Annual Report
and Accounts
2018
a deeper
understanding
of respiratory
biology
Stock symbol: LSE:SNG
www.synairgen.com
Contents
Introduction
Highlights
Business Review
Inhaled IFN-β (SNG001) in COPD to treat
or prevent exacerbations caused by
respiratory viruses
Strategic Report
Governance
Directors
Synairgen’s Founders
Corporate Governance Statement
Directors’ Remuneration Report
Report of the Audit Committee
Directors’ Report
2
3
9
15
17
18
22
26
27
30
29
Financials
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the
members of Synairgen plc
Consolidated Statement of
33
Comprehensive Income
33
Consolidated Statement of Changes in Equity
34
Consolidated Statement of Financial Position
35
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements 36
47
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity 47
Notes to the Parent Company
Financial Statements
48
Operational highlights
(including post period-end)
Financial
highlights
• Successfully advanced inhaled interferon beta (IFN-β)
• Revenues for the year were £0.11 million
programme into the clinic for the treatment or
prevention of virally-induced COPD exacerbations
• Part 1 of SG015 clinical trial completed, showing
that SNG001 was well tolerated and that antiviral
biomarker analysis showed COPD patients (without
viral infection) inhaling SNG001 had significantly
increased antiviral activity in the lungs
• Raised £2.7 million (net of expenses) in October 2018
to increase the scope of our inhaled IFN-β clinical trial,
enhancing our business development opportunity
for the COPD programme
• Part 2 of SG015 trial commenced with 13 trial sites
now active
• Our Australian partner, Pharmaxis, has satisfactorily
completed Phase I trials and 3-month toxicology
for 2 compounds, enabling it to progress the next
strategic steps of the LOXL2 inhibitor programme
(2017: £5.03 million, which included a non-recurring
£5 million upfront payable by Pharmaxis)
• Research and development expenditure for the year
was £3.23 million (2017: £2.06 million) reflecting
investment in the development of the IFN-β programme
• Loss from operations for the year ended 31 December
2018 was £4.13 million (2017: profit of £1.62 million)
• Cash, cash equivalents and deposit balances
of £5.33 million at 31 December 2018 (2017:
£6.85 million). The Group remains debt free
Other
Corporate Directory
Glossary
51
51
www.synairgen.com
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Inhaled IFN-β (SNG001) in COPD
to treat or prevent exacerbations
caused by respiratory viruses
What is COPD
Chronic Obstructive Pulmonary Disease (COPD) is a
lung condition characterised by airflow limitation in the
lungs. This airflow limitation is normally progressive and is
associated with an abnormal inflammatory response of the
lung to viruses, bacteria and fungal infections. The majority
of COPD is associated with long-term cigarette smoking.
Symptoms of COPD include cough, excessive sputum
production and shortness of breath.
Open
airways
COPD statistics
• COPD is the 3rd leading cause of death worldwide
(after heart attack and stroke)1
• More than 15 million Americans have COPD2
• In 2010 there were 715,000 hospitalisations for
COPD in the USA.3 The average cost of a
hospitalisation following a visit to the Emergency
Department in the USA for a COPD patient is $29,0004
Exacerbations of COPD
Exacerbations of COPD are defined as the worsening of
COPD symptoms. A ‘moderate’ exacerbation requires
treatment with oral corticosteroids and/or antibiotics.
Oral corticosteroids cause unwanted side effects and
there is a drive to reduce antibiotic usage. A ‘severe’
exacerbation is one that has led to a visit to A&E and/or
admission to hospital.
Exacerbations are associated with irreversible loss of lung
function and, therefore, accelerated disease progression.
Exacerbations severely impact on the patient’s quality of
life (patients typically take a number of weeks to recover)
and, being the second most common cause of emergency
admissions to hospital in England, are a major healthcare
burden.5
Narrowing of
airways
Swelling /
inflammation
in airways
More swelling /
inflammation
in airways
Normal Airway
COPD
Exacerbation of COPD
Infection
and mucus
accumulation
References
1. World Health Organisation. Available at http://www.who.int/mediacentre/factsheets/fs310/en/
4. Singh JA, et al. Utilization due to chronic obstructive pulmonary disease and its predictors:
2. https://www.nhlbi.nih.gov/health/educational/copd/what-is-copd/index.htm
3. American Lung Association: Trends in COPD (chronic bronchitis and emphysema): Morbidity
and Mortality. March 2013. Available at http://www.lung.org/finding-cures/our-research/
trend-reports/copd-trend-report.pdf
a study using the U.S. National Emergency Department Sample (NEDS). Respiratory Research
2016; 17:1
5. Department of Health. An Outcomes Strategy for Chronic Obstructive Pulmonary Disease
(COPD) and Asthma in England. Published July 2011
100%
80%
60%
Percentage
still alive
40%
20%
0%
Frequency of severe exacerbations
impacts death rates in
COPD patients
No
exacerbation*
1-2
exacerbations*
≥3
exacerbations*
0
10 20 30 40 50 60
Time (months)
Adapted from: Soler-Cataluña et al. Thorax 2005;60:925-31
* Patients were classified into a category depending on
the number of severe exacerbations they had in the
first 12 months of the study.
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The need for an antiviral therapy
Respiratory viral infections, such as the common cold and flu, are a
major driver of exacerbations in COPD patients when infections spread
from the upper respiratory tract to the lungs and worsen pre-existing
lung inflammation. Furthermore, there is growing evidence that virus
infections increase susceptibility to follow-on bacterial infections.
Analysis of sputum samples from
COPD exacerbations:1
21%
No virus
or bacteria
detected
29%
Bacteria
and virus
38%
Bacteria only
12%
Virus only
Exacerbations
of COPD are
frequently
associated with
respiratory
viruses
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References
1. 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
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How interferon beta (IFN-β) works
IFN-β is a naturally-occurring protein that orchestrates
the body’s antiviral defences to fight infections.
We have shown in in vitro models that IFN-β protects the lung cells of COPD patients
when infected with viruses that cause exacerbations. Synairgen is currently conducting
a Phase II clinical trial to look at the protective effects of inhaled IFN-β in COPD patients
when they catch a cold or flu infection.
The key
mechanisms
of action of
IFN-β are:
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VirusIFN-β3Activates immune cells to eliminate virus-infected cells B cellsT cellsNK cellsMacrophagesDC cellsWhite blood cells migrate to the lungs to combat the viral infection 2Drives the expression of 100s of antiviral proteins which act at different stages of the viral replication cycle,resulting in broadantiviral protection2Binding of IFN-β to type 1 IFN receptor triggers expression of antiviral genesOAS1IFN-βMX1GBP1CXCL10IFIT2CellshrinkageCauses controlled cell death in cells that cannot stop the infection, preventing the spread of the infection1 Strategic Report
The directors present their Strategic Report
for the year ended 31 December 2018.
SG015 Part 1 Biomarker Results
• Antiviral biomarkers in the lung were elevated 24 hours after dose, showing that
the lungs are primed to combat cold or flu infections
• Antiviral biomarker responses are similar to those observed in our previous trial in asthma
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
2018 has been a year of excellent operational progress. We
successfully advanced our inhaled interferon beta (IFN-β)
programme, to treat or prevent COPD exacerbations, into the
clinic and, in September 2018, we raised £2.7 million (net of
costs) to expand the number of patients to be included in our
clinical trial, to increase the power of the study and enhance
our chance of partnering our inhaled IFN-β programme
for COPD. In addition, our Australian partner, Pharmaxis,
has completed Phase I clinical trials for the LOXL2 inhibitor
programme with positive results and we now eagerly await the
next steps for this product where Synairgen has a significant
financial interest in its success.
Inhaled IFN-β programme
Inhaled IFN-β progression in COPD to treat
or prevent virus-induced exacerbations
We have progressed inhaled IFN-β into COPD, where the
risk that a patient will exacerbate due to a cold infection
is much higher (approximately 50%1) compared to asthma
(<10%2), with some identifiable sub-groups at higher risk than
others.3 The cost to both patient and healthcare providers
of virus-induced COPD exacerbations is also substantial – in
England alone, COPD is the second most common cause of
unplanned hospitalisations after cardiovascular disease.4
We have long known that COPD represents a very
substantial market for inhaled IFN-β, addressing a large
number of patients who are expensive to treat. The
historical barrier to progressing into COPD was the
complexity around identifying the virus-positive patients
for treatment. COPD patients can suffer from bacterial
infections as well as viral infections and, up until recently,
distinguishing between viral and bacterial infections, at the
point of assessment, was too great an obstacle to allow
progression of inhaled IFN-β into COPD clinical trials.
Our ability to progress with COPD has been enabled by
the availability of a novel point of care test launched by
bioMérieux. This test confirms the presence of a respiratory
virus in a patient within 45 minutes of a nasal or throat swab
being taken. Utilisation of this new diagnostic test means
that we can be sure that every patient we treat in the COPD
trial is virus positive. This will eliminate the background
“noise” associated with the inclusion of patients with no viral
infection in the trial and thereby reduce the required trial
size, and therefore cost, to obtain meaningful results.
