Annual Report
and Accounts
2015
a deeper understanding
of respiratory biology
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Synairgen plc, Mailpoint 810, Level F, South Block, Southampton General Hospital, Tremona Road, Southampton, SO16 6YD United Kingdom
© Synairgen plc
Stock symbol: LSE:SNG
www.synairgen.com
Strategy
Synairgen leverages its deep understanding of
respiratory biology to discover and develop novel
therapies in the areas of highest unmet respiratory
medical need, including severe asthma, COPD and
IPF. 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
Synairgen’s Founders
Directors
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
1
2
3
16
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
Parent Company Statement of Changes in Equity 43
Notes to the Parent Company
Financial Statements
44
www.synairgen.com
Other
Corporate Directory
Glossary
47
47
Cover image is a section of lung
tissue from an IPF patient, with
fibroblast cells stained in red and
scar tissue stained blue.
1 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Post
period-end
• Positive results from
Pharmaxis collaboration
with LOXL2 inhibitors
Operational
highlights
Financial
highlights
• In July, AstraZeneca commenced its
Phase IIa study of AZD9412 (inhaled
interferon beta, developed by
Synairgen). The study is progressing
according to plan and results are
expected in 2017
• In August, a research collaboration
was signed with Pharmaxis to
develop a selective inhibitor of the
lysyl oxidase type 2 enzyme (LOXL2)
to treat the fatal lung disease
idiopathic pulmonary fibrosis (IPF)
• Continued screening of new
development opportunities using
Synairgen’s proprietary ‘BioBank’
platform, leveraging Synairgen’s
world-class founder and respiratory
drug discovery and development
expertise
• Loss from operations for the
year ended 31 December
2015 was £2.61 million (2014:
profit £1.09 million). The prior
year profit was driven by the
one-off upfront licensing
payment from AstraZeneca of
£4.25 million
• Research and development
expenditure for the year was
£1.36 million (2014: £1.65
million)
• Cash, cash equivalents and
deposit balances of £7.71
million at 31 December 2015
(2014: £9.60 million). The
Group remains debt free
• Current funds support the
ongoing search and
identification of new potential
molecules opportunities
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 2
Strategic Report
The directors present their Strategic Report
for the year ended 31 December 2015.
Principal activities
Synairgen plc (the ‘Company’) is the holding company for
Synairgen Research Limited, a respiratory drug discovery
and development company.
Operating Review
Summary
Our business model is centred around a deep understanding
of respiratory biology. Our focus is on the discovery and
development of novel therapies for respiratory diseases,
particularly in the areas of highest unmet medical need,
including severe asthma, COPD and IPF. Our strategy
is to take drugs through to proof of concept stage and
then partner them. Synairgen’s first novel development
programme to enter the clinical stage (AZD9412) is an
inhaled interferon beta (IFN-beta) therapy which was out-
licensed to AstraZeneca for further clinical development
and commercialisation. AstraZeneca started a confirmatory
Phase II clinical trial in July 2015 and results are expected
in 2017.
In August 2015 we announced a research collaboration with
Pharmaxis Ltd (Pharmaxis), based in Sydney, Australia, to
progress their anti-fibrotic LOXL2 inhibitor compounds for
idiopathic pulmonary fibrosis (IPF). Since that time the two
companies have been working well together to progress the
programme and positive data was reported in March 2016.
Our strategy is to continue to build a portfolio of assets, to
which we can add value, in collaboration with market leaders
and other specialist biotechnology companies, all with the
common goal of improving the health and well-being of
respiratory disease sufferers.
Inhaled IFN-beta being developed by AstraZeneca
In June 2014, Synairgen signed a global exclusive licence
agreement with AstraZeneca worth up to $232 million in
milestone payments plus tiered royalties. AstraZeneca is
responsible for all development, regulatory and commercial
activities and on-going costs associated with this programme.
The licence agreement with AstraZeneca also provides the
opportunity to expand the clinical programme into other
pulmonary diseases, including COPD.
In July 2015 AstraZeneca enrolled the first patient into
a Phase II clinical trial which is designed to confirm the
efficacy signal in the target population which was first
observed in our pilot Phase II study SG005. The global
trial will dose approximately 220 asthmatic patients who
develop cold symptoms and is expected to complete in
2017. Half of the patients will receive placebo, and half
AZD9412, which is designed to boost antiviral defences in
the lungs to prevent these common viruses ‘taking hold’
3 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
3 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
and causing a deterioration in asthma symptoms, known
as exacerbations. The primary outcome for the trial is
the number of severe asthma exacerbations. Secondary
outcomes will include lung function, asthma symptoms,
safety and biomarkers relevant to the underlying biology.
AstraZeneca is a world leader in the respiratory sector,
with a strong market presence and pipeline. This strength
in respiratory medicine is of great benefit to Synairgen, and
considerable effort and expertise is being applied to this
programme over and beyond the ongoing clinical trial.
During the year, various academic groups from universities
around the world have generated data that is helpful in
understanding not only the problem that these common
respiratory viruses cause to patients with asthma, but
also to patients with the other major lung disease of
chronic obstructive pulmonary disease (COPD). COPD
affects approximately 25% of people who have smoked.
The common cold virus is similarly implicated in causing
exacerbations of COPD and is an unmet area of clinical
need that is of great interest to AstraZeneca. In particular
these studies have focussed on the mechanisms which
may contribute to a deficiency in antiviral defences caused
by lower or delayed production of IFN-beta. In the first
study1, lung samples from asthmatic patients expressed
more of the SOCS1 protein, which is known to suppress
IFN-beta production. This may explain the lower levels of
IFN-beta observed in cells from asthmatic patients when
they are exposed to the common cold virus. In a second
study2, it was shown that corticosteroids (an essential anti-
inflammatory asthma therapy) may be compromising the
lung’s antiviral defences, an unwanted effect that could be
overcome through application of IFN-beta. A third paper3
describes why lung cells from COPD patients may be more
susceptible to flu infection. These papers further support
Synairgen’s original work in establishing the rationale
for using inhaled AZD9412 to boost antiviral defences in
asthmatic and COPD patients when they are infected with
common respiratory viruses. This makes us increasingly
confident that AZD9412 should be of significant benefit to
such patients in an area of unmet need worldwide.
With its inhaled interferon beta
programme, Synairgen has a particular
interest in the common cold and how
it affects asthma and COPD patients.
