Annual Report
and Accounts
2017
a deeper
understanding
of respiratory
biology
Stock symbol: LSE:SNG
www.synairgen.com
Contents
Introduction
Highlights
Synairgen’s respiratory BioBank platform
Inhaled IFN-β to reduce COPD exacerbations
LOXL2 inhibitors for fibrotic indications
Business Review
Strategic Report
Governance
Synairgen’s Founders
Directors
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
2
3
5
7
9
14
15
17
19
21
25
26
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
Post period-end
highlights
• First patients were dosed in
the Company’s Phase II trial
of inhaled SNG001 in patients
with COPD in February 2018
Operational
highlights
Financial
highlights
• Successful completion of pre-clinical
pharmacology and toxicology studies
of PXS-5382A, a compound from the
anti-fibrotic LOXL2 inhibitor programme,
and initiation of a Phase I clinical trial
• Revision of collaboration terms for LOXL2
programme with Pharmaxis where
Synairgen received a £5 million upfront
payment and circa 17% of any future
partnering proceeds from all fibrotic
indications in return for Pharmaxis taking
on full responsibility for the programme
• Synairgen regained full control of
inhaled interferon beta programme from
AstraZeneca, and conducted further
analyses of the INEXAS trial in asthma
leading to a new clinical development
plan for the product in COPD
• Revenues for the year ended
31 December 2017 were
£5.03 million (2016: £nil)
• Research and development
expenditure for the year was
£2.06 million (2016: £2.42 million)
• Profit from operations for
the year was £1.62 million
(2016: loss of £3.44 million)
• Cash, cash equivalents and
deposit balances of £6.85
million at 31 December 2017
(2016: £4.77 million). The
Group remains debt free
2018 Annual General Meeting
Notice of 2018 Annual General Meeting
Explanatory Notes
Other
Corporate Directory
Glossary
47
48
51
51
www.synairgen.com
1 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 2
Synairgen’s respiratory
BioBank platform
Synairgen is located within Southampton General Hospital,
a large regional hospital with particular expertise in
respiratory disease and excellent clinical research facilities.
Using its own clinical team and scientists, Synairgen has
accumulated an extensive BioBank comprised of blood,
sputum, nasal lavage, biopsies and lung cells from well-
characterised volunteers with respiratory diseases (and
relevant controls). These samples are stored in accordance
with the requirements of Synairgen’s Human Tissue
Authority Licence.
Using this resource, Synairgen has developed a number of
advanced tissue models, including models of respiratory
virus infection in asthma and COPD, and a fibroblastic
focus model of lung fibrosis (IPF). These models have been
key to the advancement of our interferon beta programme
and our collaboration with Pharmaxis to develop inhibitors
of LOXL2 for IPF and other fibrotic conditions.
“
One of the reasons why
there have been few
drug breakthroughs
in asthma and COPD
is that small animal
models consistently
fail to reproduce fully
the diseases as they
occur in humans.”
Prof. Stephen Holgate
3 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 4
Mouse
Animal models cannot truly
replicate disease pathology
and chronicity, or the
impact of environmental
factors such as viruses,
cigarette smoke and other
inflammatory agents.
Human
By measuring levels of potential
drug targets in patients’ samples or
inhibiting them in disease-relevant
models using cells from patients,
Synairgen is able to select the
most promising targets for its drug
development programmes. The
cell-based models are also used to
select the best drug candidates to
move forwards into the clinic and to
develop biomarkers, which help to
show drug activity in the lungs and
to assess dosing regimens.
Synairgen is developing an inhaled
interferon beta (IFN-β) therapy
to reduce COPD exacerbations
Chronic obstructive pulmonary disease (COPD)
is a progressive life-threatening lung disease
that interferes with normal breathing, causing
breathlessness. The majority of COPD is
associated with long-term cigarette smoking.
According to the World Health Organisation
(WHO), COPD is the only cause of death whose
incidence is on the increase and is predicted to
become the third leading cause of death worldwide
(exceeded only by heart disease and stroke).
The Global Burden of Disease Study reports
a prevalence of 251 million cases of COPD
globally in 2016.
In 2010, the cost of COPD in the USA was projected
to be approximately US$50 billion, which includes
$20 billion in indirect costs and $30 billion
in direct health care expenditures.1
Normal
airway
Exacerbation
of COPD
Narrowing
of airways
Focussing in on COPD
Why exacerbations of COPD matter?
Cold and flu viruses
are major drivers of
COPD exacerbations
Respiratory viral infections,
such as the common cold
and flu, are a major driver
of exacerbations in patients
with lung disease when
infections spread from the
upper respiratory tract to
the lungs to worsen pre-
existing lung inflammation.
Furthermore, there is
growing evidence that
virus infections increase
susceptibility to follow on
bacterial infections.
Patients with COPD
can expect to get 2 to 4
respiratory virus infections
(colds) per year.
The chance that a patient
will exacerbate when they
get a cold is approximately
50%3 (much higher than for
asthma at <10%).
Exacerbations
represent a significant
unmet medical need
in COPD
Exacerbations of COPD are
defined as the worsening of
COPD symptoms beyond
normal day-to-day variations
and are associated with
irreversible loss of lung
function and accelerated
disease progression.
Exacerbations severely
impact on the patient’s
quality of life (patients
typically take a number
of weeks to recover) and
are a major healthcare
burden, and are the second
most common cause of
emergency admissions to
hospital.2 Exacerbations
are currently treated
with oral corticosteroids
and antibiotics. Systemic
administration of
corticosteroids is associated
with unwanted side effects
and in addition there is a
concerted drive to reduce
antibiotic usage.
IFN-β as a treatment for
COPD exacerbations
100%
80%
60%
Percentage
still alive
40%
20%
0%
No
exacerbation
1-2
exacerbations
3-4
exacerbations
Only 3 out of 10 patients
will be alive after 5 years if they
have frequent exacerbations
compared to 7 out of 10 patients
who have no exacerbations over
the same period.
0
10 20 30 40 50 60
Time (months)
Adapted from: Soler-Cataluña et al. Thorax 2005;64:925-31
21%
No virus
or bacteria
detected
29%
Bacteria
and virus
38%
Bacteria only
12%
Virus only
Exacerbations
of COPD are
frequently
associated with
respiratory
viruses4
Relaxed
muscles
Open
airways
References
Swelling/
inflammation
in airway
Mucus
accumulation
in airway
1. https://www.researchgate.net/publication/244482870_The_clinical_and_economic_
burden_of_chronic_obstructive_pulmonary_disease_in_the_USA. Accessed April 2018
3.
Johnston NW, et al. Colds as predictors of the onset and severity of COPD
exacerbations. International Journal of COPD 2017:12 839–848
2. Department of Health. An Outcomes Strategy for Chronic Obstructive
Pulmonary Disease (COPD) and Asthma in England. Published July 2011
4. Wilkinson TMA et al. A prospective, observational cohort study of the seasonal dynamics
of airway pathogens in the aetiology of exacerbations in COPD. Thorax 2017; 0: 1-9.
Doi:10.1136/thoraxjnl=2016-209023
IFN-β is a naturally-occurring protein that orchestrates the body’s antiviral defences.
We have shown in in vitro models that IFN-β protects the lung cells of COPD patients when infected with
viruses that cause exacerbations.
1.
Lung lining cells from a
COPD patient, grown in
the laboratory have a
cobblestone appearance.
2.
Infected with the common
cold virus, the cells burst
open as they would in
the lung, where this
causes inflammation and
worsening symptoms.
3.
Pre-treatment with IFN-β
to switch on the antiviral
defences in the cells stops
the spread of the infection.
The cells therefore have a
normal appearance.
Clinical development
of inhaled IFN-β (SNG001)
SNG001 is a formulation of IFN-β
being developed by Synairgen for
the treatment and prevention of
exacerbations of COPD. SNG001
has already been shown to improve
lung function and symptoms in
patients with severe asthma when
they get a cold or flu infection.
Synairgen has initiated a two-part
Phase II clinical trial (commenced
February 2018), and is assessing
patient safety in 10 COPD patients
without viral infections in Part 1
(anticipated to complete in Q2
2018), prior to assessing efficacy
parameters in 80 COPD patients
with confirmed virus in Part 2, who
will be dosed for 14 days.
5 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 6
LOXL2 inhibitors for
fibrotic indications
Inhibitors of LOXL2 to treat IPF, NASH and
other fibrotic conditions
Synairgen has been collaborating with Pharmaxis Ltd to
develop inhibitors of LOXL2 and has a share of circa 17%
of any net licensing proceeds that Pharmaxis receives from
the licensing of its LOXL2 inhibitors for fibrotic indications.
IPF
Idiopathic Pulmonary Fibrosis (IPF) manifests itself in scarring
(fibrosis) of the lungs. As this scarring worsens, the lungs
find it more difficult to function, compromising the uptake
of oxygen into the blood, resulting in the symptoms of IPF,
which are shortness of breath and a persistent dry cough. The
median survival is two to five years from the time of diagnosis.1
IPF affects in the region of 100,000 people in the USA.2
CO2
O2
Normal
Air Sac
CO2
O2
Fibrosis
Air Sac
damaged
by IPF
Hypothesis for treatment of IPF and NASH
Pre-clinical evidence to date
Clinical status
LOXL2 is an enzyme which is increased in fibrotic disease and
cross-links collagen (the major constituent of scar tissue) to
stiffen tissue. In fibrotic diseases, the accumulation of scar
tissue and resulting increases in tissue stiffness impairs organ
function. It is intended that softening the tissue by inhibiting
collagen cross-linking caused by this excessive LOXL2 can break
the cycle of fibrosis.
Data generated by Synairgen in in vitro and in vivo
models of fibrosis has shown the potential of LOXL2
selective inhibitors to reduce the stiffness of fibrotic
lung tissue. Data generated in vivo by Pharmaxis has
shown the potential of LOXL2 selective inhibitors to
limit disease in a progressive model of liver fibrosis.
Two small molecule LOXL2 selective inhibitors are currently
in Phase I clinical trials, with results expected later in 2018.