We are starting treatment at the onset of respiratory
symptoms in virus-positive patients. At the moment,
COPD patients are not encouraged to visit their GP/
pulmonologist if they have a cold. This is because there are
no broad spectrum antiviral therapeutic options available
to limit the spread of virus to the lungs. The advent of this
new diagnostic technology changes this paradigm. The
bioMérieux point of care test enables rapid identification
of common bacterial and viral pathogens. For the virus-
positive patients, the availability of an antiviral therapy
with the potential to either prevent exacerbations, or to
limit their severity, would be a major breakthrough.
In Q1 2018 we commenced a two-part Phase II clinical trial
in COPD patients.
Part 1 of Phase II trial
The first part of the trial was conducted to confirm the safety
of inhaled IFN-β in this patient population. Inhaled IFN-β has
been well tolerated in all of the asthma trials; COPD patients’
lungs are different and it was necessary to assess safety prior
to dosing patients in part two of the trial. Our target patients
have typically lost approximately 40% of their lung function,
their lungs are often colonised by bacteria, and their lung
inflammation is driven by different factors than in asthma.
During this first phase, we were pleased to ascertain that
inhaled IFN-β was well tolerated in COPD patients. We also
undertook a biomarker assessment. Patients in this part of
the trial were free of viral infection and inhalation of IFN-β
should activate their antiviral defences. Indeed, as reported
in June 2018, the antiviral biomarkers assessed 24 hours
after administration of a dose of inhaled IFN-β were elevated
(as shown opposite). This increase in relevant biomarkers
was very similar to that which we had observed in asthma.
2
2
2
2
Sputum collected
Sputum collected
Sputum collected
24hrs after
24hrs after
24hrs after
dose
dose
dose
Similar
biomarker
response in
asthma and
COPD
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Similar biomarker
Similar biomarker
response in
Similar biomarker
asthma and COPD
response in
asthma and COPD
response in
MX1
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expression of
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expression of
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Strategic Report
(continued)
Part 2 of SG015
Phase II trial
overview
Screening
Pre-treatment
Pool of screened
COPD patients
waiting to get a
respiratory virus
infection or
worsening COPD
symptoms
Treatment
(14 days)
Follow Up
(4 wks)
Virus test
Start Dosing
for 14 days
if virus positive
Objectives/Endpoints
• COPD symptoms
• Lung function
• Exacerbations
• Biomarkers
• Virology
• Safety
We were particularly pleased to see firstly, the robust
antiviral response in these older patients’ lungs that have
typically been exposed to many years of cigarette smoke, and
secondly, that this effect mirrored in vitro findings in COPD
patients’ lung cells from our models where IFN-β is effective.
Part 2 of Phase II trial
Completion of part one enabled the commencement of
part two of the trial. In part two, COPD patients without
infection are screened and entered into a waiting
phase. We are building this pool of ‘waiting patients’ to
approximately 200 patients. Patients then contact the trial
site as soon as they develop a cold or COPD symptoms
which are suspected to be caused by a virus. Upon arrival
at the trial site, patients are tested to determine whether
they have a respiratory virus; those that are positive are
treated with either inhaled IFN-β or placebo for 14 days.
In October 2018 we completed a placing which raised
£2.7 million (net of costs), primarily to increase the COPD
trial size from 80 patients to 120 patients in order to
be able to focus on clinical endpoints, to enhance the
chance of obtaining a positive result, and ultimately to
partner the programme when the trial is completed.
The trial is progressing well and we have now initiated 13 trial
sites, all in the UK. As at 15 February 2019, 181 patients have
been screened and 133 patients have been entered into
the ‘pool’, waiting to develop virus symptoms, ahead of the
confirmatory virus testing. In the first three months of the trial
(up to 11 January), 22 patients developed symptoms and were
tested for a respiratory virus; 3 out of the 22 tested positive
and were subsequently dosed. This reflected the mild start
to the respiratory virus season as reported by Public Health
England (PHE). In the subsequent five weeks to 15 February,
PHE reported an uplift in influenza like illness (an indication of
the impact of respiratory viruses on healthcare system) and
this has been reflected in an uplift in the number of patients
dosed in our trial. Since 11 January a further 30 patients have
been tested, of whom 15 were virus positive and dosed. The
virus test has therefore proved its value, particularly during
the late autumn and early winter, screening out patients who,
historically, may have been dosed based on their symptoms,
but who had no potential to gain from an antiviral. The
following viruses have been detected: enterovirus/rhinovirus;
RSV; coronavirus; human metapneumovirus; and influenza.
The milder start to this virus season means that we now
expect the trial to continue into the 2019/2020 virus season.
Size of market opportunity
COPD is a common disease which consumes substantial
healthcare resources, particularly in the non-summer
months. COPD patients will typically have one to two
colds per year. Each cold carries a risk of exacerbation
of approximately 50%. In the USA, the average cost
of a hospitalisation following a visit to the Emergency
Department for a COPD patient is $29,000.5 Pathogen testing
at the onset of an exacerbation is being recommended
to reduce unnecessary antibiotic prescribing for viral
exacerbations. The need for a broad spectrum antiviral
therapy is substantial. We expect considerable interest
from potential partners for this programme and have
commenced a dialogue with several large pharma companies.
LOXL2 inhibitor programme
In collaboration with Pharmaxis we identified and progressed
a LOXL2 inhibitors programme from the pre-clinical stage
through to commencement of a Phase I clinical trial. Initially
the collaboration was focussed on idiopathic pulmonary
fibrosis (IPF), an area of expertise for Synairgen.
Over the two years of the collaboration, our interactions with
potential large pharma partners led to an expansion of the
programme to also embrace other fibrotic diseases, including
non-alcoholic steatohepatitis (NASH, a type of liver fibrosis),
heart fibrosis, and kidney fibrosis. In December 2017 we
elected to pass responsibility for the further development
and commercialisation of these compounds to Pharmaxis,
who were better placed to conduct research in the non-lung
fibrotic arena, in return for £5 million and a share of at least
17% (net of allowable expenses) of any receipts from any
onward licensing by Pharmaxis of the LOXL2 inhibitors in
fibrotic indications.
During 2018, Pharmaxis successfully completed Phase I trials
for two compounds, and showed best in class inhibition of
the LOXL2 enzyme in these clinical trials. Post period-end
(17 January 2019), Pharmaxis announced that the 3 month
toxicology studies had been successfully completed for both
compounds, allowing them to progress the next strategic
steps for the programme. We continue to track Pharmaxis’
progress with great interest.
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 planned R&D expenditure
and the consequent cash position of the Group. These are further
described in the financial review below.
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 33 to 46. The consolidated financial
statements are presented under International Financial
Reporting Standards as adopted by the European Union.
The adoption of IFRS 9 ‘Financial Instruments’ and IFRS 15
‘Revenue Recognition’ had no impact on the primary
statements in either period presented.
The financial statements of the Company, set out on pages 47
to 50, are prepared in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework.
Statement of Comprehensive Income
The loss from operations for the year ended 31 December
2018 was £4.13 million (2017: profit £1.62 million). Revenues for
the year amounted to £0.11 million (2017: £5.03 million). 2017
included a non-recurring £5 million payable by Pharmaxis as
consideration for the change in collaboration terms. The 2018
revenue comprised fee for service work in relation to the LOXL2
programme. Research and development expenditure for the
year amounted to £3.23 million (2017: £2.06 million), and was
focussed almost entirely on the IFN-β Phase II clinical trial in
COPD and associated pharmaceutical development costs.
Other administrative costs for the year amounted to £1.01 million
(2017: £1.35 million), with the decrease being attributable to lower
staff bonus costs and reduced legal costs. Interest receivable
increased on account of higher average cash balances held and
the increase in base rate. The tax credit increased from £0.13
million in 2017 to £0.80 million in 2018. The 2017 credit was at
lower levels than preceding years because the Group was in
profit and this limited the amount of research and development
tax credit which could be claimed. The loss after tax for 2018 was
£3.30 million (2017: profit of £1.76 million) and the basic loss per
share amounted to 3.47p (2017: basic earnings per share of 1.93p).
Statement of Financial Position and cash flows
At 31 December 2018, net assets amounted to £6.03 million
(2017: £6.56 million), including cash and bank deposits of £5.33
million (2017: £6.84 million).
The principal elements of the £1.51 million decrease over the
year ended 31 December 2018 (2017: £2.08 million increase) in
cash and bank deposits were:
• Cash used in operations: £3.89 million (2017: £1.45 million
generated from operations);
• Research and development tax credits received: £0.07
million (2017: £0.62 million);
• Capital expenditure on property, plant and equipment:
£0.39 million (2017: £0.01 million); and
• Share issue proceeds (net of costs): £2.67 million (2017: £nil).
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Strategic Report
(continued)
The other significant changes in the statement of financial
position were:
development expenditure in the programme either by
Synairgen or a licensee.
