Siren Gold Limited Annual Report 2022

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S y n a i r g e n p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 2 Breakthrough Science for Severe Viral Lung Infections Annual Report and Accounts 2022 Synairgen plc, Mailpoint 810, Southampton General Hospital, Tremona Road, Southampton SO16 6YD LSE: SNG www.synairgen.com Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600 Breakthrough science for severe viral lung infections We are a specialist respiratory biotech company whose primary focus is developing our investigative inhaled IFN-β therapeutic (SNG001) for the treatment and prevention of severe viral lung infections as potentially the first host-directed, broad- spectrum antiviral treatment delivered directly into the lungs. Corporate directory Company details Company number 5233429 Directors Executive: Richard Marsden, Dr Phillip Monk, John Ward Non-executive: Simon Shaw (Chairman), Dr Bruce Campbell, Dr Felicity Gabbay, Prof. Sir Stephen Holgate CBE, Amanda Radford Secretary Simon Holden 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 85 Gresham Street, London EC2V 7NQ Nominated adviser and joint broker finnCap Limited One Bartholomew Close, London EC1A 7BL Joint broker Numis Securities Limited 45 Gresham Street, London EC2V 7BF Registrars Link Group 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL Solicitors Fieldfisher LLP Riverbank House, 2 Swan Lane London EC4R 3TT Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic report Highlights Chairman’s Statement Strategic Report Governance Board of Directors Corporate Governance Statement Directors’ Remuneration Report Report of the Audit Committee Directors’ Report Statement of Directors’ Responsibilities Financial statements 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 Notes to the Consolidated Financial Statements Parent Company Balance Sheet Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements 2 3 4 16 18 22 27 29 31 Other information Glossary Corporate Directory S t r a t e g c i r e p o r t G o v e r n a n c e i F n a n c a i l s t a t e m e n t s O t h e r i n f o r m a t i o n 32 39 40 41 42 43 61 62 63 69 IBC 1 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plc Highlights (including post period-end) Operational Financial > Completed further analysis of data accumulated from > Loss from operations for the year ended 31 December the more than 750 patients dosed to date with SNG001. Findings included: –– Developmentofstratificationcriteriatotargetspecific 2022 of £20.3 million (2021: £57.9 million), with R&D expenditure decreasing to £14.9 million (2021: £52.9 million). > Cash and deposit balances of £19.7 million at 31 December 2022 (31 December 2021: £33.8 million). patient populations in future clinical trials; –– SNG001 reduced the risk of several recognised Long COVID symptoms; –– Evidence of accelerated viral clearance of rhinovirus from the lung in COPD patients; and –– Furtherdemonstrationofthewell-toleratedsafetyprofile of SNG001. > Announced data from the US NIH-led ACTIV-2 Phase 2 trial for SNG001 in COVID-19 which showed an encouraging reduction in hospitalisation with SNG001 versus placebo in home-based patients. > Published data from the Phase 3 SPRINTER trial for SNG001 in hospitalised COVID-19 in the European Respiratory Journal Open Research in December 2022. Data from the trial, which did not meet primary or key secondary endpoints, included the observation of an encouraging signal in the reduction in progression to severe disease or death for patients treated with SNG001. > Gained a deeper understanding of the extent of the mechanism of action of SNG001 as a host-directed, variant-agnostic antiviral agent: – Potent antiviral activity was shown in vitro against SARS- CoV-2 Alpha, Beta, Delta, Gamma and Omicron Variants of Concern, addition to our existing in vitro studies which showed potent antiviral activity against a wide variety of seasonal respiratory and pandemic viruses including RSV,rhinovirus,variousinfluenzastrainsincludingH5N1 and MERS-CoV. > Undertook a thorough evaluation of clinical development options to map out a route to conducting a Phase 3 registrational programme required for a regulatory submission. – IdentifiedaclinicaldevelopmentplanforSNG001 designed to address the unmet need in targeted, high-risk patient populations that appear to be most responsive to SNG001 in previous clinical trials, for example elderly patients and those with certain co- morbidities. In addition, we plan to assess SNG001 in immunocompromised patients who are particularly vulnerable to respiratory viral infections, ventilated patientswithconfirmedviralpneumonia,andalsothose who appear unable to clear virus and become long-term “shedders” and mutation hosts. – Plan will start with a series of focused, investigator- led/Synairgen-sponsored studies, using existing resources, which are intended to lead towards a Phase 3 registrational programme. – Preparation is underway for these focused trials to initiate in H2 2023. 22 Synairgen plc Annual report and accounts 2022 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600 Chairman’s Statement “ The Group’s work in 2022 has shown that there is a significant unmet need in the broader respiratory antiviral area, in addition to the need to find potential treatment solutions for future viral pandemics. Respiratory virus infections remain a leading cause of death globally. “ 2022 started with high hopes for the success of our Phase 3 clinical trial of SNG001 for the treatment of COVID-19 in hospitalised patients. Unfortunately, the trial did not meet its primary endpoints which was most likely due to improvements in standards of care and is further discussed in this report. However, the data did provide significantinsightsintothepatientgroupsthatappeared tobenefitmostfromSNG001.ThishasenabledSynairgen to refocus on SNG001’s potential both in the hospital and the home environment as a broad-spectrum antiviral for thosemostatriskofsevererespiratoryproblems.This obviously includes COVID-19, however the Group’s work in2022hasshownthatthereisasignificantunmetneed in the broader respiratory antiviral area, in addition to the needtofindpotentialtreatmentsolutionsforfutureviral pandemics. Respiratory virus infections remain a leading cause of death globally. Working closely with our partners, including academic institutions, diagnostic and medical device companies, advisors, and our strong team of researchers, scientists and regulatory experts, and building on the substantial body of trial evidence we have for SNG001, the team spent much of the year advancing the clinical development plans topursuethisgoal.Theseareintheprocessofbeing discussed with potential trial sites and investigators with a view to commencing later this year. I would like to take this opportunity to thank the Board of Directors for their unwavering support during this challengingtime.Theirguidanceandexpertisehavebeen invaluable in helping us navigate both the challenges and analysis of the opportunities. I would also like to note the retirementofTheoHaroldandIainBuchanan,bothof whomhavemadesignificantcontributionstoSynairgen. At the same time, we are pleased to welcome Amanda RadfordandFlicGabbaytoourBoardofDirectors.Their experience and insight will be instrumental in helping us achieve our goals. I am proud of the dedication and hard work of our entire team in a particularly challenging year, and I am excited for our future progress in developing this novel treatment for a wide range of viral respiratory diseases. Simon Shaw Chairman 26 April 2023 3 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcStrategic Report Principal Activities and Strategy Synairgen plc (the ‘Company’) is the holding company for Synairgen Research Limited, a UK-based respiratory drug discovery and development company, Synairgen Inc. and Synairgen Research (Ireland) Limited (together, the ‘Group’ or ‘Synairgen’). Synairgen is developing SNG001, an investigative formulation of inhaled interferon beta (‘IFN-β’), for the possible treatment and prevention of severe viral lung infections in high-risk patient groups. The development plan is outlined below in the Operational Review. A glossary on pages 69 to 75 provides additional explanation of the more detailed scientific and clinical terminology referenced in this report. Operational Review Overview 2022 was an important year for Synairgen, providing the Groupwithinsightsanddatathathavehelpedrefineand clarify the potential for SNG001. Inthefirstquarterof2022, the Group received the disappointingnewsthatthePhase3SPRINTERtrial of SNG001 in hospitalised patients with COVID-19 did not meet the trial’s primary endpoints. Following the announcement of the topline results, post hoc analyses subsequently showed positive trends in subsets of higher riskpatientgroupswithinthetrial.Throughthisworkand months of investigation, both in-house and with clinical collaborators on both sides of the Atlantic, we have established a number of ways forward for the SNG001 development programme. We are embarking on these with renewed vigour in 2023. From a clinical perspective, alongside the safety data accumulatedtodatefromthemorethan750patients dosed with SNG001, we gained important new insights aboutthespecificpatientpopulationstotargetinfuture clinical trials, particularly in relation to the potential for reducing the risk of disease progression - whether in the hospital setting or the home environment. We can also seefromtheSPRINTERtrialthatSNG001mayhavea positiveeffectinreducing the risk of several recognised Long COVID symptoms. Finally, a further analysis during theyearoftheSG015Phase2trialinpatientswithCOPD showed accelerated viral clearance of human rhinovirus in patients receiving SNG001 compared to placebo. On the non-clinical side, we learned more about the mechanism of action of SNG001 as a host-directed, variant-agnostic antiviral agent. Adding to our existing in vitro studies which showed potent antiviral activity against a wide variety of seasonal respiratory and pandemic viruses including Respiratory Syncytial Virus (‘RSV’), rhinovirus,variousinfluenzastrainsincludingH5N1 and MERS-CoV, we showed potential antiviral activity in further in vitro studies against SARS-CoV-2 Alpha, Beta, Gamma, Delta and Omicron Variants of Concern.1 Themarketcontextisclear:there are no approved antiviral therapies for the majority of hospitalised adult patients due to respiratory viral lung infections, and thepandemichashighlightedthesignificantissuesfor health systems and patients as a result. In the US alone, approximately three million people are hospitalised every year due to viral lung infections such as rhinovirus, RSV, COVID-19,influenzaandothers.2 Bronchialcilia,SEM(P580/0140) 4 1 2 Synairgenonfile. IQVIAmarketresearchQ42022;Sources:USCDC,HCUP,IQVIA ClaimsData,PubMed;dataonfile Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Ourworkin2022hasshownthatthereisasignificant unmet need in this broader antiviral area, in addition to theneedtofindpotentialtreatmentsolutionsforfuture viral pandemics. Our clinical work over many trials to date indicates that SNG001 has potential utility against a wide spectrum of respiratory viruses in certain high-risk patient groups. Clinical Development Outlook TheGroupanditsclinical advisors believe that based on the safety data and body of pre-clinical and clinical data forSNG001ithasthepotentialtobethefirstinhaled broad-spectrum antiviral for the patients who are at high risk of disease progression. Development Plan Thisaccumulatednon-clinicalandclinicaldata,together with third-party research and feedback from the clinical community, has strengthened our conviction that SNG001 has potential as a broad-spectrum antiviral which could be directed towards certain types of patients infected withawiderangeofrespiratoryviruses.TheSynairgen team, and our collaborators and advisors, have assessed manydifferentoptionsforanoptimalclinicaldevelopment programme, and have mapped out a series of focused clinicaltrialstoconfirmthesignalswehaveseenand investigate SNG001 against this wide spectrum of respiratoryvirusesinspecifichigh-riskpatientgroups. Mindful of the insights gained in 2022 and the challenges outlined, Synairgen continues to explore the potential of SNG001inthreesettings: 1) For use as a broad-spectrum antiviral in people hospitalised with severe viral lung infections, particularly those in high-risk groups; 2) Topreventprogressionofdisease/hospitalisationin high-risk patient groups with a range of respiratory viruses in the home setting; and 3) As a possible future pandemic preparedness option for government agencies. Wearenowprogressingprotocolsspecifictothreemain opportunities for the next stage of the development programmenamelyinthepatientpopulationsidentified: in the elderly (who were most at risk during the pandemic);immunocompromised (such as patients taking chemotherapy for whom even a common cold can delay effectivetreatmentoftheirunderlyingdisease);and otherpatientswhomaybenefitmostfromtheuseof SNG001 (including ventilated patients withconfirmedviral pneumonia and those who appear unable to clear virus andbecomelongterm“shedders”andmutationhosts). Bothindividuallyandcollectively,thesearesignificant unaddressed market opportunities. Thedevelopmentofabroad-spectrumantiviraltreatment hasbeenasignificantchallengeinthefieldofantiviral research.Thesearchforabroad-spectrumantiviral treatment can be traced back several decades, with a growing recognition of the need for a treatment that can effectivelytargetawiderangeofdifferentviralinfections. In recent years, there has been increased recognition in the importance of developing broad-spectrum antivirals that target the host cell rather than the virus itself. However, despite this growing interest, there is currently no precedent for a broad-spectrum antiviral clinical development programme. Many of the platform trials that emerged during the COVID-19 pandemic have completed or wound down in part due to lower rates of severe illness or changes in funding. Synairgen has been and remains in contact with the relevant platform trial investigators and will continue to evaluate options should they arise; in parallel, wanting to move forward at pace, we believe that implementing our own clinical development plan as quickly as possible will provide promising opportunities to collect appropriate and meaningful data to support an eventual regulatory submission. Over the past year, the Group has undertaken a thorough evaluation of clinical development options with the aim of conducting a Phase 3 registrational programme required for a regulatory submission. As there is no precedent for a broad-spectrum antiviral clinical development programme, designing and determining a clinical pathway is complex as there are multiple viruses being targetedfordifferenthigh-riskpatientgroups.Ithasbeen determined that to achieve this aim, a multi-staged clinical development plan is required. TheGroupisnowadvancingaclinicaldevelopment plan for SNG001 designed to address the unmet need in targeted patient populations that appear to be most responsive to SNG001 in previous clinical trials, as well as in immunocompromised patients who are particularly vulnerable to respiratory viral infections and also ventilated patients withconfirmedviralpneumonia. Thisplanwillstartwithaseriesoffocused,investigator- led/Synairgen-sponsored studies that build a pathway towards a Phase 3 registrational programme. Preparation is underway for these focused trials to start in H2 2023. 5 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcStrategic Report (continued) Clinical Need Severe viral lung infections can be caused by a variety of viruses,includinginfluenza,coronaviruses,RSV,rhinovirus, andadenovirus,amongothers.Theseinfectionscan lead to serious complications, including pneumonia, acuterespiratorydistresssyndrome(ARDS),anddeath, particularly in vulnerable, high-risk populations such as elderly individuals, those with COPD and asthma, and people with weakened immune systems. Rationale for SNG001 as a Broad- spectrum Antiviral ThereisastrongscientificrationaleunderpinningSNG001 for use in treating patients infected with a broad range of respiratory viruses, combined with itssafetyprofileand a growing body of encouraging clinical and non-clinical data which has helped us better understand the potential role SNG001 might play in treating patients at risk of developing severe illness due to these respiratory viruses. In the US, severe viral lung infections are responsible for upwards of three million hospitalisations annually, at a costof$50billion.3 Currentantiviraltreatmentsarelimitedintheirefficacy,as theyaretypicallyspecifictoasinglevirus.Forexample, whilecertainantiviralsareeffectiveagainstinfluenza, theyarenoteffectiveagainstothervirusesthatcancause severe lung infections, such as coronaviruses or RSV. Thishighlightstheneedforabroad-spectrumantiviral thatcaneffectivelytreatarangeofdifferentvirallung infections,regardlessofthespecificviruscausingthe infection. A broad-spectrum antiviral would be a valuable addition to the healthcare arsenal, as it would improve outcomes for patients and reduce the spread of viral infections in healthcare settings. Additionally, a broad- spectrum antiviral would be useful in the event of a pandemic caused by a novel virus, as it would provide a treatmentoptioneveniftheaetiologyofthespecificvirus is not yet known. In summary, the need for a broad-spectrum antiviral to treat severe viral lung infections is driven by the high incidence of severe lung infections caused by a variety ofdifferentviruses,thelimitednumberandefficacyof current antivirals, and the potential to improve outcomes for patients and reduce the spread of viral infections. Theannualcost of hospitalisations for severe lung infections illustrates the substantial market opportunity foraneffective broad-spectrum antiviral to treat such infections. TheGrouphasconductedin vitro testing of SNG001 against a broad range of respiratory viruses ranging from seasonalcoldandfluviruseslikeRSVandrhinovirus; highlypathogenicvirusessuchasH5N1,aformof‘birdflu’, MERS-CoV and SARS-CoV-2 variants of concern including Alpha, Beta, Gamma, Delta and Omicron.4 In vitro tests have shown potent antiviral activity at concentrations that are readily achievable following inhaled delivery of interferon beta. We believe these concentrations could not be accomplished at the lining of the lungs via the injected route, and indeed recent studies have shown systemic use of IFN-βthroughinjectionisineffectivein fightingCOVID-19inthelungs.5 2022 Clinical Summary and Progress SPRINTER – Investigating SNG001 in the hospitalised environment SPRINTER(SG018;NCT04732949)wasaglobal, randomised, placebo-controlled, double-blind clinicaltrialassessingtheefficacyandsafety of inhaled SNG001 for the treatment of adults hospitalised due to COVID-19 who required treatmentwithsupplementaloxygen.Thetrial recruited a total of 623 patients who were randomisedtoreceiveSNG001(n=309)orplacebo (n=314)ontopofstandardofcare. Synairgen announced in February 2022 that the Phase 3SPRINTERtrialdidnotmeettheprimaryendpointsof dischargefromhospitalandrecovery.Therewas,however, an encouraging signal in the key secondary endpoint ofreductionintherelativerisk(RRR)ofprogressionto severediseaseordeathwithin35daysincludinga25.7% reductionintheIntention-to-Treatpopulationand36.3% HartnettJ.InfluenzaOtherRespirViruses.2022;16:906–915;Pastula STet.al.,OFID,2017,ofw270; ZhouJAet.al.,CID,2020,70(5):773-779; Disease Burden of Flu | CDC; Preliminary Medicare COVID-19 Data Snapshot(Dec2021);ICERReport:SpecialAssessmentofOutpatient TreatmentsforCOVID-19(Feb2022). 4 5 Synairgenonfile. WHOSolidarityTrialConsortium.RepurposedAntiviralDrugs for Covid-19 –InterimWHOSolidarityTrialResults.NEnglJMed. 2021;384:497–511. 