NASH
Non-alcoholic steatohepatitis (NASH) is a liver disease in
which fat deposits in the liver lead to inflammation and tissue
damage. Risk factors include obesity, insulin resistance and
type 2 diabetes, high blood pressure and age. Worldwide,
around 25% of adults3 are estimated to have non-alcoholic
fatty liver disease (NAFLD), with similar proportions in the USA
and Europe, and occurrence is increasing with levels of obesity.
Diagnosis of NASH is difficult, but recent studies estimate that
NASH may be present in up to 30% of people with NAFLD.3
In some cases, NASH progresses to liver fibrosis and ultimately
cirrhosis and possibly cancer, with some 600,000 people in the
USA having progressed to NASH-related cirrhosis in 2012.4
NASH is projected to be the most common cause of liver
transplant in the coming decade, yet there are currently no
effective drug therapies available in the marketplace.5
The amount of fibrosis in the early stages of NASH is currently
the only predictor of how the disease will progress.
Normal liver
The liver performs many roles
essential for normal functioning
of the body, including filtering toxins
from the blood, processing nutrients
absorbed from food in the gut,
secreting hormones, and regulating
the concentrations of sugar, fat and
protein in the blood. Under normal
conditions it is able to maintain
a balance between absorbed
nutrients and the requirements of
the body, storing small amounts of
carbohydrates and fat and releasing
them as needed.
References
Non-alcoholic fatty liver
disease (NAFLD)
When the liver is flooded with excess
fat over a long time, either directly
from the diet, released from insulin-
resistant fatty tissue, or converted
from sugars in the liver, the liver
cells accumulate large fat deposits
and become enlarged, a process
called steatosis. This process can be
reversed if fat intake is reduced.
Non-alcoholic steatohepatits
(NASH)
In some cases, enlarged fatty liver
cells become stressed and start
to die, leading to inflammation of
the liver and scarring, as the liver
cells are replaced by the cells and
collagen that form scar tissue. This is
known as NASH, and may develop in
up to 30% of people with NAFLD.
Cirrhosis
As fibrosis progresses, large areas
of the liver are replaced by very stiff
scar tissue, greatly impairing the
function of the liver. This is known
as cirrhosis, and can result in liver
failure and increases the risk of
developing liver cancer.
1. Meltzer E and Noble P. Idiopathic pulmonary fibrosis. Orphanet J Rare Dis. 2008;3:8
2. Https://ghr.nim.nih.gov/condition/idiopathic-pulmonary-fibrosis. Accessed April 2018
3. Younossi ZM et al Global epidemiology of non-alcoholic fatty liver disease – meta-analytic
assessment of prevalence, incidence, and outcomes. Hepatology 2016; 64: 73-84
4. LaBrecque D et al World Gastroenterology Organisation Global Guidelines:
Nonalcoholic fatty liver disease and nonalcoholic steatohepatitis (2012)
(http://www.worldgastroenterology.org/guidelines/global-
guidelines/nafld-nash. Accessed April 2018)
5. Musso G et al Non-alcoholic steatohepatitis: Emerging molecular targets and
therapeutic strategies. Nature Reviews Drug Discovery 2016; 15: 249-274
7 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 8
Strategic Report
The directors present their Strategic Report
for the year ended 31 December 2017.
Principal activities and strategy
Synairgen plc (the ‘Company’) is the holding company for
Synairgen Research Limited, a respiratory drug discovery and
development company.
Synairgen leverages its deep understanding of respiratory biology
to discover and develop novel therapies in areas of high unmet
respiratory medical need, including severe asthma, chronic
obstructive pulmonary disease (COPD) and idiopathic pulmonary
fibrosis (IPF). Using our BioBank platform (consisting of 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 license them
to partners to advance through to commercialisation. A glossary
on pages 51 to 53 provides additional explanation of some of the
more detailed scientific and clinical terminology.
Operating Review
Summary
We closed 2017 in a strong position, having met a number of
challenges during the year. AstraZeneca returned rights to the
inhaled interferon beta (IFN-β) asset, enabling Synairgen to
progress the programme for COPD, where there is significant
unmet medical need. We also made good progress with
Pharmaxis, successfully taking a LOXL2 inhibitor through
pre-clinical activities into a Phase I clinical trial. In response
to considerable interest in the role of LOXL2 as a molecular
target in non-lung indications, we updated the collaboration
agreement, with Pharmaxis assuming all future development,
licensing and financing responsibilities. Synairgen received
£5 million and a 17% interest in any future licence income
received by Pharmaxis across all potential fibrotic indications.
Inhaled interferon beta programme
Clinical need and identification of high risk patients
Respiratory viruses (e.g. those responsible for common
cold and flu infections) do not often cause serious illness in
healthy people. In contrast, in patients with asthma and COPD
these infections are much more likely to spread to the lungs,
worsening pre-existing lung inflammation, and exacerbating
disease symptoms. There is a great need for an antiviral
therapy that can be delivered directly to the lungs when
patients are at risk from these common respiratory viruses.
Inhaled IFN-β to boost the lungs’ antiviral defences
IFN-β is a natural protein made by lung cells when a virus is
detected. IFN-β ‘orchestrates’ many antiviral pathways. In vitro
experiments have shown IFN-β production to be deficient
or insufficient in asthma and COPD patients’ lung cells,
compared with cells from healthy individuals when infected
by respiratory viruses. This makes these patient groups more
susceptible to infection. Synairgen has progressed inhaled
IFN-β into clinical trials as a drug to be given at the time of
respiratory virus infection to boost the lung’s defences.
Asthma or COPD
Both asthma and COPD patients suffer from exacerbations
(acute worsening) of their disease. These exacerbations are
strongly linked to common viral infections. COPD patients
can also exacerbate due to bacterial lung infections and
other environmental factors. Up until recently, the difficulty
of excluding bacterial infections in COPD led us to advancing
inhaled IFN-β for asthma over COPD, even though the health
economic impact of viral infections is much greater for COPD.
Asthma
Inhaled IFN-β has boosted markers of antiviral defence in the
lungs in three clinical trials in asthma, confirming successful
delivery to the target organ and demonstrating proof of
activation of the mechanism. In all clinical trials completed
so far, inhaled IFN-β has been well tolerated. In the two
Phase II clinical trials that have been conducted in asthma
(SG005 by Synairgen and INEXAS by AstraZeneca) the drug
has significantly accelerated a recovery in lung function in
patients who have been infected with a respiratory virus. In
both trials, a subset of more difficult to treat patients had
better asthma control during viral infection. However, the
rate of exacerbation (defined as requiring oral steroids or
hospitalisation) was too low (less than 10%) to determine
whether the drug was providing benefit. This rate of
exacerbation was similar to a 2017 trial conducted by Aviragen
where the rate was found to be approximately 7%.1 Thus
exacerbations, when they do occur in asthma, are strongly
linked to viral cold infections (up to 80% being caused
by colds2), however the chance that a patient is going to
exacerbate when they get their next cold was deemed likely
to be too low to support an attractive pricing point for the
drug, making progression in asthma challenging. AstraZeneca
returned the asset to Synairgen for ‘strategic reasons’.
The move towards COPD
In all trials undertaken to date in asthma, the biomarker
responses and the clinical effect were encouraging,
particularly the positive improvements in lung function.
The issue was that the asthma population, whilst easier to
characterise for trial enrolment purposes, did not see a
sufficient number of exacerbations to properly measure
the impact of drug. Synairgen has long identified COPD as a
disease where virally-driven exacerbations are recognised
to be a significant health economic burden. COPD is the
second most common cause of unplanned hospitalisation
after cardiovascular disease,3 and it is no coincidence that
most of these exacerbations occur in the winter months.
Hitherto, the challenge in COPD was to identify patients
who were infected with a virus rather than bacteria or
other causes of exacerbation. The upshot of this was that
the trial size required in order to have sufficient evidence
of the drug’s effect would have resulted in an excessively
long duration, high cost and would still have run the risk of
significant numbers of non-virally infected patients being
treated, thereby potentially diluting the results of the trial.
Substantial progress was made on both of these
elements in 2017:
• First, two papers were published which clarify the
interaction of viruses with COPD. One paper shows that,
when looking at all colds in the study period, the risk
that a cold will cause an exacerbation of COPD is around
50%,4 much greater than the <10% figure in asthma. The
second paper5 shows that there is a strong interaction
between seasonal viruses and bacteria which permanently
colonise the COPD patients’ lungs, greatly increasing the
chance that a patient will exacerbate. These papers both
establish, what most hospitals know through experience,
that COPD sufferers are significantly more likely to have
severe virus-induced exacerbations than asthmatics.
• Second, a new point of care diagnostic test has been
launched in 2017 which enables the confirmation of the
presence of a respiratory virus in less than 60 minutes. This
test will be used in clinical trials to confirm the presence
of the virus. This makes clinical trials in COPD feasible
as we can exclude patients who present to healthcare
providers with only bacterial or environmental drivers
of their condition. It also makes the trials more efficient
and less costly to run; in the two asthma trials we were
able to confirm the presence of a virus in 63% of patients
in SG005, and 48% of patients in the INEXAS trial. In
the recently started COPD trial, 100% of patients in the
efficacy analysis will have a confirmed viral infection prior
to initiation of treatment. This will allow the drug to show
its activity against the target viral infections without
the dilutive effect of trial subjects who are exacerbating
for some other reason (bacterial or environmental).
COPD development
We are progressing inhaled IFN-β in COPD. Starting with a
two-part Phase II clinical trial (commenced February 2018),
we are assessing patient safety in 10 COPD patients without
viral infections in Part 1 (anticipated to complete in Q2 2018),
prior to assessing efficacy parameters in 80 COPD patients
with confirmed virus in Part 2, who will be dosed for 14 days.
All of the patients in Part 2 will be tested for the presence
of virus prior to dosing. This trial, which is anticipated to
finish during the 2018/19 winter season, is designed to pave
the way for a pivotal Phase IIb clinical trial. Preparatory
work for the Phase IIb clinical trial will commence in 2018.