• The net book value of property, plant and equipment
• Commercial risk
increased from £0.01 million to £0.37 million at
31 December 2018. This was due to the purchase
of 13 bioMérieux multiplex PCR virus detection
machines (one for each clinical trial site) at a total
cost of £0.36 million. The remainder of the capital
expenditure was for laboratory and IT equipment;
• Current tax receivable increased from £0.07 million
to £0.80 million on account of the higher R&D tax credit
as discussed above;
• Trade and other receivables decreased from £0.63 million
to £0.22 million on account of amounts receivable from
Pharmaxis reducing by some £0.45 million;
• Trade and other payables decreased from £1.10 million to
£0.78 million. The major driver behind this reduction is the lack
of bonus accrual at 31 December 2018; and
• Share capital and share premium increased from £0.91 million
and £25.77 million to £1.09 million and £28.26 million respectively,
an aggregate increase of £2.67 million on account of the
fundraising in October 2018 whereby 18.00 million shares of
1p each were issued at a premium of 15p primarily to fund
the enlarged Phase II trial. Costs of the issue amounted to
£0.21 million, which were taken to the share premium account.
Principal risks and uncertainties
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
• Interferon beta Phase II trial overruns
The Group is currently running a Phase II trial in COPD,
which is seeking to randomise 120 patients. The speed
of the trial is dependent upon the rate of recruitment
into the pre-treatment pool and the rate at which such
patients contract colds. Overrunning of the trial into
2020 would result in extra costs to complete the trial, as
a number of the monthly costs are fixed in nature.
The Group is continually monitoring the progress of the trial
and looking to secure efficiencies and maximise the size of the
pre-treatment pool as quickly as possible.
• Interferon beta Phase II trial fails to meet endpoints
There can be no guarantee that the trial will meet its
endpoints and generate good enough results to merit further
There can be no guarantee that the Group, or Pharmaxis, in
the case of its LOXL2 programme in which the Group has
a 17% share, 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.
• The Group may not be able to add further programmes
to its portfolio
The Group currently has two programmes – the interferon
beta programme and a share of Pharmaxis’ LOXL2 programme.
Whilst it is seeking to add additional programmes, this may not
be possible for a number of reasons, including failure to agree
commercial terms, due diligence findings or inability to fund
additional programmes if additional expenditure is required on
the interferon beta programme.
• 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.
• Competition risk
The Group’s current and potential competitors include
pharmaceutical and biotechnology companies and academic
institutions, many of whom have significantly greater financial
resources than the Group. There can be no assurance that
competitors will not succeed in developing products that are
more effective or economic than any developed by the Group,
or which would render the Group’s products non-competitive
or obsolete.
• 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 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.
• Cyber attack or IT systems failure
The Group is at risk of cyber attack or IT systems failure, which
would cause operational harm, including potential theft or loss
of data.
References
The Group seeks to minimise this risk by retaining the services
of external IT advisers, and pursuing suitable back-up and
security policies.
• Brexit
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 at the end of
March 2019.
There is still substantial uncertainty as to what form Brexit will
take. In the short term our exposure relates to whether the
supply chain for consumables for the running of the Phase II
clinical trial will be impacted. A review is being undertaken to
determine what extra levels of stocks need to be purchased to
manage any potential disruption. The trial is being conducted
solely at UK sites and all drug supplies are located in the UK.
Outlook
Operationally we are wholly focussed on our inhaled IFN-β
programme in COPD and engaging with potential partners
for this programme in advance of Phase II data availability.
We are pleased that Pharmaxis have announced completion
of the three month toxicology studies which were necessary
to progress partnering discussions in disease areas which are
of great interest to large pharma. We continue to assess new
opportunities to complement our existing COPD programme.
By order of the Board
John Ward
Company Secretary
22 February 2019
1.
Johnston NW, et al. Colds as predictors of the onset and severity of COPD exacerbations
International Journal of COPD 2017:12: 839-848
4. Department of Health. An Outcomes Strategy for Chronic Obstructive Pulmonary Disease
(COPD) and Asthma in England. Published July 2011
2.
(i) Aviragen Therapeutics presentation Directing Next Generation Direct-Acting Antivirals
5. Singh JA, et al. Utilization due to chronic obstructive pulmonary disease and its predictors:
May 2017. (ii) Synairgen analysis of INEXAS trial results, dated 27 September 2017 (https://
www.synairgen.com/wp-content/uploads/2018/06/ifnb-press-release-final-26-sept-002.pdf)
a study using the U.S. National Emergency Department Sample (NEDS). Respiratory Research
2016; 17:1
3. 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
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LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2018| 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 50 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
BenevolentAI. 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
a non-executive director for
Allecra Therapeutics GmbH
and for Aurealis Pharma AG.
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
Paul Clegg
Non-executive Director
Richard Marsden joined
Synairgen in a consulting
role as General Manager
in November 2003, was
appointed to the Board
as Managing Director in
June 2004, and appointed
Chief Executive Officer in
September 2009. Between
1998 and 2003 he worked
as Projects Manager and
Cystic Fibrosis Business
Development Manager at
Profile Therapeutics plc,
where he managed the
Cystic Fibrosis business
and played a major role
in the development of its
proprietary pharmaceutical
unit, Profile Pharma Limited.
Prior to this, he worked for
Zimmer Limited, Genentech
(UK) Limited and Roche
Products Limited.
John Ward joined Synairgen
in October 2004 as Finance
Director. From December
1999 to July 2004 he was
Chief Financial Officer and
Company Secretary of Profile
Therapeutics plc and was
appointed to the Profile
Therapeutics board in March
2003. From 1996 to 1999
he was Finance Director of
Rapid Deployment Group
Limited, the UK holding
company for the healthcare
operations of Ventiv
Health, Inc. Prior to joining
Rapid Deployment he was
a Director of Corporate
Finance at Price Waterhouse.
He is a chartered accountant.
Paul Clegg was appointed
as a non-executive
director of Synairgen in
September 2009. He is Chief
Executive Officer of Accsys
Technologies PLC, Chairman
of Tricoya Technologies Ltd
and a non-executive director
of Peel Hunt LLP. Paul was
previously Managing Director
and Chief Executive Officer
of Cowen International
Limited and director of
Cowen Asset Management
Limited until June 2008.
After over twenty years
working in the investment
banking industry, Paul
joined Accsys Technologies
PLC, a 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 2018 | 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 1,300 papers in
peer-reviewed literature. He is
Member of the Horizon 2020
Science Panel for Health; Board
Chair of the National Centre for
the Replacement, Refinement and
Reduction of Animals in Research
(NC3Rs); Trustee and Chair of the
Research Strategy Committee of
Cancer Research UK; Trustee and
Chair of the Grants Panel of the
Great Ormond Street Hospital
Children’s Charity; Trustee and
Chair of The Kennedy Trust for
Rheumatology Research; Member
of the Governing Body of the
Nuffield Council for Bioethics;
and Member of the Natural
Environment Research Council.
He serves on a number of
Advisory Committees in
industry, including scientific
board member or advisor to a
number of companies involved
in developing new treatments
for airways diseases.
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 2018 | 16
Synairgen’s
Founders
Corporate Governance Statement
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
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 Chairman, it is my primary responsibility to lead the
Board effectively and to oversee the adoption, delivery and
communication of the Company’s corporate governance model.
In September 2018 the Board adopted the Quoted Companies
Alliance Corporate Governance Code (QCA Code). On our
website (www.synairgen.com/investors/corporate-governance-
statement/) we set out how we comply with the 10 principles
of the QCA Code. The following sections of the Corporate
Governance Statement explain how the QCA Code is applied
by the Company. During the period we undertook a formal
Board performance review, which identified some areas for
improvement during 2019, including formalising individual
effectiveness reviews and the approach to risk management.
Board of Directors
On 31 December 2018 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).
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.
Brief curriculum vitae details about the directors are given on pages
15 and 16. The key experience, skills, qualities and capabilities
that each director brings to the Board are summarised below:
Simon Shaw
Simon is an experienced public company director, having fulfilled
both the roles of Chief Financial Officer and Chief Operating Officer
for listed companies. He has life science company experience and
in addition to his skills as a Chairman contributes strong financial
and corporate finance skills. As an executive director of a FTSE
250 company he keeps his skill set in these areas up to date.
Richard Marsden
Richard has worked in a number of roles within the life sciences
sector and has experience of sales and marketing, clinical
trials, project management, business development and
general management. He is actively involved in the design
and management of the clinical trial and leads the Company’s
business development activities. He maintains and develops
his skill sets in these areas by regular interaction with the
Company’s expert advisers and key opinion leaders (KoLs).
Dr Phillip Monk
Phillip is a leading scientist in respiratory biology, with experience
of managing teams of scientists and taking drugs through pre-
clinical and early clinical trials. His particular contribution to the
Board is championing the identification and management of
new opportunities up to the clinical stage, and maximising value
from early stage clinical trials. Phill regularly interacts with expert
advisers/KoLs and attends key relevant medical conferences.
John Ward
John is a Chartered Accountant, who has worked for 22 years
as Finance Director and Company Secretary in the life sciences
sector, with experience gained in private and quoted companies.
From his time at Price Waterhouse he also has corporate
finance experience. He keeps his skill set up to date by attending
appropriate courses run by accountancy firms, the ICAEW and ICSA.
Iain Buchanan
Iain has 40 years’ management experience in the pharmaceutical
and biotech sector. Iain keeps his skill set up to date through
his involvement with a number of other life sciences boards.
Dr Bruce Campbell
Bruce has 50 years’ drug development experience. He is a visiting
Professor in Pharmacology at King’s College London and has
particular expertise in pre-clinical development. Bruce keeps
his skill set up to date through his involvement with a number of
other life sciences companies either as a director or consultant.