3 6 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Lunglining,SEM(P580/0175) reduction in the Per Protocol population (though neither wasstatisticallysignificant). Toassessthestrengthofthissignalandidentify specificpatientpopulationsthatmightbenefitmost from treatment, post hoc analyses were performed on groups of patients recognised to be at greater risk of developingseverediseaseinhospital.Theseanalyses includedpatients≥65yearsold,thosewithco-morbidities associated with worse COVID-19 outcomes and those who,atbaseline,despitereceivinglowflowoxygen,had clinicalsignsofcompromisedrespiratoryfunction(defined asoxygensaturationof≤92%orrespiratoryrate≥21 breaths/min). Theseanalysesshowedstrongertreatmenteffectswith SNG001 in high-risk patient subgroups, with the strongest effectobservedinthosewhohadclinicalsignsof compromised respiratory function. In these patients, who representedapproximatelyone-thirdoftheSPRINTER trialpopulation,SNG001significantlyreducedtherisk of progression to severe disease or death compared to placeboby70%inthePerProtocolpopulation(OddsRatio (95%ConfidenceInterval)0.23(0.06,0.98);p=0.046). Thedatafromthispivotaltrialwaspresentedatthe ClinicalTrialsSymposiumoftheAmericanThoracicSociety 2022(ATS2022)InternationalConferenceinSanFrancisco, California in May 2022 and appeared in the peer-reviewed EuropeanRespiratoryJournalOpenResearch(ERJOR)in December 2022. In addition to this, Long COVID symptoms and patient reported outcome measures were assessed as a secondaryendpointoftheSPRINTERtrialatfollow- up visits via telephone/video call on Day 60 and 90. Patients on SNG001 saw the relative risk of fatigue/ malaisereduced[RRR=35.4%],oneofthemostcommon symptoms of Long COVID. ACTIV-2 – Investigating antiviral treatments in the home environment In October 2022, Synairgen received the positive toplineresultsforoutcomesthrough28daysof follow-up from the Phase 2 evaluation of SNG001 from the US National Institute of Allergy and InfectiousDiseases(NIAID)ACTIV-2trial(Protocol ACTIV-2/A5401:“AdaptivePlatformTreatmentTrial forOutpatientswithCOVID-19[AdaptoutCOVID]”; AppendixB).Thistrialwasestablishedtoinvestigate potential therapies in adults experiencing mild to moderate COVID-19 outside of the hospital setting. Based on the study results, the Independent Data SafetyMonitoringBoardforACTIV-2recommended SNG001 advance from Phase 2 into Phase 3 but in March 2022, the NIH decided to halt all participant recruitmentinthetrialduetothesignificantshiftin the nature of the pandemic. At that point, the Phase 3 component, including SNG001, was halted. Overall SNG001 was well-tolerated and there was no statisticallysignificantdifferencebetweenSNG001and placebo with respect to the primary safety outcome measure,andtherewerenostatisticallysignificant differencesintheotherprimaryoutcomesnamelytimeto symptom improvement or viral clearance. It is notable that one patient was hospitalised in the SNG001 treatment group compared with seven in the placebo group (1/110 SNG001versus7/110placebo,representingan86% relativeriskreductionp=0.07).WhilethePhase2stage of the trial was not powered to prove this, the promising decrease in hospitalisations in patients that received SNG001 may be important, especially combined with a goodsafetyprofile. ThedatafromtheACTIV-2trialwaspresentedatthe Conference on Retroviruses and Opportunistic Infections Conference(CROI)inFebruary2023byDrWilliamFischer from the University of North Carolina at Chapel Hill and have been submitted for publication in a peer-reviewed journal. TobuildontheresultsoftheACTIV-2trial,oneofthe clinical opportunities we are investigating for SNG001 is its use in the home environment to help prevent hospitalisation in high-risk patients with a wide range of viral lung infections. 7 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcStrategic Report (continued) SG015 COPD trial virology In early 2020, due to the emergence of SARS-CoV-2, Synairgen’sSG015(NCT03570359)trialinCOPD patients was paused with 109 out of the targeted 120 patients recruited. An interim analysis of the data was reported in September 2020 which demonstrated that SNG001 boosted lung antiviral responses as assessed using sputum biomarkers andasignificantimprovementinthelungfunctionof exacerbating patients. In September 2022, Synairgen reported positive data from post hoc assessments of lung sputum samples from SG015whichshowedthatSNG001acceleratedclearance of rhinovirus (which approximately half of the trial participantshad)fromthelungs.Thisbuildsonexisting data supporting SNG001’s mechanism of action. Manufacturing As we look ahead to delivering the clinical development programme, we have made the strategic decision to focus ourmanufacturingeffortsonthesupplyofadditionalpre- filledsyringedrugproductandplaceboforclinicaltrials. While we remain committed to exploring new packaging options,suchasblow-fill-seal delivery, we believe that at this time it is important to prioritise the production ofSNG001tofulfilcurrentrequirements,usingcurrent proven process and materials. Outlook Underpinned by the encouraging data accumulated to date for SNG001 and that respiratory virus infections remain a leading cause of death globally, we remain excitedbyitspotentialtobethefirstinhaledbroad- spectrum antiviral for patients at high risk of disease progression, in both the hospital and home environment. Basedonthesignificantclinicalneedandtheinsights gained from our clinical and pre-clinical data, the Group will advance its clinical development plan for SNG001 with a series of focused, investigator-led/Synairgen-sponsored studies, commencing in H2 2023 utilising existing cash resources, to build a pathway towards a Phase 3 registrational programme. We continue to gather valuable insights from studies conducted and look forward to presenting our latest analysisofthePhase3SPRINTERtrialdataatISIRVand ATSinMayandupdatingallourshareholdersonour progress in due course. 8 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Financial Review equatesto16%ofour2022researchanddevelopment expenditure(2021:17%). TheFinancialReviewshouldbereadinconjunctionwith theconsolidatedfinancialstatementsoftheCompany anditssubsidiaries(togetherthe‘Group’)andthenotes thereto on pages 39 to 60.Theconsolidatedfinancial statements are prepared in accordance with UK-adopted international accounting standards. ThefinancialstatementsoftheCompany,setouton pages 61 to 68, are prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. Consolidated Statement of Comprehensive Income Thelossfromoperationsfortheyearended31December 2022was£20.3million(2021:£57.9millionloss)with research and development expenditure amounting to £14.9million(2021:£52.9million)andotheradministrative expensesof£5.4million(2021:£5.0million). Research and development expenditure continued to be focused on clinical trials and manufacturing activities. ClinicaltrialexpenditureonSPRINTER,SG015and SG016 reduced markedly compared to 2021. Additional preparatorycostsfortheACTIV-2Phase3studywere incurred in 2022 prior to the trial being halted. Manufacturing activities (including procurement of long leadtimeitems)alsoreducedsignificantlyin2022withthe main area of expenditure being on outsourced activities, including blow-fill-seal drug product development, release testing, stability testing and comparison testing, with all costs being expensed to the income statement. Other administrative expenses, which comprises all expenses which are not research and development expenditure,of£5.4millionin2022remainedbroadly inlinewiththetotalexpenditureof£5.0millionin 2021.Therewasgreaterexpenditureonmedicalaffairs and corporate communications in 2022 compared to 2021 when there was a greater expenditure on pre- commercialisation activities. Interest receivable increased from £nil to £0.2 million as deposit interest rates increased during the second half of 2022. Theresearchanddevelopmenttaxcreditdecreasedfrom £9.2millionto£2.4millioninlinewithreducedqualifying researchanddevelopmentexpenditure.Thecredit Thelossaftertaxfor2022was£17.6million(2021:£48.7 million)andthebasiclosspersharewas8.76p(2021:basic losspershareof24.28p). Consolidated Statement of Financial Position and Cash Flows At 31 December 2022, net assets amounted to £20.3 million(2021:£37.0million),includingcashanddeposit balances of £19.7 million, comprising cash and cash equivalentsof£15.9millionandotherfinancialassets– bankdepositsof£3.8million,(2021:£33.8millioncash andcashequivalents). Theprincipalelementsofthe£14.1milliondecrease duringtheyearended31December2022(2021:£41.2 milliondecrease)incashanddepositbalanceswere: > Cashoutflowsfromoperationsbeforechangesin workingcapital:£19.3million(2021:£57.2million),with the reduction being attributable to the lower research and development expenditure as explained above; > Changesinworkingcapital:£4.1millionoutflow(2021: £12.2millioninflow),onaccountofthereductionin trade and other payables as discussed below. In 2021 there was a reduction in trade and other receivables of some£7.8millionandanincreaseintradeandother payablesof£4.4million; > Interest received £0.1 million (2021:£nil);and > Researchanddevelopmenttaxcreditsreceived:£9.1 million(2021:£3.9million)onaccountofreceiptofthe 2021 tax credit. TheothersignificantchangesintheStatementofFinancial Positionwere: > Current tax receivable decreased from £9.1 million to£2.4milliononaccountofthelowerresearchand development tax credit receivable; and > Tradeandotherpayablesdecreasedfrom£7.6million to£3.3millionastradepayablesreducedfrom£4.2 millionto£0.5millioninlinewiththereductioninthe level of operating expenditure. 9 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcKey Performance Indicators (KPIs) TheBoardconsidersthatthemostimportantKPIsduring theyearunderreviewarenon-financialandrelatetothe progress of the clinical programmes and the advancement of manufacturing activities, which are discussed elsewhere in this report. ThemostimportantfinancialKPIsaretheresearchand developmentexpenditureonthePhase3SPRINTER clinical trial and on-going manufacturing activities, and the cash position of the Group. Cash and deposit balances reducedfrom£33.8millionto£19.7millionprincipally on account of the planned research and development expenditure.Thefinancialresultsarediscussedinthe Financial Review above. Strategic Report (continued) Parent Company Balance Sheet Company-only impairment of investment in subsidiary Following the announcement of the results of Synairgen ResearchLimited’sPhase3SPRINTERtrialon21February 2022, the share price of Synairgen plc (the Parent Company)fell84%fromitsclosingpriceof171.0pon Friday18February2022toaclosingpriceof27.2pon 21 February and for the remainder of 2022 closed at a rangeofbetween12.4pand35.0p.Thefallinshareprice is an indicator of possible impairment in the carrying value of the Parent Company’s investment in Synairgen Research Limited. We have therefore assessed the recoverable amount of this investment using a value in use methodology which has been calculated by applying a pre-tax 14.9%discountratetotheriskadjustedpost taxcashflowsprojectedtoarisefromtheSNG001 programme as a broad spectrum antiviral. As a result of this review, we have recognised an impairment loss, a non-cash charge, of £66.2 million. It should be noted that this impairment review exercise is for accounting purposes; therefore it does not seek to derive a market valuation for the Company or its programmes. Determining the estimated recoverable amount of Synairgen Research Limited is judgemental in nature and requires the use of certain estimated inputs that represent key sources of estimation uncertainty. Furtherdetailscanbefoundinnote4oftheParent Companyfinancialstatements. 10 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Section 172 Statement As required by section 172 of the Companies Act 2006, a director of a company must act in a way they consider, in good faith, would most likely promote the success of the companyforthebenefitofitsshareholders.Indoingthis, the director must have regard, amongst other matters, to the: a) Likely consequences of any decisions in the long-term; b) Interests of the Company’s employees; c) Need to foster the Company’s business relationships with suppliers, customers and others; d) Impact of the Company’s operations on the community and the environment; e) Desirability of the Company maintaining a reputation for high standards of business conduct; and f) Need to act fairly between members of the Company. As a Board, our aim is always to uphold the highest standards of governance and business conduct, taking decisions in the interests of the long-term sustainable success of the Company, generating value for our shareholders and contributing to wider society. We recognise that our business can only grow and prosper over the long term by understanding the views and needs of our stakeholders. Engaging with stakeholders is key to ensuring the Board has informed discussions and factors stakeholder interests into decision-making. 11 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcStrategic Report (continued) Thefollowingtable,incombinationwiththeCorporateGovernanceStatementsetoutonpages18 to 21 and the Company’swebsite(www.synairgen.com),setsouttheframeworkofourengagementwithkeystakeholdergroups. Our stakeholders Investors TheGroupcontinuestoconsumecashresourcesand 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 Synairgenhas34employees(includingexecutivedirectors), who are multi-skilled and many of them have worked for theGroupformanyyears.Theyallplayakeyroleinthe business and it is vital that they all understand and support the key decisions taken in the running of the business. Material topics How we engage > Business strategy > Operational performance > Financial performance and cash requirements > Enviromental, Social and Corporate Governance (ESG) > RNS announcements > Website and social media updates > Meetings after preliminary statement release and interims for investors > AGM > Proactive Investor interviews > Responses to direct investor questions > Operational targets and > Bi-monthly scheduled progress > Opportunities to share ideas company meetings and a policy of open disclosure > Regular virtual and face-to- > Financial resources of the Group > Share price > Workingtimeflexibilityand working from home face team meetings > Open door policy to executive directors > Company intranet > Use of share-based University of Southampton Synairgen is a spin-out company from the University andstillmaintainsmanylinkswithit,whichbenefitboth parties.TheUniversityisSynairgen’slandlordandcertain 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 understand their product/service devel- opment plans and they understand our needs. > Operating facilities > Intellectual property > Joint projects > Published papers > Supplier product development plans > Our clinical trial, manufacturing and longer-term development needs 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 continue to 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 com- panies can sell to the community and which governments will buy for stockpiling and it is therefore critical that there is anidentifiedmarketneedinthecommunity. > Programme development plans, including clinical trial designs > Clinical trial read-outs > In-house and external competing products > New therapeutics development > Involvement in clinical trials incentives for employees > Meetings with Founders > Interaction on projects with scientists and clinicians and the University’s Research & Innovation Services team > Regular project meetings > Regular meetings at key respiratory and anti- infective conferences (ATS,ERS,ECCMIDandID Week)andmeetingsduring business development conferences > Interactions with government agencies > Interactions with clinicians and Key Opinion Leaders, including Advisory Boards > Patient data from clinical trials 12 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Our stakeholders Regulators We work in a highly regulated sector and it is critical that we maintain full compliance with all appropriate regulations. Material topics How we engage > Clinical trial approvals > Scientificadvicefor authorities on key development topics > Regulatory compliance > Use of external consultants to ensure we are complying with regulations > Interactions with Ethics Committees, MHRA, FDA, EMA and other regulatory agencies Principal Decisions in 2022 We have considered the decisions taken by the Board which will have an impact on the longer-term performance and prospects for the Group.TheBoardbelievesthat three key decisions taken during the year fall into this category and were made with full consideration of both internal and external stakeholders: > Thedecisiontodevoteresourcetothecomplete analysisofthedatafromtheSPRINTERPhase 3 trial, particularly with regards to high-risk patient groups; > ThedecisiontoidentifyandengagewithCOVID-19 (andotherviruses)platformtrialsandtheirprincipal investigators, to establish interest in SNG001; and > ThedecisiontotransitionfromaCOVID-19-directed development plan to a targeted broad-spectrum (‘all viruses’)developmentplanaddressingkey high-risk patient groups. Post period-end, the Board has considered the next strategic steps for the development of SNG001 and is now embarked on a strategy of commencing a number of focused clinical trials in high-risk patients and also determining a way towards commencing a larger trial in high-risk non-hospitalised patients. Principal Risks and Uncertainties In addition to the fact that the Group has only one candidate(SNG001),albeitwithanumberofpotential indications, and is therefore dependent on there being a successful outcome to its development, the Board considers that the principal risks and uncertainties facing theGroupmaybesummarisedasfollows: Ability to design and deliver appropriate broad- spectrum clinical trials TheGroup’sstrategyincludesdevelopingSNG001asa broad-spectrum antiviral which will require a series of clinical trials, for which there is little regulatory guidance or precedence. At this stage these clinical trial protocols are still at the development stage, however, initial focused studies will provide data to inform the design and implementation of regulatory studies. While there can be no guarantee at this stage that these trials will be approved by the regulatory agencies and that it will be possible to complete them, the risks are minimised by the fact that the studies are built upon the existing data on SNG001, consider the regulatory environment for antivirals, include input from regulatory and clinical development experts, as well as advice from Key Opinion Leaders and potential Investigators.Regulatoryscientificadvicewill be sought for those studies that might be novel or form a key part of the regulatory pathway to an eventual marketing authorisation application. Pre-clinical testing and/or clinical trials fail to generate positive data Thereisahighfailurerateinthedevelopmentof pharmaceuticals and there is a substantial risk of adverse, undesirable, unintended or inconclusive results from pre-clinical testing or clinical trials, which may substantially delay, halt entirely or make uneconomic any further development of SNG001 and may prevent or limit its commercial use. Thepre-clinicaland clinical trial data that has been previously generated, as wellasotherscientific evidence, supports the rationale for the proposed clinical trials. The programme of clinical studies follows a logical development path with focused initial studies providing data which can be used to appropriately design key regulatory studies to reduce risks of failure. Clinical trials overrun Thereareanumberoffactorswhichmayleadtodelays, includingbutnotlimitedto:(i)delaystoregulatory approvals;(ii)variationsinlabellingandotherregulatory requirementsbetweencountries;(iii)dealingwith protocolchanges;and(iv)difficultyinfindingsuitablesites and patients, including competition for patients from competing clinical trials. If any of the above circumstances or events occur, then delays may impact the clinical development programme timetable, which in turn may also have cost and/or ultimately commercial implications. 13 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcStrategic Report (continued) TheGroupseeksto mitigate these risks through: ongoing risk assessment; close project management; selection procedures for all key suppliers (includingtrialsites); and regular ongoing contact with sites and other key vendors throughout trials. The regulatory approval processes of the MHRA, EMA, FDA and other comparable regulatory agencies may be lengthy, time-consuming and unpredictable TheGroup’sfuturesuccessisdependentuponitsability to develop successfully, obtain regulatory approval for, and then successfully commercialise SNG001, which it may do independently or in partnership with another pharmaceutical company. Even if SNG001 is successful in clinical trials, there can be no assurance it will receive regulatory approval at all or in a timely manner. A drug which has received approval in one territory may not succeed in getting approval in other territories and regulatorsindifferentjurisdictionsmayseekdifferent criteria and endpoints in order for regulatory approval and marketing authorisations to be granted. TheGrouptakestheadviceofspecialistregulatory advisers and maintains an on-going dialogue with regulators. Commercial risk TherecanbenoguaranteethattheGroupwillsucceed in securing and maintaining the necessary contractual relationships with commercialisation partners for its programmes under development. Even if programmes are successfully out-licensed and pharmaceutical products are brought to the market by a partner, there is no guarantee that such products will succeed in the marketplace. Synairgen continues to build its commerical capabilities and partnerships to maximise the strength of SNG001 ‘go to market’ strategic options, pending regulatory approval. There are a number of competing antiviral therapeutics at different stages of development Thereareanumberofcompetingtherapeuticsfor antiviral applications at varying stages of development, which may be brought to market more quickly than SNG001orprovetobemoreeffective,desirable or cheaper. Some of the Group’s competitors have substantiallygreaterfinancialandotherresources.There can therefore be no assurance that competitors will not succeed in developing products which would render SNG001 non-competitive. Currently, antivirals in development are largely targeting the virus itself and are mainly specifictoasinglevirus. 