Annual Report
and Accounts
2019
a deeper
understanding
of respiratory
biology
Stock symbol: LSE:SNG
www.synairgen.com
Contents
Introduction
Highlights
Business Review
Strategic Report
Governance
Synairgen’s Founders
Directors
Corporate Governance Statement
Directors’ Remuneration Report
Report of the Audit Committee
Directors’ Report
Financials
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the
members of Synairgen plc
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
2
3
10
11
13
17
22
23
25
26
29
29
30
31
Notes to the Consolidated Financial Statements 32
Parent Company Balance Sheet
46
Parent Company Statement of Changes in Equity 46
Notes to the Parent Company
Financial Statements
Other
Corporate Directory
Glossary
47
50
50
Highlights
(including post period-end)
Operational highlights
Financial highlights
• In March 2020, Synairgen raised £14.0 million in a
heavily oversubscribed equity issue to fund its COVID-19
related activities and strengthen its balance sheet.
• Research and development expenditure for the year
amounted to £3.46 million (2018: £3.23 million) and
the majority of this expenditure was focussed on
running the IFN-beta Phase II clinical trial in COPD.
• The loss from operations for the year ended
31 December 2019 was £4.82 million
(2018: loss £4.13 million).
• Cash and bank deposits of £2.45 million at
31 December 2019 (31 December 2018: £5.33 million).
• Synairgen has paused the SG015 trial of SNG001
(inhaled interferon-beta 1a) in COPD patients due to
the prevalence of COVID-19 in the community, with
109 out of 120 patients recruited. The Company has
received approval from the Medicines and Healthcare
products Regulatory Agency (MHRA) to conduct an
unplanned interim analysis on the grounds that
data from the 109 COPD patients with confirmed
viral infection generates useful safety, biomarker
and potentially efficacy data to support ongoing
trials of SNG001 in COVID-19 patients. The results
of this interim analysis are expected this Summer.
• In March 2020, Synairgen announced it had
received expedited approvals from the MHRA
and Health Research Authority (HRA) to conduct a
trial of SNG001 in COVID-19 patients (SG016).
• The SG016 study has progressed well, with 98
patients out of the target of 100 now dosed
in the hospital setting. Results from this part
of the study are expected in July 2020.
• Synairgen is extending the SG016 study to patients
in the home environment with confirmed COVID-19,
to initiate dosing with SNG001 (or placebo) earlier
in the course of the illness and before severe lower
respiratory tract symptoms develop. Dosing in the home
environment is expected to commence in May 2020.
www.synairgen.com
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Strategic Report
The directors present their Strategic Report
for the year ended 31 December 2019.
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), idiopathic pulmonary
fibrosis (IPF) and respiratory viruses such as COVID-19. 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 50 to 52
provides additional explanation of some of the more detailed
scientific and clinical terminology.
Operating Review
Summary
In 2019 we recruited steadily into our SG015 Phase II trial
of SNG001 in patients with COPD. Due to the emergence of
the SARS-CoV-2 virus, which causes COVID-19, recruitment
into this trial was paused from March 2020. Post period-
end, addressing whether SNG001 has potential utility as a
therapeutic for COVID-19 has been a key priority for the
business. Synairgen has commenced a placebo-controlled
trial of SNG001 in hospitalised patients with COVID-19 and is
aiming to commence dosing in home-based ‘at risk’ patients
imminently. We are also investing in the supply chain to
minimise the impact of long lead times in the event that there
is demand for SNG001 to treat COVID-19 patients. Separately,
Synairgen’s partner in the LOXL2 programme, Pharmaxis, has
continued its licensing discussions during the period, which
in time could potentially yield financial benefit to Synairgen.
Progress with SGN001 programme
SNG001 is a formulation of IFN-beta 1a (IFN-beta) for
inhalation via a nebuliser. Compared to injected formulations
of IFN-beta, which have been used extensively as a treatment
for patients with multiple sclerosis, SNG001 is pH neutral and
is free of excipients which may be pharmacologically active
in the airways such as mannitol and human serum albumin.
The relevance of interferons in virus defence
The Type I interferons, such as interferon alpha (IFN-alpha)
and interferon beta (IFN-beta), are key mediators involved in
responses to viral infection. Although these antiviral proteins
bind to the same receptor, they differ in their antiviral and
immunomodulatory effects. Cells produce interferons as an
innate immune response to combat a viral infection. It is this
innate immune response that provides a first line of defence
against viruses until the adaptive immune system generates
antibodies, which clear the virus infection and can provide long
term immunity. IFN-alpha is produced in large quantities by
specialised white blood cells called plasmacytoid dendritic cells
and is approved for use in some systemic infections such as
hepatitis. IFN-beta is made by many cell types, including epithelial
cells and fibroblasts where it is produced as an immediate
local response to viral infection and triggers an antiviral
programme preparing the tissue to fight off the infection.
Various groups have shown that upon infection with a respiratory
virus IFN-beta production is deficient in lung epithelial cells of
patient groups such as those with asthma, COPD, cystic fibrosis,
and also the elderly, who can become severely ill due to common
respiratory viruses (e.g. influenza, RSV, rhinovirus) each winter.1
The reasons for this are being explored, however treatment with
exogenous IFN-beta in vitro has been shown to be protective
irrespective of background co-morbidity risk factors and whether
cells are treated with IFN-beta pre- or post-infection.
SNG001 programme in asthma and COPD
SNG001 has been progressed through three clinical trials in
asthma. A Phase I safety and proof-of- delivery trial showed
a dose-dependent upregulation of antiviral responses
measured in lung (sputum) samples. In two Phase II trials,
SNG001 accelerated a recovery in lung function from the
losses caused by a range of common respiratory viruses.
With the development of an immediate point-of-care testing
system to validate viral infection in patients (bioMérieux
BioFire FilmArray technology) in 2018, the SNG001
programme switched from asthma to COPD, a condition
where the impact of viral infections can be very severe.
COPD patients are approximately five times more likely to
become severely ill due to respiratory viruses than asthmatic
patients,2 and have always been recognised as a larger potential
market for a broad spectrum antiviral product which could
prevent exacerbations or accelerate recovery from exacerbation.
However, half of infectious COPD exacerbations are caused by
bacteria, with no virus present. This meant use of SNG001 in
the context of COPD would be very challenging without a
point-of-care test for viral infections. The bioMérieux BioFire
FilmArray and other technologies which have subsequently
become available, ensure the selection and treatment of solely
those patients where the presence of a virus is confirmed.
In 2018 Synairgen commenced a two-part COPD trial (SG015) to
assess initially, the safety and lung antiviral biomarker responses
to SNG001 in the absence of viral infection. In the first part of
the trial SNG001 was well tolerated in patients with moderate
to severe COPD. We also observed a strong antiviral biomarker
signal, which was comparable to the response previously
observed in asthma. This paved the way to proceed into the
second part of the trial, which was designed to dose 120 patients
with confirmed naturally-occurring respiratory virus infections.
Recruitment into the trial commenced in earnest in January 2019
and was progressing well until the emergence of SARS-CoV-2
which made it difficult to test for virus and dose patients without
potentially exposing them and research staff to SARS-CoV-2 virus.
Hence in March 2020 the trial was paused, with 109 out of the
targeted 120 patients recruited. We have received approval
from the Medicines and Healthcare products Regulatory Agency
(MHRA) to run an unplanned interim analysis on the grounds
that data from 109 COPD patients with confirmed viral infection
generates useful safety, biomarker and potentially efficacy data
to support ongoing trials of SNG001 in COVID-19 patients.
We expect to have data from this interim analysis in the
Summer 2020. In due course we will consider options as
to how to progress SNG001 in COPD.
Rationale for using SNG001 in COVID-19 patients
The high-risk groups for severe COVID-19 illness are the elderly
and those with chronic co-morbidities. These groups overlap
with the observed innate immune deficiency in the elderly and in
patients with COPD, many of whom will have other co-morbidities.
Further to this compromised immunity, some viruses, including
coronaviruses, have evolved to suppress IFN-beta production to
enable them to evade the “first response” immune system.
This therefore provides two reasons to warrant assessment of
SNG001 in COVID-19 patients. In the laboratory, IFN-beta has
been shown to protect cells from infection by SARS-CoV-2,
the virus which causes COVID-19.3
Clinical trial (SG016) in COVID-19 patients
Patients initiated in hospital
In late March 2020, Synairgen dosed the first COVID-19 patients
in a randomised placebo-controlled trial. This trial has received
‘National Priority’ status from the National Institute of Health
Research, thereby enabling 9 top UK respiratory Translational
Research Centre sites to participate. The trial has now recruited
98 COVID-19 patients who are hospitalised but breathing
unaided; the trial does not include severe patients requiring
ventilatory support. There has been a notable slowdown
in recruitment during the last three weeks as the incidence
of COVID-19 has reduced, but we would hope to reach our
recruitment target of 100 shortly. A planned review of the data
will inform onward clinical trial activity, which will be agreed
with regulatory agencies. Conducting high quality clinical trials
in the current environment is very challenging. It is the efforts
and support of the participating centres and key contributing
partners, suppliers and the regulatory bodies which have
enabled this trial to happen quickly. We anticipate producing
initial trial data in July 2020.