Paul Clegg
Paul has corporate finance experience of the life sciences
sector from his time at the US investment bank Cowen and
his non-executive directorship of Peel Hunt. He is also CEO
of another AIM-quoted company, Accsys Technologies. His
particular contribution to the Board is in the area of operational
matters and corporate finance. He keeps up to date on his
skill set responsibilities through his executive role at Accsys.
Prof. Stephen Holgate
Stephen is a leading academic in respiratory medicine, combining
an outstanding knowledge of base and clinical science. He has
experience of working with many pharmaceutical companies
and guides the Board on developments in the respiratory sector.
Stephen keeps up to date through his ongoing involvement with
many industry and government-related organisations as an advisor.
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LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2018| 18
Corporate Governance Statement
(continued)
All eight members of the Board bring relevant sector experience
in life sciences. Five members of the Board have public markets
experience from other companies. The Board has expertise
in the following key areas: public markets; discovery and pre-
clinical respiratory projects, clinical development, business
development/licensing and finance. The Board believes that
its blend of relevant experience, skills and personal qualities
and capabilities is sufficient to enable it to successfully
execute its strategy. The Board is composed solely of males
and recognises this gender imbalance. In due course, the
Board will look to amend its composition appropriately.
John Ward fulfils the roles of Finance Director and Company
Secretary. The Board considers that at this stage of the Company’s
development this is an appropriate and cost effective modus
operandi. It will continue to monitor when it will be necessary
and appropriate to separate the roles. The Company Secretary
reports directly to the Chairman on governance matters.
Non-executive directors are required to attend 5 scheduled
bi-monthly Board meetings (Scheduled Board meetings)
and committee or Scientific Advisory Board meetings. Non-
executive directors are required to be available at other
times as required for face-to-face and telephone meetings
with the executive team. All members of the executive
team work for the Company on a full-time basis and have
no non-executive directorships with other companies.
The Board notes that its directors have been in post for more than
nine years but considers that they remain functionally independent,
in that they remain fully committed to promoting the success
of the Company for the benefit of shareholders as a whole.
The Board also notes that two of its non-executive directors
were granted options in 2009 and 2010, which will expire
in 2019 and 2020. The practice of granting non-executive
directors options has now ceased and the Board considers
that the holding of these options (which for each director
represents less than 0.3% of the issued share capital) does not
compromise the independence of the two directors concerned.
With effect from the 2019 AGM, the Board has decided to put
all directors up for re-election on an annual basis rather than
the current three year rotation to enable shareholders to
confirm their support that the directors remain independent.
The Company does not have a Senior Independent Director
and we believe that this is appropriate at this stage of the
Company’s development.
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 2018, 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
2
In addition there were five 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.
Board performance
A Board evaluation process led by the Chairman took place in
August 2018. All of the directors completed a questionnaire
about the effectiveness of the Board and the results were
compiled on an anonymous basis by the Company Secretary. The
Board reviewed the outcome of the questionnaire. A number of
refinements in working practices were identified as a result of this
exercise and have since been adopted. Individual effectiveness
reviews and the approach to risk management were two
particular areas which the Board agreed needed further work.
Also during August 2018 a review of the Chairman’s performance
over the last year was carried out by the completion of a
questionnaire by other Board members. It is intended that
this internal review will be carried out on an annual basis.
is responsible for all senior appointments that are made within
the Group. During the year ended 31 December 2018, the
committee met three times with all members attending. The
Directors’ Remuneration Report is detailed on pages 22 to 25.
Board committees
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 Audit Committee Report is detailed on page 26.
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
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. During the year under
review the SAB met once to discuss new opportunities. Dr Bruce
Campbell is responsible for feeding back the outputs from the
SAB to the Company’s Board.
Business model and strategy
As detailed in the Strategic Report on page 9, 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. The
key challenges in execution are set out in the section of the
Strategic Report entitled Principal risks and uncertainties.
Corporate culture
Synairgen is a biotechnology company focussed on developing new
respiratory therapies which will make a difference to people’s lives.
Our core values to achieve this are:
• Passion – to demonstrate a passion for delivering high
quality service;
• Professionalism – to demonstrate courtesy, honesty and
responsibility when dealing with individuals or others in the
business environment;
• Collaboration – to work effectively and inclusively with individuals,
institutions, or other companies in the business environment;
• Experience – to demonstrate knowledge and skills in the
business environment; and
• Approachability – to be accommodating, friendly and transparent
when working with others.
These matters are reviewed annually during staff appraisals.
19 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
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Corporate Governance Statement
(continued)
Directors’ Remuneration Report
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 indicates the
level of proxies lodged on each resolution, after it has been
dealt with by a show of hands. Details of the resolutions
and explanations thereto are included with the notice.
Internal control and risk management
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 mitigate, 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;
• regular financial reforecasts;
• 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.
The Company maintains a summary risk register which is
reviewed by the Board on an annual basis. The principal risks and
uncertainties facing the Group, with mitigation strategies, are
set out in the Strategic Report on pages 13 and 14. Project risk
management is continually evaluated by weekly project meetings
and other management tools. IT risk is covered at bi-annual
meetings with external IT advisers. An annual Health and Safety
report is prepared for the Board.
Simon Shaw
Chairman
22 February 2019
In previous years the Company has produced this report on a
voluntary basis. In September 2018 the Company adopted the QCA
Corporate Governance Code which includes the requirement to
prepare a remuneration committee report. This report 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 three times during the year ended 31 December
2018 and considered the pay of the executive directors and
ensured it understood pay arrangements more broadly
across the Group. 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 or, where it is not permitted under HMRC rules, as a salary
supplement after deducting an amount to reflect employers’ NICs
to ensure that the overall cost to the employer is not increased
(at 9% of base salary) and typical benefits including family private
health cover, permanent health and life assurance.
The previous salary and benefit review took effect from 1 January
2018. Salaries and benefits have been reviewed in February 2019,
taking into account Group and individual performance, external
benchmark information and internal relativities.
As a consequence of the 2019 review, the following changes were
made with effect from 1 January 2019:
1 January 2018 to
31 December 2018 From 1 January 2019
Salary
per
annum
(£000)
186
135
145
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
9% 100% 191
9% 100% 137
9% 100% 149
9% 100%
9% 100%
9% 100%
Richard Marsden
Dr Phillip Monk
John Ward
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 2018 is
set out on page 25 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 scheme for 2018 involved
a range of operational milestone targets linked to the interferon
beta programme, the LOXL2 programme and potential new
opportunities. As the Group has not received any revenues from
these achievements, the executive directors requested that the
Committee defer a final decision regarding such bonuses until
such a commercial benefit is delivered. No bonuses were therefore
awarded in respect of the year ended 31 December 2018.
(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.
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Directors’ Remuneration Report
(continued)
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.
As indicated in last year’s report, an LTIP award was made in
April 2018 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 approximately 61.5% of
salary, with performance conditions as set out below.
The Committee intends to make an LTIP award (the 2019 award)
during the six week period following the preliminary announcement
of the results for the year ended 31 December 2018, with each
of Richard Marsden, Phillip Monk and John Ward being granted
awards over shares worth up to 65% of salary with performance
conditions similar to the 2018 LTIP award.
Executive directors are expected to retain no fewer than 50% of
shares acquired upon vesting of awards under the LTIP, net of
shares sold to pay taxes, until such time as, in combination with any
other shares the executives may have acquired, they hold shares
with a value equivalent to 100% of base salary.
All awards will lapse at the end of the applicable performance
period to the extent that the applicable performance criteria
conditions have not been satisfied with no opportunity for
retesting. In the event of a good leaver event or a change of control
of the Company, the LTIP awards may vest early, but only to the
extent that, in the opinion of the Committee, the performance
conditions have been satisfied at that time. The awards will
generally also be subject to a time pro-rated reduction to reflect
the reduced period of time between the grant of the awards and
the time of vesting although this reduction may not be applied in
certain cases.
Performance conditions for the 2015 LTIP awards
The awards were subject to two performance conditions.
Firstly, awards would 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 was 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%
Performance between the steps
Vesting percentage
of total number of shares
subject to award
0%
25%
50%
100%
Pro-rata on a straight-line basis
Secondly, no award would vest unless the average annual growth
in the TSR of the Company over the performance period was 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%.
No awards became exercisable during 2018 as the performance
criteria conditions for the awards granted in 2015 were not met and
accordingly these awards lapsed.
Performance conditions for the 2018 LTIP award
The performance conditions followed the same structure as set
out above for the 2015 awards, except that the first condition
thresholds were raised to the following:
TSR growth over the performance
period less percentage increase in the
techMARK mediscience™ index over the
same period
Less than 10%
10%
20%
30%
Performance between the steps
Vesting percentage
of total number of shares
subject to award
0%
25%
50%
100%
Pro-rata on a straight-line basis
The second performance condition remained unchanged.
(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 2018, the executive directors
did not hold any non-executive directorships with other companies.
The Chairman and non-executive directors have entered into
letters of appointment for an initial fixed period of twelve months,
which renew automatically for a further twelve month period on
the anniversary of commencement. The appointment can be
terminated on three months’ notice by either party.