14 Thehost-directed, virus-agnostic mode of action of SNG001 means it has a broader potential utility and fewer direct competitors.Thelarge market for respiratory viral diseases, and potential for new viruses and variants, means there are likely to be opportunities for a number of products to be commerically available before any significantmarketsaturation.TheGroupcontinuously monitors the competitive environment and medical need to appropriately targetandrefinethedevelopment and future commercial strategies. Synairgen is dependent on a small team of key personnel and scientific and clinical collaborators TheGroup’ssuccessishighlydependentontheexpertise and experience of a small team of key personnel andscientificandclinicaladvisers/contractors.While the Group has entered into employment and other agreements with each of these key personnel, the retention of such personnel cannot be guaranteed. Should key personnel leave or no longer be party to agreements or collaborations with the Group, the Group’s businessprospects,financialconditionand/orresultsof operationscouldbeadverselyaffected. Tomitigatethisrisk,theGrouphasrecruitedadditional staffandcontractedwithcertainkeypartnerstoprovide services to the Group, including CRO services, regulatory affairsconsultantsandclinicalmanagementservices. Manufacturing complexity SNG001 beta Interferon-1a is expressed as a recombinant protein using CHO cells. As a biological product the drug substance manufacturing process is well controlled to ensureproductconsistency.Thepurifieddrugsubstance isformulatedandfilledundersterileconditionsto manufacturedrugproduct.Thisactivityisgovernedbya revised HPLC content assay, which is currently undergoing further development to optimise consistent run-to-run performance. A delay in the satisfactory demonstration that thismethodisfitforpurposemayimpactontheavailability of drug product for use in the planned clinical trials. Failure of a manufacturing batch due to process error or product quality may delay the timing for clinical resupply as well as deplete drug substance stocks. In terms of regulatory compliance, the next key milestone is gaining approval from the FDA that the new drug substance is deemed comparable to the Rentschler-manufactured drug substance and is clinically interchangeable. If this is not achieved, the risk is that drug product manufactured using the new drug substance may not be granted approval for use in clinical studies in the US without undergoing additional testing. Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Project risk is mitigated through the close involvement of experienced CMC and laboratorystaff,combinedwith additional specialist consultants.Thisextends into careful selection and management of the drug product Contract Manufacturing Organisaton. In the event that additional work is required to be undertaken to prove drug product comparability with previously manufactured clinical materials, clinical trial activity would be undertaken at UK and EU clinical trial sites in the short term. The Group is dependent on third party supply, manufacturing and clinical service relationships Incommonwithotherdrugdevelopersofsimilarsize, the Group engages the expertise and resources of thirdpartiesinanumberofkeyareasincluding:(i)the conductofclinicaltrials;(ii)themanufacture,scale-up, fill/finish,analyticaltestingandsupplyofSNG001;and (iii)themanufactureandsupplyofthenebuliser.Critical and complex aspects of the Group’s business, including ownership of the drug substance cell line, are therefore in the hands of third parties over whom the Group has limitedcontrol.TheGroupcannotguaranteethatthose third parties or their suppliers (including suppliers of raw materials and components necessary for manufacturing activities)willbeabletoperformtheircontractualand regulatory obligations satisfactorily or on time. Default, delay, non-compliance with law and regulation or other sub-optimal performance by a third party may adverselyaffecttheGroup’sbusinessplansandprospects. Regulatory requirements for pharmaceutical products tend to make the substitution of counterparties costly and time-consuming. Alternative suppliers may not be able tomanufactureproductseffectively,ontimeorobtain the necessary manufacturing licences from applicable regulatory authorities. TheGroupseekstominimizeriskbyholdingregular meetingswithkeysuppliersandtheuseofinternalstaff, project managers and other consultants to manage the relationships. Intellectual property ThecommercialsuccessoftheGroupdependson its ability to obtain patent and other market-related protection for its products in the US, Europe and elsewhereandtopreservetheconfidentialityofits know-how.Thereisnoguaranteethatpatentapplications will succeed or be broad enough to provide protection for the Group’s intellectual property rights and exclude competitors with similar pharmaceutical products. ThesuccessoftheGroupisalsodependentonnon- 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 products. Litigation may be necessary to protect the Group’s intellectual property, which may result in substantial costs. TheGroupseekstoreducethisriskbyworking with patent attorneys and other advisor to maximise in- market protection where appropriate, and by minimising disclosure to third parties. Funding risk TheGroupcontinuestoconsumecashresources. UntiltheGroupgeneratespositivenetcashinflows from successful out-licensing transactions and commercialisation of its products, it remains dependent upon securing funding through the injection of equity capital or from collaborations with pharmaceutical companies.TheGroupmaynotbeabletogenerate positivenetcashflowsinthefutureorattractsuch additional funding required on suitable terms, or at the time it is needed. In such circumstances, the Group’s programmes may be delayed or cancelled and the business operations curtailed. TheGroupseekstoreducethisriskthroughtightfinancial control, prioritising programmes which will generate the best returns, and keeping shareholders informed on progress. Insurance risk TheGroupmaynotbeabletoprocureadequate insurance cover to enable it to continue its operations. Cyber-attack or IT systems failure TheGroupisatriskofcyber-attackorITsystemsfailureto it or its key suppliers, which may cause operational harm, including potential theft or loss of data. TheGroupseekstominimisethisriskbyretainingthe servicesofexternalITadvisers,pursuingsuitableback-up and security policies, and maintaining Cyber Essentials certification. By order of the Board Richard Marsden ChiefExecutiveOfficer 26 April 2023 15 Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcBoard of Directors Simon Shaw Non-executive Chairman Richard Marsden Chief Executive Officer 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 FinancialOfficerofSavillsplc.HewasChiefFinancial OfficerofGyrusGroupPLCfrom2003untilitssaleto OlympusCorporationin2008,havingpreviouslybeen ChiefOperatingOfficerofProfileTherapeuticsplc between1998and2003.Between1991and1997hewas acorporatefinancier,latterlyatHambrosBankLimited.He is a Chartered Accountant. Richard Marsden joined Synairgen in a consulting role as General Manager in November 2003, was appointed totheBoardasManagingDirectorinJune2004,and wasappointedChiefExecutiveOfficerinSeptember 2009.Between1998and2003heworkedasProjects Manager and Cystic Fibrosis Business Development ManageratProfileTherapeuticsplc,wherehemanaged the Cystic Fibrosis business and played a major role in the development of its proprietary pharmaceutical unit,ProfilePharmaLimited.Priortothis,heworked forZimmerLimited,Genentech(UK)LimitedandRoche Products Limited. Dr Phillip Monk ChiefScientific Officer John Ward Chief Financial Officer Phillip Monk joined Synairgen in October 2006 as Head of Bioscience Development and was appointed to the Board asChiefScientificOfficerinSeptember2009.Phillipwas previouslyDirectoroftheRespiratoryandInflammation BiologygroupatCambridgeAntibodyTechnology(‘CAT’). PriortojoiningCAT,heworkedatBayerAGwithinthe respiratory disease therapeutic area, focusing on the development of novel therapies for asthma, COPD and cysticfibrosis. JohnWardjoinedSynairgeninOctober2004asFinance DirectorandwasappointedChiefFinancialOfficer inMarch2021.FromDecember1999toJuly2004he wasChiefFinancialOfficerandCompanySecretaryof ProfileTherapeuticsplcandwasappointedtotheProfile TherapeuticsboardinMarch2003.From1996to1999he 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. 16 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Dr Bruce Campbell Non-executive Director Dr Felicity (Flic) Gabbay Non-executive Director Bruce Campbell joined Synairgen as a non-executive directorinApril2006.Hehas50yearsofdrug 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 European companies. Formerly he was Senior VP of International Development at Neurocrine Biosciences, Inc. (‘Neurocrine’). Prior to joining Neurocrine he worked for27yearsatServier(UnitedKingdom),latterlyas ScientificDirector.Inaddition,hehasalsobeena director and European Chairman of the Drug Information Association, a member of the European ICH Safety WorkingPartyandascientificadvisortoIPGroupplc. Flic Gabbay joined Synairgen as a non-executive director in September 2022. She has extensive experience within the life sciences sector including holding several senior and CEO positions in big pharma, biotech and CROs in both Europe and North America. She is Founding andSeniorPartneratTranScripLtd,acontractdrug development CRO. Starting her career as a medical doctor, Flic held various medical research posts in Europe and the US before moving into the biotechnology sector. She is the current President of the Faculty of Pharmaceutical Medicine for the three Royal Colleges of Physicians, a Fellow of the Academy of Medical Sciences and an Honorary Fellow of the British Pharmacological Society. Prof. Sir Stephen Holgate CBE Non-executive Director Amanda Radford Non-executive Director Amanda Radford joined Synairgen as a non-executive director in December 2022. She is currently Group Financial Controller of BSI Group. She has previously held seniorfinancialpositionsatcompaniesincludingConvatec Groupplc,PostOfficeLtd,PetsatHomeVetGroupand TalkTalkTelecomGroup.SheisaCharteredAccountant. 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 pursued an academic careerleadingtohisappointmentin1987tohiscurrent 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-reviewedliterature.HeisTrusteeof the Natasha AllergyResearchFoundation,ChairofTheKennedyTrust for Rheumatology Research and Member of the Natural Environment Research Council. He is Principal Investigator oftheUKRI/MetOfficeCleanAirStrategicPriorityFund Champion grant and is Special Advisor to the RCP on air quality. He also serves on a number of Advisory Committees in industry and the Research Councils. 17 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcCorporate Governance Statement TheBoardofdirectorsoftheCompany(the‘Board’)is accountable to the Company’s shareholders for good corporate governance and it is the objective of the Board to attain and maintain a high standard of corporate governance. As Chairman, it is my primary responsibility toleadtheBoardeffectivelyandtooverseetheadoption, delivery and communication of the Company’s corporate governance model. InSeptember2018,theBoardadoptedtheQuoted Companies Alliance Corporate Governance Code (‘QCA Code’).Onourwebsite(www.synairgen.com/investors/ corporate-governance-statement/)wesetouthowwe seek to comply with the ten principles of the QCA Code. ThefollowingsectionsoftheCorporateGovernance Statement explain how the QCA Code is applied by the Company. Board of directors On 31 December 2022, the Board consisted of myself, as the non-executive Chairman, three executive directors (RichardMarsden,DrPhillipMonkandJohnWard),and four non-executive directors (Dr Bruce Campbell, Dr Flic Gabbay,Prof.SirStephenHolgateandAmandaRadford). Theresponsibilitiesofthenon-executiveChairman andtheChiefExecutiveOfficerareclearlydivided. The non-executive directors bring relevant experience from differentbackgroundsandreceiveafixedfeefortheir services and reimbursement of reasonable expenses incurred in attending meetings. Brief biographies for the directors are given on pages 16 and 17.Thekeyexperience,skills,qualitiesandcapabilities that each director brings to the Board are summarised below: Simon Shaw Simon is an experienced public company director, having fulfilledboththerolesofChiefFinancialOfficerandChief OperatingOfficerforlistedcompanies.Hehaslifescience company experience and in addition to his skills as a Chairman,contributesstrongfinancialandcorporate financeskills.AsanexecutivedirectorofaFTSE250 company, he keeps his skill set in these areas up to date. Richard Marsden Richard has worked in several 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 Group’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 identificationandmanagementofnewopportunitiesupto the clinical stage, and maximising value from clinical trials, particularly with reference to biomarker and statistical analysis. Phillip regularly interacts with expert advisers/ KOLs and attends key relevant medical conferences. John Ward John is a Chartered Accountant who has worked for more than 20 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 Waterhousehealsohascorporatefinanceexperience. He keeps his skill set up to date by attending appropriate coursesrunbyaccountancyfirmsandtheICAEW. Dr Bruce Campbell Brucehas50years’drugdevelopmentexperience.Hehas particular expertise in pre-clinical development. Bruce keeps his skill set up to date through his involvement with several other life sciences companies either as a director or consultant. Dr Flic Gabbay Flic is an independent non-executive director and Chair of the Remuneration and Nomination Committee, joining the Board in September 2022. She has extensive experience in the life sciences sector including holding several senior and CEO positions in big pharma, biotech and contract researchorganisations(‘CRO’)inEuropeandNorth America. 18 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Prof. Sir 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. commitments made towards achieving best practice, Dr Flic Gabbay and Amanda Radford were appointed as independent non-executive directors in September 2022 and December 2022 respectively, with a view to bringing a new perspective to the Board together with theirrespectiveexpertiseinbiotechandfinance.Wewill continuetoassesstheeffectivenessoftheBoardandwill continue to identify high-quality independent directors as the Company continues to develop. Amanda Radford Amanda is an independent non-executive director and Chair of the Audit Committee, joining the Board in December2022.Amandahasheldseniorfinanceroles inanumberofpubliccompaniesandhassignificant experienceinexternalreporting,financialcontrols, forecasting and business planning, as well as fundraising and M&A. All eight members of the Board bring relevant sector experience in life sciences. Four members of the Board have capital markets experience from other companies. TheBoardhasexpertiseinthefollowingkeyareas:capital markets; discovery and pre-clinical respiratory projects; clinical development; business development/licensing andfinance.TheBoardbelievesthatitsblendofrelevant experience, skills and personal qualities and capabilities is sufficienttoenableittosuccessfullyexecutethecurrent phase of its strategy. Simon Holden is the Company Secretary. Simon is a corporatelawyerbybackgroundandfulfilstheroleof secretary for several other quoted companies, on the MainMarketandAIM.TheCompanySecretaryreports directly to the Chairman on governance matters. Non-executive directors are required to attend monthly Boardmeetings(‘ScheduledBoardmeetings’)and,where relevant,committeeorScientificAdvisoryBoardmeetings. 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. TheBoardcontinuestonotethatitdoesnotyetcomply with QCA best practice in that three of its non-executive directors have been in post for more than nine years. Nevertheless the Board considers that these directors remain functionally independent, in that they remain fully committed to promoting the success of the Company forthebenefitofshareholdersasawhole.Inlinewith TheBoardputsalldirectorsupforre-electiononan annualbasistoenableshareholderstoconfirmtheir support for the directors and that, in the case of the non-executives, they are considered by shareholders as remaining functionally independent. TheCompanydoesnothaveaSeniorIndependent Director, but does have two independent directors (Dr FlicGabbayandAmandaRadford)whichwebelieveis appropriate at this stage of the Company’s development. TheBoardretainsfullandeffectivecontroloftheGroup. ThisincludesresponsibilityfordeterminingtheGroup’s strategy and for approving budgets and business plans tofulfilthisstrategy.ScheduledBoardmeetingstake place monthly and the Board also meets on any other occasions it considers necessary. During the year ended 31 December 2022, the Board met eleven times for Scheduled Board meetings and held three unscheduled Board meetings. At each meeting, there was an opportunity for the non-executive directors to discuss matters without the executive directors present. 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 the agenda items to be discussed. Additional information is provided when requested by the Board or individual directors. In addition, the Board has access to the Company’s professional advisers as necessary. TheCompanySecretaryisresponsibletotheBoardfor 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. 19 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcCorporate Governance Statement (continued) During 2022, the committee met four times with all members(asthenconstituted)present.TheAudit Committee Report is detailed on pages 27and28. Remuneration and Nomination Committee TheRemunerationandNominationCommitteecurrently comprises Dr Flic Gabbay (Chair),DrBruceCampbell and Simon Shaw. Dr Flic Gabbay became Chair of the committee on her appointment to the Board, Iain Buchananhavingpreviouslyfulfilledtherole.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 ownperformanceandthatoftheGroupgenerally.The committeeadministerstheLong-TermIncentivePlansand approves grants under these schemes. It also advises on theremunerationpolicyfortheGroup’semployees.The committee is responsible for all senior appointments that are made within the Group. During 2022, the committee met twice with all members(asthenconstituted)present.TheDirectors’ Remuneration Report is detailed on pages 22 to 26. Scientific Advisory Board TheCompanyestablishedaScientificAdvisoryBoard (‘SAB’)in2016.ThepurposeoftheSABistoprovide strategicadviceandinputonscientificaspectsof Synairgen’s research and development projects. TheSABcurrentlycomprisesDrPhillipMonk(Chair),Dr Bruce Campbell, Dr Flic Gabbay and Synairgen’s three academic founders (Professors Sir Stephen Holgate, DonnaDaviesandRatkoDjukanovic).Otherexternal experts and Synairgen employees attend meetings as required. Dr Bruce Campbell is responsible for feeding back the outputs from the SAB to the Board. Business model and strategy As detailed in the Strategic Report on page 4, Synairgen’s strategy is to develop SNG001 as a broad-spectrum inhaledantiviraltreatment.Thekeychallengesin execution are set out in the section of the Strategic Report entitled Principal risks and uncertainties. Board performance A Board evaluation process led by the Chairman last took place in March 2021. It is intended that an evaluation be carried out regularly so the Board can monitor its effectiveness.TheprocesscompletedinMarch2021 identifiedthattheprincipalareasfortheBoardtoaddress were succession planning and Board diversity. It was agreedthatcompositionoftheBoardshouldreflectamix of individuals with relevant knowledge, independence, competence, industry experience and diversity of perspectivestogenerateeffectivechallenge,discussion and objective decision-making. In 2022, the Company appointed Dr Flic Gabbay and Amanda Radford as independent non-executive directors. TheBoardbelievesthatwiththeseappointments,it has the necessary blend of skills, experience, personal qualities and capabilities, and a more diverse range of perspectives.TheBoardwillcontinuetoevaluateits performance and seek to address any concerns which are raised. A review of the Chairman’s performance was also carried out in March 2021 by the completion of a questionnaire by other Board members, which concluded that the Chairman was carrying out his duties diligently. It is intended, going forward, that this internal review will be carried out regularly. Board committees As appropriate, the Board has delegated certain responsibilities to Board committees. Audit Committee TheAuditCommitteecurrentlycomprisesAmanda Radford(Chair),BruceCampbellandSimonShaw.Amanda became the Chair of the committee on her appointment totheBoard.PriortothisTheodoraHaroldfulfilledthe role. Thecommitteehasprimaryresponsibilityforensuring thatthefinancialperformanceoftheGroupisproperly measured and reported on and is compliant with relevant accountingstandards.Itreviewstheinterimfinancial informationandannualfinancialstatementsbeforethey aresubmittedtotheBoard.Thecommitteereviews accounting policies and material accounting judgements. Thecommitteealsoreviews,andreportson,reportsfrom the Group’s auditors relating to the Group’s accounting controls. It makes recommendations to the Board on the appointmentofauditorsandtheauditfee.Thecommittee monitorsthescope,resultsandcost-effectivenessofthe audit. It has unrestricted access to the Group’s auditors. 