
Respiratory syncytial virus
(RSV) can cause both mild
respiratory illness (e.g. the common
cold) and serious respiratory tract
infections (such as bronchiolitis
and pneumonia). More severe
infections can occur in the very
young, the very old and those with
weakened immune systems
Safety study
See Phase I Clinical Trial
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LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2014 | 48
Glossary (continued)
Steroids
A group of chemicals that is
produced naturally in the body
by the adrenal gland. In asthma,
steroids are given by inhalation
or by mouth to reduce the
inflammation of the airways
Systemic absorption
The fraction of drug that reaches
the systemic circulation
Upper airway
The tubes in the nose and neck
that conduct air into the lung
Translational medicine
The process of converting a
scientific discovery into something
that aims to improve the health of
individuals and the community
Type I IFNs
A classification of interferon that
includes IFN-β
Virus
A virus is a non-living small particle
that infects cells in biological
organisms. Viruses can reproduce
only by invading and controlling
other cells as they lack the cellular
machinery for self-reproduction
Wheeze
A whistling sound made by a
person who has airflow obstruction
when breathing
Seasonal Influenza
Seasonal flu is a yearly
outbreak of flu infection, caused
by a flu virus. The seasonal flu is
somewhat different every year, as
flu viruses are always changing
Secondary/exploratory
endpoint
The second most important (or
additional) measure (or endpoint)
assessed in a clinical trial
Severe asthma
Asthma which requires
treatment with high dose inhaled
corticosteroids plus a second
controller (and/or systemic
corticosteroids) to prevent it from
becoming ‘uncontrolled’ or which
remains ‘uncontrolled’ despite this
therapy
SG004
A double-blinded, placebo-
controlled, single and multiple
dose-escalating Phase I study to
assess the safety and tolerability
of inhaled IFN-β in controlled
asthmatic male and female
subjects
SG005
A randomised, double-blinded,
placebo-controlled Phase II
study, comparing the efficacy and
safety of inhaled IFN-β to placebo
administered to asthmatic subjects
after the onset of a respiratory
viral infection for the prevention or
attenuation of asthma symptoms
caused by respiratory viruses
Sputum
The thick mucus that is coughed up
by a person. Sputum contains cells
and soluble substances secreted
into the airways (bronchi), some
of which can mediate disease if
present in amounts different to
normal. Sputum is also commonly
called phlegm
49 | Synairgen plc annual report and accounts 2014 | www.synairgen.com | LSE:SNG
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