Directors’ interests in share options
The interests of directors in share options over ordinary shares during the year were as follows:
Synairgen Long-Term Incentive Plan
Date of grant
At 1 January 2018
Granted during
the year
Lapsed during
the year
At 31 December 2018
Exercise
price
Earliest
exercise date
Expiry date
Richard Marsden
7 September 2009
8 September 2010
21 September 2011
27 October 2015
5 April 2018
Dr Phillip Monk
21 September 2011
27 October 2015
5 April 2018
John Ward
7 September 2009
8 September 2010
21 September 2011
27 October 2015
5 April 2018
605,000
246,889
538,063
387,931
–
–
–
–
–
880,903
400,212
280,172
–
–
–
636,208
100,000
224,445
489,148
301,724
–
–
–
–
–
685,147
–
–
–
(387,931)
–
–
(280,172)
–
–
–
–
(301,724)
–
605,000
246,889
538,063
–
880,903
400,212
–
636,208
100,000
224,445
489,148
–
685,147
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
7 Sept 2012
6 Sept 2019
8 Sept 2013
7 Sept 2020
21 Sept 2014
20 Sept 2021
27 Oct 2018
26 Oct 2025
5 Apr 2021
4 Apr 2028
21 Sept 2014
20 Sept 2021
27 Oct 2018
26 Oct 2025
5 Apr 2021
4 Apr 2028
7 Sept 2012
6 Sept 2019
8 Sept 2013
7 Sept 2020
21 Sept 2014
20 Sept 2021
27 Oct 2018
26 Oct 2025
5 Apr 2021
4 Apr 2028
No options were exercised by directors during the year.
Synairgen Qualifying Non-Employee Option Scheme
Date of grant
Iain Buchanan
28 June 2010
Paul Clegg
7 September 2009
At 1 January and
31 December 2018
Exercise
price
Earliest
exercise date
Expiry date
212,765
23.5p
28 June 2013
27 June 2020
250,000
20p
7 Sept 2012
6 Sept 2019
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 2018 was 13.25p. During the year then ended, the mid-market price ranged from
11.25p to 26.00p. On 22 February 2019 the closing price was 16.25p.
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Directors’ Remuneration Report
(continued)
Report of the Audit Committee
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 2018 and has
been audited by the Company’s auditor, BDO LLP.
In September 2018 the Company adopted the QCA Corporate
Governance Code and as a result an audit committee report
has been prepared for the first time for the year ended
31 December 2018.
Directors’ remuneration
The remuneration received by directors who served during the years ended 31 December 2018 and 2017 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)
186
135
145
30
25
25
30
25
601
–
–
–
–
–
–
–
–
–
2
1
4
–
–
–
–
–
7
Year ended 31 December 2018
Total (incl.
pension)
Pension
Total (excl.
pension)
Year ended 31 December 2017
Total (incl.
pension)
Pension
Total (excl.
pension)
188
136
149
30
25
25
30
25
17
12
13
–
–
–
–
–
205
148
162
30
25
25
30
25
320
229
250
30
25
25
30
25
16
12
13
–
–
–
–
–
336
241
263
30
25
25
30
25
608
42
650
934
41
975
(i) Richard Marsden was the highest paid director during the years ended 31 December 2018 and 2017. 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 2017 bonus awards were paid after the completion of the statutory audit.
In respect of key management personnel, for the year ended 31 December 2018, the total share-based payment amounted to
£78,000 (2017: £98,000) and total social security costs were £62,000 (2017: £106,000).
By order of the Board
Paul Clegg
Chairman of the Remuneration and Nomination Committee
22 February 2019
Constitution and membership
The Audit Committee (the ‘Committee’) has primary responsibility
for ensuring that the financial performance of the Group
is properly measured and reported on. It was established
in October 2004 and its terms of reference are outlined
in the Corporate Governance Statement on page 20.
The members of the Committee during the year under review and
at the date of this report are 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.
Matters covered by the Committee
The Committee, which is required to meet at least twice a year,
met five times during the year ended 31 December 2018, with
all members present, and covered the following matters:
• January 2018: planning meeting for the 2017 year-end audit,
including agreement of audit scope, materiality, areas of
audit focus, accounting treatment for the renegotiation of
collaboration agreement with Pharmaxis, audit fees and
auditor independence.
• March 2018: audit completion meeting for the 2017 year-end
audit, including review of the valuation model to support
Synairgen plc’s investment in Synairgen Research Limited,
review of the financial forecast to support the Group’s ability
to account on a going concern basis, review of the auditor’s
report on the audit, and review of the annual report.
• August 2018: planning meeting for the 2018 interim review,
including agreement of scope, materiality and areas of
focus, and review of new International Financial Reporting
Standards.
• September 2018: interims completion meeting for 2018,
including review of report from the Company’s auditors.
• December 2018: planning meeting for the 2018 year-end
audit, including agreement of audit scope, materiality, areas
of audit focus, audit fees and auditor independence.
The Committee also met in February 2019 for the audit completion
meeting for the 2018 year-end audit, including review of the
valuation model to support Synairgen plc’s investment in Synairgen
Research Limited, review of the financial forecast to support the
Group’s ability to account on a going concern basis, review of the
auditor’s report on the audit, and review of the annual report.
BDO, the Company’s auditors, were present at all meetings.
John Ward, the Company’s Finance Director, was present at all
meetings, except for when his performance was being discussed
by the Committee.
Auditor independence
As set out in the Corporate Governance Statement on page 20, 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 for tax advice during the year (as detailed
in note 4 to the Financial Statements on page 39) amounted to
£16,000 and in relation to a Group audit fee of £32,000 are not
deemed to be of such significance to them as to impair their
independence.
Internal audit function
The Group does not have an internal audit function, but the
Committee considers that this is appropriate, given the size and
relative lack of complexity of the Group. The Committee keeps this
matter under review annually.
Simon Shaw
Chairman of the Audit Committee
22 February 2019
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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 2018.
The review of future developments is covered in the Outlook
section of 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 2018, the Group has
invested £3,232,000 (2017: £2,061,000) in research and
development activities and a review of this expenditure is
included in the Strategic Report.
Going concern
The directors have prepared financial forecasts to estimate
the likely cash requirements of the Group over the next twelve
months, given its stage of development and lack of recurring
revenues. In preparing these financial forecasts, the directors
have made certain assumptions with regards to the timing and
amount of future expenditure over which they have control. The
directors have attempted to take a prudent view in preparing
these forecasts, recognising the inherent variability in costs of
the ongoing Phase II clinical trial.
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.
Treasury policy and financial risk management
The Group’s treasury policy and financial risk management is set
out in note 16 to the financial statements on pages 43 and 44.
Dividends
The directors do not propose the payment of a dividend.
Substantial shareholdings
As at 22 February 2019, 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
24,316,651
Lansdowne Partners International Limited
20,673,111
Richard Griffiths
Leonard Licht
15,391,112
10,700,000
Southampton Asset Management Limited
3,600,000
22.2%
18.9%
14.1%
9.8%
3.3%
Directors
The directors of the Company during the year ended
31 December 2018 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 2018, had the
following interests in the ordinary shares of the Company:
Richard Marsden (i)
Dr Phillip Monk
John Ward
Simon Shaw (ii)
Iain Buchanan
Dr Bruce Campbell (iii)
Paul Clegg (iv)
Prof. Stephen Holgate (v)
31 December 2018
Number of shares
1 January 2018
Number of shares
310,682
230,314
339,006
154,432
183,439
276,506
1,474,096
1,474,096
112,741
294,259
204,244
858,360
112,741
294,259
204,244
858,360
(i) Richard Marsden’s shareholding includes 156,250 shares held in his pension plan.
(ii) Simon Shaw’s shareholding includes 105,516 shares held in his pension plan.
(iii) Dr Bruce Campbell’s shareholding includes 40,299 shares owned by his wife,
Susan Campbell.
(iv) Paul Clegg’s shareholding includes 180,149 shares held in his pension plan.
(v) Prof. Stephen Holgate’s shareholding includes 1,923 shares owned by his wife,
Elizabeth Holgate.
Between 31 December 2018 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 to 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
22 February 2019
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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 keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and 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 Group and 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 Group’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of
the financial statements contained therein.
By order of the Board
John Ward
Company Secretary
22 February 2019
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 will
continue in business.
Opinion
We have audited the financial statements of Synairgen plc (the
‘parent company’) and its subsidiary (the ‘group’) for the year
ended 31 December 2018 which comprise the Consolidated
Statement of Comprehensive Income, Consolidated Statement
of Changes in Equity, Consolidated Statement of Financial
Position, 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 2018 and of the group’s loss for the year
then ended;
• the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company 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.
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
In respect of our audit of the group financial
statements we have determined that there are no
key audit matters to communicate in our report.
Key audit matters impacting the parent company
financial statements only
Investment in subsidiary: impairment review
As at 31 December 2018, the company held an investment of
£24.3m 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.
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Independent Auditor’s Report
to the members of Synairgen plc
(continued)
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 a significant audit risk.