20 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Corporate culture Internal control and risk management Our aim is to restore lives with respiratory treatments which treat those most at risk. We articulate these values and supporting behaviours as follows: > TogetherWePioneer:Wepioneerbybreaking through barriers, being open and supportive and by accentuating the positive. > TogetherWeCare:Wecareinthewayweputpatients first,byinspiringpassioninothersandbyalwaysbeing respectful. > TogetherWeDeliver:Wedeliverbyembracing uncertainty, by “making it happen” and by being the differencewewanttosee. Thesevaluesandbehavioursareincorporatedinto theannualperformancereviewprocess.Throughthe companyintranetavailabletotheGroup’sstaffand regularinternalmeetings,wearealsofocusedonfinding, sharing and celebrating stories of these values and behaviours in action. Investor relations Thedirectorsseektobuildamutualunderstandingof 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. For private investors, we conduct interviews via Proactive Investor and maintain dedicated subcontract resource to answer directqueries.TheCompanyalsomaintainsinvestor relationspagesonitswebsite(www.synairgen.com)to increase the amount of information available to investors. ThereisanopportunityattheAnnualGeneralMeetingfor shareholders to question the Chairman, the Chairs 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. TheCompanycountsallproxy votes and indicates the level of proxies lodged on each resolution, after it has been dealt with by a show of hands or otherwise via poll. 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. Thedirectorsareresponsibleforestablishingand maintaining the Group’s system of internal control and reviewingitseffectiveness.Thesystemofinternalcontrol 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. Themainfeaturesoftheinternalcontrolsystemareas follows: > A control environment exists through the close management of the business by the executive directors.TheGrouphasadefinedorganisational structure with delineated approval limits. Controls are implemented and monitored by personnel with the necessaryqualificationsandexperience; > A list of matters reserved for Board approval; > Monthly management reporting and analysis of variances; > Regularfinancialreforecasts; > Financialrisksforeachmajortransactionareidentified and evaluated by the Board; and > Standardfinancialcontrolsoperatetoensurethatthe assets of the Group are safeguarded and that proper accounting records are maintained. TheGroupmaintainsasummaryriskregisterwhichis reviewed by the Board on an annual basis. Theprincipal risks and uncertainties facing the Group, with mitigation strategies, are set out in the Strategic Report on pages 13 to 15. Project risk management is continually evaluated by weekly project meetings and other management tools. ITriskiscoveredatbi-annualmeetingswithexternalIT advisers. A Health and Safety report is reviewed by the Board annually. Simon Shaw Chairman 26 April 2023 21 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcDirectors’ Remuneration Report Executive remuneration currently comprises a base salary, anannualperformance-relatedbonus,LTIPparticipation, a6%pensioncontributioneithertotheexecutive director’s individual money purchase scheme or, as a salarysupplement(afterdeductinganamounttoreflect employer’s NICs to ensure that the overall cost to the employerisnotincreased)andtypicalbenefitsincluding family private health cover, permanent health and life assurance. Therehavebeennosalaryincreasesforexecutive directors since the last review in August 2021 (and no increasesareanticipatedfor2023)andtheexecutive director salaries, bonus and pension arrangements remain as follows: Salary per annum (£000) Maximum bonus as a % of salary Pension contribution as a % of salary Richard Marsden Dr Phillip Monk John Ward 310 225 225 100% 100% 100% 6% 6% 6% Executive directors are also rewarded for improvements in the performance of the Group sustained over a periodofyearsintheformofLTIPawardsgrantedona discretionary basis by the Committee. Directors’ remuneration for the year ended 31 December 2022 is set out on page 26 of this report. (ii) Chairman and non-executive director remuneration Witheffectfrom1October2022, the fee payable to the Chairmanwasreducedfrom£85,000to£80,000per annum and the fee payable to non-executive directors reducedfrom£45,000to£40,000.Thefeeforchairing acommitteeremainedat£5,000.Oftheon-going £250,000perannumaggregateremunerationpayableto the Chairman and non-executive directors, £200,000 is remunerationfortheirappointedservicesand£50,000 is ascribed to special services performed beyond their normal duties on account of the continued increased frequency of Board meetings. InSeptember2018, the Company adopted the QCA Corporate Governance Code which includes the requirement to prepare a remuneration committee report.Thisreportincludesandcomplieswiththe disclosure obligations of the AIM Rules. Remuneration Committee TheCompany’sremunerationpolicyistheresponsibility of the Remuneration and Nomination Committee (the ‘Committee’).ThetermsofreferenceoftheCommittee are outlined in the Corporate Governance Statement on page 20. Iain Buchanan chaired the Committee until he retired from the Board on 1 December 2022, whereupon Dr Flic Gabbay joined the Committee as Chair (who has previously served as a remuneration committee member elsewhere for more thantenyears).DrBruce Campbell and Simon Shaw are the other members of the Committee. TheCommittee,whichisrequiredtomeetatleasttwice a year, met twice during the year ended 31 December 2022 and considered the pay of the executive directors and ensured it understood pay arrangements more broadlyacrosstheGroup.TheChiefExecutiveOfficerand 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 remunerationadviser,FITRemunerationConsultantsLLP. No other advice has been provided to the Group by this firmduringtheyear. Remuneration policy (i) Executive remuneration TheCommitteehasadutytoestablisharemuneration 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.Asignificantelementofthetotal remuneration package, in the form of bonus and Long- TermIncentivePlan(‘LTIP’)awards,isperformancedriven. 22 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022(iii) Annual bonus plan TheCompanyoperatesadiscretionarybonusscheme for executive directors for delivery of exceptional performance against pre-set relevant corporate objectives, which are subject to malus and clawback provisionswithinanoverallcapof100%ofsalary.No bonuses were awarded in respect of 2022. (iv) Equity-based incentive schemes TheCommitteestronglybelievesthatlong-term equity- based incentive schemes increase the focus of employees in improving Group performance, while at the same time providing a strong incentive for retaining and attracting individuals of a high calibre. Long-Term Incentive Plan (‘LTIP’) TheSynairgenLTIP,comprisingconditional(performance- related)shareawards(technicallystructuredasnominal cost options, pursuant to which participants must pay 1p pershareontheexerciseoftheirawards)isthesolelong- 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. GrantsundertheLTIPinanyfinancialyeararecappedata maximumof100%ofbasesalary. Asindicatedinlastyear’sreport,anLTIPawardwas made in July 2022 during the six week period following the preliminary announcement of the results for the year ended 31 December 2021. As also noted in last year’s report,theCommitteerecognisedthesignificantfallin share price during 2022 and therefore, consistent with good practice, reduced the number of shares over which theawardwasissuedfromthepreviouslevelof100%of salaryto50%foreachofRichardMarsden,PhillipMonk andJohnWard.Theperformanceconditionsforthe awards remain in line with previous grants and are set out below. TheCommitteeintendstomakeasimilarLTIPaward(the 2023award)duringthesix-weekperiodfollowingthe preliminary announcement of the results for the year ended 31 December 2022, with each of Richard Marsden, Phillip Monk and John Ward being granted awards over shares worth up to 50% of salary with vesting and performanceconditionssimilartothe2022LTIPaward. Recognisingthesignificantfallinsharepricein2022, consistent with good practice, the Committee will bear this in mind when determining the number of shares over which the 2023 award should be granted. Executive directors are expected to retain no fewer than 50%ofsharesacquireduponvestingofawardsunderthe LTIP,netofsharessoldtopaytaxes,untilsuchtimeas,in combination with any other shares the executives may have acquired, they hold shares with a value equivalent to 100%ofbasesalary. All awards will lapse at the end of the applicable performance period to the extent that the applicable performanceconditionshavenotbeensatisfiedwithno opportunity for retesting. In the event of a “good leaver” eventorachangeofcontroloftheCompany,theLTIP awards may vest early, but only to the extent that, in the opinion of the Committee, the performance conditions havebeensatisfiedatthattime.Theawardswillgenerally alsobesubjecttoatimepro-ratedreductiontoreflectthe 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 2019-2022 LTIP awards Theperformanceconditionsforallfourawardswerethe same.Theawardsaresubjecttotwoconditions.Firstly, awards will only vest to the extent that the percentage increaseinthetotalshareholderreturn(‘TSR’,beingthe return earned by a shareholder over the performance period in terms of change in the share price and assuming re-investment of any dividends in more shares at the prevailingpriceontherelevantex-dividenddate)ofthe Company over the three year performance period is equal or greater than the percentage increase in the techMARK Mediscience™Indexoverthesameperiodasfollows: TSR growth over the performance period less percentage increase in the techMARK Mediscience™ Index over the same period Vesting percentage of total number of shares subject to award Lessthan10% 10% 20% 30% 0% 25% 50% 100% Performance between the steps Pro-rata on a straight-line basis Secondly, no award will vest unless the average annual growthintheTSRoftheCompanyovertheperformance periodisequaltoorgreaterthanRPIplus2%or,formore than75%ofanawardtovest,annualaverageTSRmust exceedRPIbyatleast5%ratherthan2%. 23 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcDirectors’ Remuneration Report (continued) Duringtheyear,the2019LTIPawardvestedinfull,having met all the performance conditions. TheLTIPawards made in 2020, 2021 and 2022 are currently below vesting performance conditions. TSR Performance ThelatestguidelinesfromtheQCAencourage companiestoincludeachartshowingitsTSR performance over the preceding 10 years relative to a recognised index. While the Company has principally focused on the techMARK Mediscience™ Index,itdoesnotformallypublishaTSR-based index, so the AIM 100 has been used below. Synairgen AIM 100 (v) Service contracts and letters of appointment Theexecutivedirectorshaveenteredintoservice agreements which can be terminated on 12 months’ notice by either party in the case of Richard Marsden, and six months’ notice by either party in the case of Phillip Monk and John Ward. During the year ended 31 December 2022, the executive directors did not hold any non-executive directorships with other companies. TheChairmanandnon-executivedirectorshaveentered intolettersofappointmentforaninitialfixedperiod of 12 months, which renew automatically for a further 12-month period on the anniversary of commencement. Theappointmentcanbeterminatedonthreemonths’ notice by either party. 2 1 0 2 r e b m e c e D 1 3 t a 0 0 1 o t d e s a b e r , n r u t e R r e d o h e r a h S l l a t o T 500 450 400 350 300 250 200 150 100 50 0 2 1 0 2 / 2 1 / 1 3 3 1 0 2 / 2 1 / 1 3 4 1 0 2 / 2 1 / 1 3 5 1 0 2 / 2 1 / 1 3 6 1 0 2 / 2 1 / 0 3 7 1 0 2 / 2 1 / 9 2 8 1 0 2 / 2 1 / 1 3 9 1 0 2 / 2 1 / 1 3 0 2 0 2 / 2 1 / 1 3 1 2 0 2 / 2 1 / 1 3 2 2 0 2 / 2 1 / 1 3 Source: Datastream (a Reﬁnitiv Product) 24 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022 Directors’ interests in share options Theinterestsofdirectorsinshareoptionsoverordinarysharesduringtheyearwereasfollows: Synairgen Long-Term Incentive Plans Date of grant Richard Marsden 5April2018 4April2019 18June2020 4June2021 5July2022 Dr Phillip Monk 5April2018 4April2019 18June2020 4June2021 5July2022 John Ward 5April2018 4April2019 18June2020 4June2021 5July2022 At 1 January 2022 Granted during the year At 31 December 2022 Exercise price Earliest exercise date Expiry date 880,903 772,167 490,817 135,626 – – – – 880,903 772,167 490,817 135,626 – 534,482 534,482 636,208 557,679 354,483 97,953 – – – – 636,208 557,679 354,483 97,953 – 387,931 387,931 685,147 600,575 381,749 105,487 – – – – 685,147 600,575 381,749 105,487 – 387,931 387,931 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 5April2021 4April2028 4April2022 3 April 2029 18June2023 17 June 2030 4June2024 3 June 2031 5July2025 4July2032 5April2021 4April2028 4April2022 3 April 2029 18June2023 17 June 2030 4June2024 3 June 2031 5July2025 4July2032 5April2021 4April2028 4April2022 3 April 2029 18June2023 17 June 2030 4June2024 3 June 2031 5July2025 4July2032 Therewerenootheroptionsgrantedtodirectorsorwhichwereexercisedorlapsedduringtheyear. Themid-marketpriceoftheCompany’ssharesat31December2022was13.50p.Duringtheyearthenended,the mid-marketpricerangedfrom12.35pto209.00p.On26 April 2023 the closing price was 12.00p. 25 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcDirectors’ Remuneration Report (continued) Directors’ remuneration Theremunerationreceivedbydirectorswhoservedduringtheyearsended31December2022 and 2021 was as follows: Year ended 31 December 2022 Year ended 31 December 2021 Total (excl. pension) £000 Pension (v) £000 Total fixed (incl. pension) £000 Total (excl. pension) £000 Total fixed (incl. pension) £000 Pension £000 Salary/fee £000 Benefits £000 Notes Executive directors Richard Marsden Dr Phillip Monk John Ward Non-executive directors Simon Shaw Iain Buchanan Dr Bruce Campbell Dr Felicity Gabbay TheodoraHarold Prof. Sir Stephen Holgate Amanda Radford 310 225 225 84 45 44 11 38 44 4 (i) (ii) (iii) (iv) Total 1,030 2 2 3 – – – – – – – 7 312 227 228 84 45 44 11 38 44 4 16 13 12 – – – – – – – 328 240 240 84 45 44 11 38 44 4 258 187 195 55 35 30 – 13 30 – 16 15 12 – – – – – – – 274 202 207 55 35 30 – 13 30 – 1,037 41 1,078 803 43 846 (i) IainBuchananresignedasanon-executivedirectoron1December2022. (ii) DrFelicityGabbaywasappointedasanon-executivedirectoron29September2022. (iii) TheodoraHaroldwasappointedasanon-executivedirectoron30September2021andresignedon29September2022. (iv) AmandaRadfordwasappointedasanon-executivedirectoron1December2022. (v) TheCompanypermitsemployees,includingexecutivedirectors,tochangetheirpensionprovisionthroughanelectionunderaflexiblebenefits arrangement.Thereportednumbersarebeforeanypersonalelections. Inrespectofkeymanagementpersonnel(thethreeexecutivedirectors),fortheyearended31December2022,the totalshare-basedpaymentamountedto£328,000(2021:£250,000)andtotalsocialsecuritycostswereacreditof £28,000(2021:charge£212,000).The2022socialsecuritycostswereacreditonaccountofthereductionintheLTIP Employer National Insurance accrual because of the fall in share price during 2022. Totalsocialsecuritycostsinrespectofthenon-executivedirectorsfortheyearended31December2022were£34,000 (2021:£19,000). On behalf of the Board Felicity Gabbay Chair of the Remuneration and Nomination Committee 26 April 2023 26 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Report of the Audit Committee for the year ended 31 December 2022 Constitution and membership TheAuditCommittee(the‘Committee’)hasprimary responsibilityforensuringthatthefinancialperformance of the Group is properly measured and reported on and is compliant with relevant accounting standards. It was establishedinOctober2004anditstermsofreference are outlined in the Corporate Governance Statement on page 20. Committee membership, meetings and attendance Thetablebelowshowsthenumberofmeetingsattended out of the number of meetings members were eligible to attend. > 26 September2022:reviewoftheinterimresultsfor the six months to 30 June 2022; the adoption of the going concern basis in the preparation of the interim results; the research and development tax credit; and auditor’s independent review report. > 12 December2022:planningmeetingforthe2022 year-end audit, including agreement of audit scope, materiality, areas of audit focus and audit fees; planning for audit partner rotation; review of the company auditor’s response to the Financial Reporting Council’s(FRC)AuditQualityReview(AQR);areview of new accounting and auditing standards (including InternationalAuditingStandard(ISA)315Revised)and confirmationofauditorindependence. Director Amanda Radford (Chairfrom1December2022) Simon Shaw Bruce Campbell (Membersince1December2022) Iain Buchanan (Memberuntil30November2022) TheodoraHarold (MemberandChairuntil29September2022) Attended/eligible to attend Post31December2022,theCommitteehasmettwice: 1/1 4/4 1/1 3/3 3/3 > 6 April2023:preliminaryreviewoftheauditor’s findingsinrelationtothe2022year-endaudit, review of the adoption of the going concern basis in thepreparationofthefinancialstatementsforthe 2022 year-end; update on the valuation of Synairgen plc’s investment in Synairgen Research Limited; the accounting for clinical trial costs and the research and development tax credit; and review of internal controls and assessment of requirement for internal audit. TheCommitteememberscollectivelyhaveawiderange offinancial,auditandrelevantsectorandbusiness experience that enables the Committee to provide constructive challenge and support to management. Amanda Radford and Simon Shaw are considered to have recentandrelevantfinancialexperience. Matters covered by the Committee TheCommittee,whichisrequiredtomeetatleasttwicea year, met four times during the year ended 31 December 2022,andcoveredthefollowingmatters: > 17 January2022:planningmeetingforthe2021 year-end audit, including agreement of audit scope, materiality, areas of audit focus, audit fees and consideration of auditor independence. > 19 May2022:auditcompletionmeetingforthe2021 year-endauditincludingreviewsof:thesupportfor Synairgen plc’s investment in Synairgen Research Limited;thefinancialforecasttosupporttheGroup’s ability to adopt the going concern basis in the preparationofthe2021year-endfinancialstatements; the accounting for clinical trial costs; the research and development tax credit; the auditor’s report on the audit; and the annual report. > 25April 2023 for the audit completion meeting for the 2022year-endauditincludingreviewsof:theforecasts and assumptions used to derive the impairment loss in relation to Synairgen plc’s investment in Synairgen ResearchLimited;theauditor’sfinalreportonthe audit; and the annual report. BDO, the Company’s auditors, were present at all meetings. John Ward, the Group’s Chief Financial Officer,waspresentatallmeetingsexceptforwhenhis performance was being discussed by the Committee. Significant accounting judgements Impairment review of Synairgen plc’s investment in Synairgen Research Limited TheCommitteeconsideredmanagement’sassessment of the valuation of Synairgen Research Limited (‘SRL’)as at 31 December 2022 given the fall in the share price of Synairgen plc following the announcement of the results ofSynairgenResearchLimited’sPhase3SPRINTERstudy on 21 February 2022 was a trigger for an impairment review. 27 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcReport of the Audit Committee (continued) Auditor independence All non-audit engagements performed by the external auditor are approved by the Committee in accordance with the Company’s policy as disclosed in Corporate Governance Principle number 9 on the Group’s website. TheCompanywascompliantwiththepolicythroughout 2022. Non-audit fees incurred during 2022 totalled £16,000, which relates to the review of the interim results for the six months to 30 June 2022. Internal audit function TheGroupdoesnothaveaninternalauditfunction,but the Committee considers that this is appropriate, given thesizeandrelativelackofcomplexityoftheGroupat thisstageinitsdevelopment.TheCommitteekeepsthis matter under review annually. On behalf of the Board Amanda Radford Chair of the Audit Committee 26 April 2023 Thevaluation of SRL includescertainsignificant judgments, including the likelihood of successful product approval, the costs of reaching approval, revenue forecasts, the estimated useful life of a therapeutic product following commercialisation and the subsequent commercialprofitability of the product once approved, together with the pre-tax discount rates applied to the risk-adjustedfuturecashflows. TheCommitteechallengedmanagementonthe inputs into the valuation model and discussed the appropriateness of management’s assumptions and outcome of the impairment review with the Group’s auditor. Following discussion, the Committee agreed with management’s impairment calculations which resulted in an impairment loss of £66.2 million and the associated disclosures in the 2022 annual report. Going concern statement TheCommitteeconsideredmanagement’sassessment of the Group’s available funding and forecast cash requirements for the going concern period to 30 June 2024.GiventhestageofdevelopmentoftheGroup and lack of recurring revenues, the Committee challenged management on the appropriateness of the assumptions inthecashflowprojectionsinrelationtotheGroup’s plans to design and establish data from a focused series of observational studies and investigator-led/Synairgen- sponsored Phase 2 clinical trials. Noting that the outcome of future plans in relation to trials is uncertain, the Committee reviewed management’s forecast of committedcostsandwhethertherewassufficientcash available to cover such expenditure for the duration of the going concern period. TheCommitteediscussedtheassumptionsand conclusions of the going concern review with the Group’s auditor. TheCommitteeagreedwithmanagement’sadoptionof the going concern basis in the preparation of the annual accounts and approved and recommended the draft Going Concern statement to the Board. 