Patients initiated at home
The SG016 protocol also allows the dosing of patients in the
home environment; the objective being to initiate treatment
earlier than the hospital study to prevent development of
significant lower respiratory tract illness and subsequent
hospitalisation. In order to minimise risks to patients and
healthcare workers in this setting, all visits will be conducted
by video link. Dosing is set to commence in May 2020.
Patients will interact with the trial team using Skype/Teams/
Zoom or their preferred choice of video conferencing as soon as
COVID-19 symptoms develop. Patients will be informed about
the trial and provide online consent. Patients will self-swab
under video supervision. Within a few hours of the swab having
been taken, the virus test results will be known. If positive for
SARS-CoV-2, the drug (placebo or SNG001), aerosol delivery
device, and other trial equipment will be despatched to the
patient. Each dose will be taken under video supervision.
Endpoints will also be assessed during the video calls.
This is the first trial of its type to be conducted “remotely”
in this way and if successful, may point towards a potential
domiciliary care protocol for this and future viral outbreaks.
Supply chain in the event of success
In the event that the current trials prove successful,
Synairgen has made good progress with suppliers to scale
up production of SNG001 rapidly with the aim of being able
to supply meaningful quantities by the end of this year.
LOXL2 inhibitor programme
Pharmaxis, the Company’s Australian-based partner
for the antifibrotic LOXL2 inhibitor programme, has
updated the market (on 30 April 2020) stating that it
is currently pursuing a number of different partnering
options with international pharma companies to enable
this drug to enter the clinic in phase 2 trials and will
provide more information when the process concludes.
Synairgen is entitled to receive circa 17% of Pharmaxis’
licence receipts/royalties, net of allowable expenses.
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Strategic Report
(continued)
Board changes
In April 2019, Paul Clegg announced his intention to retire
from the Board as a non-executive director after the 2019
AGM in June. The Board thanks Paul for his significant
contribution and advice to Synairgen over the last 10
years and for his Chairmanship of the Remuneration and
Nomination Committee. Iain Buchanan became the new
Chairman of the Remuneration and Nomination Committee.
Key performance indicators (KPIs)
The Board considers that the most important KPIs are
non-financial and relate to the progress of the scientific
programmes which are discussed in the preceding section
of this report.
The most important financial KPIs are the planned R&D
expenditure on the COPD trial and the cash position of the
Group. The actual expenditure on the COPD trial was below
budget and the closing cash position was ahead of budget.
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 29 to 45. The consolidated financial
statements are presented under International Financial
Reporting Standards as adopted by the European Union.
The adoption of IFRS 16 ‘Leases’ has only had a limited impact
on the Consolidated Statement of Financial Position as at
31 December 2019 with the recognition of right-of-use assets
(£0.26 million) and lease liability payables (£0.33 million). There
was no impact on the 2018 primary statements presented.
The financial statements of the Company, set out on
pages 46 to 49, 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
2019 was £4.82 million (2018: loss £4.13 million). There were no
revenues for the year (2018: £0.11 million). The 2018 revenue
comprised fee for service work in relation to the LOXL2
programme, through our partnership with Pharmaxis Ltd.
Research and development expenditure for the year
amounted to £3.46 million (2018: £3.23 million) and the
majority of this expenditure was on running the IFN-beta
Phase II clinical trial in COPD.
Other administrative costs for the year were £1.36 million
(2018: £1.01 million), with the increase attributable to higher
staff costs during the period. The tax credit for 2019 amounted
to £0.91 million (2018: £0.80 million) and included £0.04 million
in respect of prior periods. The loss after tax for 2019 was £3.89
million (2018: loss of £3.30 million) and the basic loss per share
amounted to 3.55p (2018: basic loss per share of 3.47p).
Statement of Financial Position and cash flows
At 31 December 2019, net assets amounted to £2.25 million
(2018: £6.03 million), including cash and bank deposits of
£2.45 million (2018: £5.33 million).
The principal elements of the £2.88 million decrease over the
year ended 31 December 2019 (2018: £1.51 million decrease)
in cash and bank deposits were:
• Cash used in operations: £3.73 million (2018: £3.89 million);
• Research and development tax credits received:
£0.84 million (2018: £0.07 million);
• Capital expenditure on property, plant and equipment:
£0.01 million (2018: £0.39 million); and
• Share issue proceeds (net of costs): £nil (2018: £2.67 million).
The other significant changes in the statement of financial
position were:
• Net book value of property, plant and equipment reduced
from £0.37 million to £0.30 million as we depreciated
the bioMérieux multiplex PCR virus detection machines
purchased in 2018 for use in the SG015 clinical trial;
• Following the adoption of IFRS 16 (as discussed above)
we recognised right-of-use assets in 2019 and at
31 December 2019 the balance net of depreciation
charged amounted to £0.26 million (2018: £nil). We also
recognised the corresponding lease liabilities and at
31 December 2019 the non-current liability element
amounted to £0.13 million (2018: £nil) and the current
liability element £0.20 million (2018: £nil); and
• Trade and other payables increased from £0.78 million to
£1.49 million, on account of higher accruals for clinical trial
related activities and staff performance bonuses.
Post year-end fundraising
£14 million (before expenses) was raised in March 2020 by the
issue of 40 million ordinary shares at a price of 35p per share
to fund the following activities:
• COVID-19 clinical trial activity (£7 million);
• Manufacture of SNG001 drug product and other supply
c) the need to foster the Company’s business relationships
chain considerations (£4 million); and
with suppliers, customers and others;
• Strengthened balance sheet for potential partnering
discussions, working capital and fees (£3 million).
d) the impact of the Company’s operations on the community
and the environment;
Section 172 statement
For years beginning on or after 1 January 2019 companies
quoted on AIM now have to include a Section 172(1) statement
in the Strategic Report explaining how directors have had
regard to the matters set out in Section 172(1).
Under Section 172(1) of the Companies Act 2006, a director
of a company must act in the way he considers, in good faith,
would be most likely to promote the success of the Company
for the benefit of its members as a whole, and in doing so
have regard (amongst other matters) to:
a) the likely consequences of any decision in the long-term;
b) the interests of the Company’s employees;
e) the desirability of the Company maintaining a reputation
for high standards of business conduct; and
f)
the need to act fairly between members of the Company.
The directors acknowledge their duty under Section 172 of
the Companies Act 2006 and consider that they have, both
individually and together, acted in the way that, in good faith,
would be most likely to promote the success of the Company
for the benefit of its members as a whole.
The following table, in combination with the Corporate
Governance Statement set out on pages 13 to 16 and the
Company’s website (www.synairgen.com), sets out the
framework of our engagement with key stakeholder groups.
Our stakeholders
Material topics
How we engage
Investors
The Group continues to consume cash
resources and remains dependent upon
securing funding through share issues. It is
therefore critical that we have shareholders
who will continue to invest in the company
over the longer term.
Employees
Synairgen has 14 employees (including
executive directors) who are multi-skilled and
most of them have worked for the Group
for many years. They all play a key role in the
business and it is vital that they all understand
and support the key decisions taken in the
running of the business.
University of Southampton
Synairgen is a spin-out company from the
University and still maintains many links with
it, which benefit both parties. The University
is Synairgen’s landlord and certain intellectual
property is licensed from it.
Suppliers
We have a number of key long-term suppliers
who play an important part in our development
programmes and it is important that we under-
stand their product/service development plans
and they understand our needs.
• Business strategy
• Operational performance
• Financial performance and
cash requirements
• Corporate Governance
• Operational targets and progress
• Opportunities to share ideas
• Financial resources of the Group
• Share price
• Working time flexibility
• RNS announcements
• Website updates
• Meetings after preliminary statement release
and interims for institutional investors
• AGM
• Proactive investor interview
• Regular full company meetings and a policy
of open disclosure
• Team meetings
• Open door policy to executive directors
• Structured appraisal process
• Use of share-based incentives for employees
• Operating facilities
• Intellectual property
• Joint projects
• Published papers
• Meetings with Founders
• Interaction on projects with scientists and
clinicians
• Supplier product development plans
• Our clinical trial and longer-term
development needs
• Regular project meetings
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Strategic Report
(continued)
Our stakeholders
Material topics
How we engage
Collaboration partners
Following our earlier collaboration with
Pharmaxis, we maintain a 17% stake in the
LOXL2 programme.
Customers (licensees)
Our customers are the large pharmaceutical
and biotech companies who have the resources
and infrastructure to take our products to
market. It is therefore critical that we interact
with these companies at an early stage to make
sure we are developing a product which they
may wish to license.
Community
We aim to develop therapeutics which
pharmaceutical companies can sell to the
community and it is therefore critical that there
is an identified market need in the community.
Regulators
We work in a highly regulated sector and it is
critical that we maintain full compliance with
all appropriate regulations.
• Operational milestones
• Business development support and activities
• Quarterly updates
• Programme development plans, including
• Regular meetings at key respiratory
clinical trial designs
• Clinical trial read-outs
• In-house and external competing products
conferences (ATS, ERS)
• New therapeutics development
• Involvement in clinical trials
• Interactions with clinicians
• Patient data from clinical trials
• Clinical trial approvals
• Regulatory compliance
• Use of external consultants to make
sure we are complying with regulations
• Interactions with MHRA and Ethics
Committees
Principal decisions in 2019
Principal risks and uncertainties
We have considered the decisions taken by the Board which
will have an impact on the longer-term performance and
prospects for the Company. The Board believes that two
decisions taken during the year fall into this category and
were made with full consideration of both internal and
external stakeholders.