LOXL2 collaboration with Pharmaxis
LOXL2 in fibrosis
LOXL2 is an enzyme which ‘knits together’ collagen fibres,
increasing the rigidity of tissue as a component of the
fibrosis pathology. LOXL2 is implicated in major fibrotic
diseases such as the liver disease NASH (Non-alcoholic
Steatohepatitis), heart fibrosis, kidney fibrosis and the
lung disease idiopathic pulmonary fibrosis (IPF).
Collaboration with Pharmaxis
In the collaboration with Pharmaxis, Synairgen assisted in the
development and selection of compounds for progression,
and used our BioBank and in vitro model platform to
generate compelling data to support the development of
compounds for IPF. This included generating data from
a fibroblastic focus model (developed in collaboration
with the University of Southampton) using cells from
IPF patients, in which we showed that treatment with
LOXL2 inhibitors had the potential to reduce lung tissue
stiffness. Lung tissue stiffness is a key factor in IPF as it
makes it increasingly difficult for a patient to breathe.
Synairgen completed the pre-clinical package for
PXS-5382 and commenced a Phase I trial in Q4 2017.
9 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 10
Strategic Report
(continued)
Large pharma interest in non-IPF indications and
renegotiation of collaboration agreement
During the year, it became evident that potential large
pharma partners were very interested in the collaboration’s
compounds. However, that interest was not solely in IPF
but included significant other non-respiratory indications,
particularly NASH. Pharmaxis generated persuasive data
in pre-clinical models showing that the inhibitors could
reduce liver fibrosis and improve liver function. It became
increasingly important that we reconfigure the collaboration
with Pharmaxis to allow the lifting of certain constraints in
the collaboration agreement to allow Pharmaxis to pursue a
multi-compound multi-indication deal. In December 2017 we
permanently passed full development, financial and licensing
responsibilities to Pharmaxis in return for £5 million and a
retained interest in the programme of 17% of the fibrotic
indication licensing revenue received by Pharmaxis. In its
half yearly report for the six months ended 31 December
2017 dated 15 February 2018, Pharmaxis stated that it plans
to partner the LOXL2 program in the second half of 2018
following Phase I trial readout. For more information on
the development and licensing of the LOXL2 inhibitors visit
www.pharmaxis.com.
New opportunities
The LOXL2 programme is an example of the type of
collaboration we seek. It is a demonstration of the value of our
approach and technology. In this collaboration we contributed
expertise and used our human biology based approach which
utilised our BioBank-based in vitro model platform and the
strong ties we have with the University of Southampton to
add value in a collaboration. We are actively assessing new
opportunities with similar potential.
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 2017
cash and deposit balances amounted to £6.85 million
(2016: £4.77 million) and were above budgeted levels. The
operating profit of £1.62 million (2016: loss of £3.44 million)
was also favourable to the budgeted result for the year.
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 prepared in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework.
Statement of Comprehensive Income
The profit from operations for the year ended 31 December 2017
was £1.62 million (2016: loss £3.44 million). Revenues of
£5.03 million (2016: £nil) comprised the £5 million payable
by Pharmaxis as consideration for the change in terms
(as discussed above) and the balance of revenues are
attributable to materials provided to AstraZeneca. Research
and development expenditure for the year amounted to
£2.06 million (2016: £2.42 million), and was focussed primarily
on two programmes, namely the LOXL2 programme and
preparation for the interferon beta Phase II clinical trial
in COPD.
Other administrative costs for the year amounted to
£1.35 million (2016: £1.02 million), with the increase being
attributable to higher staff costs on account of bonuses.
As the Group was in profit, there was a reduction in the
research and development tax credit from £0.59 million to
£0.13 million. The profit after tax for 2017 was £1.76 million
(2016: loss of £2.82 million) and the basic earnings per share
amounted to 1.93p (2016: basic loss per share of 3.08p).
Statement of Financial Position and cash flows
At 31 December 2017, net assets amounted to £6.56 million
(2016: £4.69 million), including net funds of £6.85 million
(2016: £4.77 million).
The principal elements of the £2.08 million increase over the
year ended 31 December 2017 (2016: £2.94 million decrease)
in net funds were:
• Cash generation from operations of £1.45 million
(2016: £3.32 million used in operations); and
• Research and development tax credits received of
£0.62 million (2016: £0.33 million).
The increase in trade and other receivables (2017: £0.63
million, 2016: £0.09 million) is attributable to amounts billed or
billable to Pharmaxis at 31 December 2017 as a result of the
transaction referred to above. The increase in trade and other
payables (2017: £1.10m, 2016: £0.86m) is attributable to the
bonus accrual at 31 December 2017 (2016: £nil).
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 and LOXL2 programmes
The Group currently has an interest in two programmes: the
interferon beta programme for COPD, which post period-end
has entered into Phase II, and the LOXL2 programme (which is
now operationally controlled by Pharmaxis), which is in Phase I.
The Group continues to review additional development
opportunities, sourced inter alia through its Key Opinion Leader
network, which it hopes will enable it to broaden and diversify
its portfolio further. However there can be no guarantee that
either the Group’s due diligence activities will be satisfactorily
complete or that the Group will be able to in-license such
opportunities on reasonable commercial terms.
• 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 many years, is a significant element
of its technology platform and is important in relation to the
evaluation and development of future opportunities. Rebuilding
the BioBank would take time and incur cost.
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.
• Pre-clinical development, clinical development
and regulatory risk
The development of pharmaceutical drugs requires that, upon
satisfactory completion of pre-clinical work, the necessary
safety and efficacy 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 seeking advice from
toxicology experts, closely monitoring the progress of
recruitment on clinical trials, drawing on the experience of its
Founders, seeking advice from regulatory advisers, holding
consultations with the appropriate regulatory bodies, and
consulting with its collaboration partners.
• 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.
11 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 12
Strategic Report
(continued)
Synairgen’s
Founders
• Competition risk
• Brexit
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.
• 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.
Following the referendum vote in June 2016 the UK government
started the withdrawal process from the European Union in
March 2017, putting the UK on course to leave by April 2019.
At this stage it still remains unclear as to what the long term
impact will be.
Outlook
We closed the financial year in a strong position. We have full
possession of the inhaled IFN-β programme which is being
progressed to prevent or attenuate exacerbations of COPD
caused by respiratory viruses and remain very excited by this
asset. We also have a lasting interest in the potentially high
value LOXL2 programme being progressed by Pharmaxis.
In addition, we have a number of potentially attractive new
programmes under review which gives us confidence in further
development of our collaborative pipeline in the coming periods.
By order of the Board
John Ward
Company Secretary
14 March 2018
References
1. Aviragen Therapeutics presentation Directing Next Generation Direct-Acting
Antivirals May 2017
4.
Johnston NW, et al. Colds as predictors of the onset and severity of COPD exacerbations.
International Journal of COPD 2017:12 839–848
2.
J.T. Kelly et al. Host immune responses to rhinovirus: Mechanisms in asthma.
J Allergy Clin Immunol 2008; 122: 671-682
3. Department of Health. An Outcomes Strategy for Chronic Obstructive
Pulmonary Disease (COPD) and Asthma in England. Published July 2011
5. Wilkinson TMA et al. A prospective, observational cohort study of the seasonal dynamics
of airway pathogens in the aetiology of exacerbations in COPD. Thorax 2017; 0: 1-9.
Doi:10.1136/thoraxjnl=2016-209023
Prof. Stephen Holgate CBE
is MRC Clinical Professor of
Immunopharmacology at the
University of Southampton
Prof. Donna Davies
is Professor of Respiratory
Cell and Molecular Biology
at the University of
Southampton
Prof. Ratko Djukanovic
is Professor of Medicine
at the University of
Southampton
13 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2016 | 14
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’).
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
Chairman of the Board for
Adapsyn Bioscience Inc. and
as a non-executive director for
Allecra Therapeutics GmbH.
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 company quoted on
AIM and the Amsterdam
Euronext Exchange, which
has developed the process
and the commercial
industrialisation of wood
acetylation, as Chief Executive
Officer in August 2009.
15 | Synairgen plc annual report and accounts 2017 | 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
Member of the Science Europe
Medical Science Committee and
Horizon 2020 Health Science
Panel; 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 and Chair of the Research
Strategy Committee of Cancer
Research UK; Chair of the research
committee of the British Lung
Foundation (and Trustee); Trustee
and Chair of The Kennedy Trust
for Rheumatology Research; and
Member of the UK Research &
Innovation NERC Council. He
serves on a number of Advisory
Committees in industry including
scientific board member or
advisor to a number of companies,
including Teva and Novartis.
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 2017 | 16
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 2017.
The review of future developments is 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 2017, the Group has
invested £2,061,000 (2016: £2,418,000) in research and
development activities and a review of this expenditure is
included in the Strategic Report.
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 2017 amounted to £6.56 million (2016: £4.69 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 2017 amounted to
£6.85 million and comprised short-term deposits (with original
maturities of greater than three months and less than one year)
and cash and cash equivalents as shown below.
Short-term deposits
Cash and cash equivalents
Net funds
31 Dec
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
2.00
4.85
6.85
1.66
3.72
6.75
0.46
3.11
3.99
2.85
0.83
4.77
7.71
9.60
1.29
The Group did not have any bank borrowings as at
31 December 2017 (2016: £nil).
There have been seven significant issues of shares raising a
total (net of costs) of £27.1 million, with the most recent raising
£4.98 million in July 2014. The other major sources of funding
received by the Group from the formation of the business until
31 December 2017 have been: revenues from licensing transactions
of £9.25 million, research and development tax credits of
£3.67 million, bank interest of £1.73 million, and revenues from
collaborative work of £0.69 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 deposit balances are subject to the risk of fluctuating
base rates. During the year under review some of the deposits
were placed on fixed rate terms. 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, Canadian dollar, Euro and US dollar currency
movement as the Pharmaxis collaboration involved expenditure in
all these currencies. The largest exposure related to the Australian
dollar as the Phase I clinical trial was conducted in Australia.
To hedge against currency movement, the Group purchased
Australian dollars before the payment was due.
Dividends
The directors do not propose the payment of a dividend.