28 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Directors’ Report Thedirectorspresenttheirreportandtheaudited financialstatementsforSynairgenplc(the‘Company’)and itssubsidiaries(togetherthe‘Group’)fortheyearended 31 December 2022. Treasury policy and financial risk management TheGroup’streasuryandfinancialriskmanagement policiesaresetoutinnote16tothefinancialstatements on pages 55 and 56. Dividends Thedirectorsdonotproposethepaymentofadividend. Substantial shareholdings As at 26 April 2023, the Company had been advised of the followingshareholderwithaninterestof3%ormoreinits ordinarysharecapital: Number of ordinary shares % of share capital 56,696,000 28.2% Name of shareholder TFGAsset Management UK LLP Directors ThedirectorsoftheCompanyduringtheyearended31 December2022were: Executive directors: RichardMarsden(ChiefExecutiveOfficer) DrPhillipMonk(ChiefScientificOfficer) JohnWard(ChiefFinancialOfficer) Non-executive directors: SimonShaw(Chairman) IainBuchanan(resigned1December2022) Dr Bruce Campbell DrFelicityGabbay(appointed29September2022) TheodoraHarold(resigned29September2022) Prof. Sir Stephen Holgate CBE AmandaRadford(appointed1December2022) Thereviewoffuturedevelopmentsiscoveredinthe 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 2022, the Group has invested£14,936,000(2021:£52,857,000)inresearchand development activities and a review of this expenditure is included in the Strategic Report. Going concern Thedirectorshavepreparedfinancialforecaststo estimate the likely cash requirements of the Group over theperiodto30June2024,givenitsstageofdevelopment andlackofrecurringrevenues.Inpreparingthesefinancial forecasts, the directors have made certain assumptions with regards to the timing and amount of future expenditureoverwhichtheyhavecontrol.Thedirectors have taken a prudent view in preparing these forecasts. TheGroup’savailableresourcesaresufficienttocover the Group’s plans to design and establish data from a focused series of observational studies and investigator- led/Synairgen-sponsored Phase 2 clinical trials, including manufacture of additional active and placebo for use in these trials (details of these plans can be found in theStrategicReport). Regardless of the outcome of these plans, which are uncertain, the Group’s available resourcesaresufficienttocoverexistingcommittedcosts and the costs of these planned activities until at least 30 June2024. In addition, the directors have considered the sensitivity ofthefinancial forecasts to changes in key assumptions, including, among others, potential cost overruns within anticipated spend and changes in exchange rates. After due consideration of these forecasts and current cash resources, including the sensitivity of key inputs, the directors consider that the Group has adequate financialresourcestocontinueinoperationalexistence for the foreseeable future (being a period of at least 12 monthsfromthedateofthisreport)and,forthisreason, thefinancialstatementshavebeenpreparedonagoing concern basis. 29 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcDirectors’ Report (continued) Directors’ interests in ordinary shares Auditors Thedirectors,whoheldofficeat31December2022, had the following interests in the ordinary shares of the Company: At 31 December 2022 At 1 January 2022 Number of shares Number of shares 995,771 423,934 734,092 995,771 423,934 734,092 1,531,239 1,531,239 RichardMarsden(i) Dr Phillip Monk John Ward SimonShaw(ii) 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 areawareofthatinformation.Thedirectorsarenotaware of any relevant audit information of which the auditors are unaware. By order of the Board DrBruceCampbell(iii),(vii) 331,554 331,554 DrFelicityGabbay(iv) – – Simon Holden Company Secretary Prof. Sir Stephen Holgate (v),(vii) 911,876 911,876 26 April 2023 AmandaRadford(vi) – – (i) (ii) RichardMarsden’sshareholdingincludes184,821sharesheldinhis pension plan. SimonShaw’sshareholdingincludes105,516sharesheldinhis pension plan. (iii) DrBruceCampbell’sshareholdingincludes41,388sharesownedby his wife, Susan Campbell. (iv) Dr Felicity Gabbay had no shareholding in the Company at her date of appointment(29September2022). (v) Prof.SirStephenHolgate’sshareholdingincludes2,950sharesowned byhiswife,ElizabethHolgate. (vi) Amanda Radford had no shareholding in the Company at her date of appointment(1December2022). (vii) Dr. Bruce Campbell’s and Prof. Sir Stephen Holgate’s shareholdings at 1 January 2022 have been re-stated to include their respective subscriptionstothe2020OpenOfferof8,724shares(inclusiveof 1,089sharesbyMrsCampbell)and24,945shares(inclusiveof1,027 sharesbyMrsHolgate)whichwereomittedinerrorfromprevious disclosures of shares held. Directors’ and officers’ liability insurance Qualifying indemnity insurance cover has been arranged in respect of the personal liabilities which may be incurred bydirectorsandofficersoftheGroupduringthecourse oftheirservicewiththeGroup.Thisinsurancehasbeenin place during the year and to the date of this report. 30 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements Website Publication Thedirectorsareresponsibleforensuringtheannual reportandfinancialstatementsaremadeavailable on a website. Financial statements are published on the Group’s website in accordance with legislation in the United Kingdom governing the preparation and disseminationoffinancialstatements,whichmayvary fromlegislationinotherjurisdictions.Themaintenance and integrity of the Group’s website is the responsibility of thedirectors.Thedirectors’ responsibility also extends to theongoingintegrityofthefinancialstatementscontained therein. By order of the Board Simon Holden Company Secretary 26 April 2023 ThedirectorsareresponsibleforpreparingtheAnnual Reportandthefinancialstatementsinaccordancewith applicable law and regulations. Companylawrequiresthedirectorstopreparefinancial statementsforeachfinancialyear.Underthatlawthe directorshaveelectedtopreparetheGroupfinancial statements in accordance with UK-adopted international accountingstandardsandtheCompanyfinancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standardsandapplicablelaw).Undercompanylawthe directorsmustnotapprovethefinancialstatements unlesstheyaresatisfiedthattheygiveatrueandfair viewofthestateofaffairsoftheGroupandCompany andoftheprofitorlossoftheGroupforthatperiod.The directorsarealsorequiredtopreparefinancialstatements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. Inpreparingthesefinancialstatements,thedirectorsare required to: > Select suitable accounting policies and then apply them consistently; > Make judgements and accounting estimates that are reasonable and prudent; > StatewhethertheGroupfinancialstatementshave been prepared in accordance with UK-adopted international accounting standards and the Company financialstatementsinaccordancewithUnited Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law),subjecttoanymaterialdeparturesdisclosedand explainedinthefinancialstatements;and > Preparethefinancialstatementsonthegoingconcern basis unless it is inappropriate to presume that the Company will continue in business. Thedirectorsareresponsibleforkeepingadequate accountingrecordsthataresufficienttoshowandexplain the Group’s and Company’s transactions and disclose withreasonableaccuracyatanytimethefinancialposition of the Group and the Company and enable them to ensurethatthefinancialstatementscomplywiththe requirementsoftheCompaniesAct2006.Theyarealso 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. 31 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcIndependent auditor’s report to the members of Synairgen plc Opinion on the financial statements Inouropinion: > 1. thefinancialstatementsgiveatrueandfairview of the state of the Group’s and of the Parent Company’saffairsasat31December2022andof the Group’s loss for the year then ended; > 2. theGroupfinancialstatementshavebeen properly prepared in accordance with UK adopted international accounting standards; > 3. theParentCompanyfinancialstatementshave been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and > 4. thefinancialstatementshavebeenprepared in accordance with the requirements of the Companies Act 2006. WehaveauditedthefinancialstatementsofSynairgen plc(the‘ParentCompany’)anditssubsidiaries(the ‘Group’)fortheyearended31December2022which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, the Parent Company Balance Sheet, the Parent Company Statement ofChangesinEquityandnotestothefinancialstatements, includingasummaryofsignificantaccountingpolicies. Thefinancialreportingframeworkthathasbeenapplied inthepreparationoftheGroupfinancialstatementsis applicable law and UK adopted international accounting standards.Thefinancialreportingframeworkthathas been applied in the preparation of the Parent Company financialstatementsisapplicablelawandUnitedKingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United KingdomGenerallyAcceptedAccountingPractice). Basis for opinion We conducted our audit in accordance with International StandardsonAuditing(UK)(ISAs(UK))andapplicablelaw. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of thefinancialstatementssectionofourreport.Webelieve thattheauditevidencewehaveobtainedissufficientand appropriate to provide a basis for our opinion. 32 Independence We remain independent of the Group and the Parent Company in accordance with the ethical requirements thatarerelevanttoourauditofthefinancialstatements in the UK, including the FRC’s Ethical Standard as applied tolistedentities,andwehavefulfilledourotherethical responsibilities in accordance with these requirements. Conclusions relating to going concern Inauditingthefinancialstatements,wehaveconcluded that the Directors’ use of the going concern basis of accountinginthepreparationofthefinancialstatements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accountingincluded: > We considered the Directors’ method for assessing going concern, including the relevance and reliability of underlying data used to make the assessment, and whether assumptions and changes to assumptions from prior years are appropriate and where relevant, consistentwitheachother.Theassumptionswere assessed against the Group’s development plans and committed expenditure. > We obtained an understanding of the Directors’ plans for future actions in relation to the going concern assessment and considered whether such plans are feasible in the circumstances. > We reviewed the Directors’ sensitivity analysis of the forecasts to the extent of reasonable worst-case scenarios, solely in relation to their estimates of plannedoperationalcostswhicharenotfixed. > We assessed the adequacy and appropriateness of disclosuresinthefinancialstatementsregardingthe going concern assessment. We carried out the above procedures through using our understanding of the business model, objectives, strategies and related business risk, the measurement and review oftheGroup’sfinancialperformance,forecastingand budgeting processes and the Group’s risk assessment process. Based on the work we have performed, we have not identifiedanymaterialuncertaintiesrelatingtoevents or conditions that, individually or collectively, may cast significantdoubtontheGroup’sandParentCompany’s ability to continue as a going concern for a period of at least twelvemonthsfromwhenthefinancialstatementsare authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Overview Coverage 100%(2021:100%)ofGrouplossbeforetax 100%(2021:100%)ofGrouptotalassets Key audit matters 2022 2021 Clinical trial and manufacturing cost accounting* Assessment of carrying value of investments in subsidiaries(parentcompany) x ✓ ✓ x * Theclinicaltrialwassubstantiallycompletedinfinancialyear2021andthereforedoesnotrepresenta keyauditmatterincurrentfinancialyear. Materiality Groupfinancialstatementsasawhole £800,000(2021:£2,300,000)basedon4%(2021:4%)oflossbeforetax An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financialstatements.Wealsoaddressedtheriskof management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. TheGroup’soperationsarebasedsolelyinSouthampton, United Kingdom. Synairgen plc and Synairgen Research Limited were consideredsignificantcomponentsandweresubjectto full-scopeauditsbythegroupauditteam.Theremaining subsidiarieswereconsideredtobenon-significantbased ontheirsizeandrisk. Key audit matters Key audit matters are those matters that, in our professionaljudgement,wereofmostsignificanceinour auditofthefinancialstatementsofthecurrentperiod andincludethemostsignificantassessedrisksofmaterial misstatement(whetherornotduetofraud)thatwe identified,includingthosewhichhadthegreatesteffect on:theoverallauditstrategy,theallocationofresources intheaudit,anddirectingtheeffortsoftheengagement team.Thesematterswereaddressedinthecontextof ourauditofthefinancialstatementsasawhole,andin forming our opinion thereon, and we do not provide a separate opinion on these matters. 33 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plc Independent auditor’s report to the members of Synairgen plc (continued) Key audit matter Assessment of carrying value of investments in subsidiaries (parent company) Refer to the accounting policies (page 63)and Note4ofthe Company Financial Statements (pages 66 and 67) Cost of investment £106.4million (2021:£92.3 million) Impairment provision £66.2 million:(2021:£Nil) Net carrying value £40.2million (2021:£92.3 million) TheParentCompanyis a holding company. Its main investment is into a biopharmaceutical company focused on the development andcommercializationofa broad-spectrum inhaled antiviral for the treatment and prevention of severe viral lung infections in high risk patient groups. Theimpairmentassessment of the carrying value of the investment in subsidiary, Synairgen Research Limited, requiressignificantjudgement to determine an appropriate recoverable amount. Judgement is required, as the recoverable amount is determined by taking intoaccountfuturecashflows in relation to the development andcommercializationactivities ofthesubsidiary.Thereisarisk that the investment may be impaired below its carrying value and not properly accounted for. For these reasons we considered the carrying value of the investment in subsidiary and the related disclosures to be a key audit matter. How the scope of our audit addressed the key audit matter Ourauditproceduresincluded: • • • • • • We obtained management’s analysis of the recoverable amount for the subsidiary and tested whether the calculation of the recoverable amount was appropriate. With the assistance of our internal valuation experts, we tested the arithmetic accuracy and integrity of the models used in the valuation by sample-checking formulae, assessed the reasonableness of the discount rates and reviewed the methodology applied versus our expectations. For the valuation model’s key commercial assumptions, such as probability of successful development, market for therapeutic treatment, expected sales price and operating margin, we assessed the reasonability by agreeing management’s key assumptions to their supporting evidence such as market research studies, pricing and benchmarking analysis; we challenged whether the supporting analysis is appropriate against available market data and industry benchmarks. Forthevaluationmodel’scashflowsupto commercialisation, we assessed and challenged management’scashflowassumptionsregardingfuture development costs necessary to be incurred for the drug candidate to reach a point of commercialisation against available third party benchmark as well as costs previously incurred. We assessed whether management’s approach for assessing impairment of its investments was appropriate, and if the assessment complied with the applicable accounting standards. We assessed whether the disclosure in the Parent Companyfinancialstatementsmetwiththerequirements ofthefinancialreportingframeworkandwasconsistent with management’s assessment. Key observations Based on the procedures performed, we consider that the assumptions made by management in their impairment assessment and the related disclosures are reasonable. 34 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Our application of materiality We apply the concept of materiality both in planning andperformingouraudit,andinevaluatingtheeffect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, couldinfluencetheeconomicdecisionsofreasonable usersthataretakenonthebasisofthefinancial 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 natureofidentifiedmisstatements,andtheparticular circumstances of their occurrence, when evaluating their effectonthefinancialstatementsasawhole. Based on our professional judgement, we determined materialityforthefinancialstatementsasawholeand performance materiality as follows: Materiality Group financial statements Parent Company financial statements 2022 £000 800 2021 £000 2,300 2022 £000 720 2021 £000 1,420 Basis for determining materiality 4%(2021:4%)oflossbeforetax Rationale for the benchmark applied Loss before tax is considered to be one of the principal considerations for theusersofthefinancialstatementsin assessingthefinancialperformanceof the Group. 90%ofGroup materiality 62%ofGroup materiality Cappedat90%(2021:62%)ofGroup materiality given the assessment of the components aggregation risk. Performance materiality 600 1,725 540 1,065 Basis and rationale for determining performance materiality 75%ofGroupmaterialityconsidering a number of factors including the expected total value of known and likely misstatements (based on past experienceandotherfactors)and management’s attitude towards proposed adjustments. 75%ofParentCompanymateriality considering a number of factors including the expected total value of known and likely misstatements (based onpastexperienceandotherfactors) and management’s attitude towards proposed adjustments. Component materiality For the purposes of our Group audit opinion, we set materialityfortheremainingsignificantcomponentofthe Group – being the trading subsidiary Synairgen Research Limited, apart from the Parent Company whose materiality issetoutabove.Thematerialityforthiscomponent wassetat£790,000(2021:£2,000,000),basedona percentageof3.9%oflossbeforetax(2021:90%ofGroup materiality).Intheauditofthiscomponent,wefurther appliedperformancematerialitylevelsof75%(2021:75%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. Reporting threshold We agreed with the Audit Committee that we would reporttothemallindividualauditdifferencesinexcess of£24,000(2021:£46,000).Wealsoagreedtoreport differencesbelowthisthresholdthat,inourview, warranted reporting on qualitative grounds. Other information Thedirectorsareresponsiblefortheotherinformation. Theotherinformationcomprisestheinformationincluded in the Annual Report and Accounts other than the financialstatementsandourauditor’sreportthereon. Ouropiniononthefinancialstatementsdoesnotcover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent withthefinancialstatementsorourknowledgeobtained in the course of 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 this gives rise toamaterialmisstatementinthefinancialstatements themselves. 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. 35 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcIndependent auditor’s report to the members of Synairgen plc (continued) Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required bytheCompaniesAct2006andISAs(UK)toreportoncertainopinionsandmattersasdescribedbelow. Strategic report and Directors’ report Inouropinion,basedontheworkundertakeninthecourseoftheaudit: Matters on which we are required to report by exception > the information given in the Strategic report and the Directors’ report for the financialyearforwhichthefinancialstatementsarepreparedisconsistentwith thefinancialstatements;and > the Strategic report and the Directors’ report have been prepared in accord- ance with applicable legal requirements. In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identifiedmaterialmisstatementsinthestrategicreportortheDirectors’report. We have nothing to report in respect of the following matters in relation to which theCompaniesAct2006requiresustoreporttoyouif,inouropinion: > 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 > theParentCompanyfinancialstatementsisnotinagreementwiththe accounting records and returns; or > certaindisclosuresofDirectors’remunerationspecifiedbylawarenotmade; 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 preparationofthefinancialstatementsandforbeing satisfiedthattheygiveatrueandfairview,andforsuch internal control as the Directors determine is necessary toenablethepreparationoffinancialstatementsthatare free from material misstatement, whether due to fraud or error. Inpreparingthefinancialstatements,theDirectorsare 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 whetherthefinancialstatementsasawholearefreefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. 