In June 2014, Synairgen signed a global
exclusive licence agreement with
AstraZeneca worth up to $232 million
in milestone payments plus tiered
royalties. AstraZeneca is responsible
for all development, regulatory and
commercial activities and on-going
costs associated with this programme.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 4
Idiopathic Pulmonary Fibrosis (IPF) is a rare and
poorly understood lung condition that manifests
in scarring (fibrosis) of the lungs. As this scarring
gets worse, the lungs find it more difficult to
function, compromising the uptake of oxygen into
the blood, resulting in the symptoms of IPF.
CO2
O2
CO2
O2
capillary
Normal Air Sac
Air Sac damaged
by IPF
5 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Role of LOXL2 in fibrosis
Collagen fibres
LOXL2
from fibroblasts
Excessive production and
cross-linking of collagen fibres
results in fibrosis
Strategic Report
(continued)
LOXL2 inhibitor to reduce
fibrosis in patients with idiopathic
pulmonary fibrosis (IPF)
In August 2015, Synairgen entered
into a collaboration with Pharmaxis to
identify and develop an oral inhibitor
of the LOXL2 enzyme which has been
implicated in lung fibrosis, in particular
IPF, and other fibrotic conditions.
Idiopathic Pulmonary Fibrosis (IPF)
is a rare and poorly understood lung
condition that manifests in scarring
(fibrosis) of the lungs. As this scarring
gets worse, the lungs find it more
difficult to function, compromising
the uptake of oxygen into the blood,
resulting in the symptoms of IPF.
Symptoms include shortness of breath
(even when performing day-to-day
activities), which gets worse over
time, and a persistent dry cough.The
median survival is two to five years
from the time of diagnosis4. IPF affects
in the region of 100,000 people in
the US5 and at least this number in
Europe6.
Inhibition of Lysyl Oxidase-like protein
2 (LOXL2) is an attractive target
in treatment of IPF. Scar tissue is
composed of collagen fibres, which
are produced by a type of cell called
a fibroblast. LOXL2 is an enzyme
released from fibroblasts that links
collagen fibres together to stiffen
scar tissue. Excessive production and
linking of collagen fibres results in
fibrosis. LOXL2 levels are increased
in the lungs of patients with IPF, and
higher levels are associated with more
rapid disease progression. Pharmaxis
has identified a novel family of
compounds that selectively inhibit the
LOXL2 enzyme.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 6
A section of lung from a diagnostic
biopsy from an IPF patient
The majority of this image shows normal lung tissue.
However in the top right quadrant (and enlarged to the
right) is a fibroblastic focus, comprising fibroblast cells
(stained red), which make scar tissue (stained blue).
The fibroblastic focus is the hallmark of IPF.
A section from an in vitro model of a
fibroblastic focus
The model (developed in collaboration with the
University of Southampton) uses fibroblast cells
taken from an IPF patient.
7 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Strategic Report
(continued)
Two new treatments have recently
been approved for the treatment of IPF:
pirfenidone (Roche); and nintedanib
(Boehringer Ingelheim). However, there
remains a clear unmet need for more
effective and better tolerated drugs.
Importantly, LOXL2 inhibitors, due to their
differentiated mechanism of action, have
the potential to provide additional benefit
to these treatments.
The deal terms with Pharmaxis recognise
the extensive work already completed
in building up the library of compounds.
The objective of the collaboration is to
build value through application of our
pre-clinical models and clinical expertise,
and to license the programme to a
large pharmaceutical company at the
end of Phase I or Phase IIa. Pharmaxis
and Synairgen will share any licensing
revenues in accordance with the ratio of
total investment by the two companies at
that time. The share of licensing revenues
is expected to be approximately equal
for a compound licensed for IPF after
early clinical development. Synairgen
will also receive a share of the licensing
revenues paid by a licensee to Pharmaxis
for collaboration compounds developed
in other fibrotic indications outside the
respiratory field such as non-alcoholic
steatohepatitis (NASH) or kidney fibrosis.
As can be seen by comparing the two images above, the in vitro model
replicates structures seen in IPF tissue. This fibroblastic focus model
has been used to profile the LOXL2 inhibitors being developed in
collaboration with Pharmaxis, with the results being shown on
pages 9 and 10 overleaf.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 8
Strategic Report
(continued)
Disease-relevant activity of the Pharmaxis inhibitors
measured in the fibroblastic focus in vitro model
More
cross-links
C o ntrol
B A P N p ositive co ntrol
compound A
compound B
inceasing dose
To date we have used our proprietary in vitro models (using
lung cells from IPF patients) to demonstrate the ability of
the Pharmaxis compounds to inhibit the cross-linking of
collagen fibres. We are currently conducting numerous
pre-clinical tests prior to the selection of a candidate. In
March 2016, we provided an update which shows that
the Pharmaxis enzyme inhibitors, by inhibiting LOXL2, are
able to reduce cross-linking of collagen fibres in a dose
dependent manner.
Additionally it has also been found that collagen fibres
were less organised in the presence of the inhibitors. It is
hypothesised that this will result in less “stiff” lung tissue
and that this may beneficially alter the course of this
devastating disease. We are very excited at the prospect of
progressing one of the Pharmaxis compounds into a Phase I
clinical trial, which we anticipate commencing during 2017.
9 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Second harmonic generation images
showing collagen structure within
the fibroblastic focus in vitro model
(generated in collaboration with the University of Southampton)
Less organised
collagen
Collagen fibres
are alligned due
to cross-linking
The Pharmaxis
compounds reduce
cross-linking,
disrupting the
organisation of
collagen fibres.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 10
We use our BioBank and tissue models
to increase confidence in the rationale for
progressing such an asset and work to
produce the scientific data required
by large pharma licensees.
BioBank samples are
obtained from volunteer
patients attending
specialist clinical
research facilities at
Southampton General
Hospital
1
BioBank samples are used
to create in vitro human
respiratory cell and tissue
models to discover, develop
and validate novel drug
targets
3
2
Synairgen’s BioBank
contains blood, sputum,
lung cells and tissue
samples collected from
subjects with and without
specific respiratory diseases
4
Cultured epithelial cells
grown at an air-liquid
interface showing cilia
and mucus-secreting
cells
11 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Strategic Report
(continued)
Synairgen’s new pipeline developments
We continue to assess new opportunities in our
laboratories in parallel to discussing commercial terms
and conducting due diligence in relation to bringing such
opportunities into the Group. The ideal programme for us:
• has sufficient novelty such that it could achieve sales
exceeding $1 billion per annum;
• has been progressed and produced promising initial
data; and
• needs the validation of our BioBank technology
platform and Synairgen’s wider clinical and commercial
competence to progress to a proven value inflection
point, ready for licensing to a large pharma company.