How We Addressed the Key Audit Matter in the Audit
We challenged the impairment review prepared by
management through assessing the appropriateness
of the key assumptions including:
• The discount rate – through use of specialists
and carrying out sensitivity analysis;
• The scale of the market opportunities – with reference to
third party sources such as medical journals and publicly
available information in respect of the structure and
quantum of transactions involving similar assets; and
• The risk-weighting of estimated future cash flows -
ensuring, through third party sources, that these
weightings are in line with industry valuation practice.
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.
We also considered the adequacy of the disclosures in the
financial statements relating to the directors’ assessment.
Our application of materiality
Group Materiality: £200,000 (2017: £170,000).
Parent Company materiality: £140,000 (2017: £110,000).
Our group materiality was based upon 5% of the loss
before tax for the year (2017: 5% of the normalised loss
before tax for the year) from research and development
activities. We consider 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 £140,000 to £180,000.
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 £4,000 (2017: £8,500). 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 were subject to
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 the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and 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 29, 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.
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.
Ian Oliver (Senior Statutory Auditor)
For and on behalf of
BDO LLP, Statutory Auditor
Reading, United Kingdom
22 February 2019
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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Consolidated Statement
of Comprehensive Income
for the year ended 31 December 2018
Consolidated Statement
of Financial Position
as at 31 December 2018
Revenue
Research and development expenditure
Other administrative expenses
Total administrative expenses
(Loss)/Profit from operations
Finance income
(Loss)/Profit before tax
Tax
(Loss)/Profit and total comprehensive (loss)/income for the
period attributable to equity holders of the parent
(Loss)/Earnings per ordinary share
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2018
Year ended
31 December 2018
£000
Year ended
31 December 2017
£000
Notes
105
(3,232)
(1,005)
(4,237)
(4,132)
36
(4,096)
795
(3,301)
(3.47)p
(3.47)p
5,025
(2,061)
(1,349)
(3,410)
1,615
14
1,629
132
1,761
1.93p
1.87p
4
6
7
8
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Retained
deficit
£000
Total
£000
18b
18c
18d
25,771
483
(22,483)
4,685
Note
At 1 January 2017
Recognition of share-based payments
Profit and total comprehensive income for the year
At 31 December 2017
Issue of ordinary shares
Transaction costs in respect of share issue
Recognition of share-based payments
Loss and total comprehensive loss for the year
18a
914
–
–
914
180
–
–
–
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 2018
£000
31 December 2017
£000
9
10
11
12
13
14
15
17
17
18
18
29
374
403
56
795
216
50
5,284
6,401
6,804
(777)
(777)
6,027
45
12
57
56
71
633
2,000
4,845
7,605
7,662
(1,103)
(1,103)
6,559
1,094
28,262
483
(23,812)
6,027
914
25,771
483
(20,609)
6,559
–
–
25,771
2,700
(209)
–
–
–
–
113
1,761
483
(20,609)
–
–
98
–
–
–
–
(3,301)
(3,301)
113
1,761
6,559
2,880
(209)
98
The financial statements on pages 33 to 46 were approved and authorised for issue by the Board of directors on 22 February 2019 and signed on
its behalf by:
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
At 31 December 2018
1,094
28,262
483
(23,812)
6,027
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Consolidated Statement of Cash Flows
for the year ended 31 December 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Cash flows from operating activities
(Loss)/Profit before tax
Adjustments for:
Finance income
Depreciation
Amortisation
Share-based payment charge
Cash flows from operations before changes in working capital
Increase in inventories
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
Cash (used in)/generated from operations
Tax credit received
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
Decrease/(Increase) in other financial assets
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Transaction costs in respect of share issue
Net cash generated from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Year ended
31 December 2018
£000
Year ended
31 December 2017
£000
(4,096)
1,629
(36)
24
16
98
(3,994)
–
426
(326)
(3,894)
71
(3,823)
27
(386)
1,950
1,591
2,880
(209)
2,671
439
4,845
5,284
(14)
7
17
113
1,752
(1)
(548)
243
1,446
621
2,067
19
(6)
(339)
(326)
–
–
–
1,741
3,104
4,845
1. Accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively ‘IFRSs’) as adopted by the European Union (‘Adopted IFRSs’) and with those parts of the Companies
Act 2006 applicable to companies preparing their financial statements under IFRSs.
The accounting policies adopted are consistent with those of the previous financial year except for the adoption of IFRS 9 and IFRS 15.
Adoption of new standards
IFRS 9
The Group adopted IFRS 9 Financial Instruments, which addresses the classification, measurement and derecognition of financial assets and
financial liabilities, on 1 January 2018, considering the cumulative impact at this date in assessing whether an adjustment to opening reserves is
required. This standard also had no financial impact on either the current or comparative periods.
IFRS 15
IFRS 15 Revenue from Contracts with Customers has replaced IAS 18, effective for accounting periods beginning on or after 1 January 2018. The
Group has transitioned to the new standard through means of the cumulative effect method as at 1 January 2018 (the date of initial application).
It has performed an impact assessment, taking advantage of the practical expedient not to apply IFRS 15 to any contracts that were completed
contracts at that date and, instead, to continue to apply IAS 18 to those contracts. No material transitional entries were required on the
adoption of IFRS 15 at its date of initial application. An explanation of the accounting treatment adopted for completed contracts in all periods
presented, and in future accounting periods, is set out in the revenue accounting policy below.
The recognition policy for future revenues, which may arise from new collaboration or licensing agreements signed after 1 January 2018, will be
considered under IFRS 15, when they arise.
New standards and interpretations not applied
There is one major new IFRS issued by the IASB which is mandatory for periods shown below:
IFRS
Title
IFRS 16
Leases
Effective for periods
beginning on or after
1 January 2019
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 is cancellable by the Group
on three months’ notice, and which will need to be considered under IFRS 16. As the lease commitment is less than one year, the Group expects to
adopt the practical expedient not to recognise a right-of-use asset and the associated liability.
The Directors do not anticipate that the adoption of 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.
Going concern
The directors have prepared financial forecasts to estimate the likely cash requirements of the Group over the next twelve months, given its stage
of development and lack of recurring revenues. In preparing these financial forecasts, the directors have made certain assumptions with regards to
the timing and amount of future expenditure over which they have control. The directors have attempted to take a prudent view in preparing these
forecasts, recognising the inherent variability in costs of the ongoing Phase II clinical trial.
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.
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (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 50) made up to the reporting date. All intra-group transactions, balances, income and
expenses are eliminated on consolidation. The formation of the Group arose from merger accounting and as the business combination took place
prior to 1 July 2006, the date of transition to IFRS, the transaction has not been restated as permitted by IFRS 1 “First-time Adoption of International
Financial Reporting”.
Revenue
Revenue is stated net of value added tax.
The Group’s licensing and collaboration agreement with Pharmaxis in respect of the jointly developed LOXL2 inhibitors was renegotiated in
December 2017. As no substantive performance obligations remained at 1 January 2018, it was treated as a completed contract on transition to
IFRS 15 and the Group elected to account for the income related to it in the 2017 financial year, together with any future income resulting from the
Group’s share of its partner’s future income from the collaboration, under IAS 18. Only the up-front receipt was recognised as revenue in 2017,
as a reliable estimate of the other amounts which might be received could not be made at that time. Revenue from other amounts which may be
received in future under this agreement, will be recognised when a reliable estimate can be made, which is likely to be when the partner’s income
has been earned and the Group’s share is contractually due.
Revenue from the provision of services (which is not considered to be material in the current or prior year) is recognised over time, based on the
estimated stage of completion of the contracted work.
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
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated
statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of
equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based
on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Intangible assets
Intangible assets are stated at cost less any accumulated amortisation and any accumulated impairment losses. Patent costs are amortised over
ten years on a straight-line basis and the amortisation cost is charged to research and development expenditure in the consolidated statement of
comprehensive income.
Property, plant and equipment
Property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is
provided on a straight-line basis at rates calculated to write off the cost of property, plant and equipment less their estimated residual value over
their expected useful lives, which are as follows:
Computer equipment:
Laboratory and clinical equipment:
3 years
5 years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying
value may not be recoverable.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s consolidated statement of financial position when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets
The Group classifies its financial assets as financial assets held at amortised cost.
These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. 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.
The Group’s financial assets measured at amortised cost 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 highly liquid
investments with original maturities of three months or less.
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.
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.
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 (losses)/profits were generated in that territory. The revenue generated in 2018 was generated from one customer (2017: two customers).
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (continued)
4. (Loss)/Profit from operations
The (loss)/profit from operations has been arrived at after charging:
6. Finance income
For the years ended 31 December 2018 and 2017 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
2018
£000
24
16
72
93
2018
£000
18
14
5
8
8
53
2018
9
3
12
2018
£000
729
84
94
907
(8)
98
997
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
7. Taxation
Current tax
UK corporation tax credit on (loss)/profit for the year
Adjustment in respect of prior years
Total income tax credit
The tax assessed on the (loss)/profit on ordinary activities for the year is different to the standard
rate of corporation tax in the UK of 19% (2017: 19.25%). The differences are reconciled below:
(Loss)/Profit on ordinary activities before tax
(Loss)/Profit on ordinary activities before tax multiplied by the standard rate of
corporation tax in the UK
Effects of:
Tax relief on share option exercises
Expenses not deductible for tax purposes
Enhanced research & development relief
Variable rates on tax losses surrendered for research & development tax credit
Movement in unrecognised losses and temporary differences
Overprovision in respect of previous years
Total tax credit for the current year
2018
£000
(795)
–
(795)
2018
£000
(4,096)
(778)
(2)
19
(620)
247
339
–
(795)
2017
£000
(71)
(61)
(132)
2017
£000
1,629
314
–
22
(452)
23
22
(61)
(132)
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 differences are expected to reverse.