• The decision to initiate more clinical trial sites and enlarge
the patient pool for the Group’s phase II trial of interferon
beta in COPD.
• The decision to commit resources to explore the potential
for interferon beta in immuno-compromised patients.
In addition, the Board keeps the Company’s finances under
close scrutiny, seeking to ensure that it has sufficient capital
resources to execute its business plan. During the year, the
Board continually assessed whether additional funding would
be required to complete the COPD trial (SG015).
The Board considers that the principal risks and uncertainties
facing the Group may be summarised as follows:
• Interferon beta Phase II trials fail to generate
encouraging data
There can be no guarantee that the trials being conducted
in COPD patients, hospitalised COVID-19 patients and
home-based COVID-19 patients will generate data which
merits further development expenditure in the programmes
either by Synairgen or a licensee.
• Impact of COVID-19 on the wider economy
Whilst the emergence of the COVID-19 pandemic has
presented a very significant potential opportunity for the
Group to develop a new indication for its interferon beta
programme and the Group’s employees have been able to
function effectively working from home or where required in
the clinical and laboratory facilities, it remains unclear at this
stage what the medium and long term impact will be on the
wider economy and how this will affect the Group.
• Interferon beta Phase II trial in COVID-19 patients at home
overruns or is unable to randomise 120 patients
The Group is commencing a Phase II trial in COVID-19
patients at home, which is seeking to randomise 120
patients. The conclusion of the trial is dependent upon the
rate at which such patients can be recruited into the trial,
which will be determined by the success in being able to find
such patients and the prevalence of COVID-19 in the coming
months. Overrunning of the trial would result in extra costs
to complete the trial, as a number of the monthly costs
are fixed in nature. Inability to recruit the full patient target
will reduce the chance of finding statistically significant
outcomes.
At the date of this report recruitment activity is about to
commence. The Group is continually monitoring the best
recruitment options available and will also consider the
benefits of opening additional sites. In the event that the
COVID-19 infection rates reduce very substantially, the
Group would consider whether it is best to finish the trial
before the target 120 patients have been randomised.
• Ability to scale up interferon beta production
In the event of a positive read-out from the COVID-19 trials,
there will potentially be a need to significantly increase
production to maximise the commercial opportunity.
The Group is currently exploring routes whereby the drug
and delivery devices can be manufactured at scale.
• Commercial risk
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.
• 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. Post period-end, the Group raised £14 million
(before expenses) to fund its COVID-19 activities and
strengthen its balance sheet.
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Synairgen’s
Founders
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
• 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 setting up and running of two COVID-19 clinical trials
whilst in a “lockdown” environment has placed a significant
additional burden on the existing headcount.
The Group seeks to reduce this risk by recruiting
additional staff/contractors and additionally appropriate
incentivisation of staff through participation in long term
equity incentive schemes.
• Brexit
The UK left the European Union in January 2020 and
is now in a transition period until the end of 2020.
It remains unclear what the final outcome of the transition
process will be. In the short term our key focus is upon
completing the Phase II clinical trials during 2020 and we
have secured adequate stocks of drug and consumable
items to complete them at our trial sites which are all
located in the UK.
• 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.
The Group seeks to minimise this risk by retaining
the services of external IT advisers and pursuing
suitable back-up and security policies.
Summary and Outlook
During the calendar year 2019 we made good progress in the trial
of our wholly-owned asset SNG001 in COPD. The emergence of
SARS-CoV-2 has caused us to pause the COPD trial and to divert
our expertise and investment to addressing the more pressing
COVID-19 pandemic. Knowing that a broad spectrum antiviral
agent delivered directly to the lungs may prevent the development
of lower respiratory tract illness or accelerate the recovery of
patients already hospitalised, we have raised additional funding
of £14 million, which has enabled us to successfully initiate a
trial of approximately 220 patients with COVID-19, some 100 of
whom are in the hospital environment with severe respiratory
symptoms, with a further 120 patients who will be dosed in the
home environment upon early signs of COVID-19. Our staff and
our key suppliers in both the UK and overseas have been able to
continue working through lockdown. Data from the hospital trial
will read out during the summer, and, if positive, the Company will
work closely with regulators to determine an expeditious route
to securing approval for SNG001, a treatment we believe could
play an important role in addressing the current COVID-19 crisis
and similar viruses in the future. In parallel the Company is now
working with manufacturers to scale up for potential demand
for SNG001. The outlook for the business is positive and we look
forward to updating the market on further progress in due course.
By order of the Board
John Ward
Company Secretary
25 May 2020
References
1.
(i) Wark PA, et al. Asthmatic bronchial epithelial cells have a deficient innate immune response to infection with rhinovirus. J Exp Med. 2005;201(6):937-947 (ii) García-Valero J, et al. Deficient
pulmonary IFN-β expression in COPD patients. PLoS One. 2019;14(6):e0217803 (iii) Chattoraj SS, et al. Pseudomonas aeruginosa suppresses interferon response to rhinovirus infection in
cystic fibrosis but not in normal bronchial epithelial cells. Infect Immun. 2011;79(10):4131-4145. (iv) Prakash S, et al. Impaired secretion of interferons by dendritic cells from aged subjects to
influenza: role of histone modifications. Age (Dordr). 2013;35(5):1785-1797.
2. The risk that that a COPD patient will exacerbate due to a cold infection is approximately 50% (Johnston NW. et al. Colds as predictors at the onset and severity of COPD exacerbations
International Journal of COPD 2017:12: 839-848) compared to asthma where it is less than 10% ((i) Aviragen Therapeutics presentation Directing Next Generation Direct-Acting Antivirals
May 2017 (ii) Synairgen analysis of INEXAS trial results, dated 27 September 2017)
3. Mantlo E, et al. Antiviral activities of type I interferons to SARS-CoV-2 infection. Antiviral Res. 2020 Apr 29;179:104811
9 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2019| 10
Directors
Simon Shaw
Non-executive Chairman
Dr Phillip Monk
Chief Scientific Officer
Iain Buchanan
Non-executive Director
Prof. Stephen Holgate CBE
Non-executive Director
Simon Shaw joined Synairgen
as executive Chairman on its
inception in June 2003 and
became non-executive Chairman
in October of that year. He is
Group Chief Financial Officer of
Savills plc. He was Chief Financial
Officer of Gyrus Group PLC from
2003 until its sale to Olympus
Corporation in 2008, having
previously been Chief Operating
Officer of Profile Therapeutics
plc between 1998 and 2003.
Between 1991 and 1997 he was
a corporate financier, latterly at
Hambros Bank Limited. He is a
chartered accountant.
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
Dr Bruce Campbell
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 was 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.
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 and Syncona.
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.
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
Prof. Stephen Holgate CBE
11 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2018 | 12
Corporate Governance Statement
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 2019 we
undertook another formal Board performance review, which
identified two areas for improvement during 2020.
Board of Directors
On 31 December 2019 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 three non-executive directors (Iain
Buchanan, Dr Bruce Campbell and Prof. Stephen Holgate).
Paul Clegg retired from the Board as a non-executive
director after 10 years of service on 3 June 2019.
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
page 11. 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 clinical trials 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, particularly with reference to biomarker
and statistical analysis. Phill regularly interacts with expert
advisers/KoLs and attends key relevant medical conferences.
John Ward
John is a Chartered Accountant who has worked for 23 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 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.
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.
All seven members of the Board bring relevant sector experience
in life sciences. Four 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 still 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 6 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 one of its non-executive directors
was granted options in 2010, which will expire in 2020. The
practice of granting non-executive directors options has
now ceased and the Board considers that the holding of
these options (which represents less than 0.3% of the
issued share capital at 31 December 2019) does not
compromise the independence of the director concerned.
With effect from the 2019 AGM and on an on-going
basis, the Board puts all directors up for re-election on
an annual basis 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 2019, the Board met six 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
6
6
6
6
6
6
3
6
6
6
6
6
6
5
3
5
In addition there was one other meeting, 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
December 2019. 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 and noted that some of
the areas identified, such as succession planning, were not feasible
at this stage of the Company’s evolution. However a number of
refinements in working practices were identified as a result of this
exercise with regards to improvement of Board meeting efficiency
and risk management systems and have been scheduled for
implementation in 2020.
13 | Synairgen plc annual report and accounts 2018 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2019| 14
Corporate Governance Statement
(continued)
Also during December 2019, 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.
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).
During 2019, the committee met four times. Simon Shaw and
Iain Buchanan attended all four meetings and Dr Bruce Campbell
attended three meetings. The Audit Committee Report is detailed
on page 22.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee currently
comprises Iain Buchanan (Chairman), Dr Bruce Campbell and
Simon Shaw. Iain Buchanan became Chairman of the committee
on 3 June 2019 when Paul Clegg retired from the Company as a
non-executive director. The committee is responsible for making
recommendations to the Board on remuneration policy for
executive directors and the terms of their service contracts, with
the aim of ensuring that their remuneration, including any share
options and other awards, is based on their own performance
and that of the Group generally. The committee administers the
Long-Term Incentive Plan, the staff share option scheme and the
Qualifying Non-Employee Option Scheme and approves grants
under all three schemes. It also advises on the remuneration
policy for the Group’s employees. The committee is responsible
for all senior appointments that are made within the Group.