Substantial shareholdings
As at 14 March 2018, 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
21,091,651
Lansdowne Partners International Limited
16,923,111
Richard Griffiths
Leonard Licht
13,416,112
3,700,000
Southampton Asset Management Limited
3,600,000
23.1%
18.5%
14.7%
4.1%
3.9%
Directors
The directors of the Company during the year ended
31 December 2017 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
Directors’ interests in ordinary shares
The directors, who held office at 31 December 2017, had the
following interests in the ordinary shares of the Company:
1 January and 31 December 2017
Number of shares
Richard Marsden
Dr Phillip Monk
John Ward
Simon Shaw (i)
Iain Buchanan
Dr Bruce Campbell (ii)
Paul Clegg (iii)
Prof. Stephen Holgate (iv)
154,432
183,439
276,506
1,474,096
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 shares 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 2017 and the date of this report there has
been no change in the interests of directors in shares as disclosed
in this report.
Directors’ and officers’ liability insurance
Qualifying indemnity insurance cover has been arranged
in respect of the personal liabilities which may be incurred
by directors and officers of the Group during the course
of their service with the Group. This insurance has been in
place during the year and on the date of this report.
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
14 March 2018
17 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 18
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.
We note that the AIM rules are due to be updated from later
in 2018 to require a statement as to how we comply with a
recognised corporate governance code. We believe that this
section largely complies with those proposed modifications
but will review the position once the rules are amended.
Board of Directors
On 31 December 2017 the Board of directors (the ‘Board’)
consisted of a non-executive Chairman (Simon Shaw), three
executive directors (Richard Marsden, Dr Phillip Monk and John
Ward), and four non-executive directors (Iain Buchanan, Dr Bruce
Campbell, Paul Clegg and Prof. Stephen Holgate). Brief details about
the directors are given on pages 15 and 16. The responsibilities
of the non-executive Chairman and the Chief Executive Officer
are clearly divided. The non-executive directors bring relevant
experience from different backgrounds and receive a fixed fee for
their services and reimbursement of reasonable expenses incurred
in attending meetings.
The Board retains full and effective control of the Group. This
includes responsibility for determining the Group’s strategy and
for approving budgets and business plans to fulfil this strategy.
There are a number of Scheduled Board meetings and the Board
also meets on any other occasions it considers necessary. During
the year ended 31 December 2017, the Board met five 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
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
3
In addition there were twelve 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 2017, the
committee met twice with all members attending both meetings.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee currently comprises
Paul Clegg (Chairman), Dr Bruce Campbell and Simon Shaw. The
committee is responsible for making recommendations to the
Board on remuneration policy for executive directors and the
terms of their service contracts, with the aim of ensuring that their
remuneration, including any share options and other awards, is
based on their own performance and that of the Group generally.
The committee administers the Long-Term Incentive Plan, the staff
share option scheme and the Qualifying Non-Employee Option
Scheme and approves grants under all three schemes. It also
advises on the remuneration policy for the Group’s employees. The
committee is responsible for all senior appointments that are made
within the Group. During the year ended 31 December 2017, the
committee met twice with all members attending both meetings.
Scientific Advisory Board
The Company established a Scientific Advisory Board (‘SAB’) in 2016.
The purpose of the SAB is to provide strategic advice and input on
scientific aspects of Synairgen’s research and development projects.
The SAB currently comprises Dr Phillip Monk (Chairman), Iain
Buchanan, Dr Bruce Campbell, and Synairgen’s three academic
founders (Professors Stephen Holgate, Donna Davies and Ratko
Djukanovic). Other external experts and Synairgen employees
attend meetings as required. The SAB meets biannually on
a scheduled basis with extra meetings as required. Dr Bruce
Campbell is responsible for feeding back the outputs from the
SAB to the Company’s Board.
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, which is set out on pages 47 to 50 of this annual report.
Internal control
The directors are responsible for establishing and maintaining the
Group’s system of internal control and reviewing its effectiveness.
The system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and
can only provide reasonable but not absolute assurance against
material misstatement or loss.
The main features of the internal control system are as follows:
• a control environment exists through the close management of
the business by the executive directors. The Group has a defined
organisational structure with delineated approval limits. Controls
are implemented and monitored by personnel with the necessary
qualifications and experience;
• a list of matters reserved for board approval;
• monthly management reporting and analysis of variances;
• financial risks for each major transaction are identified and
evaluated by the Board; and
• standard financial controls operate to ensure that the assets of
the Group are safeguarded and that proper accounting records
are maintained.
By order of the Board
John Ward
Company Secretary
14 March 2018
19 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 20
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 2017. 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 January
2016 and there was no review during 2017. Salaries and benefits
have been reviewed in March 2018, taking into account Group
and individual performance, external benchmark information and
internal relativities.
As a consequence of the 2018 review, the following changes were
made with effect from 1 January 2018:
1 January 2016 to
31 December 2017 From 1 January 2018
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
182
131
141
9% 100% 186
9% 100%
9% 100% 135
9% 100%
9% 100% 145
9% 100%
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.
Directors’ remuneration for the year ended 31 December 2017 is
set out on page 24 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. 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 pre-set
relevant corporate objectives, which are subject to malus and
clawback provisions. The following bonuses, representing 75%
of annual salary, were awarded for the year ended 31 December
2017: Richard Marsden £136,000; Dr Phillip Monk £98,000; and
John Ward £106,000, having regards to a balanced scorecard of
measures particularly including operational objectives linked to
the interferon beta COPD programme and the LOXL2 collaboration
with Pharmaxis.
(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) is the sole on-going
long-term incentive vehicle for executive directors.
Senior executives and other employees may be granted an award
which will normally vest if demanding performance conditions are
achieved over a three-year period and if the grantee remains an
employee of the Group.
Grants under the LTIP in any financial year are capped at a
maximum of 100% of base salary.
No LTIP grants were made in 2017, largely due to the Company
being in prohibited periods for much of the year. The last grant
was made in October 2015 and the Committee intends to make an
award (the 2018 award) during the six week period following the
preliminary announcement of the results for the year ended
31 December 2017, with each of Richard Marsden, Phillip Monk
and John Ward being granted awards over shares worth up to
65% of salary, with performance conditions as set out below.
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%.
Performance conditions for the 2018 LTIP award
The performance conditions will follow the same structure as
set out above for the 2014 and 2015 awards, except that the first
condition thresholds will be raised to the following:
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.
TSR growth over the performance
period less percentage increase in the
techMARK mediscience™ index over the
same period
Less than 10%
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 2014 and 2015 LTIP awards
The performance conditions for both 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
Vesting percentage
of total number of shares
subject to award
0%
25%
50%
100%
10%
20%
30%
Performance between the steps
Pro-rata on a straight-line basis
The second performance condition will remain unchanged.
No awards became exercisable during 2017 as the performance
criteria conditions for the awards granted in 2014 were not met and
accordingly these awards lapsed.
(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 2017, 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.
21 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 22
Directors’ Remuneration Report
(continued)
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 2017
Lapsed during
the year
At 31 December 2017
Exercise
price
Earliest
exercise date
Richard Marsden
7 September 2009
8 September 2010
21 September 2011
3 November 2014
27 October 2015
Dr Phillip Monk
21 September 2011
3 November 2014
27 October 2015
John Ward
7 September 2009
8 September 2010
21 September 2011
3 November 2014
27 October 2015
605,000
246,889
538,063
313,827
387,931
400,212
233,425
280,172
100,000
224,445
489,148
285,297
301,724
–
–
–
(313,827)
–
–
(233,425)
–
–
–
–
(285,297)
–
605,000
246,889
538,063
–
387,931
400,212
–
280,172
100,000
224,445
489,148
–
301,724
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
No options were exercised by directors during the year.
Synairgen Qualifying Non-Employee Option Scheme
Expiry date
6 Sept 2019
7 Sept 2020
7 Sept 2012
8 Sept 2013
21 Sept 2014
20 Sept 2021
3 Nov 2017
27 Oct 2018
2 Nov 2024
26 Oct 2025
21 Sept 2014
20 Sept 2021
3 Nov 2017
27 Oct 2018
2 Nov 2024
26 Oct 2025
7 Sept 2012
8 Sept 2013
6 Sept 2019
7 Sept 2020
21 Sept 2014
20 Sept 2021
3 Nov 2017
27 Oct 2018
2 Nov 2024
26 Oct 2025
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 2017 and has
been audited by the Company’s auditor, BDO LLP.
Directors’ remuneration
The remuneration received by directors who served during the years ended 31 December 2017 and 2016 was as follows:
£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
Note
Salary/
fee
Bonus
Benefits
(i)
182
131
141
30
25
25
30
25
136
98
106
–
–
–
–
–
589
340
2
–
3
–
–
–
–
–
5
Year ended 31 December 2017
Total (incl.
pension)
Pension
Total (excl.
pension)
Year ended 31 December 2016
Total (incl.
pension)
Pension
Total (excl.
pension)
320
229
250
30
25
25
30
25
16
12
13
–
–
–
–
–
336
241
263
30
25
25
30
25
184
131
143
30
25
25
30
25
16
12
13
–
–
–
–
–
200
143
156
30
25
25
30
25
934
41
975
593
41
634
(i) Richard Marsden was the highest paid director during the years ended 31 December 2017 and 2016. He did not exercise any options during either year.
(ii) The Company permits employees, including executive directors, to change their pension provision through an election under a flexible benefits arrangement.
The reported numbers are before any personal elections.
(iii) The bonus awards included above are due to be paid after the completion of the statutory audit.
In respect of key management personnel, for the year ended 31 December 2017, the total share-based payment amounted to
£98,000 (2016: £121,000) and total social security costs were £106,000 (2016: £59,000).
Date of grant
Iain Buchanan
28 June 2010
Paul Clegg
7 September 2009
At 1 January and
31 December 2017
Exercise
price
Earliest
exercise date
Expiry date
212,765
23.5p
28 June 2013
27 June 2020
By order of the Board
Paul Clegg
Chairman of the Remuneration and Nomination Committee
250,000
20p
7 Sept 2012
6 Sept 2019
14 March 2018
These awards were granted under a legacy plan. 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 2017 was 10.875p. During the year then ended, the mid-market price ranged from
6.875p to 31.25p. On 14 March 2018 the closing price was 13.75p.