We use our BioBank and tissue models to increase
confidence in the rationale for progressing such an asset
and work to produce the scientific data required by large
pharma licensees. We have a high due diligence threshold
and a number of potential assets have been explored
but declined. There are a number of opportunities from
academic groups, small biotech companies, and some
currently residing within large pharma, which we are
continuing to review in depth. A number of these assets
are at the clinical stage.
We expect to be able to bring at least one such
collaboration into the Group in the coming year.
Key performance
indicators (KPIs)
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 2015 cash
and deposit balances amounted to £7.71 million (2014: £9.60
million) and were above budgeted levels. The operating loss of
£2.61 million (2014: profit of £1.09 million) was also favourable
to the budgeted result for the year.
References
1. Gielen V et al. Increased nuclear suppressor of cytokine signaling 1 in asthmatic bronchial epithelium suppresses rhinovirus induction of innate
interferons. J Clin Immunol. 2015;136(1):177-188
2. Singanayagam A et al. Effect of fluticasone propionate on virus-induced airways inflammation and anti-viral immune responses in mice. Lancet. 2015;385
Suppl 1:S88
3. Hsu AC et al. Impaired antiviral stress granule and IFN-β enhanceosome formation enhances susceptibility to influenza infection in COPD epithelium. Am
J Respir Cell Mol Biol. 2016; [Epub ahead of print]
4. Meltzer E and Noble P. Idiopathic pulmonary fibrosis. Orphanet J Rare Dis. 200; 3:8
5. https://ghr.nlm.nih.gov/condition/idiopathic-pulmonary-fibrosis. Accessed March 2016
6. http://www.pulmonary-fibrosis.net/index.php?option=com_content&view=category&layout=blog&id=2&Itemid=4. Accessed March 2016
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 12
Strategic Report
(continued)
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, set out on pages
43 to 46, are, for the first time, prepared in accordance
with Financial Reporting Standard 100 Application of
Financial Reporting Requirements and Financial Reporting
Standard 101 Reduced Disclosure Framework, having been
previously prepared in accordance with UK Generally
Accepted Accounting Practice. This change in the basis of
preparation has not materially altered the recognition and
measurement requirements previously applied.
Statement of Comprehensive Income
The loss from operations for the year ended 31 December
2015 was £2.61 million (2014: profit £1.09 million). The
Group reported a profit in 2014 on account of the
recognition of the AstraZeneca licensing transaction £4.25
million upfront payment. Revenues in the current year to
31 December 2015, representing scientific fee for service
work for AstraZeneca, amounted to £0.03 million, were
down from the 2014 revenues of £4.29 million (comprising
the licence receipt of £4.25 million and fee for service
income of £0.04 million). Research and development
expenditure for the year amounted to £1.36 million (2014:
£1.65 million), with a higher rate of expenditure in the
second half of the year following the commencement of
the LOXL2 programme with Pharmaxis in August 2015.
There has been continuing expenditure during the year on
research into new opportunity candidates.
Other administrative costs for the year amounted to £1.28
million (2014: £1.55 million), with the reduction over the prior
year being attributable to lower staff costs. The research and
development tax credit amounted to £0.30 million (2014:
£0.06 million). The 2014 tax research and development tax
credit was restricted on account of the Group being in profit.
The loss after tax for 2015 was £2.26 million (2014: profit of
£1.19 million) and the basic loss per share amounted to 2.47p
(2014: basic earnings per share of 1.42p).
Statement of Financial Position and cash flows
At 31 December 2015, net assets amounted to £7.35 million
(2014: £9.44 million), including net funds, as detailed below
in Capital structure and funding, of £7.71 million (2014:
£9.60 million).
The principal elements of the £1.89 million decrease over
the year ended 31 December 2015 (2014: £8.31 million
increase) in net funds were:
• cash used in operations of £1.99 million (2014: £1.61
million inflow);
• research and development tax credits received of £0.06
million (2014: £0.20 million); and
• share issue proceeds (net of costs) £nil (2014: £6.51
million).
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 2015 amounted to £7.35 million (2014:
£9.44 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 2015
amounted to £7.71 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:
13 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
31 Dec
2015
£m
3.72
2014
£m
6.75
2013
£m
0.46
2012
£m
1.43
2011
£m
2.45
3.99
2.85
0.83
1.66
0.90
Short-term deposits
Cash and cash
equivalents
Net funds
7.71
9.60
1.29
3.09
3.35
The Group did not have any bank borrowings as at 31
December 2015 (2014: £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 2015 have been: revenues
from licensing transactions of £4.25 million, research and
development tax credits of £2.72 million, bank interest
of £1.69 million, and revenues from collaborative work of
£0.67 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
Australian dollar, Euro and US dollar currency movement
as the Pharmaxis collaboration involves expenditure
in all these currencies. The largest exposure relates to
the Australian dollar on account of work undertaken by
Pharmaxis and which is billed on a quarterly basis. To
hedge against currency movement the Group purchases
Australian dollars during the quarter before the payment
is due.
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 and advanced drug
development programme is the interferon beta
programme, which is now being developed by AstraZeneca,
following the significant investment by the Group.
During the year under review the Group has entered into
the LOXL2 collaboration agreement with Pharmaxis Ltd. It
continues to review a number of additional development
opportunities which it hopes will enable it to broaden and
diversify its portfolio further.
• 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 clinical trials, drawing
on the experience of its Founders, seeking advice from
regulatory advisers, and holding consultations with the
appropriate regulatory bodies.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 14
Strategic Report
(continued)
• 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.
15 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
• 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.
Outlook
Our primary asset, AZD9412, is in a confirmatory Phase II trial
being conducted by AstraZeneca, with results from this trial
expected in 2017.
During 2016, we expect to increase the data package around
the LOXL2 inhibitor, building on the positive data already
announced, and prepare for a Phase I clinical trial to start
during 2017. Jointly with Pharmaxis, we have started to engage
with large pharma companies, who are showing a strong
interest in this programme.
We retain a strong balance sheet to enable us to continue
to both develop existing programmes and screen new
opportunities.
By order of the Board
John Ward
Company Secretary
21 March 2016
Synairgen’s
Founders
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 2015 | 16
Directors
Simon Shaw
Non-executive Chairman
Dr Phillip Monk
Chief Scientific Officer
Iain Buchanan
Non-executive Director
Dr Bruce Campbell
Non-executive Director
Bruce Campbell joined
Synairgen as a non-executive
Director in April 2006.
He has 45 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.
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.