During 2019, the committee met three times with all
members attending. The Directors’ Remuneration
Report is detailed on pages 17 to 21.
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. 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 3, 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
• Approachability – to be accommodating, friendly and
transparent when working with others
These matters are reviewed annually during staff appraisals.
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 proxies lodged
are also published on the Company’s website. Details of the
resolutions and explanations thereto are included with the notice,
including any special arrangements necessitated by COVID-19.
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 7 to 9. 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
25 May 2020
15 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2019| 16
Directors’ Remuneration Report
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.
The previous salary and benefit review took effect from
1 January 2019, at which point the executive directors’
salaries were increased by 2% (in line with or below the
level awarded to staff generally).
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 15. The members of the
Committee are Iain Buchanan (Chairman), Dr Bruce Campbell
and Simon Shaw. Paul Clegg was Chairman of the Committee
until his retirement from the Board on 3 June 2019, after
which Iain Buchanan joined the Committee as Chairman.
The Committee, which is required to meet at least twice a
year, met three times during the year ended 31 December
2019 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 employer’s 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.
Salaries and benefits have been reviewed with effect from
1 January 2020, taking into account Group and individual
performance, external benchmark information and
internal relativities. As a consequence of the 2020 review,
executive director salaries were, again, increased by 2%,
which was below the level awarded to staff generally.
1 January 2019 to
31 December 2019 From 1 January 2020
Salary
per
annum
(£000)
190
137
148
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% 194
9% 100% 140
9% 100% 151
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 2019 is
set out on page 20 and 21 of this document.
(ii) Chairman and non-executive director remuneration
During the year ended 31 December 2019, the Chairman and the
non-executive directors received 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
was 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 director
remuneration. The non-executive directors are also reimbursed
for all reasonable expenses incurred in attending meetings.
The remuneration paid to the Chairman and the non-executive
directors has remained unchanged since 2009 and 2014
respectively. In April 2020, a benchmarking of the remuneration
of the Chairman and the non-executive directors was undertaken.
As a result of this, the fee payable to the Chairman was increased
to £45,000 per annum with effect from 1 January 2020. The fixed
fee for the non-executive directors remains unchanged at £25,000
and a fee of £5,000 will continue to be paid to non-executive
directors who chair either the audit or remuneration committees.
The Chairman has waived his entitlement to the fee for chairing the
audit committee.
(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. As reported last year in respect of 2018, the
scheme for 2018 involved a range of operational milestone targets
linked to the interferon beta programme, the LOXL2 programme
and potential new opportunities. Again, as reported last year
in respect of 2018, the Committee noted that, while significant
progress had, again, been made against these milestones in
2018, as the Company had 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.
Following the significant progress made since then, the Committee
determined that the 2018 bonus targets should now be assessed
rather than held over again. It determined that the scorecard was
achieved as to 55%. This was wholly based on achievement in 2018.
The Committee also assessed performance against the scorecard
for 2019. This included supporting the LOXL2 programme,
recruitment targets for the interferon beta COPD trial, commencing
another study of interferon beta, announcement of a new programme
and investor relations targets. The Committee determined that
this was met as to 42% noting, in particular, full achievement of the
stretch target of entering 286 patients into the pool by the end of
September 2019 (which had been given a 40% weighting).
Bonuses in respect of 2018 and 2019 will be paid in Q2 2020.
(iv) Equity-based incentive schemes
The Committee strongly believes that long term equity-based
incentive schemes increase the focus of employees in improving
Group performance, whilst at the same time providing a strong
incentive for retaining and attracting individuals of a high calibre.
Long Term Incentive Plan (LTIP)
The Synairgen Long Term Incentive Plan, comprising conditional
(performance-related) share awards (technically structured as
nominal cost options pursuant to which participants must pay
1p per share on the exercise of their awards) is the sole on-going
long-term incentive vehicle for executive directors.
Senior executives and other employees may be granted an award,
which will normally vest if demanding performance conditions are
achieved over a three-year period and if the grantee remains an
employee of the Group.
Grants under the LTIP in any financial year are capped
at a maximum of 100% of base salary.
As indicated in last year’s report, an LTIP award was made in
April 2019 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 approximately 51% of
salary (the Committee approved an award over shares worth 65%
of salary but determined that this should be assessed on a higher
than actual share price (the 16p price at which funds were raised
in October 2018) so 51% represents the actual grant multiple), with
performance conditions as set out below.
The Committee intends to make an LTIP award (the 2020 award)
during the six week period following the preliminary announcement
of the results for the year ended 31 December 2019, with each
of Richard Marsden, Phillip Monk and John Ward being granted
awards over shares worth up to 100% of salary with performance
conditions similar to the 2019 LTIP award. The Committee’s long-
term policy has been to grant executive directors an award over
shares worth one times salary at grant. However, that has not
been feasible in recent years due a combination of close period
constraints and management of the dilution limits. The Committee
noted that the current share price is approximately 3 times the
share price used for the 2019 grant and that it was, therefore,
now feasible and appropriate to award shares in line with the
shareholder approved policy level of 100% of salary.
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 2018 and 2019 LTIP awards
The performance conditions for both awards were the same.
The awards are subject to two conditions. Firstly, awards will
only vest to the extent that the percentage increase in the
total shareholder return (‘TSR’, being the return earned by a
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Directors’ Remuneration Report
(continued)
shareholder over the performance period in terms of change in
the share price and assuming re-investment of any dividends in
more shares at the prevailing price on the relevant ex-dividend
date) of the Company over the three year performance period is
equal or greater than the percentage increase in the techMARK
mediscience™ index over the same period as follows:
TSR growth over the performance
period less percentage increase in the
techMARK mediscience™ index over the
same period
Less than 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
Secondly, no award will vest unless the average annual growth in
the TSR of the Company over the performance period is equal to or
greater than RPI plus 2% or, for more than 75% of an award to vest,
annual average TSR must exceed RPI by at least 5% rather than 2%.
(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 2019, 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
At 1 January 2019
Granted during
the year
At 31 December 2019
Exercise
price
Earliest
exercise date
Expiry date
Date of grant
Richard Marsden
7 September 2009
8 September 2010
21 September 2011
5 April 2018
4 April 2019
Dr Phillip Monk
21 September 2011
5 April 2018
4 April 2019
John Ward
7 September 2009
8 September 2010
21 September 2011
5 April 2018
4 April 2019
605,000
246,889
538,063
880,903
–
–
–
–
–
772,167
400,212
636,208
–
–
–
557,679
100,000
224,445
489,148
685,147
–
–
–
–
–
600,575
605,000
246,889
538,063
880,903
772,167
400,212
636,208
557,679
100,000
224,445
489,148
685,147
600,575
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
1p
7 Sept 2012
31 Dec 20201
8 Sept 2013
7 Sept 2020
21 Sept 2014
20 Sept 2021
5 April 2021
4 April 2028
4 April 2022
3 April 2029
21 Sept 2014
20 Sept 2021
5 April 2021
4 April 2028
4 April 2022
3 April 2029
7 Sept 2012
31 Dec 20201
8 Sept 2013
7 Sept 2020
21 Sept 2014
20 Sept 2021
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
At 1 January 2019
Lapsed
during the year
At 31 December
2019
Exercise
price
Earliest
exercise date
Expiry date
212,765
–
212,765
23.5p
28 June 2013
27 June 2020
7 September 2009
250,000
(250,000)
–
20p
7 Sept 2012
6 Sept 2019
These awards were granted under a legacy plan. The exercise of the options awarded in June 2010 (which vested in 2013) is subject to
the rules of the scheme. The option granted to Mr Clegg lapsed without being exercised on its 10th anniversary.
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 2019 was 5.875p. During the year then ended, the mid-market price
ranged from 5.875p to 18.00p. On 22 May 2020 the closing price was 51p.
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 2019 and has been
audited by the Company’s auditor, BDO LLP.
Directors’ remuneration
The remuneration received by directors who served during the years ended 31 December 2019 and 2018 was as follows:
Note
Salary/
fee
Bonus
Benefits
Total (excl.
pension)
Pension
Total (incl.
pension)
Total (excl.
pension)
Pension
Total (incl.
pension)
Year ended 31 December 2019
Year ended 31 December 2018
£000
Executive Directors
Richard Marsden
Dr Phillip Monk
John Ward
(i)
Non-executive Directors
Simon Shaw
Iain Buchanan
Dr Bruce Campbell
Paul Clegg
(ii)
Prof. Stephen Holgate
190
137
148
30
28
25
13
25
80
58
62
–
–
–
–
–
2
1
3
–
–
1
–
–
7
272
196
213
30
28
26
13
25
17
12
13
–
–
–
–
–
289
208
226
30
28
26
13
25
290
210
229
30
25
25
30
25
17
12
13
–
–
–
–
–
307
222
242
30
25
25
30
25
803
42
845
864
42
906
Note 1. Awards normally lapse on the tenth anniversary of grant. Due to close period constraints, it was not feasible for the executives to exercise their 2009 awards and
the Committee agreed to extend the exercise window until the end of 2020.