Recognised deferred taxation
Accelerated capital allowances
Other temporary differences
Trading losses
Charge for the year
2018
£000
62
(2)
(60)
–
2017
£000
1
(1)
–
–
For the purpose of presentation in the Consolidated Statement of Comprehensive Income, remuneration costs of £507,000 (2017: £668,000) are
included in research and development expenditure and £490,000 (2017: £781,000) 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 25, which are ascribed
as forming part of these financial statements.
Unrecognised deferred taxation
At 31 December 2018 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to
£14,964,000 (2017: £12,978,000) and non-trading losses of £2,222,000 (2017: £2,016,000). At 31 December 2018 the Group has an unrecognised
deferred tax asset in respect of these losses of £2,922,000 (2017: £2,549,000). 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 £429,000 (2017: £369,000) and
a deferred tax asset of £73,000 (2017: £63,000) 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.
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (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. (Loss)/Earnings per ordinary share
2018
£000
(2,612)
(383)
(2,995)
2017
£000
(2,667)
55
(2,612)
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to ordinary equity holders of the parent company by the
weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary
shares, being share options where the exercise price is less than the average market price of the Company’s ordinary shares during the year and
where performance conditions have been met or, in the case of options where the performance period is not completed, are being met.
Where there is a loss (as for the year ended 31 December 2018), the loss attributable to ordinary shareholders and weighted average number
of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic loss per share.
This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore antidilutive under the
terms of IAS 33.
The (losses)/earnings and the number of weighted average number of shares used in the calculations are as follows:
Basic (loss)/earnings per share
Effect of additional shares under option
Losses
£000
(3,301)
–
Shares
000
95,263
–
Diluted (loss)/earnings per share
(3,301)
95,263
2018
LPS
pence
(3.47)
–
(3.47)
Earnings
£000
1,761
–
1,761
Shares
000
91,363
2,873
94,236
2017
EPS
pence
1.93
(0.06)
1.87
9. Intangible assets
Cost
At 1 January 2017, 31 December 2017 and 2018
Amortisation
At 1 January 2017
Charge for the year
At 31 December 2017
Charge for the year
At 31 December 2018
Net book amount
At 31 December 2018
At 31 December 2017
At 1 January 2017
Patent costs
£000
212
150
17
167
16
183
29
45
62
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Depreciation
At 1 January 2017
Charge for the year
At 31 December 2017
Charge for the year
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
At 1 January 2017
11. Inventories
Raw materials
Raw materials comprises the Group’s BioBank.
12. Trade and other receivables
Amounts receivable within one year:
Trade receivables
Other tax and social security
Prepayments and accrued income
13. Other financial assets – bank deposits
Amounts receivable within one year:
Sterling floating rate deposit of greater than three months’ maturity at inception
Computer
equipment
£000
Laboratory and
clinical equipment
£000
37
3
40
4
44
32
5
37
2
39
5
3
5
135
3
138
382
520
127
2
129
22
151
369
9
8
2018
£000
56
2018
£000
–
81
135
216
2018
£000
50
Total
£000
172
6
178
386
564
159
7
166
24
190
374
12
13
2017
£000
56
2017
£000
292
69
272
633
2017
£000
2,000
At 31 December 2018 £29,000 (31 December 2017: £45,000) of the net book amount relates to interferon beta patent costs.
41 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (continued)
14. Cash and cash equivalents
16. Financial instruments (continued)
Cash available on demand
At 31 December 2018, £2,000,000 (2017: £1,000,000) was on 32 days’ notice.
15. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
16. Financial instruments
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
2018
£000
5,284
2018
£000
305
44
428
777
2017
£000
4,845
2017
£000
282
94
727
1,103
Notes
(i)
2018
Book and fair value
£000
2017
Book and fair value
£000
56
50
5,284
5,390
506
2,000
4,845
7,351
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 2018 had a weighted average period to maturity of 53 days and a weighted average annualised rate of interest of 0.85%
(2017: 95 days, 0.70%).
Sensitivity analysis
It is estimated that an increase of quarter of one percentage point in interest rates would have decreased/increased the Group’s (loss)/profit before
taxation by approximately £14,000 (2017: £9,000).
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 2018
and 31 December 2017 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 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.
Currency risk
During the year under review, the Group was exposed to Euro currency movement as pharmaceutical development costs for the interferon
beta trial were denominated in Euros. To hedge against currency movement, the Group purchased Euros before the payment was due.
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 2018 amounted to £6.03 million (2017: £6.56 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 2018 amounted to £5.33 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:
Trade and other payables (less than one year)
(ii)
733
1,009
(i) Trade and other receivables shown above excludes prepayments and other taxes, which are not a contractual right to receive cash,
amounting to £160,000 (2017: £127,000).
(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 £44,000 (2017: £94,000).
Short-term deposits
Cash and cash equivalents
Net funds
2018
£m
0.05
5.28
5.33
2017
£m
2.00
4.85
6.85
2016
£m
1.66
3.11
4.77
2015
£m
3.72
3.99
7.71
31 Dec
2014
£m
6.75
2.85
9.60
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, credit risk and currency risk.
The Group did not have any bank borrowings as at 31 December 2018 (2017: £nil).
Interest rate risk
The Group’s deposit balances are subject to the risk of fluctuating base rates.
Interest rate risk profile of financial assets, excluding short-term debtors:
There have been eight significant issues of shares raising a total (net of costs) of £29.72 million, with the most recent raising £2.67 million in October
2018. The other major sources of funding received by the Group from the formation of the business until 31 December 2018 have been: revenues
from licensing transactions of £9.25 million, research and development tax credits of £3.74 million, bank interest of £1.76 million, and revenues from
collaborative work of £0.79 million.
Australian Dollar
Euro
Sterling
2018
Floating rate
financial assets
£000
2017
Floating rate
financial assets
£000
–
8
5,326
5,334
1
1
6,843
6,845
43 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2018| 44
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (continued)
17. Share capital, share premium and share-based payment
At 1 January 2017 and 2018
Issuance of ordinary shares
Costs of issuance of shares
At 31 December 2018
Notes
(i) - (ii)
Number
of shares
91,362,612
18,070,830
–
Ordinary shares
of 1p each
£000
914
180
–
109,433,442
1,094
Share
premium
£000
25,771
2,700
(209)
28,262
Total
£000
26,685
2,880
(209)
29,356
(i) 70,205 ordinary shares of 1p were issued on 29 March 2018 at par following the exercise of share options under the Company’s long term incentive plan (LTIP).
(ii) 18,000,625 ordinary shares of 1p each were issued on 15 October 2018 at a premium of 15p to fund an increase in the size of the Phase II clinical trial in COPD,
to enable investment in new opportunities and to provide working capital.
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.
The Group uses a number of share-based incentive schemes as detailed above and in the Directors’ Remuneration Report on pages 22 and 23.
The fair value per award granted and the assumptions are as follows:
Date of Grant
7 Sept 2009
7 Sept 2009
28 Jun 2010
8 Sept 2010
21 Sept 2011
5 Apr 2018
Type of
award
Number of
shares
Exercise
price (p)
Share price
at date of
grant (p)
Fair value per
option (p)
Award life
(years) Risk free rate
Expected
volatility
rate
Performance
conditions
LTIP
QNEOS
QNEOS
LTIP
LTIP
LTIP
705,000
250,000
212,765
471,334
1,626,404
2,822,316
6,087,819
1p
20p
23.5p
1p
1p
1p
18.5p
18.5p
23.5p
24.25p
22.5p
13.0p
7.1p
4.0p
5.6p
12.1p
13.4p
7.5p
3
5
5
3
3
3
2.09%
2.67%
2.09%
0.92%
0.79%
0.90%
30%
30%
30%
40%
56%
56%
Market
Market
Market
Market
Market
Market
The Company has applied IFRS 2 to all the above share-based payments and the following comments apply to these options:
All issued shares are fully paid.
(i) Stochastic valuation methodology was used for all awards.
Options
At 31 December 2018 there were options outstanding over 6,087,819 un-issued ordinary shares, equivalent to 5.6% 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)
5 April 2018 (LTIP)
705,000
250,000
212,765
471,334
1,626,404
2,822,316
6,087,819
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
5 April 2021
4 April 2028
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 the year
Granted during the year
Exercised during the year
Lapsed during the year
Number of outstanding options at year-end
Number
4,529,237
2,822,316
(70,205)
(1,193,529)
6,087,819
2018
Weighted average
exercise price
3.1p
1.0p
1.0p
1.0p
2.6p
Number
5,629,647
–
–
(1,100,410)
4,529,237
2017
Weighted average
exercise price
2.9p
n/a
n/a
2.0p
3.1p
(ii) Expected dividend yield is nil, consistent with the Directors’ view that the Group’s model is to generate value through capital growth rather than payment of dividends.