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
tralokinumab, 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.
Iain Buchanan was appointed
as a non-executive director
in June 2010 and brings to
the company over 40 years
of management experience
in the pharmaceutical and
biotech industries. Most
recently he was CEO of
NOXXON Pharma AG based in
Berlin and previously he was
CEO of Novexel S.A. based
in Paris. He joined Novexel
from Vertex Pharmaceuticals
where he established the
European affiliate. Prior to
Vertex, Iain managed the
international licensee business
of Cilag AG - a subsidiary of
Johnson and Johnson - based
in Switzerland. Iain serves as
a member of the supervisory
board of NOXXON Pharma AG.
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
Paul Clegg
Non-executive Director
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.
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.
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
which has developed the
process and the commercial
industrialisation of wood
acetylation, as Chief
Executive Officer.
17 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Prof. Stephen Holgate CBE
Non-executive Director
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 1000 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.
Simon Shaw
Richard Marsden
Dr Phillip Monk
John Ward
Iain Buchanan
Dr Bruce Campbell
Paul Clegg
Prof. Stephen Holgate CBE
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 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 2015.
Directors’ interests in ordinary shares
The directors, who held office at 31 December 2015, had the
following interests in the ordinary shares of the Company:
The review of future developments and the use of financial instruments
and financial risk management policies are covered in the Strategic Report.
Details of directors’ remuneration and share options are given in the
Directors’ Remuneration Report.
Research and development
During the year ended 31 December 2015, the Group has invested
£1,355,000 (2014: £1,649,000) 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 21 March 2016, 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
Woodford Investment Management LLP
20,386,651
22.3%
Lansdowne Partners International Limited
16,923,111
18.5%
Richard Griffiths
9,117,012
10.0%
Southampton Asset Management Limited
3,600,000
3.9%
Directors
The directors of the Company during the year ended 31 December
2015 were:
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
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 2015
Number of shares
1 January 2015
Number of shares
154,432
183,439
276,506
1,474,096
112,741
294,259
204,244
858,360
110,972
161,710
243,912
1,408,879
112,741
294,259
204,244
858,360
(i) Simon Shaw’s shareholding includes 105,516 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 2015 and the date of this report there has
been no change in the interests of directors in shares as disclosed
in this report. The interests of directors in share options as set out
in the Directors’ Remuneration Report on pages 24 and 25 have
changed since 31 December 2015 as the options granted on 11
March 2013 under the Synairgen Long Term Incentive Plan have now
lapsed as the performance criteria were not met.
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.
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.
By order of the Board
John Ward
Company Secretary
21 March 2016
19 | Synairgen plc annual report and accounts 2015 | 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 2015 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 17 and 18. 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 2015, 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
7
7
7
7
7
6
7
4
In addition there were two 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 2015,
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.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 20
Corporate Governance (continued)
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
21 March 2016
It also advises on the remuneration policy for the Group’s employees.
The committee is responsible for all senior appointments that are
made within the Group. During the year ended 31 December 2015, the
committee met twice with each member attending both meetings.
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.
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.
21 | Synairgen plc annual report and accounts 2015 | 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
twice during the year ended 31 December 2015. 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.
The previous salary and benefit review took effect from 1 December
2014 and, as reported in the previous Directors’ Remuneration
Report, there was no review during 2015. Salaries and benefits
have been reviewed in January 2016 taking into account Group
and individual performance, external benchmark information and
internal relativities.
As a consequence of the 2016 review, the following changes were
made with effect from 1 January 2016:
1 December 2014 to 31 December 2015
From 1 January 2016
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
180
130
140
9%
9%
9%
100%
100%
100%
182
131
141
9%
9%
9%
100%
100%
100%
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 22
Directors’ Remuneration Report (continued)
Executive directors are also rewarded for improvements in the
performance of the Group sustained over a period of years in the form of
Long Term Incentive Plan share awards granted on a discretionary basis
by the Committee.
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.
Directors’ remuneration for the year ended 31 December 2015 is set out
on page 26 of this document.
(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 relevant
corporate objectives. The following bonuses, representing 40% of annual
salary, were awarded for the year ended 31 December 2015: Richard
Marsden: £72,000; Dr Phillip Monk: £52,000; and John Ward: £56,000.
(iv) Equity-based incentive schemes
The Committee strongly believes that long term 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. The authority for this
original plan expired in 2015. At the Company’s Annual General Meeting
(‘AGM’) in June 2015 shareholders approved the introduction of a new
LTIP plan (the Synairgen Long Term Incentive Plan 2015 or ‘2015 LTIP’). In
all material respects, the rules of the new LTIP are the same as those of
the previous plan, except where it has been clarified:
a) That a participant who ceases to be employed whilst holding a vested
LTIP award will ordinarily have an opportunity to exercise that vested
award in the succeeding 12 months before the award lapses;
b) Consistent with evolving best practice, provisions for malus and
clawback were introduced; and
c) If regulatory restrictions prevent the grant of an LTIP award in any
year, the 100% of base salary individual award limit for that financial
year may be carried forward to the following financial year and used
in addition to the following year’s annual individual award limit when
awards are made.
Grants under the 2015 LTIP in any financial year are capped at a
maximum of 100% of base salary.
In October 2015, Richard Marsden, Dr Phillip Monk and John Ward were
granted awards over shares worth 62.5% of base salary. This level is
lower than past practice to reflect both the increase in salaries awarded
in 2014 and that new awards will be made on the more common basis
of the Company bearing employers’ NICs (with such liability mitigated
through the use of EMI qualified awards to the extent feasible).
Executive directors are expected to retain no fewer than 50% of shares
acquired upon vesting of awards under the LTIP, net of shares sold to
pay 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.
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 2013, 2014 and 2015 LTIP awards
The performance conditions for all three 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
Less than 0%
0%
10%
20%
Vesting percentage
of total number of shares
subject to award
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%.
23 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
No awards became exercisable during 2015 as, given regulatory
constraints in 2012, no grants reached the end of their 3 year
performance period during the year.
Qualifying Non-Employee Option Scheme (QNEOS)
On 12 June 2009 shareholders in General Meeting approved the
adoption of the QNEOS. This plan was a discretionary share scheme
which enabled 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.