Note 2. The Company issued 40,000,000 new shares pursuant to a placing on 30 March 2020 and 15 April 2020. While this would have permitted the Committee to adjust
the shares subject to awards using the HMRC established TERPS formulae (which would have increased the shares subject to awards by approximately a further one-third),
the Committee felt that this was not appropriate as the placing was offered on a non-pre-emptive basis.
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5 April 2021
4 April 2028
Total
596
200
4 April 2022
3 April 2029
Directors’ Remuneration Report
(continued)
Report of the Audit Committee
for the year ended 31 December 2019
(i) Richard Marsden was the highest paid director during the years ended 31 December 2019 and 2018. He did not exercise any options during either year.
(ii) Paul Clegg retired as a non-executive director on 3 June 2019. He received no payments for loss of office.
(iii) 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.
(iv) As explained on page 18, the executive directors were also awarded past due bonuses in respect of 2018; in 2019, the Committee had deferred a decision on
such bonuses so no bonus was included in the 2018 report. The 2018 bonuses were £102,000, £74,000 and £80,000 in respect of Richard Marsden, Phillip Monk
and John Ward.
In respect of key management personnel, for the year ended 31 December 2019, the total share-based payment amounted to £85,000
(2018: £78,000) and total social security costs were £126,000 (2018: £62,000).
By order of the Board
Iain Buchanan
Chairman of the Remuneration and Nomination Committee
25 May 2020
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 15,
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) amounted to £7,000 and in
relation to a Group audit fee of £35,000 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 at this stage in its development. The Committee
keeps this matter under review annually.
Simon Shaw
Chairman of the Audit Committee
25 May 2020
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 15.
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 four times during the year ended 31 December 2019,
with Simon Shaw and Iain Buchanan attending all meetings
and Bruce Campbell attending three meetings, and covered
the following matters:
• February 2019: 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.
• July 2019: planning meeting for the 2019 interim review,
including agreement of scope, materiality, areas of focus and
fees. The Committee also reviewed the impact of adoption
of IFRS 16 Leases.
• September 2019: interim report completion meeting
for 2019, including review of report from the Company’s
auditors.
• December 2019: planning meeting for the 2019 year-end
audit, including agreement of audit scope, materiality, areas
of audit focus, audit fees and auditor independence.
The Committee also met in May 2020 for the audit completion
meeting for the 2019 year-end audit including reviews of: the
valuation model to support Synairgen plc’s investment in Synairgen
Research Limited; the financial forecast to support the Group’s
ability to account on a going concern basis, including the potential
impact of COVID-19; the implementation of IFRS 16 accounting;
the auditor’s report on the audit; and the annual report.
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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 2019.
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 2019, the Group
has invested £3,460,000 (2018: £3,232,000) in research
and development activities and a review of this
expenditure is included in the Strategic Report.
Post balance sheet event
Post year-end, COVID-19 developed into a global pandemic.
As described in the Strategic Report, the Group is now evaluating
SNG001 in clinical trials of COVID-19 patients. As set out in note 21
to the consolidated financial statements on page 45, post year-
end, the Company raised £14 million (before expenses) to fund
its COVID-19 related activities and strengthen its balance sheet.
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 clinical trials of SNG001 in COVID-19 patients.
COVID-19 impacted the Group in a number of ways. The
Phase II study in COPD was paused in March 2020 with 109 of
the planned 120 patients randomised. An unplanned interim
analysis is now being undertaken. The potential therapeutic
benefits of interferon beta for patients with COVID-19 is now
being explored in two clinical trials. The impact of lockdown
and the challenge of commencing two new trials in a very
short timescale has placed a significant burden on staff, whose
response has been outstanding. With the exception of clinical
staff who are working on the COVID-19 clinical trials and a small
number of laboratory staff, all other staff have worked from
home and communications have been facilitated by conference
calls and videoconferencing. Key suppliers have also continued
working during lockdown and this has not materially impeded
on our ability to commence the trials in COVID-19 patients. Our
clinical staff who are working in the hospital facility are issued
with appropriate PPE, in accordance with NHS guidelines.
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 17 to the financial statements on page 42.
Dividends
The directors do not propose the payment of a dividend.
Substantial shareholdings
As at 25 May 2020, 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
Link Fund Solutions Limited
21,341,293
Lansdowne Partners International Limited
17,468,735
Leonard Licht
9,720,000
14.3%
11.7%
6.5%
Directors
The directors of the Company during the year ended
31 December 2019 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 – retired 3 June 2019
Prof. Stephen Holgate CBE
Directors’ interests in ordinary shares
The directors, who held office at 31 December 2019, 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)
Prof. Stephen Holgate (iv)
At 1 January and
31 December 2019
Number of shares
310,682
230,314
339,006
1,474,096
112,741
294,259
858,360
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.
(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) Prof. Stephen Holgate’s shareholding includes 1,923 shares owned by his wife,
Elizabeth Holgate.
By order of the Board
John Ward
Company Secretary
25 May 2020
On 15 April 2020 the directors detailed below subscribed for
shares in the Company’s fundraising:
Richard Marsden (i)
Dr Phillip Monk
John Ward
Simon Shaw
Dr Bruce Campbell
Prof. Stephen Holgate
57,143
14,286
28,571
57,143
28,571
28,571
(i) Richard Marsden’s subscription included 28,571 shares held in his pension plan.
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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
25 May 2020
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 subsidiaries (the ‘Group’) for the year
ended 31 December 2019 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 Consolidated and Parent Company 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 2019 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 2019, the Parent Company held an investment
of £26.9m 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 accounting standards that involves
assessing the recoverable amount of the investment by
estimating future cash flows and discounting to present value.
There is inherent uncertainty in estimating the timing and
extent of future cash flows of a drug development company.
The degree of estimation and complexity involved in the
impairment review, for example in determining the appropriate
discount rate and clinical success probabilities to be applied to the
cash flows, causes us to consider this to be a significant audit risk.
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Independent Auditor’s Report
to the members of Synairgen plc
(continued)
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, using our internal
valuations experts in order to assist with assessing
the appropriateness of the discount rate;
• The scale of the market opportunities used to develop
future revenue forecasts – 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;
• Future development costs forecasts, by reference to
supplier quotations and previous clinical trials and
related development costs experience; 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 accounting standards.
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.
Based on the procedures we performed, we consider
the estimates and judgements made by management to
assess the carrying value of the investment in subsidiary
to be reasonable. We reviewed the disclosures in note
2 and are satisfied that they are appropriate.
Our application of materiality
Group materiality: £200,000 (2018: £170,000).
Parent Company materiality: £180,000 (2018: £140,000).
Our Group materiality was based upon 4% of the loss before
tax for the year (2018: 5% of the loss before tax for the year).
We consider losses before tax to be one of the principal
considerations for the users of the financial statements
in assessing the financial performance of the Group.
The audit of Synairgen Research Limited, the only subsidiary in
the Group was performed to a materiality of £150,000, calculated
on the same basis as that of the Group, while materiality
for Synairgen plc, as the holding company, was capped at a
level which is 90% (2018: 70%) of the Group materiality.
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, being £150,000 (2018: £150,000) for the Group
and £135,000 (2018: £105,000) for Synairgen plc. 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.
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 (2018: £4,000). We
also agreed to report differences below these thresholds that,
in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The Group’s operations are based solely in Southampton,
United Kingdom.
The scope of our Group audit was established by obtaining an
understanding of the Group, including its control environment,
and assessing the risks of material misstatement.