36 Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance withISAs(UK)willalwaysdetectamaterialmisstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,theycouldreasonablybeexpectedtoinfluence the economic decisions of users taken on the basis of thesefinancialstatements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non- compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect ofirregularities,includingfraud.Theextenttowhich our procedures are capable of detecting irregularities, includingfraudisdetailedbelow: Non-compliance with laws and regulations Basedon: > Our understanding of the Group and the industry in which it operates; Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022 > Discussion with management, those charged with governance and the Audit Committee; and > Obtaining an understanding of the Group’s policies and procedures regarding compliance with laws and regulations, weconsideredthesignificantlawsandregulationsto be the Companies Act 2006, the applicable accounting standards,IncometaxandVATlegislation,Employment Taxes,HealthSafetyregulations,theBriberyAct2010,Aim ListingrulesandtheDataProtectionAct2018. Ourproceduresinrespectoftheaboveincluded: > Examination of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations; > Examination of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations; > Reviewoffinancialstatementdisclosuresandagreeing to supporting documentation; > Involvement of tax specialists in the audit to assess compliance with relevant tax legislation; and > Discussions with Directors and the Audit Committee regarding known or suspected instances of non- compliance with laws and regulations. Fraud Weassessedthesusceptibilityofthefinancialstatements to material misstatement, including fraud. Our risk assessmentproceduresincluded: > Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; > Obtaining an understanding of the Group’s policies andproceduresrelatingto: – Detecting and responding to the risks of fraud; and – Internal controls established to mitigate risks related to fraud. > Examination of minutes of meeting of those charged with governance for any known or suspected instances of fraud; > Discussion amongst the engagement team as to howandwherefraudmightoccurinthefinancial statements; > Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and > Considering remuneration incentive schemes and performancetargetsandtherelatedfinancial statement areas impacted by these. Based on our risk assessment, we considered the areas mostsusceptibletofraudtobesignificantaccounting estimates and inappropriate journal entries (management overrideofcontrols). Ourproceduresinrespectoftheaboveincluded: > Testingasampleofjournalentriesthroughoutthe year,whichmetadefinedriskcriteria,byagreeingto supporting documentation; > Involvement of forensic specialists in the audit as part of the planning risk assessment procedures; and > Assessingsignificantestimatesmadebymanagement for bias, including investment valuations (as set out inthekeyauditmatterssectionofthereport),R&D tax credits, valuation of share based payments, and estimatesinthecashflowforecast. Wealsocommunicatedrelevantidentifiedlawsand regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks ofmaterialmisstatementinthefinancialstatements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentationsorthroughcollusion.Thereare inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulationsisfromtheeventsandtransactionsreflected inthefinancialstatements,thelesslikelyweareto become aware of it. A further description of our responsibilities is available on theFinancialReportingCouncil’swebsiteat:www.frc.org. uk/auditorsresponsibilities. Thisdescriptionformspartof our auditor’s report. 37 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plc Independent auditor’s report to the members of Synairgen plc (continued) Use of our report ThisreportismadesolelytotheParentCompany’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.Tothefullestextentpermittedbylaw,wedonot 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(SeniorStatutoryAuditor) For and on behalf of BDO LLP, Statutory Auditor Reading United Kingdom 26 April 2023 BDO LLP is a limited liability partnership registered in EnglandandWales(withregisterednumberOC305127). 38 Job No: 49377Proof Event: 14Black Line Level: 9Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Consolidated Statement of Comprehensive Income for the year ended 31 December 2022 Research and development expenditure Other administrative expenses Total administrative expenses and 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) Year ended 31 December 2022 £000 Year ended 31 December 2021 £000 Notes (14,936) (5,364) (20,300) 207 – (20,093) 2,448 (52,857) (5,009) (57,866) 11 (2) (57,857) 9,194 (17,645) (48,663) (8.76)p (24.28)p 6 6 7 8 39 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcConsolidated Statement of Changes in Equity for the year ended 31 December 2022 At 1 January 2021 Loss and total comprehensive loss for the year Transactions with equity holders of the Group Issue of ordinary shares Recognition of share-based payments Share capital £000 18a 1,999 – 14 – 14 Share premium £000 18b 125,245 Merger reserve £000 18c 483 – – – – – – – – Retained deficit £000 18d (42,586) (48,663) – 508 508 Total £000 85,141 (48,663) 14 508 522 At 31 December 2021 2,013 125,245 483 Loss and total comprehensive loss for the year Transactions with equity holders of the Group Issue of ordinary shares Recognition of share-based payments – 1 – 1 – – – – – – – – (90,741) (17,645) 37,000 (17,645) – 919 919 1 919 920 At 31 December 2022 2,014 125,245 483 (107,467) 20,275 40 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Consolidated Statement of Financial Position as at 31 December 2022 Assets Non-current assets Intangible assets Property, plant and equipment Current assets Current tax receivable Trade and other receivables Other financial assets – bank deposits Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Total liabilities Total net assets Equity Capital and reserves attributable to equity holders of the parent Share capital Share premium Merger reserve Retained deficit Total equity Notes 31 December 2022 £000 31 December 2021 £000 9 10 7 12 13 14 15 17 17 18 18 44 86 130 2,415 1,308 3,750 15,926 23,399 23,529 (3,254) (3,254) 20,275 2,014 125,245 483 (107,467) 20,275 53 173 226 9,055 1,530 – 33,827 44,412 44,638 (7,638) (7,638) 37,000 2,013 125,245 483 (90,741) 37,000 The financial statements on pages 39 to 60 were approved and authorised for issue by the Board of directors on 26 April 2023 and signed on its behalf by: Richard Marsden Chief Executive Officer John Ward Chief Financial Officer 41 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcConsolidated Statement of Cash Flows for the year ended 31 December 2022 Year ended 31 December 2022 £000 Year ended 31 December 2021 £000 Notes (20,093) (57,857) (207) – – 93 – 9 919 (19,279) – 289 (4,384) (23,374) 9,088 (14,286) 140 – (6) (3,750) (3,616) 1 – – 1 (17,901) 33,827 15,926 (11) 2 (4) 92 94 9 508 (57,167) 41 7,841 4,359 (44,926) 3,910 (41,016) 12 (18) (15) – (21) 14 (124) (2) (112) (41,149) 74,976 33,827 Cash flows from operating activities Loss before tax Adjustments for: Finance income Finance expense Lease adjustment Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible fixed assets Share-based payment charge Cash flows from operations before changes in working capital Decrease in inventories Decrease in trade and other receivables (Decrease)/Increase 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 intangible assets Purchase of property, plant and equipment Increase in other financial assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Principal paid on lease liabilities Interest paid on lease liabilities Net cash generated from/(used in) financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 14 42 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 1. Accounting policies Basis of preparation The Group financial statements have been prepared in accordance with UK-adopted international accounting standards. The accounting policies adopted are consistent with those of the previous financial year. New standards, interpretations and amendments adopted from 1 January 2022 With effect from 1 January 2022, the Group adopted the amendments to existing standards set out below that are effective for an annual period that begins on or after 1 January 2022: > Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41) > Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before intended use > Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract > Amendments to IFRS 3 – References to Conceptual Framework The adoption of these amendments has not had a material impact on the disclosures or on the amounts reported in the Group’s financial statements. New standards, interpretations and amendments not yet effective At the date of approval of these Group financial statements, the Group had not yet applied the following new and revised accounting standards, amendments and interpretations that have been issued by the IASB but that are not yet effective for and in some cases had not yet been adopted by the UK Endorsement Board (UKEB): Effective 1 January 2023 – adopted by UKEB > IFRS 17 – Insurance Contracts (including the June 2020 and December 2021 Amendments to IFRS 17) > Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies > Amendments to IAS 8 – Definition of Accounting Estimates > Amendments to IAS 12 – Deferred Tax Related to Assets and Liabilities arising from a Single Transaction Effective 1 January 2024 – not yet adopted by UKEB > Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback > Amendments to IAS 1 – Classification of Liabilities as Current or Non-current The Group does not expect the adoption of these IFRS amendments would have had a material impact on the Group in the current period or will have a material impact on future reporting periods and on foreseeable future transactions. 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 period to 30 June 2024, 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 taken a prudent view in preparing these forecasts. The Group’s available resources are sufficient to cover the Group’s plans to design and establish data from a focused series of observational studies and investigator- led/Synairgen-sponsored Phase 2 clinical trials, including manufacture of additional active and placebo for use in these trials (details of these plans can be found in the Strategic Report). Regardless of the outcome of these plans, which are uncertain, the Group’s available resources are sufficient to cover existing committed costs and the costs of these planned activities until at least 30 June 2024. In addition, the directors have considered the sensitivity of the financial forecasts to changes in key assumptions, including, among others, potential cost overruns within anticipated spend and changes in exchange rates. After due consideration of these forecasts and current cash resources, including the sensitivity of key inputs, the directors consider that the Group has adequate financial resources to continue in operational existence for the foreseeable future (being a period of at least 12 months from the date of this report) and, for this reason, the financial statements have been prepared on a going concern basis. 43 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 1. Accounting policies (continued) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (as detailed in note 4 to the Parent Company Financial Statements on page 67) 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”. 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. 44 Where vested share options are exercised by the participants but settled by the Company net of shares withheld to meet the participant’s tax and National Insurance contribution liabilities (‘net settlement’), the payment to meet such tax and National Insurance contribution liabilities is treated as a deduction to equity to the extent that the payment equates to the settlement date fair value of the shares withheld, and in the consolidated statement of cash flows is included within cash flows from financing activities. 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 Raw materials inventory purchased and associated processing/manufacturing costs, related to therapeutics produced for clinical trial purposes or commercial use ahead of regulatory approval, are expensed as incurred through research and development expenditure. Where inventory manufacturers invoice in advance of the manufacturing activities, the invoice is recorded as a prepayment within trade and other receivables. 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. Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) Financial assets The Group classifies its financial assets as financial assets held at amortised cost. The Group’s financial assets measured at amortised cost principally comprise other financial assets and cash and cash equivalents in the consolidated statement of financial position. Other financial assets are fixed-term, liquid investments with maturities of over three months at inception. 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. These financial assets 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. 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. 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. 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. Leases Taxation 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. 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 a termination option being exercised. 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 current tax receivable under current assets in the year to which they relate and are reflected in the tax line of the consolidated statement of comprehensive income. Deferred tax balances are recognised in respect of all temporary differences that have originated but not reversed by the reporting date except for differences arising on: > Investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference could not reverse in the foreseeable future; and > The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit. 45 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 1. Accounting policies (continued) 3. Segmental analysis 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). The Group operates in one area of activity, namely drug discovery and development. All assets of the Group are located within the United Kingdom. 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. The directors consider that the research and development tax credit recognised, which amounts to £2,448,000 (2021: £9,194,000), is a critical accounting estimate on account of its size and the judgements involved in determining which elements of expenditure qualify to be included in the credit. 46 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 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 (out of IFRS 16 scope): Land and buildings Other operating lease rentals The fees for 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 UK subsidiary, pursuant to legislation Audit-related assurance services Tax compliance services Tax advisory services Company secretarial services Total fees 2022 £000 93 – 9 75 93 2022 £000 56 38 16 – – – 110 2021 £000 92 94 9 31 39 2021 £000 40 26 8 65 187 6 332 47 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 5. Employee benefit expense The average monthly number of employees (including executive directors) was: Research Administration Their aggregate remuneration comprised: Wages and salaries Social security costs Pension costs – defined contribution plans Total cash-settled remuneration Accrued holiday pay Share-based payment Total remuneration 2022 2021 19 11 30 2022 £000 2,649 151 309 3,109 – 919 4,028 15 9 24 2021 £000 1,725 413 196 2,334 18 508 2,860 Note (i) (ii) (iii) Note (i) Social security costs credit for 2022 comprises (a) a credit in respect of the Employer National Insurance accrual for LTIPs of £206,000 on account of the fall in share price year on year (2021: charge £186,000); and (b) a charge in respect of wages, salaries and other benefits of £357,000 (2021: charge £227,000). (ii) This includes cash payments in lieu of pension plan contributions. (iii) For the purpose of presentation in the consolidated statement of comprehensive income, remuneration costs of £2,156,000 (2021: £1,458,000) are included in research and development expenditure and £1,872,000 (2021: £1,402,000) 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. The following costs were incurred in respect of key management personnel (i.e. the three executive directors): Salaries Benefits Pension costs – defined contribution plans Share-based payment (i) This includes payments in lieu of pension plan contributions. The total gain on excercise of share options was £nil (2021: £1,984,000). Emoluments of highest paid director Emoluments for the highest paid director were £328,000 (2021: £274,000). Note (i) 2022 £000 749 7 53 328 2021 £000 621 7 53 250 Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report on page 26. 48 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 6. Finance income and expense Finance income represents bank interest receivable. Finance expense 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 2022 £000 (2,415) (33) (2,448) 2021 £000 (9,055) (139) (9,194) 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% (2021: 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: Expenses not deductible for tax purposes Enhanced research and development relief Variable rates on tax losses surrendered for research and development tax credit R&D expenditure credits Research and Development Expenditure Credit (RDEC) Movement in unrecognised deferred tax Adjustment in respect of previous years Total tax credit for the current year 2022 £000 2021 £000 (20,093) (57,857) (3,818) (10,993) 176 (1,758) 737 10 (41) 2,279 (33) (2,448) 97 (6,707) 2,810 - - 5,738 (139) (9,194) The UK Budget Announcement on 15 March 2023 stated an intended overhaul of the UK R&D regime. This includes a decrease in the additional deduction for SMEs’ qualifying expenditure from 130% to 86% and a decrease for loss- making SMEs in the research and development tax credit from 14.5% to 10% unless the claimant is a qualifying R&D intensive SME. This will have a consequential effect on the Group’s future tax credits. Deferred taxation Changes in tax rates and factors affecting the future tax charge An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. This will increase the Group’s future current tax charge accordingly. The deferred tax at 31 December 2022 has been calculated at 25%. 49 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 7. Taxation (continued) Recognised deferred taxation Accelerated capital allowances Other temporary differences Trading losses Charge for the year 2022 £000 21 (6) (15) – 2021 £000 43 (43) – – Unrecognised deferred taxation At 31 December 2022 the Group has trading losses carried forward which are available for offset against future profits of the Group amounting to £66,005,000 (2021: £54,490,000) and non-trading losses of £3,908,000 (2021: £3,456,000). At 31 December 2022 the Group has an unrecognised deferred tax asset in respect of these losses of £17,478,000 (2021: £14,486,000). The full utilisation of these losses in the foreseeable future is uncertain and no deferred tax asset has therefore been recognised. In addition to the deferred tax asset on losses, the Group has a potential future tax deduction on share options of £1,062,000 (2021: £13,078,000) and a deferred tax asset of £266,000 (2021: £3,270,000) thereon. The additional tax deduction will crystallise at the point the options are exercised. As the utilisation of this additional deduction against taxable profits in the Group is uncertain, no deferred tax asset has been recognised in respect of the future tax deduction on share options. The movement on the unrecognised deferred tax asset comprises the following: Unrecognised deferred tax asset at the start of the year Change in tax rate Movement in the year 2022 £000 (17,756) – 12 2021 £000 (6,844) (2,161) (8,751) Unrecognised deferred tax asset at the end of the year (17,744) (17,756) 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) 2022 (17,645) 201,360 (8.76) 2021 (48,663) 200,442 (24.28) 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. 50 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 9. Intangible assets Cost At 1 January 2021 Additions At 31 December 2021 and 2022 Amortisation At 1 January 2021 Charge for the year At 31 December 2021 Charge for the year At 31 December 2022 Net book amount At 31 December 2022 At 31 December 2021 At 1 January 2021 Patent costs £000 249 18 267 205 9 214 9 223 44 53 44 At 31 December 2022 £44,000 (31 December 2021: £53,000) of the net book amount relates to interferon beta patent costs. 