The ability to make further option grants under the QNEOS expired in
June 2014. Following a review by the Committee during 2015, shareholder
approval was sought and given by shareholders at the 2015 AGM to
continue to operate the Synairgen Non-Employee Share Option Plan
2015 (‘QNEOS 2015’). QNEOS 2015 operates similarly to QNEOS except:
a) The list of those eligible to receive new grants will be limited to non-
employee consultants of the Group who are not also directors (so
non-executive directors will not be eligible to participate without
further recourse to shareholders); and
b) Consistent with developments in best practice and for consistency
with the 2015 LTIP, the leaver rules have been clarified to ensure that
vested but unexercised options are retained for a period post
a participant ceasing to be engaged by the Group.
During the year under review no options were granted under
QNEOS 2015.
(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.
During the year ended 31 December 2015, the executive directors did
not hold any 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 2015
Granted during
the year
At 31 December 2015
Exercise
price
Earliest
exercise date
Expiry date
Richard Marsden
7 September 2009
8 September 2010
21 September 2011
11 March 2013
3 November 2014
27 October 2015
Dr Phillip Monk
21 September 2011
11 March 2013
3 November 2014
27 October 2015
John Ward
7 September 2009
8 September 2010
21 September 2011
11 March 2013
3 November 2014
27 October 2015
605,000
246,889
538,063
245,732
313,827
–
–
–
–
–
–
387,931
400,212
182,776
233,425
–
–
–
–
280,172
100,000
224,445
489,148
223,393
285,297
–
–
–
–
–
–
301,724
No options were exercised by directors during the year.
605,000
246,889
538,063
245,732
313,827
387,931
400,212
182,776
233,425
280,172
100,000
224,445
489,148
223,393
285,297
301,724
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
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
27 Oct 2018
26 Oct 2025
21 Sept 2014
20 Sept 2021
11 Mar 2016
10 Mar 2023
3 Nov 2017
2 Nov 2024
27 Oct 2018
26 Oct 2025
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
27 Oct 2018
26 Oct 2025
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 24
Directors’ Remuneration Report (continued)
Other options granted under the Synairgen plc Staff Option Scheme
Date of grant
Dr Phillip Monk
2 October 2006
At 1 January and
31 December 2015
Exercise
price
Earliest
exercise date
Expiry date
50,000
85.5p
2 Oct 2009
1 Oct 2016
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 2015
Exercise
price
Earliest
exercise date
Expiry date
212,765
23.5p
28 June 2013
27 June 2020
250,000
20p
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 2015 was 22.5p. During the year then ended, the mid-market price ranged from 22.5p
to 39.5p. On 21 March 2016 the closing price was 22.0p.
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 2015 and has been audited by the
Company’s auditor, BDO LLP.
25 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Directors’ remuneration
The remuneration received by directors who served during the years ended 31 December 2015 and 2014 was as follows:
Note
(i)
£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
Total
Salary/
fee
Bonus
Benefits
180
130
140
30
25
25
30
25
72
52
56
–
–
–
–
–
585
180
3
–
2
–
–
–
–
–
5
Year ended 31 December 2015
Total (incl.
pension)
Pension
Total (excl.
pension)
Year ended 31 December 2014
Total (incl.
pension)
Pension
Total (excl.
pension)
255
182
198
30
25
25
30
25
16
12
13
–
–
-
-
-
271
194
211
30
25
25
30
25
396
294
359
30
25
16
30
16
12
9
11
–
–
–
–
–
408
303
370
30
25
16
30
16
770
41
811
1,166
32
1,198
(i) Richard Marsden was the highest paid director during the year ended 31 December 2015. He did not exercise any options during that year. Dr Phillip Monk was the
highest paid director during the year ended 31 December 2014, earning a total of £596,000, comprising emoluments as set out above of £303,000 and gains on the
exercise of options amounting to £293,000.
(ii) The total amount paid to third parties amounted to £nil (2014: £15,000).
In respect of key management personnel, for the year ended 31 December 2015, total share-based payment amounted to £137,000 (2014: £123,000)
and total social security costs were £86,000 (2014: £142,000).
By order of the Board
Paul Clegg
Chairman of the Remuneration and Nomination Committee
21 March 2016
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 26
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
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 Financial
Reporting Standard 100 Application of Financial Reporting Requirements
and Financial Reporting Standard 101 Reduced Disclosure Framework
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.
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
21 March 2016
27 | Synairgen plc annual report and accounts 2015 | 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 2015 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, the Parent Company Statement of Changes in Equity 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), including Financial
Reporting Standard 101 ‘Reduced Disclosure Framework’.
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 Financial Reporting Council’s (FRC’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 2015 and
of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company’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 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.
Kim Hayward (senior statutory auditor)
For and on behalf of
BDO LLP, statutory auditor
Southampton
United Kingdom
21 March 2016
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 28
Consolidated Statement
of Comprehensive Income
for the year ended 31 December 2015
Revenue
Research and development expenditure
Other administrative expenses
Total administrative expenses
(Loss)/Profit from operations
Finance income
(Loss)/Profit before tax
Tax
(Loss)/Profit and total comprehensive (loss)/income
for the period attributable to equity holders of the parent
(Loss)/Earnings per ordinary share
Basic (loss)/earnings per share pence
Diluted (loss)/earnings per share pence
Year ended
31 December 2015
£000
Year ended
31 December 2014
£000
Notes
25
(1,355)
(1,279)
(2,634)
(2,609)
50
(2,559)
304
(2,255)
(2.47p)
(2.47p)
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 2015
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Retained
deficit
£000
Total
£000
Note
At 1 January 2014
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
Recognition of share-based payments
Total comprehensive loss for the year
At 31 December 2015
29 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
18a
752
161
–
–
–
18b
19,422
6,761
(412)
–
–
18c
483
18d
(19,078)
–
–
–
–
–
–
159
1,188
913
25,771
483
(17,731)
1,579
6,922
(412)
159
1,188
9,436
166
–
–
–
–
–
–
166
(2,255)
(2,255)
913
25,771
483
(19,820)
7,347
Consolidated Statement of Financial Position
as at 31 December 2015
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 2015
£000
31 December 2014
£000
9
10
11
12
13
14
15
17
17
18
18
81
17
98
56
303
112
3,722
3,992
8,185
8,283
(936)
(936)
7,347
913
25,771
483
(19,820)
7,347
102
17
119
56
55
102
6,752
2,847
9,812
9,931
(495)
(495)
9,436
913
25,771
483
(17,731)
9,436
The financial statements on pages 29 to 42 were approved and authorised for issue by the Board of directors on 21 March 2016 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 2015 | 30
Consolidated Statement of Cash Flows
for the year ended 31 December 2015
Year ended
31 December 2015
£000
Year ended
31 December 2014
£000
(2,559)
1,125
(50)
10
21
–
166
(2,412)
–
(18)
441
(1,989)
56
(1,933)
58
(10)
–
3,030
3,078
–
–
–
1,145
2,847
3,992
(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
Cash flows from operating activities
(Loss)/Profit 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 in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash (used in)/generated from operations
Tax credit received
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
Purchase of intangible assets
Decrease/(Increase) in other financial assets
Net cash generated from/(used in) 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 in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
31 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015
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 have been adopted and are effective for the current year:
IFRS 2
IFRS 3
IFRS 8
Share-based Payment (Definition of vesting and market condition)
Business Combinations (Accounting for contingent consideration)
Operating Segments (Disclosure of judgements made relating to the aggregations of operating segments and reconciliation of
reportable segments’ assets to total entity assets)
The adoption of these pronouncements has not impacted the classification or measurement of the Group’s assets and liabilities.