23 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 24
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
Independent Auditor’s Report
to the members of Synairgen plc
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 year. Under that law the directors have elected
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (‘IFRSs’) as adopted
by the European Union and the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable
law). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and Company and
of the profit or loss of the Group for that period. The directors are
also required to prepare financial statements in accordance with
the rules of the London Stock Exchange for companies trading
securities on AIM.
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 the Group financial statements have been
prepared in accordance with IFRSs as adopted by the European
Union and the Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), 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 and the
Group 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 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 Company’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
14 March 2018
Opinion
We have audited the financial statements of Synairgen plc
(the ‘parent company’) and its subsidiary (the ‘group’) for the
year ended 31 December 2017 which comprise the Consolidated
Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity,
Consolidated Statement of Cash Flows, Parent Company Balance
Sheet, Parent Company Statement of Changes in Equity and notes
to the financial statements, including a summary of significant
accounting policies.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has
been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 Reduced
Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31
December 2017 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section
of our report. We are independent of the group and the parent
company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the
parent company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements
are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matters impacting the group financial statements
Revenue recognition
The group’s revenue recognition policy is included within the
accounting policies on page 33 and the components of revenue
are set out in note 3.
During the financial year, the group renegotiated and amended its
collaboration agreement in respect of one of its key development
programmes (LOXL2).
Under the renegotiated terms, the group was due
£5 million in consideration for changing its interest in
future proceeds from the programme. Management has
recorded this consideration as revenue in the financial
statements, the impact of which is highly material.
There is complexity in the terms of the amended agreement,
particularly in determining the specific amendments from the
25 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 26
Independent Auditor’s Report
to the members of Synairgen plc
(continued)
original collaboration agreement, whether any new performance
obligations have arisen and whether there are any circumstances in
which the consideration could be refunded. We therefore consider
there to be an audit risk that the revenues should not be fully
recognised in the current accounting period.
How We Addressed the Key Audit Matter in the Audit
We have reviewed in detail the terms and clauses in the amended
agreement, with a particular focus on whether it established any
new performance obligations on the group or whether there are
any circumstances in which the consideration could be refundable.
We have also assessed the recognition and presentation of the
transaction in accordance with IAS 18 and industry practice.
Key audit matters impacting the parent company
financial statements only
Investment in subsidiary: impairment review
As at 31 December 2017, the company holds an investment of
£20.1m in its subsidiary, Synairgen Research Limited (as set out
in note 4 of the parent company financial statements). At each
reporting date, management carries out an impairment review
in accordance with IAS 36 and industry practice that involves
assessing the recoverable amount of the investment by estimating
future cash flows and discounting to present value. There is
inherent uncertainty in estimating the timing and extent of future
cash flows of a drug development company.
The degree of estimation and complexity involved in the
impairment review, for example in determining the appropriate
discount rate and clinical success probabilities to be applied to the
cash flows, causes us to consider this to be an audit risk.
How We Addressed the Key Audit Matter in the Audit
We have challenged the impairment review prepared by
management through assessing the appropriateness of the key
assumptions such as the discount rate, the scale of the market
opportunities and the risk-weighting of estimated future cash flows.
In so doing, we have reviewed third-party sources of information
including market announcements, analyst assessments, the
composition of transactions for similar drugs and medical journals.
We have assessed the methodology used in the preparation
of the model with reference to the requirements of IAS 36 and
established industry practice.
We have also performed sensitivity analysis to test whether a
reasonably possible change could result in an impairment.
Our application of materiality
Group Materiality: £170,000 (2016: £240,000).
Parent Company materiality: £110,000 (2016: £150,000).
Our group materiality, for both the current and prior year, has been
based upon 5% of the normalised loss for the year from research
and development activities, having deducted the revenues from
the amended agreement in establishing the 2017 materiality
owing to its one-off nature. We consider normalised losses before
tax to be one of the principal considerations for members of the
company in assessing the financial performance of the group.
The audit of Synairgen Research Limited was performed to a
materiality calculated on the same basis as that of the group,
while materiality for Synairgen plc, as the holding company,
was net-asset based.
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions
of reasonable users that are taken on the basis of the financial
statements. In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the
extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Performance materiality was set at 75 per cent of the
above materiality levels. In setting the level of performance
materiality we considered a number of factors including
the expected total value of known and likely misstatements
based on past experience and other factors.
Where financial information from the two components was
audited separately, component materiality levels were set for
this purpose at lower levels varying from £110,000 to £150,000.
We agreed with the audit committee that we would report to
the committee all individual audit differences identified during
the course of our audit in excess of £8,500 (2016: £12,000). We
also agreed to report differences below these thresholds that,
in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The group’s operations are based solely in Southampton,
United Kingdom.
The scope of our group audit was established by obtaining an
understanding of the group, including its control environment,
and assessing the risks of material misstatement.
Both components, Synairgen plc and Synairgen Research Limited,
are considered significant components and are subject to a
full-scope audits by BDO LLP.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the strategic report and directors’ report
for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement
set out on page 25, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Kim Hayward (senior statutory auditor)
For and on behalf of
BDO LLP, Statutory Auditor
Southampton, United Kingdom
14 March 2018
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
27 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 28
Consolidated Statement
of Comprehensive Income
for the year ended 31 December 2017
Consolidated Statement
of Financial Position
as at 31 December 2017
Year ended
31 December 2017
£000
Year ended
31 December 2016
£000
Notes
5,025
(2,061)
(1,349)
(3,410)
1,615
14
1,629
132
1,761
1.93p
1.87p
–
(2,418)
(1,024)
(3,442)
(3,442)
38
(3,404)
587
(2,817)
(3.08p)
(3.08p)
4
6
7
8
Revenue
Research and development expenditure
Other administrative expenses
Total administrative expenses
Profit/(Loss) from operations
Finance income
Profit/(Loss) before tax
Tax
Profit/(Loss) and total comprehensive income/(loss) for the
period attributable to equity holders of the parent
Earnings/(Loss) per ordinary share
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2017
Note
At 1 January 2016
Issue of ordinary shares
Recognition of share-based payments
Loss and total comprehensive loss for the year
At 31 December 2016
Recognition of share-based payments
Profit and total comprehensive income for the year
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Retained
deficit
£000
Total
£000
18a
913
1
–
–
18b
18c
18d
25,771
483
(19,820)
7,347
–
–
–
–
–
–
–
154
1
154
(2,817)
(2,817)
914
25,771
483
(22,483)
4,685
–
–
–
–
–
–
113
1,761
113
1,761
At 31 December 2017
914
25,771
483
(20,609)
6,559
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 2017
£000
31 December 2016
£000
9
10
11
12
13
14
15
17
17
18
18
45
12
57
56
71
633
2,000
4,845
7,605
7,662
(1,103)
(1,103)
6,559
62
13
75
55
560
90
1,661
3,104
5,470
5,545
(860)
(860)
4,685
914
25,771
483
(20,609)
6,559
914
25,771
483
(22,483)
4,685
The financial statements on pages 29 to 42 were approved and authorised for issue by the Board of directors on 14 March 2018 and signed on its
behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
29 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 30
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017
Cash flows from operating activities
Profit/(Loss) before tax
Adjustments for:
Finance income
Depreciation
Amortisation
Share-based payment charge
Cash flows from operations before changes in working capital
(Increase)/Decrease in inventories
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Cash generated from/(used in) operations
Tax credit received
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
(Increase)/Decrease in other financial assets
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Net cash generated from financing activities
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Year ended
31 December 2017
£000
Year ended
31 December 2016
£000
1,629
(3,404)
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.
(14)
7
17
113
1,752
(1)
(548)
243
1,446
621
2,067
19
(6)
(339)
(326)
–
–
1,741
3,104
4,845
(38)
9
19
154
(3,260)
1
17
(76)
(3,318)
330
(2,988)
43
(5)
2,061
2,099
1
1
(888)
3,992
3,104
The accounting policies adopted are consistent with those of the previous financial year.
New standards and interpretations not applied
There are three major new IFRSs issued by the IASB which are mandatory for periods shown below:
IFRS
IFRS 9
Title
Financial Instruments
IFRS 15
Revenue from Contracts with Customers
IFRS 16
Leases
Effective for periods
beginning on or after
1 January 2018
1 January 2018
1 January 2019
IFRS 9 Financial Instruments
The Directors have reviewed the impact of IFRS 9 and consider that it will not have any material impact on the Group’s financial statements for the
following reasons:
•
•
Typically, the Group’s trade receivables are not material;
The Group does not expect the expected credit loss impairment model to have a material effect on the Group,
as the investments are held with banks that have a good credit status; and
•
The Group has no financial assets that are likely to be affected by the revised classification and measurement rules.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 (Construction Contracts), IAS 18 (Revenue), and a number of IFRICs, and establishes a single framework for revenue
recognition through a five step approach. The Directors have considered the impact of IFRS 15 on its revenues recognised in 2017 and its potential
future revenue streams from licensing revenues and consider that the adoption of IFRS 15 will not change the way in which the Group’s performance
obligations to customers are identified or deemed to be satisfied and, therefore, no material impact on revenues recognised in the financial statements
is anticipated. The Group will not be restating comparatives on adoption of the standard and the Directors believe that the revenue reported in 2017 will
not be subject to change in subsequent years.
IFRS 16 Leases
Under the provisions of IFRS 16 most leases, including the majority of those previously classified as operating leases, will be brought onto the statement
of financial position, as both a right-of-use asset and a largely offsetting lease liability. The right-of-use asset and lease liability are both based on the
present value of lease payments due over the term of the lease, with the asset being depreciated and the liability increased for the accretion of interest
and reduced by lease payments.
The Group currently has one operating lease with its landlord, the University of Southampton, as disclosed in note 19, which has a two year life upon
renewal, which will be impacted by IFRS 16. Whilst there will be an increase in depreciation and interest charges combined with a decrease in rental
charges following adoption, the Directors consider that the net impact on the income statement will not be material. The Directors also consider that
the recognition of a right-to-use asset and the lease liability will not materially impact the net assets of the Group.