51 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 10. Property, plant and equipment Cost At 1 January 2021 Additions At 31 December 2021 Additions At 31 December 2022 Depreciation At 1 January 2021 Charge for the year At 31 December 2021 Charge for the year At 31 December 2022 Net book value At 31 December 2022 At 31 December 2021 At 1 January 2021 11. Leases Computer equipment £000 Laboratory and clinical equipment £000 59 15 74 4 78 47 9 56 10 66 12 18 12 554 – 554 2 556 316 83 399 83 482 74 155 238 Total £000 613 15 628 6 634 363 92 455 93 548 86 173 250 During the comparative year ended 31 December 2021, the Group had one lease with its landlord, the University of Southampton, which provided the Group with office space and access to laboratory equipment. A two-year lease was entered into with effect from 1 August 2019. From 1 August 2021 the Group has continued to make payments on the same basis pending renegotiation of the lease. Costs since 1 August 2021 are accounted for as a short-term lease, applying paragraph 6 of IFRS 16 (i.e. by not recognising a lease liability and corresponding right-of-use asset). For the two-year lease discussed above, the lease liability was measured at the present value of the contractual payments due to the lessor over the lease term using a discount rate of 5%, which was an estimate of the discount rate applicable to a property lease. Land and buildings £000 47 (47) – Plant and machinery £000 47 (47) – Total £000 94 (94) – Right-of-use assets At 1 January 2021 Depreciation At 31 December 2021 52 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) Lease liabilities At 1 January 2021 Interest expense related to lease liabilities Lease adjustment Lease payments At 31 December 2021 Analysis of lease expense Depreciation of right-of-use assets Land and buildings Plant and machinery Lease adjustments Short-term lease expense Charge to operating loss Interest expense related to lease liabilities Charge to loss before taxation for leases 12. Trade and other receivables Amounts receivable within one year: Other tax and social security Prepayments and interest receivable Other debtors Land and buildings £000 Plant and machinery £000 64 1 (2) (63) – 64 1 (2) (63) – 2022 £000 – – – 168 168 – 168 2022 £000 231 1,073 4 1,308 Total £000 128 2 (4) (126) – 2021 £000 47 47 (4) 70 160 2 162 2021 £000 556 974 – 1,530 53 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 13. Other financial assets – bank deposits Amounts receivable within one year Sterling fixed rate deposits of greater than three months’ maturity at inception 14. Cash and cash equivalents Cash at bank and in hand Sterling fixed rate deposits of three months’ or less maturity at inception Note (i) (i) At 31 December 2021, £5,004,000 was on 35 days’ notice. 15. Trade and other payables Trade payables Social security and other taxes Accrued expenses 2022 £000 3,750 2022 £000 11,176 4,750 15,926 2022 £000 548 206 2,500 3,254 2021 £000 – 2021 £000 33,827 – 33,827 2021 £000 4,157 410 3,071 7,638 54 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 16. Financial instruments Financial assets Amortised cost Trade and other receivables Other financial assets – bank deposits (less than one year) Cash and cash equivalents (less than one year) Total Financial liabilities Other financial liabilities Trade and other payables (less than one year) Total 2022 Book and fair value £000 2021 Book and fair value £000 Notes (i) (ii) 71 3,750 15,926 19,747 – – 33,827 33,827 3,048 3,048 7,228 7,228 (i) Trade and other receivables shown above excludes prepayments and other taxes, which are not a contractual right to receive cash, amounting to £1,237,000 (2021: £1,530,000). (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 £206,000 (2021: £410,000). 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 US Dollar Floating rate £000 Fixed rate £000 11 – 2022 Total £000 11 11,147 8,500 19,647 18 – 18 11,176 8,500 19,676 Floating rate £000 Fixed rate £000 816 30,020 2,991 33,827 – – – – 2021 Total £000 816 30,020 2,991 33,827 Sensitivity analysis It is estimated that an increase of a quarter of one percentage point in interest rates would have decreased the Group’s loss before taxation by approximately £56,000 (2021: £126,000). 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 2022 and 31 December 2021 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. 55 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 16. Financial instruments (continued) 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 and National Westminster Bank Plc, which at 31 December 2022 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 2022 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 while at the same time securing prevailing market rates. The Group seeks to lessen risk by placing its cash deposits with the three above institutions. Currency risk During the year under review, the Group was exposed to Euro and US Dollar currency movement as some of the manufacturing costs and clinical trial costs are denominated in these currencies. To naturally hedge against currency movement, the Group purchases these currencies in advance of payment due dates. Capital structure and funding The Group is funded by equity capital, reflecting the early-stage nature of its discovery and development programmes. The Group considers its capital to be its total equity, which at 31 December 2022 amounted to £20.3 million (2021: £37.0 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 2022 amounted to £19.7 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 2022 £m 3.8 15.9 19.7 2021 £m – 33.8 33.8 2020 £m – 75.0 75.0 31 December 2018 £m – 5.3 5.3 2019 £m – 2.5 2.5 The Group did not have any bank borrowings as at 31 December 2022 (2021: £nil). There have been ten significant issues of shares raising a total (net of costs) of £127.6 million, with the most recent two raising £97.9 million in March and October 2020. The other major sources of funding received by the Group from the formation of the business until 31 December 2022 have been: revenues from licensing transactions of £9.3 million, research and development tax credits of £18.5 million, bank interest of £2.0 million, and revenues from collaborative work of £0.8 million. 56 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 17. Share capital, share premium and share-based payment At 1 January 2021 Issue of ordinary shares At 31 December 2021 Issue of ordinary shares At 31 December 2022 Notes (i) (ii) Number of shares Ordinary shares of 1p each £000 199,914,402 1,427,423 201,341,825 33,150 201,374,975 1,999 14 2,013 1 2,014 Share Premium £000 125,245 – Total £000 127,244 14 125,245 127,258 – 1 125,245 127,259 (i) 1,427,423 ordinary shares of 1p were issued on 19 August 2021 at par following the exercise of share options under the Company’s LTIP. (ii) 33,150 ordinary shares of 1p were issued on 16 June 2022 at par following the exercise of share options under the Company’s LTIP. At the Company’s 2015 Annual General Meeting held on 22 June 2015 shareholders passed a special resolution removing the restriction on the Company’s share capital and amending the articles of association of the Company so that the number of shares the Company can allot and issue became unlimited. All issued shares are fully paid. 57 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 17. Share capital, share premium and share-based payment (continued) Options At 31 December 2022 there were options outstanding over 14,450,882 un-issued ordinary shares, equivalent to 7.2% of the issued share capital, as follows: Date of grant 5 April 2018 (LTIP) 4 April 2019 (LTIP) (i) 18 June 2020 (LTIP) (ii) 4 June 2021 (LTIP) (ii) 4 June 2021 (LTIP) (iii) 20 October 2021 (LTIP) (ii) 13 December 2021 (LTIP) (ii) 5 July 2022 (LTIP) (ii) Number of shares Exercise price 2,822,316 2,598,996 1,756,722 705,890 117,647 384,673 54,059 6,010,579 14,450,882 1p 1p 1p 1p 1p 1p 1p 1p Earliest exercise date Latest exercise date 5 Apr 2021 4 Apr 2028 4 Apr 2022 3 Apr 2029 18 Jun 2023 17 Jun 2030 4 Jun 2024 3 Jun 2031 4 Jun 2022 3 Jun 2031 20 Oct 2024 19 Oct 2031 13 Dec 2024 12 Dec 2031 5 July 2025 4 July 2032 Notes (i) These options vested in full during the year. (ii) The vesting performance conditions for these options are detailed in the Directors’ Remuneration Report on page 23. (iii) The vesting performance conditions for these options are outlined in the note (ii) to the table below. The Group has no legal or constructive obligation to repurchase or settle the options in cash. The movement in the number of share options is set out below: Outstanding at start of year Granted during the year Exercised during the year Lapsed during the year Number 8,517,282 6,407,130 (33,150) (440,380) Number of outstanding options at end of year 14,450,882 2022 Weighted average exercise price 1p 1p 1p 1p 1p 2021 Weighted average exercise price 1p 1p 1p 1p 1p Number 8,671,279 1,314,286 (1,427,423) (40,860) 8,517,282 At 31 December 2022, 5,421,312 share options were capable of being exercised, with an exercise price of 1p (2021: 2,822,316, with an exercise price of 1p). The options outstanding at 31 December 2022 had a weighted average remaining contractual life of 7.8 years (2021: 7.5 years). Vesting conditions are disclosed in the Directors’ Remuneration Report and in note (ii) to the following table. 58 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) The Group uses a number of share-based incentive schemes as detailed above and in the Directors’ Remuneration Report on pages 23 and 24. The fair value per award granted and the assumptions are as follows: Date of grant Type of award Number of shares Exercise price (p) Share price at date of grant (p) Fair value per option (p) Award life (years) Risk free rate Expected volatility rate Performance conditions 5 Apr 2018 LTIP (i) 2,822,316 4 Apr 2019 LTIP (i) 2,598,996 18 Jun 2020 LTIP (i) 1,756,722 4 Jun 2021 LTIP (i) 705,890 4 Jun 2021 LTIP (ii) 117,647 20 Oct 2021 LTIP (i) 384,673 13 Dec 2021 LTIP (i) 54,059 5 Jul 2022 LTIP (i) 6,010,579 14,450,882 1p 1p 1p 1p 1p 1p 1p 1p 13.0p 12.5p 39.5p 7.5p 6.2p 25.8p 160.1p 138.4p 160.1p 159.2p 167.0p 149.2p 190.0p 168.5p 29.0p 26.1p 3 3 3 3 3 3 3 3 0.90% 0.70% 0.00% 0.14% 0.14% 0.64% 0.32% 1.64% 56% 59% 80% Market Market Market 133% Market 133% Non-market 142% 146% 177% Market Market Market The Group 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 these awards. (ii) Black-Scholes valuation methodology was used for this award, which vests upon the achievement of future commercial revenue targets. At 31 December 2022, £nil has been accrued for this non-market option, in line with our latest assumption that this grant will not vest. (iii) 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. (iv) 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. (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). Volatility for the grants made in 2020, 2021 and 2022 were calculated by reviewing share price movement over the period of three years prior to grant with no adjustments. (vi) The charge for the year ended 31 December 2022 for share-based payment amounted to £919,000 (2021: £508,000). 59 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Consolidated Financial Statements for the year ended 31 December 2022 (continued) 18. Capital and reserves 18a Share capital Share capital represents the nominal value of shares issued. 18b Share premium Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues. 18c Merger reserve The merger reserve represents the reserve arising on the acquisition of Synairgen Research Limited on 11 October 2004 via a share for share exchange accounted for as a Group reconstruction using merger accounting under UK GAAP. 18d Retained deficit The retained deficit represents cumulative net gains and losses recognised in the consolidated statement of comprehensive income, adjusted for cumulative recognised share-based payments. 19. Related party transactions and balances Details of key management personnel and their compensation are given in note 5 and on page 26 of the Directors’ Remuneration Report. A list of the Company’s subsidiaries is shown in note 4 to the Parent Company Financial Statements. 20. Other commitments At 31 December 2022 the Group had entered into non-cancellable purchase commitments amounting to £0.7 million (2021: £3.3 million) in respect of manufacturing-related activities. 60 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Parent Company Balance Sheet as at 31 December 2022 Company number: 5233429 Fixed assets Investments Current assets Debtors Investments: short-term deposits Cash and cash equivalents 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 deficit Shareholders’ funds Notes 31 December 2022 £000 31 December 2021 £000 4 5 6 7 40,200 92,262 326 3,750 15,862 19,938 (123) 19,815 60,015 2,014 125,245 (67,244) 60,015 135 – 33,447 33,582 (127) 33,455 125,717 2,013 125,245 (1,541) 125,717 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 2022 was £66,622,000 (2021: loss of £608,000). The financial statements on pages 61 to 68 were approved and authorised for issue by the Board of directors on 26 April 2023 and signed on its behalf by: Richard Marsden Chief Executive Officer John Ward Chief Financial Officer 61 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcParent Company Statement of Changes in Equity for the year ended 31 December 2022 At 1 January 2021 Loss for the year and total comprehensive loss Transactions with equity holders of the Company Issue of ordinary shares Share-based payment credit Share capital £000 1,999 – 14 – 14 Share premium account £000 Retained deficit £000 Shareholders’ funds £000 125,245 (1,441) 125,803 – – – – (608) (608) – 508 508 14 508 522 At 31 December 2021 2,013 125,245 (1,541) 125,717 Loss for the year and total comprehensive loss Transactions with equity holders of the Company Issue of ordinary shares Share-based payment credit – 1 – 1 – – – – (66,622) (66,622) – 919 919 1 919 920 At 31 December 2022 2,014 125,245 (67,244) 60,015 62 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Parent Company Financial Statements for the year ended 31 December 2022 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 UK-adopted international accounting standards; > 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 the 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 to estimate the likely cash requirements over the period to 30 June 2024 of the Company and its subsidiaries, to which the Company has confirmed its intention to provide financial support for a period of not less than 12 months from the date that its financial statements for the year ended 31 December 2022 are signed, given their 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 taken a prudent view in preparing these forecasts. The Company’s available resources are sufficient to cover the Group’s plans to design and establish data from a focused series of observational studies and investigator- led/Synairgen-sponsored Phase 2 clinical trials, including manufacture of additional active and placebo for these trials (details of these plans can be found in the Strategic Report). Regardless of the outcome of these plans, which are uncertain, the Group’s available resources are sufficient to cover existing committed costs and the costs of these planned activities until at least 30 June 2024. In addition, the directors have considered the sensitivity of the financial forecasts to changes in key assumptions, including, among others, potential cost overruns within anticipated spend and changes in exchange rates. After due consideration of these forecasts and current cash resources, including the sensitivity of key inputs, 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 12 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. An assessment is made in respect of indicators of impairment in the carrying value of the Company’s investment in subsidiaries as at the year-end. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. 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. 63 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Parent Company Financial Statements for the year ended 31 December 2022 (continued) Taxation Current tax is the amount of income tax payable or receivable on the profit or loss for the year or prior years and takes into account taxation deferred. Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that the recognition of deferred tax assets is limited to the extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted. Share capital The Company’s ordinary shares are classified as equity instruments. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. 1. Accounting policies (continued) 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 are fixed-term, liquid investments with maturities of over three months at inception. Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short- term highly liquid investments with original maturities of three months or less. Financial liabilities The Company classifies its financial liabilities as financial liabilities held at amortised cost. Trade creditors are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. 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. 64 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Parent Company Financial Statements for the year ended 31 December 2022 (continued) 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. A key area of estimation uncertainty that has the most significant effect on the amounts recognised in the financial statements are the assumptions when determining the impairment of investment carrying values. Refer to Note 4 – Investments, for details. The Company holds a significant investment in its subsidiary, Synairgen Research Limited, of £40.2 million (2021: £92.3 million). An assessment was made in respect of indicators of impairment in the carrying value of the Company’s investments in subsidiaries as at 31 December 2022. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. The assessment of the recoverable amount of investments in subsidiaries involves a number of significant judgements regarding the likelihood of successful product approval, the costs of reaching approval, the estimated useful life of a therapeutic product following commercialisation and the subsequent commercial profitability of the product once approved. At 31 December 2021, the directors considered indicators of impairment by reference to Synairgen Research Limited’s fair value less costs to sell, inter alia, by reference to the AIM market capitalisation of the Group (since all Group intellectual property is owned by Synairgen Research Limited) at that date of £419 million and no impairment indicator was identified. 65 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Parent Company Financial Statements for the year ended 31 December 2022 (continued) 3. Profit and loss account The only employees of the Company during 2022 and 2021 were the three executive directors. Their aggregate remuneration, which is borne by the Company’s subsidiary undertaking Synairgen Research Limited, comprised: Wages and salaries Social security costs Pension costs – defined contribution plans Total cash-settled remuneration Accrued holiday pay Share-based payment Total remuneration Notes (i) (ii) 2022 £000 749 (28) 53 774 (3) 328 2021 £000 621 210 53 884 (4) 250 1,099 1,130 (i) The Social security credit for 2022 comprises (a) a credit in respect of the Employer National Insurance accrual for LTIPs of £136,000 (2021: charge £123,000); and (b) a charge in respect of wages, salaries and other benefits of £108,000 (2021: charge £87,000). (ii) This includes cash payments in lieu of pension plan contributions. 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 note 5 to the Group accounts on page 48. Auditor’s remuneration is disclosed in note 4 to the Group accounts on page 47. 4. Investments At 1 January 2022 Capital contribution for the year Subsidiary share-based payment Impairment (i) At 31 December 2022 (i) There was no impairment at 1 January 2022. Investment in subsidiary undertakings £000 140 – – – 140 Capital contribution £000 92,122 13,188 919 (66,169) 40,060 Total £000 92,262 13,188 919 (66,169) 40,200 66 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Notes to the Parent Company Financial Statements for the year ended 31 December 2022 (continued) The Company performed an assessment of the recoverable amount of the investment in Synairgen Research Limited at 31 December 2022 triggered by a decrease in the share price of Synairgen plc following the announcement of the results of Synairgen Research Limited’s Phase 3 SPRINTER study on 21 February 2022. The recoverable amount was determined with reference to IAS 36 methodology by assessing the value in use of the investments based on discounted cash flows. This resulted in an impairment of £66.2 million. In undertaking the impairment review, the Company has considered both external and internal sources of information, and any observable indications that may suggest that the carrying value of Synairgen Research Limited may be impaired. Future cash flows are determined using Board-approved projections over the estimated development and revenue – generating period, which is in excess of five years. These projections and strategic plans are based on key assumptions using management estimates and, where applicable, external sources of data and benchmarking. The key assumptions included development cost required to achieve regulatory approval, probability of success of clinical trials, likely licensing terms regarding milestones and royalties, and revenue and operating margins for the projected period. The discount rate is estimated on a pre-tax basis reflecting the estimated cost of capital of the Company. The pre-tax cost of capital is 14.9%. Management’s valuation model applies a post-tax cost of capital to discount risk-adjusted post- tax cash flows. Determining the estimated recoverable amount is judgemental in nature and requires the use of certain estimated inputs that represent key sources of estimation uncertainty. It is reasonably possible that the estimations and assumptions used in determining the impairment as at 31 December 2022, including discount rate assumptions, may result, within the next financial year, in a material further impairment to the carrying amount of the investment value. For example, if the pre-tax discount rate were to increase by 1% to 15.9% the impairment would increase by £7.4 million. At 31 December 2022, the Company has an investment in the following subsidiary undertakings: Name of company Registered address Proportion of voting rights and ordinary share capital held Synairgen Research Limited Mailpoint 810, Southampton General Hospital, Tremona Road, Southampton SO16 6YD Synairgen Research (Ireland) Limited 12 Fitzwilliam Place, Dublin 2, Ireland Synairgen Inc 155 Federal Street, Suite 700, Boston, MA 02210, USA 100% 100% 100% 5. Debtors Other tax and social security Prepayments and accrued income Amounts due from subsidiary undertaking All amounts fall due for payment within one year. Nature of business Drug discovery and development Pharmaceutical commercialisation Pharmaceutical commercialisation 2022 £000 12 266 48 326 2021 £000 7 128 – 135 67 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcNotes to the Parent Company Financial Statements for the year ended 31 December 2022 (continued) 6. Cash and cash equivalents Cash at bank and in hand Sterling fixed rate deposits of three months’ or less maturity at inception Note (i) (i) At 31 December 2021, £5,004,000 was on 35 days’ notice. 