Both components, Synairgen plc and Synairgen Research
Limited, are considered significant components and
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 2019 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 by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Parent Company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’
responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, 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 : 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
25 May 2020
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 2019
Consolidated Statement
of Financial Position
as at 31 December 2019
Revenue
Research and development expenditure
Other administrative expenses
Total administrative expenses
Loss from operations
Finance income
Finance expense
Loss before tax
Tax
Loss and total comprehensive loss for the
period attributable to equity holders of the parent
Loss per ordinary share
Basic and diluted loss per share (pence)
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2019
Note
At 1 January 2018
Issue of ordinary shares
Transaction costs in respect of share issue
Recognition of share-based payments
Loss and total comprehensive loss for the year
At 31 December 2018
Recognition of share-based payments
Loss and total comprehensive loss for the year
Year ended
31 December 2019
£000
Year ended
31 December 2018
£000
Notes
–
(3,460)
(1,357)
(4,817)
(4,817)
30
(6)
(4,793)
908
(3,885)
105
(3,232)
(1,005)
(4,237)
(4,132)
36
–
(4,096)
795
(3,301)
(3.55)p
(3.47)p
4
6
6
7
8
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Retained
deficit
£000
19b
19c
19d
Total
£000
6,559
2,880
(209)
98
25,771
2,700
(209)
–
–
483
(20,609)
–
–
98
–
–
–
–
(3,301)
(3,301)
19a
914
180
–
–
–
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Current assets
Inventories
Current tax receivable
Trade and other receivables
Other financial assets – bank deposits
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Lease liabilities
Current liabilities
Trade and other payables
Lease Liabilities
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 2019
£000
31 December 2018
£000
9
10
11
12
13
14
15
11
16
11
18
18
19
19
16
301
255
572
41
865
139
–
2,454
3,499
4,071
(127)
(1,490)
(201)
(1,691)
(1,818)
2,253
29
374
–
403
56
795
216
50
5,284
6,401
6,804
–
(777)
–
(777)
(777)
6,027
1,094
28,262
483
(27,586)
2,253
1,094
28,262
483
(23,812)
6,027
The financial statements on pages 29 to 45 were approved and authorised for issue by the Board of directors on 25 May 2020 and signed
on its behalf by:
1,094
28,262
483
(23,812)
6,027
–
–
–
–
–
–
111
111
(3,885)
(3,885)
Richard Marsden
Chief Executive Officer
John Ward
Finance Director
At 31 December 2019
1,094
28,262
483
(27,586)
2,253
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Consolidated Statement of Cash Flows
for the year ended 31 December 2019
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019
Cash flows from operating activities
Loss before tax
Adjustments for:
Finance income
Finance expense
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible fixed assets
Share-based payment charge
Year ended
31 December 2019
£000
Year ended
31 December 2018
£000
Notes
(4,793)
(4,096)
(30)
6
83
67
13
111
(36)
–
24
–
16
98
Cash flows from operations before changes in working capital
(4,543)
(3,994)
Decrease in inventories
Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Cash used in operations
Tax credit received
Net cash used in operating activities
Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
Decrease in other financial assets
Net cash generated from 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
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
15
15
81
713
(3,734)
838
(2,896)
26
(10)
50
66
–
–
–
(2,830)
5,284
2,454
–
426
(326)
(3,894)
71
(3,823)
27
(386)
1,950
1,591
2,880
(209)
2,671
439
4,845
5,284
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 16.
Adoption of new standards
IFRS 16 Leases
The Group has adopted IFRS 16 Leases with effect from 1 January 2019 and the accounting policy is detailed in note 11. This has resulted in the
Group’s lease with the University of Southampton being brought onto the statement of financial position, as both a right-of-use asset and a 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.
Other new standards
Other new amended standards and interpretations issued by the International Accounting Standards Board (IASB) that apply to the financial
statements do not impact the Group as they are either not relevant to the Group’s activities or require accounting which is consistent with the
Group’s current accounting policies.
There are a number of standards and amendments to standards, and interpretations which have been issued by the IASB that are effective in
future accounting periods that the Group has decided not to adopt early. The most significant of these (which are all effective for the period
beginning 1 January 2020) are (i) Amendments to References to the Conceptual Framework in IFRS Standards; and (ii) Amendments to IAS 1 and
IAS 8 – Definition of Material. The Group is currently assessing the impact of these new standards and amendments. The Group does not expect
any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.
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 clinical trials of SNG001 in COVID-19 patients.
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.
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 49) 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 2019, 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.
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019 (continued)
for the year ended 31 December 2019 (continued)
1. Accounting policies (continued)
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, 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.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with a duration of
twelve months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures. For an explanation of the transitional requirements that were
applied as at 1 January 2019, see note 11. The following policies apply subsequent to the date of initial application, 1 January 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s
incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes: amounts expected to be payable under any residual value guarantee;
the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; and any penalties payable
for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: lease
payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the
Group is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are
reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the
remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or
termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term,
which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised
when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to
the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification:
•
•
•
if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for
the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy;
in all other cases where the renegotiation increases the scope of the lease (whether that is an extension to the lease term, or one or
more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date,
with the right-of-use asset being adjusted by the same amount; and
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset
are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or
loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over
the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use
asset is adjusted by the same amount.
For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the Group by the lessor,
the Group has elected to account for the entire contract as a lease, i.e. it does not allocate any amount of the contractual payments to,
and account separately for, any services provided by the supplier as part of the contract.
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019 (continued)
for the year ended 31 December 2019 (continued)
1. Accounting policies (continued)
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.
5. Employee benefit expense
The average monthly number of employees (including executive directors) was:
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:
Research
Administration
•
•
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 were generated in that territory. The revenue generated in 2018 was generated from one customer.
4. Loss from operations
The loss from operations has been arrived at after charging:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
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
2019
£000
83
67
13
42
54
2019
£000
21
14
6
7
–
48
2018
£000
24
–
16
72
93
2018
£000
18
14
5
8
8
53
2019
11
3
14
2019
£000
1,293
164
105
1,562
(6)
111
1,667
2018
9
3
12
2018
£000
729
84
94
907
(8)
98
997
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
For the purpose of presentation in the consolidated statement of comprehensive income, remuneration costs of £788,000 (2018: £507,000) are
included in research and development expenditure and £879,000 (2018: £490,000) 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 Directors’ Remuneration Report
on pages 20 and 21, which are ascribed as forming part of these financial statements.
6. Finance income and expense
Finance income for the years ended 31 December 2019 and 2018 represents bank interest receivable.
Finance expense for the year ended 31 December 2019 represents interest expense on lease liabilities.
7. Taxation
Current tax
UK corporation tax credit on loss for the year
Adjustment in respect of prior years
Total income tax credit
2019
£000
(865)
(43)
(908)
2018
£000
(795)
–
(795)
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019 (continued)
for the year ended 31 December 2019 (continued)
7. Taxation (continued)
The movement on the unrecognised deferred tax asset comprises the following:
The tax assessed on the loss on ordinary activities for the year is different to the standard rate of corporation tax in the UK of
19% (2018: 19%). The differences are reconciled below:
Loss on ordinary activities before tax
Loss on ordinary activities before tax multiplied by the standard rate of
corporation tax in the UK
Effects of:
Tax relief on share option exercises
Expenses not deductible for tax purposes
Enhanced research & development relief
Variable rates on tax losses surrendered for research & development tax credit
Movement in unrecognised losses and temporary differences
Adjustment in respect of previous years
Total tax credit for the current year
Deferred taxation
Changes in tax rates and factors affecting the future tax charge
2019
£000
(4,793)
(911)
–
21
(674)
269
430
(43)
(908)
2018
£000
(4,096)
(778)
(2)
19
(620)
247
339
–
(795)
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 as at 31 December 2019 the
rate of corporation tax expected to be in force at the time that these timing differences are expected to reverse. Post year-end, a change to the main
UK corporation tax rate, announced in the Budget on 11 March 2020, was substantively enacted on 17 March 2020. The rate applicable from 1 April
2020 now remains at 19%, rather than the previously enacted reduction to 17%. However as this is classified as a non-adjusting post balance sheet
event the deferred tax balances remain recognised at 17%. The impact of this change to the unrecognised deferred tax asset is shown below.
Recognised deferred taxation
Accelerated capital allowances
Other temporary differences
Trading losses
Charge for the year
Unrecognised deferred taxation
2019
£000
(12)
(2)
14
–
2018
£000
62
(2)
(60)
–
At 31 December 2019 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to
£16,653,000 (2018: £14,964,000) and non-trading losses of £2,444,000 (2018: £2,222,000). At 31 December 2019 the Group has an unrecognised
deferred tax asset in respect of these losses of £3,247,000 (2018: £2,922,000). 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 £248,000 (2018: £429,000)
and a deferred tax asset of £42,000 (2018: £73,000) 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.
Unrecognised deferred tax asset at the start of the year
Movement in the year
Unrecognised deferred tax asset at the year-end
2019
£000
(2,995)
(294)
(3,289)
2018
£000
(2,612)
(383)
(2,995)
As noted above the unrecognised deferred tax asset at 31 December 2019 is calculated at a rate of 17%. If this amount had been calculated at 19%
the unrecognised deferred tax asset would increase to £3,676,000.
8. Loss per ordinary share
Loss attributable to ordinary equity holders of the parent company (£000)
Weighted average number of ordinary shares in issue (000)
Basic and diluted loss per share (pence)
2019
£000
(3,885)
109,433
(3.55)
2018
£000
(3,301)
95,263
(3.47)
Basic loss per share is calculated by dividing the loss attributable to ordinary equity holders of the parent company by the weighted average
number of ordinary shares in issue during the year.
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.
9. Intangible assets
Cost
At 1 January 2018, 31 December 2018 and 2019
Amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for the year
At 31 December 2019
Net book amount
At 31 December 2019
At 31 December 2018
At 1 January 2018
At 31 December 2019 £16,000 (31 December 2018: £29,000) of the net book amount relates to interferon beta patent costs.
Patent costs
£000
212
167
16
183
13
196
16
29
45
37 | Synairgen plc annual report and accounts 2019 | 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 2019 (continued)
for the year ended 31 December 2019 (continued)
10. Property, plant and equipment
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Depreciation
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for the year
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 1 January 2018
11. Leases
Computer
equipment
£000
Laboratory and
clinical equipment
£000
40
4
44
7
51
37
2
39
3
42
9
5
3
138
382
520
3
523
129
22
151
80
231
292
369
9
Total
£000
178
386
564
10
574
166
24
190
83
273
301
374
12
Right-of-use assets
At 1 January 2019
Additions
Depreciation
At 31 December 2019
Lease liabilities
At 1 January 2019
Additions
Interest expense related to lease liabilities
At 31 December 2019
Land and
buildings
£000
Plant and
machinery
£000
–
161
(34)
127
–
161
(33)
128
Land and
buildings
£000
Plant and
machinery
£000
–
161
3
164
–
161
3
164
Total
£000
–
322
(67)
255
Total
£000
–
322
6
328
Up to
3 months
£000
Between
3 and 12 months
£000
Between
1 and 2 yearsl
£000
At 31 December 2019
Lease liabilities
81
120
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
The Group has one lease with its landlord, the University of Southampton, which provides the Group with office space and access
to laboratory equipment. At 1 January 2019 the existing lease (the ‘Existing Lease’) had 7 months to run and therefore was covered
by one of the exclusions noted above. A new two year lease (the ‘New Lease’) was entered into with effect from 1 August 2019.