(iii) The risk free rate is equal to the prevailing UK Gilts rate at grant date that most closely matches the expected term of the grant.
(iv) The fair value charge is spread evenly over the expected vesting period.
(v) The charge for the year ended 31 December 2018 for share-based payment amounted to £98,000 (2017: £113,000).
18. Capital and reserves
18a Share capital
Share capital represents the nominal value of shares issued.
18b Share premium
Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues.
18c Merger reserve
The merger reserve represents the reserve arising on the acquisition of Synairgen Research Limited on 11 October 2004 via a share for share
exchange accounted for as a Group reconstruction using merger accounting under UK GAAP.
18d Retained deficit
The retained deficit represents cumulative net gains and losses recognised in the consolidated statement of comprehensive income, adjusted for
cumulative recognised share-based payments.
19. Commitments under operating leases
The total future value of minimum lease payments committed at the balance sheet date under non-cancellable operating leases is due as follows:
Not later than one year
Land and buildings
Other
2018
£000
18
23
41
2017
£000
18
23
41
At 31 December 2018, 3,265,503 share options were capable of being exercised, with exercise prices ranging from 1p to 23.5p (2017: 3,335,708,
with exercise prices ranging from 1p to 23.5p). The options outstanding at 31 December 2018 had a weighted average remaining contractual life of
5.3 years (2017: 4.2 years). Vesting conditions are disclosed in the Directors’ Remuneration Report.
20. Related party transactions and balances
Details of key management personnel and their compensation are given in note 5 and on page 25 of the Directors’ Remuneration Report. .
45 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
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Parent Company Balance Sheet
as at 31 December 2018
Notes to the Parent Company Financial Statements
for the year ended 31 December 2018
Notes
31 December 2018
£000
31 December 2017
£000
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).
1. Accounting policies
Basis of preparation
24,262
20,072
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:
Disclosure exemptions adopted
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
118
50
5,125
5,293
(42)
5,251
29,513
1,094
28,262
157
29,513
124
2,000
4,792
6,916
(38)
6,878
26,950
914
25,771
265
26,950
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 2018 was £206,000 (2017: loss of £204,000).
The financial statements on pages 47 to 50 were approved and authorised for issue by the Board of directors on 22 February 2019 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 2018
At 1 January 2017
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2017
Issuance of ordinary shares
Transaction costs in respect of share issues
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2018
Share
capital
£000
914
Share premium
account
£000
25,771
–
–
914
180
–
–
–
–
–
25,771
2,700
(209)
–
–
1,094
28,262
Retained
earnings
£000
Shareholders’
funds
£000
356
(204)
113
265
–
–
(206)
98
157
27,041
(204)
113
26,950
2,880
(209)
(206)
98
29,513
• 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.
Going Concern
The directors have prepared financial forecasts for the next twelve months to estimate the likely cash requirements of the Company and its
subsidiary Synairgen Research Ltd, to which the Company has confirmed its intention to provide financial support for a period of not less than
one year from the date that its financial statements for the year ended 31 December 2018 are signed, given its stage of development and lack of
recurring revenues. In preparing these financial forecasts, the directors have made certain assumptions with regards to the timing and amount of
future expenditure over which they have control. The directors have attempted to take a prudent view in preparing these forecasts, recognising
the inherent variability in costs of the ongoing Phase II clinical trial being conducted by Synairgen Research Ltd.
After due consideration of these forecasts and current cash resources, the Directors consider that the Company has 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.
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, except for the adoption of IFRS 9.
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 financial assets held at amortised cost.
These assets incorporate types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the
contractual cash flows are solely payments of principal and interest. 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.
The Company’s financial assets measured at amortised cost comprise debtors, investments: short-term deposits and cash and cash equivalents
in the balance sheet. Investments: short-term deposits 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 highly liquid investments with original maturities of
three months or less.
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.
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Notes to the Parent Company Financial Statements
Notes to the Parent Company Financial Statements
for the year ended 31 December 2018 (continued)
for the year ended 31 December 2018 (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.
Deferred tax balances are not discounted.
Share capital
The Company’s ordinary shares are classified as equity instruments. Financial instruments issued by the Company are classified as equity only to the
extent that they do not meet the definition of a financial liability or financial asset.
2. 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 £24.3 million (2017: £20.1 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
The only employees of the Company during 2018 and 2017 were the three executive directors. Their aggregate remuneration, which is borne by
the Company’s subsidiary undertaking, comprised:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Total cash-settled remuneration
Accrued holiday pay
Share-based payment
Total remuneration
2018
£000
456
60
53
569
(9)
78
638
2017
£000
785
106
52
943
5
98
1,046
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 25, which are ascribed as forming part of these financial statements.
Auditor’s remuneration is disclosed in note 4 to the Group accounts on page 39.
At 1 January 2018
Capital contribution for the year
Subsidiary share-based payment
At 31 December 2018
Investment in
subsidiary
undertaking
£000
140
–
–
140
Capital
contribution
£000
19.932
4,092
98
24,122
Total
£000
20,072
4,092
98
24,262
At 31 December 2018, the Company has an investment in the following subsidiary undertaking:
Registered address
Proportion of voting rights
and ordinary share capital held
Nature of business
Mailpoint 810,
Southampton General Hospital,
Tremona Road,
Southhampton SO16 6YD
100%
Drug discovery and development
Name of company
Synairgen Research Limited
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
Trade creditors
Accruals and deferred income
7. Share capital and share premium
2018
£000
3
115
118
2018
£000
5
37
42
2017
£000
4
120
124
2017
£000
4
34
38
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 45 and 46.
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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,
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
Level 12, Thames Tower, Station Road,
Reading RG1 1LXL
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
(aka SNG001) used for the AstraZeneca
INEXAS study. See INEXAS
Bacteria
Single-cell organisms that are found
everywhere and are the cause of
many diseases
BCSS
The breathlessness, cough and
sputum scale (BCSS) is a three-item
questionnaire, rating breathlessness,
cough and sputum on a 5-point scale
from 0 (no symptoms) to 4 (severe
symptoms)
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
CAT
The COPD Assessment Test (CAT) is a
patient-completed questionnaire, which
assists patients and their physicians in
quantifying the impact of COPD on the
patient’s health and quality of life
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
Exacerbation
A rapid deterioration of a chronic
disease that makes the symptoms
worse
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
Double-blind
A double-blind study is one in
which neither the patients nor the
clinical staff know who is receiving
a particular treatment
DSMC
A Data Safety Monitoring
Committee (DSMC) reviews and
assesses safety information from a
clinical trial
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
FEV1
Forced Expiratory Volume in the
first second. The volume of air that
can be forced out in one second
after taking a deep breath, an
important measure of pulmonary
function
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
BIOFIRE® FILMARRAY®
A system which enables rapid
simultaneous testing for a panel
of viruses and bacteria in patient
samples and is used by Synairgen
in SG015
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
I-neb
A nebuliser manufactured by
Philips that delivers inhaled drugs
to the airway
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
51 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2018 | 52
Glossary (continued)
Peak expiratory flow
A lung function test that measures
a person’s ability to breathe out air
Pharmaxis or
Pharmaxis Limited
An established pharmaceutical
research company based in
Australia with whom Synairgen
collaborated in the LOXL2
programme. Pharmaxis is quoted
on the Australian Securities
Exchange (ASX) under the code
PXS. Its website address is
www.pharmaxis.com.au
Phase I Clinical Trial
A study conducted in volunteers
to determine the biological effects
of a drug, especially safety and
tolerability
Phase II Clinical Trial
A study in patients with the
aim of making a preliminary
determination of the efficacy of a
drug to provide proof of concept
and/or to study drug dose ranges
Phase IIa Clinical Trial
Used to describe a Phase II clinical
trial evaluating efficacy, adverse
effects and safety risks
Phase IIb Clinical Trial
Used to describe a subsequent
Phase II clinical trial that also
evaluates dosage tolerance and
optimal dosage frequency in a
larger number of patients than
enrolled in a Phase IIa trial
Phase III Clinical Trial
A full scale clinical trial to determine
drug efficacy and safety prior to
seeking marketing approval
Phlegm
See Sputum
Placebo
An inactive substance or
preparation used as a control/
comparator (in a clinical trial
for example) to determine the
effectiveness of a medicinal drug
Pre-candidate
A chemical compound that has
pharmacological or biological
activity likely to be therapeutically
useful but which has not yet met all
the criteria that are required to be
a candidate drug
Seasonal Influenza
Seasonal influenza is a yearly
outbreak of influenza infection,
caused by influenza virus. The
seasonal influenza is somewhat
different every year, as influenza
viruses are always changing
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
Randomisation
The random assignment of
patients in a clinical trial to different
treatment groups (e.g. active drug
or placebo)
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
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 phase II study
in COPD patients without (Part 1)
and with (Part 2) a confirmed
respiratory virus infection,
assessing antiviral biomarker
responses and clinical effects
of inhaled SNG001 compared
to placebo
SNG001
A formulation of Interferon Beta-
1a delivered to the lung using
a nebuliser, used in SG005, the
INEXAS study and SG015
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
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
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