7. Creditors: amounts falling due within one year Trade creditors Accruals 2022 £000 11,112 4,750 15,862 2022 £000 19 104 123 2021 £000 33,447 – 33,447 2021 £000 26 101 127 8. Share capital and share premium Details of the Company’s share capital, share premium, share option schemes and LTIP can be found in note 17 to the Group accounts on pages 57 to 59. 68 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Glossary Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) programme NIH’s ACTIV programme is a public-private partnership to develop a coordinated research strategy to speed up the development of the most promising treatments and vaccine candidates for COVID-19 ACTIV-2 A master protocol designed for evaluating multiple investigational agents compared to placebo in adults with mild to moderate COVID-19, not requiring hospitalisation Acute An acute disease is a disease with a rapid onset and/or a short course Acute Respiratory Distress Syndrome (ARDS) Acute respiratory distress syndrome (ARDS) is an acute, diffuse, inflammatory form of lung injury and life-threatening condition in seriously ill patients, characterised by poor oxygenation, pulmonary infiltrates, and acute onset Adverse Event An adverse event (AE) can be any unfavourable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of a medicinal (investigational) product, whether or not related to the medicinal (investigational) product Aerogen-Ultra A portable mesh nebuliser manufactured by Aerogen that allows for continuous delivery of inhaled drugs to the airways 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 Antibodies Proteins produced by a person’s immune system that help the body to recognise and get rid of infection 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 Autoantibody An antibody produced by the body in response to a part of its own tissues 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 BFS An acronym for Blow-Fill-Seal. Blow- Fill-Seal technology is a pharmaceutical filling process in which containers are formed from a thermoplastic granulate (resin), filled with product, and then sealed in a continuous, integrated, automatic operation BioBank A collection of samples such as blood, induced sputum, bronchial biopsies and epithelial cells from clinically well-characterised volunteers. 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 Biologics License Application (BLA) A request for permission to introduce, or deliver for introduction, a biologic product into interstate commerce. Regulated by the US FDA Breathlessness, Cough and Sputum Scale (BCSS) A three-item questionnaire rating breathlessness, cough and sputum on a 5-point Likert scale from 0 (no symptoms) to 4 (severe symptoms) Brief Pain Inventory – Short Form A nine-item self- administered questionnaire used to evaluate the severity of a patient’s pain and the impact of this pain on the patient’s daily functioning Broad-spectrum antiviral An agent that acts against a wide range of disease- causing viruses 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 69 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationJob No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Annual report and accounts 2022 Synairgen plcGlossary (continued) 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 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 CMC An acronym for chemistry, manufacturing and controls. CMC involves defining manufacturing practices and product specifications that must be followed and met in order to ensure product safety and consistency between batches Collagen The main structural protein found in skin and other connective tissues Community Acquired Pneumonia (CAP) Pneumonia that is acquired outside of the hospital setting 70 Contract Research Organisation (CRO) A company that provides support to the pharmaceutical industry in the form of research services outsourced on a contract basis 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 Corticosteroids Commonly referred to as steroids, corticosteroids are a type of anti-inflammatory drug. Corticosteroids closely resemble cortisol, a hormone produced naturally by the adrenal glands COVID-19 Coronavirus disease 2019 is a respiratory illness caused by SARS-CoV-2 COVID-19 symptom assessment A self-reported assessment of the presence of COVID-19 symptoms 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 Drug Product The final formulated drug substance with excipients, in the dosage form ready to be given to patients, for example a tablet or capsule Drug Substance The unformulated or not final formulation of the active pharmaceutical ingredient 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 Endpoints (primary and secondary) The primary endpoint of a clinical trial is the outcome or outcomes (based on the drug’s expected effects) that establish the effectiveness, and/or safety features, of the drug. It is the endpoint for which the trial is powered. Secondary endpoints are additional endpoints, preferably also pre-specified, for which the trial may not be powered. These may be selected to demonstrate additional effects after success on the primary endpoint 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 Emergency Use Authorisation (EUA) Authorization by the FDA of unapproved medical products or unapproved uses of approved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases European Medicines Agency (EMA) The EMA evaluate and supervise medicines for the benefit of public and animal health in the European Union (EU) Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022FDA US Food and Drug Administration. An American body that is responsible for protecting public health by ensuring the safety, efficacy, and security of human and veterinary drugs, biological products, and medical devices; and by ensuring the safety of America’s food supply, cosmetics, and products that emit radiation 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 synthesises the extracellular matrix and collagen, the structural framework for animal tissues, and plays a critical role in wound healing 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 was used by Synairgen in SG015 EuroQuol 5 Dimension 5 Level (Eq-5D-5L) A self-assessed, health related, quality of life questionnaire. The scale measures quality of life on a five-component scale including mobility, self- care, usual activities, pain/ discomfort, and anxiety/ depression. The responses record five levels of severity Ex vivo Ex vivo refers to experimentation or measurements done in, or on, tissue from an organism in an external environment with minimal alteration of natural conditions. A primary advantage of using ex vivo tissues is the ability to perform tests or measurements that would otherwise not be possible or ethical in living subjects Exacerbation A rapid deterioration of a chronic disease that makes the symptoms worse Excipients Components of a drug substance/product which do not have a therapeutic effect but can influence the storage, stability and delivery of the drug Fast Track Designation A designation by the United States Food and Drug Administration (FDA) of an investigational drug for expedited review to facilitate development of drugs to treat a serious or life-threatening condition to fill an unmet medical need Functional Assessment of Chronic Illness Therapy – Fatigue (FACIT-F) A 13-item tool that measures an individual’s level of fatigue during their usual daily activities over the past week. The level of fatigue is measured on a four-point Likert scale (4 = not at all fatigued to 0 = very much fatigued) Generalised Anxiety Disorder Assessment (GAD-7) A seven-item instrument that is used to measure or assess the severity of generalised anxiety disorder (GAD) Gene A hereditary unit consisting of a sequence of DNA that determines a particular characteristic of a living organism H1N1 2009 In the spring of 2009, a novel influenza A (H1N1) virus emerged. It was detected first in the United States and spread quickly across the United States and the world. This new H1N1 virus contained a unique combination of influenza genes not previously identified in animals or people. This virus was designated as influenza A (H1N1)pdm09 virus H5N1 Highly pathogenic avian influenza A (H5N1) virus occurs mainly in birds, is highly contagious among birds, and can be deadly, especially in domestic poultry 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 Immunocompromised Having a weakened immune system Immunosuppressed Having a weakened immune system due to a particular health condition or because you are on medication or treatment that suppresses your immune system I-neb A nebuliser manufactured by Philips that delivers inhaled drugs to the airway INEXAS AstraZeneca’s Phase 2a 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 71 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcGlossary (continued) Influenza A contagious viral infection of the respiratory tract, leading to fever, headaches, sore throat, congestion of the nose and body aches Lower airway The airway tubes in the lung running from the throat down, ending in the air spaces (alveoli) where gas exchange occurs Multiple sclerosis (MS) A disease affecting nerves in the brain and spinal cord, causing problems with muscle movement, balance and vision Intention to Treat (ITT) All patients that were enrolled and randomly assigned to a treatment arm Investigational New Drug (IND) A drug developed by the sponsor that is ready for clinical trials in humans 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 Long COVID Long COVID (Post-COVID-19 syndrome) is defined as “signs and symptoms that develop during or following an infection consistent with COVID-19, that continue for more than 12 weeks and are not explained by an alternative diagnosis” Long-term viral shedder An infected host (person) releasing virus for a prolonged period of time Macrophages Phagocytic (i.e. cells that can engulf other cells and cell components) white blood cells involved in cellular clearance and inflammation Managed Access Programme A programme through which physicians can prescribe, within their professional responsibility, a yet unapproved treatment for patients with serious or life-threatening diseases or conditions MERS-CoV Middle East respiratory syndrome (MERS) is a viral respiratory disease caused by Middle East respiratory syndrome coronavirus (MERS-CoV) that was first identified in Saudi Arabia in 2012 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 NIAIDS The NIAIDS, the National Institute of Allergy and Infectious Diseases, is one of the 27 institutes and centres that make up the National Institutes of Health, an agency of the United States Department of Health and Human Services National Early Warning Score (NEWS2) A system for scoring the physiological measurements that are routinely recorded at the patient’s bedside; respiration rate, oxygen saturation, systolic blood pressure, pulse rate, level of consciousness or new confusion and temperature National Institute of Health and Care Research (NIHR) UK funding body for health and care research Pandemic influenza An influenza pandemic occurs when a new influenza virus appears against which the human population has no immunity, resulting in epidemics worldwide with enormous numbers of deaths and illness Parainfluenza A virus that can cause the common cold. Parainfluenza is also responsible for 75% of croup cases in children 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 Patient Health Questionnaire (PHQ-9) PHQ-9 is a self-assessed nine question form used to screen depression and monitor changes in signs/ symptoms of depression Peak expiratory flow A lung function test that measures a person’s ability to breathe out air Per Protocol Analysis The Per Protocol population is usually defined as all patients completing the study without major protocol deviations – that is, those who followed the rules of the study. Analysis of the data from this population is known as Per Protocol analysis PFS An acronym for Pre-filled syringe. Drug product is filled into syringes at the manufacturing site and provided to patients with the drug product already in the syringe, ready to use 72 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Phase 1 Clinical Trial A study conducted in volunteers to determine the biological effects of a drug, especially safety and tolerability Phase 2 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 2a Clinical Trial Used to describe a Phase 2 clinical trial evaluating efficacy, adverse effects and safety risks Phase 2b Clinical Trial Used to describe a subsequent Phase 2 clinical trial that also evaluates dosage tolerance and optimal dosage frequency in a larger number of patients than enrolled in a Phase 2a trial Phase 3 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 Placebo-controlled Placebo-controlled is a trial in which there are two (or more) groups. One group receives the active treatment, the other is given the placebo. Everything else is identical between the two groups, so that any difference in their outcome can be attributed to the treatment Platform Trial A type of prospective, disease-focused, adaptive, randomized clinical trial that compares multiple, simultaneous and possibly differently timed interventions against a single, constant control group PPQ An acronym for Process Performance Qualification. During PPQ, the process is evaluated to determine if it is capable of reproducible manufacturing and demonstrate that the manufacturing process performs as expected, as required for commercial manufacturing 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 Process Performance Qualification (PPQ) The process qualification combining the facility, utilities, equipment (each qualified), and the trained personnel with the commercial manufacturing process, control procedures, and components to produce commercial batches of drug 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 1 Clinical Trial SARS-CoV-2 Severe Acute Respiratory Syndrome-Coronavirus 2 is the virus strain that causes COVID-19 Seasonal Influenza Seasonal influenza is a yearly outbreak of influenza infection, caused by influenza virus. The seasonal influenza is somewhat different every year, as influenza viruses are always changing Secondary/exploratory endpoint The second most important (or additional) measure (or endpoint) assessed in a clinical trial Severe asthma Severe Asthma often requires treatment with high-dose inhaled corticosteroids plus a second controller medication (e.g. long-acting beta-agonists) and/or systemic corticosteroids to prevent it from becoming ‘uncontrolled’ or which remains ‘uncontrolled’ despite this therapy. It is associated with frequent asthma exacerbations, persistent symptoms, and a significant impact on the patient’s daily life and overall health. Biologics, such as monoclonal antibodies, provide a treatment option for people with severe asthma who continue to experience asthma attacks by helping reduce airway inflammation, improving lung function, and decreasing the frequency and severity of asthma attacks 73 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcGlossary (continued) SG005 Synairgen’s Phase 2 randomised, double-blind, placebo-controlled 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 Synairgen’s Phase 2 randomised, double-blind, placebo-controlled study, in COPD patients with and without a confirmed respiratory virus infection assessing anti-viral biomarker responses of inhaled SNG001 compared to placebo SG016 Home Study Synairgen’s Phase 2 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 in the home environment SG016 Hospital Study Synairgen’s Phase 2 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 in the hospital setting 74 SG018 SPRINTER Study Synairgen’s Phase 3 Trial (SG018) evaluating inhaled interferon beta in hospitalised COVID-19 patients. A randomised, double-blind, placebo- controlled study conducted in 17 countries which enrolled a total of 623 COVID-19 patients SNG001 A formulation of Interferon Beta-1a delivered to the lung using a nebuliser 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 Standard of Care A diagnostic and treatment process that a clinician should follow for a certain type of patient, illness, or clinical circumstance; how similarly qualified practitioners would have managed the patient’s care under the same or similar circumstances Statistical Power Statistical Power is the probability that a statistical test will detect differences when they truly exist 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 United States National Institute of Health (US NIH) The medical research agency of the US Upper airway The tubes in the nose and neck which conduct air into the lung Variant It is normal for viruses to change and evolve as they spread between people over time. When these changes become significantly different from the original virus, they are known as ‘variants’ Variant of Concern (VOC) A variant is considered a variant of interest if it has mutations that are suspected or known to cause significant changes, and is circulating widely (e.g. known to cause many clusters of infected people, or found in many countries). There are many variants of interest that WHO is continuing to monitor in case they become variants of concern A variant of interest becomes a variant of concern if it is known to spread more easily, cause more severe disease, escape the body’s immune response, change clinical presentation, or decrease effectiveness of known tools – such as public health measures, diagnostics, treatments and vaccines Ventilated Using a machine called a ventilator to fully or partially provide artificial ventilation (exchange of air between the lungs and the atmosphere so that oxygen can be exchanged for carbon dioxide) Viral load The amount of virus is measured in a certain amount of bodily fluid such as blood, saliva or sputum Viral shedding Virus is released or shed from an infected host (person) Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Synairgen plc Annual report and accounts 2022Virus or Variant-Agnostic Not targeted or effective against any one or several viruses or variants, but targeted or effective against all viruses or variants 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 World Health Organisation (WHO) A United Nations body responsible for international public health World Health Organisation (WHO) Ordinal Scale for Clinical Improvement (OSCI) A scale used to measure clinical improvement in patients from a score of 0; uninfected to 8; death 75 Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 10Black Line Level: 6Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Strategic reportGovernanceFinancial statementsOther informationAnnual report and accounts 2022 Synairgen plcBreakthrough science for severe viral lung infections We are a specialist respiratory biotech company whose primary focus is developing our investigative inhaled IFN-β therapeutic (SNG001) for the treatment and prevention of severe viral lung infections as potentially the first host-directed, broad- spectrum antiviral treatment delivered directly into the lungs. Corporate directory Company details Company number 5233429 Directors Executive: Richard Marsden, Dr Phillip Monk, John Ward Non-executive: Simon Shaw (Chairman), Dr Bruce Campbell, Dr Felicity Gabbay, Prof. Sir Stephen Holgate CBE, Amanda Radford Secretary Simon Holden 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 85 Gresham Street, London EC2V 7NQ Nominated adviser and joint broker finnCap Limited One Bartholomew Close, London EC1A 7BL Joint broker Numis Securities Limited 45 Gresham Street, London EC2V 7BF Registrars Link Group 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL Solicitors Fieldfisher LLP Riverbank House, 2 Swan Lane London EC4R 3TT Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600S y n a i r g e n p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 2 Breakthrough Science for Severe Viral Lung Infections Annual Report and Accounts 2022 Synairgen plc, Mailpoint 810, Southampton General Hospital, Tremona Road, Southampton SO16 6YD LSE: SNG www.synairgen.com Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600Job No: 49377Proof Event: 8Black Line Level: 4Park Communications Ltd Alpine Way London E6 6LACustomer: SynairgenProject Title: Annual Report 2022T: 0207 055 6500 F: 020 7055 6600

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