New standards and interpretations not applied
IASB have issued the following relevant standards and interpretations with an effective date for periods commencing after 1 January 2016:
Standard or
interpretation
Title
IFRS 9
IFRS 15
IFRS 16
IAS 1
IAS 27
Financial Instruments
Revenue from Contracts with Customers
Leases
Presentation of Financial Statements
Equity Method in Separate Financial Statements
Effective for periods
beginning on or after
1 January 2018
1 January 2018
1 January 2019
1 January 2016
1 January 2016
The Directors do not anticipate that the adoption of the 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 standards and interpretations. As the Group prepares its financial statements in
accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to them 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.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 32
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
1. Accounting policies (continued)
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 at the date of grant 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. 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.
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.
33 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
1. Accounting policies (continued)
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 losses were generated in that territory. The revenue generated in 2015 and 2014 was all generated from a single customer.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 34
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
4. (Loss)/Profit from operations
The (loss)/profit from operations has been arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Loss on derecognised intangible asset
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
2015
£000
10
21
–
78
93
2015
£000
12
11
7
14
9
53
2015
9
3
12
2015
£000
909
114
56
1,079
2
166
1,247
2014
£000
12
35
164
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
For the purpose of presentation in the Consolidated Statement of Comprehensive Income, remuneration costs of £581,000 (2014: £767,000) are
included in research and development expenditure and £666,000 (2014: £966,000) 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.
6. Finance income
For the years ended 31 December 2015 and 2014 Finance income represents bank interest receivable.
35 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
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 20.25% (2014: 21.50%). The differences are reconciled below:
(Loss)/Profit on ordinary activities before tax
(Loss)/Profit 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
2015
£000
(303)
(1)
(304)
2015
£000
(2,559)
(518)
–
35
(258)
120
318
(1)
(304)
2014
£000
(55)
(8)
(63)
2014
£000
1,125
242
(221)
34
(234)
27
97
(8)
(63)
Changes in tax rates and factors affecting the future tax charge
Finance Act 2015 included provision for the main rate of corporation tax to reduce from 20% to 19% on 1 April 2017, and to 18% on 1 April 2020.
This will reduce the Company’s future tax charge accordingly. The rate changes were substantively enacted on 26 October 2015. Accordingly,
deferred tax balances have been recognised at 18%, being the rate of corporation tax expected to be in force at the time these timing difference
are expected to reverse.
Recognised deferred taxation
Accelerated capital allowances
Other temporary differences
Charge for the year
2015
£000
2
(2)
–
2014
£000
2
(2)
–
Unrecognised deferred taxation
At 31 December 2015 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to
£11,917,000 (2014: £10,599,000) and non-trading losses of £1,605,000 (2014: £1,338,000). At 31 December 2015 the Group has an unrecognised
deferred tax asset in respect of these losses of £2,434,000 (2014: £2,388,000). 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 £902,000 (2014: £1,151,000) and
a deferred tax asset of £162,000 (2014: £230,000) 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
2015
£000
(2,618)
22
(2,596)
2014
£000
(2,907)
289
(2,618)
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 36
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
8. (Loss)/Earnings per ordinary share
Basic (loss)/earnings per share (‘LPS’ or ‘EPS’) is calculated by dividing the (loss)/profit 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 2015), 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 losses/earnings and the number of weighted average number of shares used in the calculations are as follows:
Basic (loss)/earnings per share
Effect of additional shares under option
Losses
£000
(2,255)
–
Shares
000
91,317
–
2015
LPS
pence
(2.47)
–
Earnings
£000
1,188
–
Diluted (loss)/earnings per share
(2,255)
91,317
(2.47)
1,188
9. Intangible assets
Cost
At 1 January 2014
Externally-acquired additions
Derecognised assets
At 31 December 2014 and 2015
Amortisation
At 1 January 2014
Derecognised assets
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Net book amount
At 31 December 2015
At 31 December 2014
At 1 January 2014
Shares
000
83,899
4,279
88,178
2014
EPS
pence
1.42
(0.07)
1.35
Patent and licence costs
£000
477
4
(269)
212
180
(105)
35
110
21
131
81
102
297
At 31 December 2015 £81,000 (31 December 2014: £102,000) of the net book amount relates to interferon beta patent costs, which has a remaining
average amortisation period of 4 years (31 December 2014: 5 years). At 1 January 2014 £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 derecognised the
interferon lambda intangible assets.
37 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
10. Property, plant and equipment
Computer
equipment
£000
Laboratory and
clinical equipment
£000
Cost
At 1 January 2014
Additions
Derecognised assets
At 31 December 2014
Additions
At 31 December 2015
Depreciation
At 1 January 2014
Derecognised assets
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
At 1 January 2014
11. Inventories
Raw materials
Raw materials 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
44
12
(25)
31
5
36
36
(25)
7
18
8
26
10
13
8
133
2
(9)
126
5
131
126
(9)
5
122
2
124
7
4
7
2015
£000
56
2015
£000
17
95
112
2015
£000
3,722
2015
£000
3,992
Total
£000
177
14
(34)
157
10
167
162
(34)
12
140
10
150
17
17
15
2014
£000
56
2014
£000
18
84
102
2014
£000
6,752
2014
£000
2,847
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 38
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
15. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
16. Financial instruments
2015
£000
281
61
594
936
2014
£000
78
33
384
495
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 13 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)
2015
Book and
fair value
£000
2014
Book and
fair value
£000
29
3,722
3,992
7,743
51
6,752
2,847
9,650
Trade and other payables (less than one year)
(ii)
866
450
(i) Trade and other receivables shown above excludes prepayments, which are not a contractual obligation to receive cash, amounting to £83,000 (2014: £51,000).
(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 £70,000 (2014: £45,000).