IFRS 16 was adopted on 1 January 2019 using the modified retrospective method without restatement of comparative figures.
The New Lease has been accounted for by recognising a right-of-use asset and a lease liability.
The lease liability has been measured at the present value of the contractual payments due to the lessor over the lease term
using a discount rate of 5%, which is an estimate of the discount rate applicable to a property lease.
The right-of-use asset has been initially measured at the amount of the lease liability. Subsequent to initial measurement the
lease liability increases as a result of interest charged at a constant rate on the balance outstanding and is reduced for any
lease payments made. Right-of-use assets are depreciated on a straight-line basis over the remaining term of the lease.
Analysis of lease expense
Depreciation of right-of-use assets
Land and buildings
Plant and machinery
Short term lease expense
Charge to operating loss
Interest expense related to lease liabilities
Charge to loss before taxation for leases
12. Inventories
Raw materials
Raw materials comprises the Group’s BioBank.
2019
£000
41
127
2019
£000
34
33
96
163
6
169
2018
£000
56
39 | Synairgen plc annual report and accounts 2019 | 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 2019 (continued)
for the year ended 31 December 2019 (continued)
13. Trade and other receivables
Amounts receivable within one year:
Other tax and social security
Prepayments and accrued income
14. Other financial assets – bank deposits
Amounts receivable within one year:
Sterling floating rate deposit of greater than three months’ maturity at inception
15. Cash and cash equivalents
Cash available on demand
At 31 December 2019, £750,000 (2018: £2,250,000) was on 32 days’ notice.
16. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
17. Financial instruments
Financial assets
Amortised cost
Trade and other receivables
Other financial assets (less than one year)
Cash and cash equivalents (less than one year)
Total
2019
£000
43
96
139
2019
£000
–
2019
£000
2,454
2019
£000
161
114
1,215
1,490
2018
£000
81
135
216
2018
£000
50
2018
£000
5,284
2018
£000
305
44
428
777
Notes
(i)
2019
Book and fair value
£000
2018
Book and fair value
£000
44
–
2,454
2,498
56
50
5,284
5,390
Financial liabilities
Other financial liabilities
Trade and other payables (less than one year)
Lease liabilities (less than one year)
Lease liabilities (greater than one year)
Total
Notes
(ii)
2019
Book and fair value
£000
2018
Book and fair value
£000
1,376
201
127
1,704
733
–
–
733
(i) Trade and other receivables shown above excludes prepayments and other taxes, which are not a contractual right to receive cash,
amounting to £95,000 (2018: £160,000).
(ii) Trade and other payables shown above excludes amounts due in respect of social security and other taxes, which are not a contractual obligation to pay cash,
amounting to £114,000 (2018: £44,000).
The objective of holding financial instruments is to have access to finance for the Group’s operations and to manage related risks.
The main risks arising from holding these instruments are interest rate risk, liquidity risk, credit risk and currency risk.
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:
Euro
Sterling
2019
Floating rate
financial assets
£000
2018
Floating rate
financial assets
£000
5
2,449
2,454
8
5,326
5,334
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%.
Sensitivity analysis
It is estimated that an increase of quarter of one percentage point in interest rates would have decreased the Group’s loss before taxation by
approximately £9,000 (2018: £14,000).
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 2019
and 31 December 2018 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 (HSBC UK Bank plc, Bank of Scotland plc and National Westminster Bank
Plc, which at 31 December 2019 had good short term credit ratings, being at least F1 for Fitch, P-1 for Moody’s and A-1 for Standard and Poor’s)
and in the Institutional Cash Series plc Institutional Sterling Liquidity Fund managed by BlackRock Investment Management (UK) Limited (rated
at 31 December 2019 as AAAmmf by Fitch, Aaa-mf by Moody’s and AAAm by Standard and Poor’s). The Group’s primary treasury objective is
to minimise exposure to potential capital losses whilst at the same time securing prevailing market rates. The Group seeks to lessen risk by
placing its cash deposits with at least three of the above institutions.
Currency risk
During the year under review, the Group was exposed to Euro currency movement as some of the 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.
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Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019 (continued)
for the year ended 31 December 2019 (continued)
17. Financial instruments (continued)
Capital structure and funding
Options
At 31 December 2019 there were options outstanding over 8,487,515 un-issued ordinary shares, equivalent to 7.8%
of the issued share capital, as follows:
The Group is funded by equity capital, reflecting the early stage nature of its discovery and development programmes.
Date of grant
Note
Number of shares
Exercise price
Earliest exercise date
Latest exercise date
The Group considers its capital to be its total equity, which at 31 December 2019 amounted to £2.25 million (2018: £6.03 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 2019 amounted to £2.45 million and comprised short-term deposits (with original maturities of greater
than three months and less than one year) and cash and cash equivalents as shown below:
Short-term deposits
Cash and cash equivalents
Net funds
2019
£m
–
2.45
2.45
2018
£m
0.05
5.28
5.33
2017
£m
2.00
4.85
6.85
2016
£m
1.66
3.11
4.77
31 Dec
2015
£m
3.72
3.99
7.71
The Group did not have any bank borrowings as at 31 December 2019 (2018: £nil).
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 2019 have been:
revenues from licensing transactions of £9.25 million, research and development tax credits of £4.58 million, bank interest of £1.78 million,
and revenues from collaborative work of £0.79 million.
18. Share capital, share premium and share-based payment
At 1 January 2018
Issue of ordinary shares
Costs of issue of shares
Notes
(i) - (ii)
Number
of shares
91,362,612
18,070,830
–
Ordinary shares
of 1p each
£000
914
180
–
At 31 December 2018 and 2019
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.
All issued shares are fully paid.
7 September 2009 (LTIP)
28 June 2010 (QNEOS)
8 September 2010 (LTIP)
21 September 2011 (LTIP)
5 April 2018 (LTIP)
4 April 2019 (LTIP)
Notes
(i)
(i)
(i)
(i)
(ii)
(ii)
705,000
212,765
471,334
1,626,404
2,822,316
2,649,696
8,487,515
1p
23.5p
1p
1p
1p
1p
7 September 2012
31 December 2020
28 June 2013
27 June 2020
8 September 2013
7 September 2020
21 September 2014
20 September 2021
5 April 2021
4 April 2022
4 April 2028
3 April 2029
These options are vested in full.
(i)
(ii) The vesting performance conditions for these options are detailed in the Directors’ Remuneration Report on pages 18 and 19.
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
6,087,819
2,649,696
–
(250,000)
8,487,515
2019
Weighted average
exercise price
2.6p
1.0p
1.0p
20.0p
1.6p
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
At 31 December 2019, 3,015,503 share options were capable of being exercised, with exercise prices ranging from 1p to 23.5p (2018: 3,265,503,
with exercise prices ranging from 1p to 23.5p). The options outstanding at 31 December 2019 had a weighted average remaining contractual life
of 6.1 years (2018: 5.3 years). Vesting conditions are disclosed in the Directors’ Remuneration Report.
The Group uses a number of share-based incentive schemes as detailed above and in the Directors’ Remuneration Report on pages 18 and 19.
The fair value per award granted and the assumptions are as follows:
Date of Grant
7 Sept 2009
28 Jun 2010
8 Sept 2010
21 Sept 2011
5 Apr 2018
4 Apr 2019
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
LTIP
LTIP
LTIP
LTIP
705,000
212,765
471,334
1,626,404
2,822,316
2,649,696
8,487,515
1p
23.5p
1p
1p
1p
1p
18.5p
23.5p
24.25p
22.5p
13.0p
12.5p
7.1p
5.6p
12.1p
13.4p
7.5p
6.2p
3
5
3
3
3
3
2.09%
2.09%
0.92%
0.79%
0.90%
0.70%
30%
30%
40%
56%
56%
59%
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:
(i) Stochastic valuation methodology was used for all awards.
(ii) Expected dividend yield is nil, consistent with the directors’ view that the Group’s model is to generate value through capital growth rather than payment of dividends.
(iii) The risk free rate is equal to the prevailing UK Gilts rate at grant date that most closely matches the expected term of the grant.
(iv) The fair value charge is spread evenly over the expected vesting period.
(v) Volatility for the grants made in 2018 and 2019 was calculated by reviewing share price movement over the period of three years prior to grant, excluding any large
share price movements (as these were not considered to be representative of future expectations of volatility).
(vi) The charge for the year ended 31 December 2019 for share-based payment amounted to £111,000 (2018: £98,000).