The Directors do not anticipate that the adoption of the other new standards and interpretations will have a material impact on the Group’s financial
statements in the period of initial application.
The Group financial statements are presented in Sterling.
31 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 32
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
1. Accounting policies (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 (as detailed in
note 4 to the Parent Company Financial Statements on page 46) 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 or
the renegotiation of collaboration agreements where no further performance obligations are created, including up-front, milestone and royalty
payments, are recognised where the milestone has been accomplished, the payments are non-refundable, the Group’s obligations in respect of 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 personal defined contribution pension schemes are charged
to the consolidated statement of comprehensive income on an accruals basis.
Share-based payments
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 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
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.
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.
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.
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.
There are no critical accounting estimates and judgements.
3. Segmental analysis
The Group operates in one area of activity, namely drug discovery and development. All assets of the Group are located within the United Kingdom and
all profits/(losses) were generated in that territory. The revenue generated in 2017 was generated from two customers: £5 million from Pharmaxis Ltd as
consideration for the change in terms of the collaboration agreement and the balance for materials provided to AstraZeneca.
33 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 34
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
4. Profit/(Loss) from operations
The profit/(loss) from operations has been arrived at after charging:
6. Finance income
For the years ended 31 December 2017 and 2016 Finance income represents bank interest receivable.
Depreciation of property, plant and equipment
Amortisation of intangible assets
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
2017
£000
7
17
71
93
2017
£000
15
15
5
8
14
57
2017
8
3
11
2017
£000
1,091
138
102
1,331
5
113
1,449
2016
£000
9
19
70
93
2016
£000
17
11
5
11
3
47
2016
9
3
12
2016
£000
766
95
80
941
5
154
1,100
For the purpose of presentation in the Consolidated Statement of Comprehensive Income, remuneration costs of £668,000 (2016: £580,000) are
included in research and development expenditure and £781,000 (2016: £520,000) 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 24, which are ascribed
as forming part of these financial statements.
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 19.25% (2016: 20%). The differences are reconciled below:
Profit/(Loss) on ordinary activities before tax
Profit/(Loss) on ordinary activities before tax multiplied by the standard rate of
corporation tax in the UK
Effects of:
Tax relief on share option exercises
Expenses not deductible for tax purposes
Enhanced research & development relief
Variable rates on tax losses surrendered for research & development tax credit
Movement in unrecognised losses and temporary differences
Overprovision in respect of previous years
Total tax credit for the current year
2017
£000
(71)
(61)
(132)
2017
£000
1,629
314
–
22
(452)
23
22
(61)
(132)
2016
£000
(560)
(27)
(587)
2016
£000
(3,404)
(681)
(2)
31
(471)
212
351
(27)
(587)
Deferred taxation
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. Finance Act 2016 included
provision for the rate to reduce further to 17% on 1 April 2020. This will reduce the Company’s future tax charge accordingly. The 17% tax rate was
substantively enacted on 15 September 2016. Accordingly, deferred tax balances have been recognised at 17%, 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
2017
£000
1
(1)
–
2016
£000
1
(1)
–
Unrecognised deferred taxation
At 31 December 2017 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to
£12,978,000 (2016: £13,341,000) and non-trading losses of £2,016,000 (2016: £1,812,000). At 31 December 2017 the Group has an unrecognised
deferred tax asset in respect of these losses of £2,549,000 (2016: £2,576,000). 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 £369,000 (2016: £535,000) and
a deferred tax asset of £63,000 (2016: £91,000) 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.
35 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 36
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
7. Taxation (continued)
The movement on the unrecognised deferred tax asset comprises the following:
10. Property, plant and equipment
Unrecognised deferred tax asset at the start of the year
Movement in year
Unrecognised deferred tax asset at the year-end
8. Earnings/(Loss) per ordinary share
2017
£000
(2,667)
55
(2,612)
2016
£000
(2,596)
(71)
(2,667)
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to ordinary equity holders of the parent company by the
weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary
shares, being share options where the exercise price is less than the average market price of the Company’s ordinary shares during the year and
where performance conditions have been met or, in the case of options where the performance period is not completed, are being met.
Where there is a loss (as for the year ended 31 December 2016), the loss attributable to ordinary shareholders and weighted average number
of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic loss per share.
This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore antidilutive under
the terms of IAS 33.
The earnings/losses and the number of weighted average number of shares used in the calculations are as follows:
Earnings
£000
1,761
–
1,761
Shares
000
91,363
2,873
94,236
2017
EPS
pence
1.93
(0.06)
1.87
Losses
£000
(2,817)
–
Shares
000
91,351
–
(2,817)
91,351
2016
LPS
pence
(3.08)
–
(3.08)
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Depreciation
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
At 1 January 2016
11. Inventories
Raw materials
Raw materials comprises the Group’s BioBank.
Basic earnings/(loss) per share
Effect of additional shares under option
Diluted earnings/(loss) per share
9. Intangible assets
Cost
At 1 January 2016, 31 December 2016 and 2017
Amortisation
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Net book amount
At 31 December 2017
At 31 December 2016
At 1 January 2016
Patent and licence costs
£000
12. Trade and other receivables
212
131
19
150
17
167
45
62
81
Amounts receivable within one year:
Trade receivables
Other tax and social security
Prepayments and accrued income
The trade receivables balance is not past due or impaired.
13. Other financial assets – bank deposits
Amounts receivable within one year:
Sterling floating rate deposit of greater than three months’ maturity at inception
Sterling fixed rate deposits of greater than three months’ maturity at inception
Computer
equipment
£000
Laboratory and
clinical equipment
£000
36
1
37
3
40
26
6
32
5
37
3
5
10
131
4
135
3
138
124
3
127
2
129
9
8
7
2017
£000
56
2017
£000
292
69
272
633
2017
£000
2,000
–
2,000
Total
£000
167
5
172
6
178
150
9
159
7
166
12
13
17
2016
£000
55
2016
£000
–
49
41
90
2016
£000
–
1,661
1,661
At 31 December 2017 £45,000 (31 December 2016: £62,000) of the net book amount relates to interferon beta patent costs.
37 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 38
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
14. Cash and cash equivalents
Cash available on demand
2017
£000
4,845
At 31 December 2017, £1,000,000 was on 32 days’ notice. At 31 December 2016, £100,000 was on a fixed deposit until 22 March 2017.
15. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
16. Financial instruments
2017
£000
282
94
727
1,103
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 17 in the Directors’ Report.
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)
2017
Book and
fair value
£000
2016
Book and
fair value
£000
512
2,000
4,845
7,357
4
1,661
3,104
4,769
Trade and other payables (less than one year)
(ii)
1,009
809
(i) Trade and other receivables shown above excludes prepayments and other taxes, which are not a contractual obligation to receive cash,
amounting to £121,000 (2016: £86,000).
(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 £94,000 (2016: £51,000).
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.
16. Financial instruments (continued)
Interest rate risk
Interest rate risk profile of financial assets, excluding short-term debtors:
Australian Dollar
Canadian Dollar
Euro
Sterling
US Dollar
2016
£000
3,104
2016
£000
356
41
463
860
2017
Floating rate
financial assets
£000
2016
Floating rate
financial assets
£000
1
–
1
6,843
–
6,845
15
1
33
4,677
39
4,765
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 2017 had a weighted average period to maturity of 95 days and a weighted average annualised rate of interest of 0.70%
(2016: 45 days, 0.85%).
Sensitivity analysis
It is estimated that an increase of quarter of one percentage point in interest rates would have increased/decreased the Group’s profit/(loss) before
taxation by approximately £9,000 (2016: £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
2017 and 31 December 2016 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, share premium and share-based payment
At 1 January 2016
Issuance of ordinary shares
At 31 December 2016 and 2017
Notes
(i)
Number
of shares
91,316,671
45,941
91,362,612
Ordinary shares
of 1p each
£000
913
1
914
Share
premium
£000
25,771
–
25,771
Total
£000
26,684
1
26,685
(i) 45,941 ordinary shares of 1p were issued on 30 March 2016 at par following the exercise of share options under the Company’s long term incentive plan (LTIP).
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.
39 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 40
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
17. Share capital and share premium (continued)
18. Capital and reserves
Options
At 31 December 2017 there were options outstanding over 4,529,237 un-issued ordinary shares, equivalent to 5.0% of the issued share capital,
as follows:
Date of grant
Number of shares
Exercise price
Earliest exercise date
Latest exercise date
7 September 2009 (LTIP)
7 September 2009 (QNEOS)
28 June 2010 (QNEOS)
8 September 2010 (LTIP)
21 September 2011 (LTIP)
27 October 2015 (LTIP)
705,000
250,000
212,765
471,334
1,696,609
1,193,539
4,529,237
1p
20p
23.5p
1p
1p
1p
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
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
Exercised during the year
Lapsed during the year
Number of outstanding options at year-end
Number
5,629,647
–
(1,100,410)
4,529,237
2017
Weighted average
exercise price
2.9p
n/a
2.0p
3.1p
2016
Weighted average
exercise price
3.8p
1.0p
9.4p
2.9p
Number
6,587,094
(45,941)
(911,506)
5,629,647
At 31 December 2017, 3,335,708 share options were capable of being exercised, with exercise prices ranging from 1p to 23.5p (2016: 3,353,500, with
exercise prices ranging from 1p to 61.5p). The options outstanding at 31 December 2017 had a weighted average remaining contractual life of 4.2
years (2016: 5.7 years). Vesting conditions are disclosed in the Directors’ Remuneration Report.
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:
Land, buildings and other
Not later than one year
20. Related party transactions and balances
2017
£000
41
2016
£000
95
Details of key management personnel and their compensation are given in note 5 and on page 24 of the Directors’ Remuneration Report.
41 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 42
Parent Company Balance Sheet
as at 31 December 2017
Notes to the Parent Company Financial Statements
for the year ended 31 December 2017
Notes
31 December 2017
£000
31 December 2016
£000
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).