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:
Australian Dollar
Euro
Sterling
US Dollar
2015
Floating rate
financial assets
£000
2014
Floating rate
financial assets
£000
45
72
7,556
41
7,714
–
93
9,491
15
9,599
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 2015 had a weighted average period to maturity of 38 days and a weighted average annualised rate of interest of 0.70%
(2014: 33 days, 0.65%).
39 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
16. Financial instruments (continued)
Sensitivity analysis
It is estimated that an increase of quarter of one percentage point in interest rates would have decreased the Group’s loss before taxation by
approximately £22,000 (2014: £15,000).
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
2015 and 31 December 2014 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 2014
Issuance of ordinary shares
Costs of issuance of shares
At 31 December 2014 and 2015
Notes
(i) - (v)
Number
of shares
75,195,891
16,120,780
–
91,316,671
Ordinary shares
of 1p each
£000
752
161
–
913
Share
premium
£000
19,422
6,761
(412)
25,771
Total
£000
20,174
6,922
(412)
26,684
(i) 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.
(ii) 266,363 ordinary shares of 1p were issued on 18 June 2014 at par following the exercise of share options under the Company’s long term incentive plan (LTIP).
(iii) 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).
(iv) 4,712 ordinary shares of 1p were issued on 13 October 2014 at par following the exercise of share options under the ‘LTIP’.
(v) 141,587 ordinary shares of 1p were issued on 17 November 2014 at par following the exercise of share options under under the ‘LTIP’.
At 31 December 2014, the total authorised number of ordinary shares was 125 million shares with a par value of 1p per share. At the Company’s
2015 Annual General Meeting held on 22 June 2015 shareholders passed a special resolution removing the restriction on the Company’s share
capital and amending the articles of association of the Company so that the number of shares the Company can allot and issue became unlimited.
All issued shares are fully paid.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 40
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
17. Share capital and premium (continued)
Options
At 31 December 2015 there were options outstanding over 6,587,094 un-issued ordinary shares, equivalent to 7.2% of the issued share capital,
as follows:
Date of grant
Approved EMI scheme
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)
27 October 2015 (LTIP)
Number of shares
Exercise price
Earliest exercise date
Latest exercise date
90,115
17,792
705,000
250,000
212,765
471,334
1,742,550
821,391
1,054,106
1,222,041
6,587,094
85.5p
61.5p
1p
20p
23.5p
1p
1p
1p
1p
1p
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
27 October 2018
26 October 2025
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
5,467,644
1,222,041
–
(102,591)
6,587,094
2015
Weighted average
exercise price
5.0p
1.0p
n/a
35.1p
3.8p
2014
Weighted average
exercise price
15.6p
1.0p
4.6p
121.6p
5.0p
Number
7,393,272
1,086,997
(2,368,481)
(644,144)
5,467,644
At 31 December 2015, 3,489,556 share options were capable of being exercised, with exercise prices ranging from 1p to 85.5p (2014: 3,522,464, with
exercise prices ranging from 1p to 136.5p). The options outstanding at 31 December 2015 had a weighted average remaining contractual life of 6.7
years (2014: 7.0 years). Vesting conditions are disclosed in the Directors’ Remuneration Report.
41 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 (continued)
17. Share capital and premium (continued)
The Group uses a number of share-based incentive schemes as detailed above and in the Directors’ Remuneration Report on pages 23 and 24. 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
2 Oct 2006
29 Oct 2007
7 Sept 2009
7 Sept 2009
28 Jun 2010
8 Sept 2010
21 Sept 2011
11 Mar 2013
3 Nov 2014
27 Oct 2015
EMI
EMI
LTIP
QNEOS
QNEOS
LTIP
LTIP
LTIP
LTIP
LTIP
90,115
17,792
705,000
250,000
212,765
471,334
1,742,550
821,391
1,054,106
1,222,041
6,587,094
85.5p
61.5p
1p
20p
23.5p
1p
1p
1p
1p
1p
85.5p
61.5p
18.5p
18.5p
23.5p
24.25p
22.5p
53p
41.5p
29p
24.4p
17.8p
7.1p
4.0p
5.6p
12.1p
13.4p
30.9p
22.4p
14.2p
5
5
3
5
5
3
3
3
3
3
4.75%
4.95%
2.09%
2.67%
2.09%
0.92%
0.79%
0.36%
1.11%
0.71%
20%
20%
30%
30%
30%
40%
56%
44%
46%
38%
None
None
Market
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 2015 for share-based payment amounted to £166,000 (2014: £159,000).
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. Commitments under operating leases
The total future value of minimum lease payments committed at the balance sheet date under non-cancellable operating leases is due as follows:
Not later than one year
Later than one year and not later than five years
Total
20. Related party transactions and balances
2015
£000
163
95
258
2014
£000
–
–
–
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 2015 | 42
Parent Company Balance Sheet
as at 31 December 2015
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
Retained earnings
Shareholders’ funds
Notes
31 December 2015
£000
31 December 2014
£000
3
4
5
19,510
17,763
15
3,722
3,879
7,616
(34)
7,582
27,092
913
25,771
408
27,092
39
6,752
2,709
9,500
(69)
9,431
27,194
913
25,771
510
27,194
Parent Company Statement of Changes in Equity
for the year ended 31 December 2015
At 1 January 2014
Loss for the year and total comprehensive loss
Issuance of ordinary shares
Transaction costs in respect of share issues
Share-based payment credit
At 31 December 2014
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2015
Share
capital
£000
752
–
161
–
–
913
–
–
Share
premium
account
£000
19,422
–
6,761
(412)
–
25,771
–
–
913
25,771
Retained
earnings
£000
Shareholders’
funds
£000
605
(254)
–
–
159
510
(268)
166
408
20,779
(254)
6,922
(412)
159
27,194
(268)
166
27,092
The financial statements on pages 43 to 46 were approved and authorised for issue by the Board of directors on 21 March 2016 and signed on its
behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
43 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Parent Company Financial Statements
for the year ended 31 December 2015
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting
Requirements (‘FRS 100’) and Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU-endorsed IFRS;
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel; and
• disclosures of related party transactions with other wholly-owned members of Synairgen plc group of companies.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are
included in the Company’s consolidated financial statements. These financial statements do not include certain disclosures in respect of:
• share-based payments; or
• financial instruments.
Principal accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of accounting
The financial statements have been prepared under the historical cost convention. The presentation currency used is sterling and
amounts have been presented in round thousands (£000s).