43 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
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Notes to the Consolidated Financial Statements
Parent Company Balance Sheet
for the year ended 31 December 2019 (continued)
as at 31 December 2019
19. Capital and reserves
19a Share capital
Share capital represents the nominal value of shares issued.
19b Share premium
Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues.
19c 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.
19d 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.
20. Related party transactions and balances
Details of key management personnel and their compensation are given in note 5 and on pages 20 and 21 of the Directors’ Remuneration Report.
21. Post balance sheet event
Post year-end, COVID-19 developed into a global pandemic. As described in the Strategic Report, the Group is now evaluating SNG001 in clinical trials
of COVID-19 patients. The Group also paused its SG015 trial in March 2020, having dosed 109 of the targeted 120 patients, and will now conduct an
unplanned interim analysis of the results. The potential therapeutic benefits of interferon beta for patients with COVID-19 is now being explored in
two clinical trials. The impact of lockdown and the challenge of commencing two new trials in a very short timescale has placed a significant burden
on staff, whose response has been outstanding. With the exception of clinical staff who are working on the COVID-19 clinical trials and a small number
of laboratory staff, all other staff have worked from home and communications have been facilitated by conference calls and videoconferencing. Key
suppliers have also continued working during lockdown and this has not materially impeded on our ability to commence the trials in COVID-19 patients.
On 26 March 2020, the Company announced that it had conditionally raised £14.0 million (before expenses) by a fundraising of 40,000,000 ordinary
shares at a price of 35 pence per share. The fundraising comprised a placing of 10,943,295 ordinary shares admitted on 30 March 2020 (made pursuant
to existing authorities to allot shares for cash and disapply pre-emption rights) and a placing and subscription of 29,056,705 ordinary shares admitted
on 15 April 2020 (approved by shareholders in a general meeting on 14 April 2020). Total expenses of the fundraising were approximately £0.8 million.
The fundraising was for the following purposes:
• COVID-19 clinical trial activity (£7 million);
• Manufacture of SNG001 drug product and other supply chain considerations (£4 million); and
•
Strengthened balance sheet for potential partnering discussions, working capital and fees (£3 million).
At this time it is unclear what the medium and long term impact of COVID-19 will be on the wider economy and how this will affect the Group.
The COVID-19 pandemic wasn’t a condition in existence at the year-end date and therefore it is being treated as a non-adjusting subsequent event.
Company number: 5233429
Fixed assets
Investments
Current assets
Debtors
Investments: short-term deposits
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium account
Retained earnings
Shareholders’ funds
Notes
31 December 2019
£000
31 December 2018
£000
4
5
6
26,893
24,262
109
–
2,445
2,554
(44)
2,510
29,403
1,094
28,262
47
29,403
118
50
5,125
5,293
(42)
5,251
29,513
1,094
28,262
157
29,513
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 2019 was £221,000 (2018: loss of £206,000).
The financial statements on pages 46 to 49 were approved and authorised for issue by the Board of directors on 25 May 2020 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 2019
At 1 January 2018
Loss for the year and total comprehensive loss
Issue of ordinary shares
Transaction costs in respect of share issue
Share-based payment credit
At 31 December 2018
Loss for the year and total comprehensive loss
Share-based payment credit
At 31 December 2019
Share
capital
£000
Share premium
account
£000
Retained
earnings
£000
Shareholders’
funds
£000
914
–
180
–
–
25,771
–
2,700
(209)
–
1,094
28,262
–
–
–
–
1,094
28,262
265
(206)
–
–
98
157
(221)
111
47
26,950
(206)
2,880
(209)
98
29,513
(221)
111
29,403
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Notes to the Parent Company Financial Statements
Notes to the Parent Company Financial Statements
for the year ended 31 December 2019 (continued)
for the year ended 31 December 2019 (continued)
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU-endorsed IFRS;
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel; and
• disclosures of related party transactions with other wholly-owned members of Synairgen plc group of companies.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the
Company’s consolidated financial statements. These financial statements do not include certain disclosures in respect of:
• share-based payments; or
• financial instruments.
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 2019 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 clinical trials of SNG001 in COVID-19 patients 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.
Investments 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
Share-based payments
When the Company grants options over equity instruments directly to the employees of a subsidiary undertaking, the effect of the share-based
payment is capitalised as part of the investment in the subsidiary as a capital contribution, with a corresponding increase in equity.
Taxation
The charge for taxation is based on the loss for the period and takes into account taxation deferred.
Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance
sheet date, except that the recognition of deferred tax assets is limited to the extent that the Company anticipates making sufficient taxable profits
in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted.
Share capital
The Group’s ordinary shares are classified as equity instruments. Financial instruments issued by the Company are classified as equity
only to the extent that they do not meet the definition of a financial liability or financial asset.
2. 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 £26.9 million (2018: £24.3 million). In assessing the carrying
value of this asset for impairment, the directors have exercised judgement in estimating its recoverable amount, including the value of the inferferon beta
programmes and the share of the LOXL2 collaboration with Pharmaxis. The value of the interferon beta programmes for 2019 is based on the COPD and
immuno-compromised patient indications (2018 – COPD alone). The potential value of interferon beta in COVID-19 patients has been excluded from the
impairment review at 31 December 2019, as the pandemic and related treatment opportunity is considered a non-adjusting post balance sheet event.
The determination of the valuation for these assets is based on the discounted value of the 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, based on the discount rate assumption of 12%, which is applied to a series of probability-adjusted cash
flows, the recoverable amount of the investment is not considered to be sufficiently sensitive to a reasonably possible increase in the discount rate, 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
in the interferon beta programmes. A failure in the development of either of these assets might result in an impairment of the investment in the subsidiary.
3. Profit and loss account
The only employees of the Company during 2019 and 2018 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
2019
£000
921
126
54
1,101
(5)
85
1,181
2018
£000
456
60
53
569
(9)
78
638
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 pages 20 and 21,
which are ascribed as forming part of these financial statements.
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.
Auditor’s remuneration is disclosed in note 4 to the Group accounts on page 35.
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Notes to the Parent Company Financial Statements
for the year ended 31 December 2019 (continued)
Corporate
Directory
Glossary
4. Investments
At 1 January 2019
Capital contribution for the year
Subsidiary share-based payment
At 31 December 2019
Investment in
subsidiary
undertaking
£000
140
–
–
140
Capital
contribution
£000
24,122
2,520
111
26,753
Total
£000
24,262
2,520
111
26,893
At 31 December 2019, the Company has an investment in the following subsidiary undertaking:
Name of company
Synairgen Research Limited
5. Debtors
Registered address
Proportion of voting rights
and ordinary share capital held
Nature of business
Mailpoint 810,
Southampton General Hospital,
Tremona Road,
Southampton SO16 6YD
100%
Drug discovery and development
Other tax and social security
Prepayments and accrued income
Amounts due from subsidiary undertaking
All amounts fall due for payment within one year.
6. Creditors: amounts falling due within one year
Trade creditors
Accruals and deferred income
2019
£000
3
103
3
109
2019
£000
3
41
44
2018
£000
3
115
–
118
2018
£000
5
37
42
7. Share capital and share premium
Details of the Company’s share capital, share premium, share option schemes and LTIP can be found in note 18 to the Group accounts on
pages 43 and 44.
8. Post balance sheet event note
Details of the fundraising post year-end and impact of COVID-19 are given in note 21 to the Group accounts on page 45.
Company number
5233429
Directors
Executive: Richard Marsden,
Dr Phillip Monk, John Ward
Non-executive: Simon Shaw (Chairman),
Iain Buchanan, Dr Bruce Campbell,
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 1LX
Bankers
HSBC UK 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
49 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
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Glossary (continued)
Collagen
The main structural protein found
in skin and other connective
tissues
COPD
Chronic Obstructive Pulmonary
Disease covers two conditions:
chronic bronchitis and
emphysema. COPD usually results
from long-term exposure of
irritants to the lungs, of which the
most prevalent is tobacco smoke.
Unlike asthma, where airflow
obstruction varies, in COPD airflow
obstruction is usually irreversible
Coronavirus
A virus that can cause respiratory
disease such as the common cold
or SARS (depending on the type of
coronavirus) and gastroenteritis
COVID-19
Coronavirus disease 2019 is a
respiratory illness caused by
SARS-CoV-2
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
Exacerbation
A rapid deterioration of a chronic
disease that makes the symptoms
worse
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
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 on 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
SARS-CoV-2
Severe Acute Respiratory
Syndrome-Coronavirus 2 is the
virus strain that causes COVID-19
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
SG016
A randomised, double-blind,
placebo-controlled trial to
determine the safety and efficacy
of inhaled SNG001 (IFN-β1a for
nebulisation) for the treatment of
patients with confirmed SARS-
CoV-2 infection
SNG001
A formulation of Interferon Beta-
1a delivered to the lung using
a nebuliser, used in SG005, the
INEXAS study, SG015 and SG016
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
51 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
LSE:SNG | www.synairgen.com | Synairgen plc annual report and accounts 2019 | 52
53 | Synairgen plc annual report and accounts 2019 | www.synairgen.com | LSE:SNG
Synairgen plc,
Mailpoint 810,
Level F, South Block,
Southampton General Hospital,
Tremona Road,
Southampton,
SO16 6YD
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