Disclosure exemptions adopted
1. Accounting policies
Basis of preparation
20,072
22,256
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:
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
4
5
6
124
2,000
4,792
6,916
(38)
6,878
26,950
914
25,771
265
26,950
102
1,661
3,063
4,826
(41)
4,785
27,041
914
25,771
356
27,041
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 Company’s loss for the year ended 31 December 2017 was £204,000 (2016: loss of £206,000).
The financial statements on pages 43 to 46 were approved and authorised for issue by the Board of directors on 14 March 2018 and
signed on its behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
Parent Company Statement of Changes in Equity
for the year ended 31 December 2017
At 1 January 2016
Issuance of ordinary shares
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2016
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2017
Share
capital
£000
913
Share premium
account
£000
25,771
1
–
–
914
–
–
914
–
–
–
25,771
–
–
25,771
Retained
earnings
£000
408
–
(206)
154
356
(204)
113
265
Shareholders’
funds
£000
27,092
1
(206)
154
27,041
(204)
113
26,950
• 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.
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.
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.
43 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 44
Notes to the Parent Company Financial Statements
Notes to the Parent Company Financial Statements
for the year ended 31 December 2017 (continued)
for the year ended 31 December 2017 (continued)
1. Accounting policies (continued)
4. Investments
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.
At 1 January 2017
(Repayments) / Additions
At 31 December 2017
Investment in
subsidiary
undertaking
£000
140
–
140
Loan to
subsidiary
undertaking
£000
20,516
(2,297)
18,219
Capital
contribution
£000
1,600
113
1,713
Total
£000
22,256
(2,184)
20,072
At 31 December 2017, the Company had an investment in the following subsidiary undertaking:
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.
Name of company
Synairgen Research Limited
Registered
address
Proportion of voting rights
and ordinary share capital held
Nature of business
Mailpoint 810, Level F, South Block,
Southampton General Hospital,
Tremona Road,
Southhampton SO16 6YD
100%
Drug discovery and development
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.
The Company holds a significant investment in its subsidiary, Synairgen Research Limited, of £20.1 million (2016: £22.3 million). In assessing the carrying
value of this asset for impairment, the directors have exercised judgement in estimating its recoverable amount, including the value of the inferferon
beta programme and the share of the LOXL2 collaboration with Pharmaxis. The determination of the valuation for both of these assets is based on the
discounted estimated probability-adjusted future cash flows generated from out-licensing transactions. The valuation is derived from a financial model
that evaluates a range of potential outcomes from what are considered the key variables, including the probability of the success of clinical trials, the
expected licensing terms that will be negotiated and the anticipated peak sales values for the resultant drugs.
The most significant judgement in arriving at the valuation is the quantity and timing of forecast cash flows from future out-licensing. Given the level
of headroom indicated by the impairment review, the discount rate assumption is not considered to be sufficiently sensitive to change to impact
the conclusion of the review. At this stage of the product development, the key sensitivity is the probability of successful completion of clinical trials.
Therefore, a failure in the development of either of the assets might result in an impairment of the investment in the subsidiary.
3. Profit and loss account
5. Debtors
Other tax and social security
Prepayments and accrued income
All amounts fall due for payment within one year.
6. Creditors: amounts falling due within one year
The only employees of the Company during 2017 and 2016 were the three executive directors. Their aggregate remuneration, which is borne by
the Company’s subsidiary undertaking, comprised:
Trade creditors
Accruals and deferred income
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Total cash-settles remuneration
Accrued holiday pay
Share-based payment
Total Remuneration
2017
£000
785
106
52
943
5
98
1,046
2016
£000
450
59
47
556
5
121
682
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 24, 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.
7. 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 and 41.
2017
£000
4
120
124
2017
£000
4
34
38
2016
£000
2
100
102
2016
£000
5
36
41
45 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 46
Notice of 2018 Annual General Meeting
Explanatory Notes
Notice is hereby given that the 2018 Annual General Meeting (‘AGM’)
of Synairgen plc (the ‘Company’) will be held at the offices of
Fladgate LLP, 16 Great Queen Street, London WC2B 5DG on
Friday, 22 June 2018 at 11.00 am to transact the following business:
Ordinary Business
Special Business
To consider and, if thought fit, to pass the following resolutions,
all of which will be proposed as Ordinary Resolutions:
As special business, to consider and, if thought fit, to pass the
following resolution, which will be proposed as a Special Resolution:
and the Directors may allot equity securities (including where
such allotment constitutes an allotment of equity securities by
virtue of section 560(2) of the Act) in pursuance of such offer or
agreement as if the authority conferred hereby had not expired.
To receive and adopt the audited accounts of the Company for
the year ended 31 December 2017, together with the Strategic,
Directors’ and Auditor’s reports in respect of such accounts.
8
1
2
3
4
5
6
7
To re-appoint as a Director Simon Shaw, who is retiring by
rotation in accordance with Article 124 of the Company’s
Articles of Association and who, being eligible, offers himself
for re-appointment.
To re-appoint as a Director Phillip Monk, who is retiring by
rotation in accordance with Article 124 of the Company’s
Articles of Association and who, being eligible, offers himself
for re-appointment.
To re-appoint as a Director Iain Buchanan, who is retiring
by rotation in accordance with Article 124 of the Company’s
Articles of Association and who, being eligible, offers himself
for re-appointment.
To re-appoint BDO LLP as the Company’s Auditor to hold
office from the conclusion of the meeting to the conclusion
of the next meeting at which the accounts are laid before the
Company and to authorise the Directors to determine
its remuneration.
To approve the Directors’ Remuneration Report
for the year ended 31 December 2017.
That the Directors be and they are hereby generally and
unconditionally authorised pursuant to section 551 of the
Companies Act 2006 (the ‘Act’) to allot equity securities (within
the meaning of section 560 of the Act) up to an aggregate
nominal amount of £377,590. This authority shall, unless
previously renewed, varied or revoked by the Company in
general meeting, expire on the earlier of 30 June 2019 and
the conclusion of the 2019 Annual General Meeting of the
Company save that the Company may make an offer or
agreement which would or might require equity securities to
be allotted after the expiry of this authority and the Directors
may allot equity securities pursuant to that offer or agreement
as if this authority had not expired; and this authority shall
be in substitution for any other authority to allot equity
securities but without prejudice to the continuing authority
of the Directors to allot equity securities in pursuance of an
offer or agreement made before the expiry of the authority
pursuant to which such offer or agreement was made.
By Order of the Board
Registered Office:
Mailpoint 810
Southampton General Hospital Tremona Road
Southampton SO16 6YD
John Ward
Company Secretary
1 May 2018
That, subject to and conditional upon Resolution 7 above being
passed, the Directors be and they are hereby empowered
pursuant to section 570 of the Companies Act 2006 (the ‘Act’)
to allot equity securities (within the meaning of section 560
of the Act) for cash pursuant to the authority conferred by
Resolution 7 above and to allot equity securities (including
where such allotment constitutes an allotment of equity
securities by virtue of section 560(2) of the Act) in each
case as if section 561(1) of the Act did not apply to such
allotment provided that this power shall be limited to:-
(i)
the allotment of equity securities, whether by way of rights
issue, open offer or otherwise, to holders of Ordinary
Shares and to holders of other securities in the Company
that by their terms are entitled to participate in such
rights issue, open offer or otherwise in such a manner
that the number of equity securities allotted to them is
in proportion (as nearly as may be) to their respective
holdings of such securities or in accordance with the rights
attached thereto and the Directors may deal as they see
fit with fractional entitlements, overseas shareholders and
with the legal or practical problems or requirements of
any regulatory body or stock exchange in any territory;
(ii)
the allotment of equity securities up to an aggregate
nominal amount of £4,628 upon the exercise of options
granted by the Company other than pursuant to an
employee share scheme as defined in the Act; and
(iii) (other than pursuant to sub-paragraphs (i) and (ii)
above) the allotment or sale of equity securities up to
an aggregate nominal amount of £91,432 (representing
approximately 10% of the nominal value of the issued
share capital of the Company at 1 May 2018);
and this power shall be in substitution for all such powers
previously given but without prejudice to the continuing power
of Directors to allot equity securities pursuant to an offer or
agreement made by the Company before the date this resolution
is passed and unless previously renewed, varied or revoked by
the Company in general meeting shall expire on the earlier of
30 June 2019 and the conclusion of the Annual General Meeting
of the Company to be held in 2019 save that the Company may,
before such expiry, make an offer or agreement which would or
might require equity securities to be allotted after such expiry
Entitlement to attend and vote
1. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, the Company specifies that only those
members registered on the Company’s register of members at:
•
•
the close of business on 20 June 2018; or,
if this Meeting is adjourned, at the close of business on
the day two business days prior to the adjourned meeting,
shall be entitled to attend and vote at the Meeting.
Appointment of proxies
2.
If you are a member of the Company at the time set
out in note 1 above, you are entitled to appoint one
or more proxies to exercise all or any of your rights to
attend, speak and vote at the Meeting and you should
have received a proxy form with this notice of meeting.
You can only appoint a proxy using the procedures set
out in these notes and the notes to the proxy form.
3. A proxy does not need to be a member of the Company but
must attend the Meeting to represent you. Details of how to
appoint the Chairman of the Meeting or another person as
your proxy using the proxy form are set out in the notes to the
proxy form. If you wish your proxy to speak on your behalf at
the Meeting you will need to appoint your own choice of proxy
(not the Chairman) and give your instructions directly to them.
4. A vote withheld is not a vote in law, which means that the
vote will not be counted in the calculation of votes for or
against the resolution. If you either select the “Discretionary”
option or if no voting indication is given, your proxy will vote
or abstain from voting at his or her discretion. Your proxy
will vote (or abstain from voting) as he or she thinks fit in
relation to any other matter which is put before the Meeting.
Appointment of proxy using hard copy proxy form
5. The notes to the proxy form explain how to direct your
proxy how to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:
•
•
completed and signed;
sent or delivered to Link Asset Services (PXS 1),
34 Beckenham Road, Beckenham BR3 4ZF; and
received by Link Asset Services no later
than 11 am on 20 June 2018.