First time application of FRS 100 and 101
In the current year the Company has adopted FRS 100 and FRS 101. In previous years the financial statements were prepared in
accordance with applicable UK accounting standards. This change in the basis of preparation has not materially altered the recognition
and measurement requirements previously applied in accordance with applicable UK accounting standards. Consequently the principal
accounting policies are unchanged from the prior year. The change in the basis of preparation has enabled the Company to take
advantage of all of the available disclosure exemptions permitted by FRS 101 in the financial statements, the most significant of which are
summarised above. There have been no other material amendments to the disclosure requirements previously applied in accordance
with applicable UK accounting standards.
Foreign currency
The financial statements are presented in UK pounds sterling, which is the Company’s functional currency.
Transactions entered into by the Company in a currency other than the currency of the primary economic environment in which it
operates (its ‘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 profit or loss.
Investment in subsidiary undertakings
Investments in subsidiary undertakings where the Company has control are stated at cost less any provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes a party to the
contractual provisions of the instrument.
Financial assets
The Company 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 Company 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.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 44
Notes to the Parent Company Financial Statements
for the year ended 31 December 2015 (continued)
1. Accounting policies (continued)
The Company’s loans and receivables comprise debtors, investments: short-term deposits and cash and cash equivalents in the balance sheet. Other
financial assets comprise short-term deposits not meeting the 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 Company classifies its financial liabilities as financial liabilities held at amortised cost. Trade creditors are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest rate method.
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.
Share capital
The Group’s ordinary shares are classified as equity instruments. Financial instruments issued by the Company are classified as equity only to the
extent that they do not meet the definition of a financial liability or financial asset.
2. Profit and loss account
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 for the year dealt with in the consolidated financial statements of the Company the £268,000 (2014: loss of £254,000).
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.
Auditor’s remuneration is disclosed in note 4 to the Group accounts on page 35.
3. Investments
At 1 January 2015
Additions
At 31 December 2015
Investment in
subsidiary
undertaking
£000
140
–
140
Loan to
subsidiary
undertaking
£000
16,343
1,581
17,924
Capital
contribution
£000
1,280
166
1,446
Total
£000
17,763
1,747
19,510
At 31 December 2015, the Company had 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
45 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Notes to the Parent Company Financial Statements
for the year ended 31 December 2015 (continued)
4. Debtors
Other tax and social security
Prepayments and accrued income
All amounts fall due for payment within one year.
5. Creditors: amounts falling due within one year
Trade creditors
Accruals and deferred income
2015
£000
2
13
15
2015
£000
4
30
34
2014
£000
7
32
39
2014
£000
27
42
69
6. Share capital and share premium
Details of the Company’s share capital, share premium, share option schemes and LTIP can be found in note 17 to the Group accounts on pages
40 to 42.
7. First time adoption of FRS 101 Reduced Disclosure Framework
This is the first time that the Company has adopted FRS 101, having previously applied applicable UK accounting standards. The date of transition to
FRS 101 was 1 January 2014. In applying FRS 101 for the first time, the Company has made the following election:
• To retain the cost of investment in subsidiary undertakings at their carrying amount under applicable UK accounting standards.
Other than the adoption of the reduced disclosures, there was no material impact of applying FRS 101 for the first time. The disclosure exemptions
are included in note 1 to the financial statements.
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 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 CBE
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
Fladgate LLP
16 Great Queen Street, London WC2B 5DG
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 usually harmless substance capable
of triggering a response that starts in
the immune system and results in an
allergic reaction
Antibiotic
A drug that inhibits bacterial growth or
kills bacteria
Antiviral
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
AZD-9412
Inhaled interferon beta formulation
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 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
Candidate
A candidate drug is a compound (e.g.
small molecule, antibody, etc.) with
strong therapeutic potential and whose
activity and specificity have been
optimised
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 (see
below) to conduct a clinical trial
COPD
Chronic Obstructive Pulmonary
Disease covers two conditions: chronic
bronchitis and emphysema. COPD
usually results from long-term exposure
of 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
47 | Synairgen plc annual report and accounts 2015 | www.synairgen.com | LSE:SNG
Coronavirus
A virus that can cause respiratory
disease such as the common cold
or SARS (depending on the type of
coronavirus) and gastroenteritis
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 airway
tubes in order to protect and
regulate the tissue underneath
Exacerbation
A rapid deterioration of a chronic
disease that makes the symptoms
worse
Fibroplastic focus
A hallmark of IPF lung tissue
characterised by dense collections
of fibroblasts (the cells that secrete
scar tissue)
Gene
A hereditary unit consisting of a
sequence of DNA that determines
a particular characteristic of a living
organism
Idiopathic Pulmonary Fibrosis
(IPF)
A disease in which tissue deep in
the lungs becomes thick and stiff,
or scarred, over time by unknown
cause. The formation of scar tissue
is called fibrosis. It usually affects
middle-aged and older people
Interferon beta (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
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
Lysyl oxidase (LOX)
An enzyme responsible for the
maintenance of collagen and
elastin in tissues
Lysyl oxidase-like protein 2
(LOXL2)
An enzyme released from
fibroblasts that links collagen fibres
together to stiffen scar tissue
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
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
Non-alcoholic steatohepatitis
(NASH)
A form of chronic liver disease in
adults and children
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 number of deaths
and illness
Parainfluenza
A virus that can cause the
common cold. Parainfluenza is also
responsible for 75% of croup cases
in children
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
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
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2015 | 48
Glossary (continued)
Pre-candidate
A chemical compound that has
pharmacological or biological
activity likely to be therapeutically
useful but which has not yet met all
the criteria that are required to be
a candidate drug
Seasonal Influenza
Seasonal influenza is a yearly
outbreak of influenza infection,
caused by influenza virus. The
seasonal influenza is somewhat
different every year, as influenza
viruses are always changing
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
Toxicology
The study of the nature and
mechanisms of deleterious effects
of chemicals on humans, animals
and other biological systems
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
Upper airway
The tubes in the nose and neck
which conduct air into the lung
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
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
Respiratory syncytial virus
(RSV)
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
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 oral
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
SOCS-1 or Suppressor of
cytokine signalling-1
A protein that inhibits IFN-β
signalling
Sputum
The thick mucus which 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 2015 | www.synairgen.com | LSE:SNG
Annual Report
and Accounts
2015
a deeper understanding
of respiratory biology
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Synairgen plc, Mailpoint 810, Level F, South Block, Southampton General Hospital, Tremona Road, Southampton, SO16 6YD United Kingdom
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Stock symbol: LSE:SNG
www.synairgen.com