•
In the case of a member which is a company, the
proxy form must be executed under its common
seal or signed on its behalf by an officer of the
company or an attorney for the company.
Any power of attorney or any other authority under which
the proxy form is signed (or a duly certified copy of such
power or authority) must be included with the proxy form.
47 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 48
Explanatory Notes
(continued)
Appointment of proxy by joint members
6.
In the case of joint holders, where more than one of
the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder
will be accepted. Seniority is determined by the order
in which the names of the joint holders appear in the
Company’s register of members in respect of the joint
holding (the first-named being the most senior).
Corporate representatives
7.
In order to facilitate voting by corporate representatives at the
Meeting, arrangements will be put in place at the Meeting so
that (i) if a corporate shareholder has appointed the Chairman
of the Meeting as its corporate representative with instructions
to vote on a poll in accordance with the directions of all the
other corporate representatives for that shareholder at the
Meeting who have been appointed in respect of different
parts of the holding of that corporate shareholder then on a
poll those corporate representatives will give voting directions
to the Chairman and the Chairman will vote (or withhold a
vote) in respect of each different part of the shareholding as
corporate representative in accordance with the directions he
has received from such corporate representatives in relation
to the respective parts of the shareholding in respect of which
they are each appointed or (ii) if more than one corporate
representative for the same corporate shareholder attends the
Meeting but the corporate shareholder has not appointed the
Chairman of the Meeting as its corporate representative,
a designated corporate representative will be nominated, from
those corporate representatives who attend, who will vote
on a poll in accordance with the directions he receives from
the other corporate representatives in respect of the parts of
the corporate shareholders shareholding in respect of which
such corporate representatives have each been appointed.
If you submit more than one valid proxy appointment,
the appointment received last before the latest time
for the receipt of proxies will take precedence.
Termination of proxy appointments
9.
In order to revoke a proxy instruction you will need to
inform the Company by sending a signed hard-copy
notice clearly stating your intention to revoke your proxy
appointment as above. In the case of a member which
is a company, the revocation notice must be executed
under its common seal or signed on its behalf by an
officer of the company or an attorney for the company.
Any power of attorney or any other authority
under which the revocation notice is signed (or
a duly certified copy of such power or authority)
must be included with the revocation notice.
The revocation notice must be received by Link Asset Services
no later than 11.00 am on 20 June 2018. If you attempt to
revoke your proxy appointment but the revocation is received
after the time specified then, subject to the paragraph
directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from
attending the Meeting and voting in person. If you have
appointed a proxy and attend the Meeting in person, your
proxy appointment will automatically be terminated.
Issued shares and total voting rights
10. As at 6.00 pm on 1 May 2018, the Company’s issued
share capital comprised 91,432,817 ordinary shares of
1p each. Each ordinary share carries the right to one
vote at a general meeting of the Company and, therefore,
the total number of voting rights in the Company
as at 6.00 pm on 1 May 2018 was 91,432,817.
Changing proxy instructions
Documents available for inspection
8. To change your proxy instructions simply submit a new
proxy appointment using the methods set out above. Note
that the cut-off time for receipt of proxy appointments
(see above) also applies in relation to amended
instructions; any amended proxy appointment received
after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy
proxy form and would like to change the instructions using
another hard-copy proxy form, please contact Link Asset
Services (PXS 1), 34 Beckenham Road, Beckenham BR3 4ZF.
11. The following documents will be available for inspection at the
Company’s registered office during normal business hours
(Saturdays, Sundays and public holidays excepted) from
the date of this notice until the conclusion of the AGM and
will also be available for inspection at the place of the AGM
for at least 15 minutes prior to and during the Meeting:
•
a statement or summary of transactions of
Directors (and their family interests) in the
share capital of the Company; and
•
copies of the service contracts of Directors.
The following notes summarise the purpose
of each resolution being proposed.
maximum nominal amount of £377,590 (which equates to
37,759,000 ordinary shares), which represents the sum of:
•
•
£304,776, being approximately 33.3% of the nominal value
of issued share capital of the Company at 1 May 2018; and
£72,814, being the nominal value of shares under option.
Other than pursuant to the exercise of share options,
including awards made under the Long Term Incentive
Plan and the Qualifying Non-Employee Option Scheme,
the Directors have no present intent to issue any ordinary
shares. This authority will expire on the earlier of 30
June 2019 and the conclusion of the 2019 AGM.
Resolution 8 comprises the special business of the
AGM and will be proposed as a special resolution:
Resolution 8: Disapplication of pre-emption rights
Also on 28 June 2017, a special resolution was passed under
section 570 of the Companies Act 2006, empowering the Directors
to allot equity securities for cash without first being required
to offer such shares to existing shareholders in proportion to
their existing holdings for a period from 28 June 2017 until the
earlier of 30 June 2018 and the conclusion of the 2018 AGM. It
is proposed that this authority also be renewed. The authority
relates to: pre-emptive issues; the allotment of up to 462,765
ordinary shares on the exercise of options already granted by the
Company other than pursuant to an employee share scheme (as
defined in the Companies Act 2006); and 9,143,200 shares, which
represents approximately 10% of the issued ordinary share capital
of the Company as at 1 May 2018. This authority will expire on
the earlier of 30 June 2019 and the conclusion of the 2019 AGM.
Resolutions 1 to 7 comprise the ordinary business of the
AGM and will be proposed as ordinary resolutions:
Resolution 1: Report and Accounts
The Directors are required to lay the Strategic Report, the
Directors’ Report, the audited accounts and the Auditor’s Report
before the Company in general meeting. The shareholders
are therefore requested to receive and adopt the Report
and Accounts for the year ended 31 December 2017.
Resolutions 2 to 4: Appointment of Directors
Article 124 of the Company’s Articles of Association requires
that, at the AGM, one third of Directors (excluding Directors
retiring in accordance with Article 130) shall retire. Accordingly,
Simon Shaw, Phillip Monk and Iain Buchanan shall retire
and, being eligible, offer themselves for re-appointment.
Resolutions 2, 3 and 4 propose their re-appointment.
Biographical details are given on pages 15 and 16 of this report.
Resolution 5: Appointment of Auditor
At each general meeting at which the accounts are laid before
shareholders, the Company is required to appoint auditors
to serve until the next such meeting. Resolution 5 proposes
the re-appointment of BDO LLP as the Company’s auditor and
that the Directors be authorised to fix its remuneration.
Resolution 6: Approval of the Directors’ Remuneration Report
Resolution 6 proposes the approval of the Directors’
Remuneration Report for the year ended 31 December
2017, as set out on pages 21 to 24 of this report.
The Directors’ Remuneration Report contains, amongst
other things, a forward-looking statement of the Company’s
policy on Directors’ remuneration for subsequent financial
years, details of the Directors’ service contracts and specific
disclosures relating to each Director’s remuneration.
Resolution 7: Authority to allot shares
By an ordinary resolution of the Company passed on 28 June
2017 at the 2017 AGM, shareholders authorised the Directors
under section 551 of the Companies Act 2006 to issue equity
securities without the prior consent of shareholders for a
period from 28 June 2017 until the earlier of 30 June 2018
and the conclusion of the 2018 AGM. Resolution 7 proposes
to authorise the Directors to allot equity securities up to a
49 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 50
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
Link 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
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-1a formulation
used for the AstraZeneca INEXAS study.
See INEXAS
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
CellScale MicroSquisher
A machine for measuring the stiffness
of tissue
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
Collagen
The main structural protein found in
skin and other connective tissues
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
Coronavirus
A virus that can cause respiratory
disease such as the common cold
or SARS (depending on the type of
coronavirus) and gastroenteritis
Cross-link
A chemical bond that acts like
a glue, holding collagen fibres
together. Lysyl oxidase (LOX)
enzymes catalyse this process
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
Fibroblast
A fibroblast is a type of cell that
synthesizes the extracellular
matrix and collagen, the structural
framework for animal tissues,
and plays a critical role in wound
healing
Fibroblastic focus
A hallmark of IPF lung tissue
characterised by dense collections
of fibroblasts (the cells that secrete
scar tissue)
Fibroblastic focus model
A laboratory model which uses cells
from IPF patients that replicates
the fibrotic lung
Fibrosis
The thickening and scarring of
connective tissue, usually as a
result of injury
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
INEXAS
AstraZeneca’s Phase IIa study
entitled ‘A Study in Asthma Patients
to Evaluate Efficacy, Safety and
Tolerability of 14 Days Once Daily
Inhaled Interferon Beta-1a After the
Onset of Symptoms of an Upper
Respiratory Tract Infection’
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), 3 (LOXL3), 4 (LOXL4)
Each is a member of a family of
enzymes which catalyses cross-
linking of collagen and elastin
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
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
51 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2017 | 52
Glossary (continued)
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
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
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
Pre-clinical
A stage of drug development
preceding human clinical trials
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
Safety study
See Phase I Clinical Trial
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
Secondary/exploratory
endpoint
The second most important (or
additional) measure (or endpoint)
assessed in a clinical trial
Second harmonic generation
imaging
A microscopic technique for
generating images of collagen, the
major constituent of scar tissue
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
SG005
A randomised, double-blind,
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
SG015
A randomised, double-blind,
placebo-controlled study, in
COPD patients with and without
a confirmed respiratory virus
infection assessing antiviral
biomarker responses of inhaled
SNG001 compared to placebo
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
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
53 | Synairgen plc annual report and accounts 2017 | www.synairgen.com | LSE:SNG
Synairgen plc,
Mailpoint 810,
Level F, South Block,
Southampton General Hospital,
Tremona Road,
Southampton,
SO16 6YD
i
m
o
c
.
n
g
s
e
d
c
d
b
w
w
w
.
d
e
t
i
m
L
i
y
n
a
p
m
o
C
n
g
s
e
D
i
l
t
n
i
r
p
e
u
B
e
h
T
y
b
d
e
c
u
d
o
r
p
d
n
a
d
e
n
g
s
e
D
i
l
c
p
n
e
g
r
i
a
n
y
S
©