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MAKING A
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Annual Report and Accounts
2017
ValiRx plc Annual Report and Accounts 2017
WELCOME TO VALIRX PLC
ValiRx Plc (AIM: VAL), a life science company, which
focuses on clinical stage cancer therapeutic development,
taking proprietary & novel technology for precision
medicines towards commercialisation and partnering.
The Group operates through the following
divisional companies:
It currently has two products in Phase I/II and Phase II
clinical trials. Its business model focuses on out-licensing
drug candidates after early proof-of-principle and
efficacy trials.
ValiPharma
ValiPharma is the therapeutics
division, with two embedded
technologies primarily directed
at the treatment of cancers.
ValiSeek
ValiSeek is a joint venture between
ValiRx and Tangent Reprofiling Ltd
to develop VAL401 in lung cancer
and potentially other indications.
Phase II
VAL401
Phase II
1
See
p.12
VAL201
V
aliPharma
k
e
e
ValiS
Pre-clinical
VAL301 VAL101
(GeneICE, VAL101)
O
p
ti
m
is
a
ti
o
n
See
p.13
1
See
p.12
See
p.13
Our Product Pipeline
We aim to make a significant contribution in “precision”
medicine and science, namely to engineer a breakthrough
into human health and well-being, through the early
detection of cancer and its therapeutic intervention.
Operational Highlights
• Period of substantive and encouraging development across
drug portfolio taking lead compounds to significant value
inflection points;
• Phase l/ll Clinical Trial of VAL201 has continued to demonstrate
high safety and tolerability and has received MHRA approval
to extend and expand the scope of the clinical trial to treat
prostate cancer;
• Completion of VAL401’s Phase II Clinical Trial in patients
with lung cancer - with trial data offering palliative stage
patients an improvement in symptoms alongside improved
survival prospects;
• Period saw the optimized, commercially viable, 2nd generation
development of the VAL101molecule derived from ValiRx’s
proprietary GeneICE platform to shut down rebellious genes
causing cancer and potentially some neurological disorders –
preparation is underway for the compound’s entry into the clinic;
• VAL301 is in late pre-clinical phase initially for the treatment of
the gynaecological condition, endometriosis – a reformulation
of VAL201, which pre-clinical studies suggest does not
compromise bone density or fertility. Final laboratory tests
are underway prior to advancing the VAL301 compound into
additional toxicology and then clinical trials;
• Patent protection and portfolio coverage was extended for
VAL201 and VAL401 during the period with US patent granted
for VAL201 in Q1 2018.
Financial Highlights
• Four Placings during the period raising £3.07m to advance
the clinical trial of VAL201 and for the pre-clinical progress
of other programmes;
• Marked 36.4% reduction in total comprehensive loss for
the year to £3.02m (2016: Loss £4.75m) reflecting decrease
in clinical trial expenditure on medicinal products;
• Loss per share from continuing operations of 1.90p
(2016: Loss 8.54p);
• Cash and cash equivalents as at 31 December 2017 of £701,410
(2016: £560,763).
Annual Report and Accounts 2017
ValiRx plc
01
Strategic Report
Governance
Financial Statements
Strategic Report
Highlights
Chairman’s Statement
How we Create Value
Our Products
Marketplace
Licensing Collaborations
Therapeutics
Chief Executive’s Report
Risks and Uncertainties
Governance
Board of Directors
Directors’ Report
Independent Auditors’ Report
Financial Statements
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Company Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Company Statement of
Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Statement of Cash Flows
Notes to the Consolidated
Financial Statements
01
02
04
06
08
10
12
14
16
18
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26
27
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31
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33
View more on our website
www.valirx.com
02
Strategic Report
CHAIRMAN’S STATEMENT
Looking towards the future
• I am pleased to report that our research,
understanding and ambition to find more
effective solutions to the treatment of
cancer have moved on substantially in 2017.
or metastatic prostate cancer. This gives
the trial increased flexibility and speed for
reaching therapeutic levels and to reduce
disease progression.
• The progress of our core clinical products,
VAL201 and VAL401 has been substantial
and both have reached significant value
inflection points. The current momentum
and exciting trajectory of both compounds
offer potential investors an investable
proposition and an attractive offering
to joint venture partners.
• The integration of our clinical in-house
team with a board of oncologists and
clinical nurse specialists has been providing
valuable insight into how we can more
rapidly bring safe, efficacious, therapeutic
and palliative medicines to cancer patients
to meet hitherto unmet needs in rapidly
growing markets.
• A particularly noteworthy achievement by
the Company in the reporting period was
the successful completion of the VAL401
Phase ll clinical study in patients with late
stage non-small cell lung cancer, the most
common form of lung cancer.
• During the period, we saw consistent
progress made with our VAL201 therapeutic,
culminating in receiving approval from
the UK Medicines and Healthcare Products
Regulatory Agency and the Research Ethics
Committee to substantially expand and
accelerate the trial for locally advanced
• The Company has also progressed the pre-
clinical pipeline. The programmes currently
consist of VAL301, which is derived from the
formulation of VAL201 and the compound
VAL101, which is derived from our GeneICE
technology platform. The Company is very
much looking forward to taking the next
generation of therapeutics into further
development and through to the clinic.
• VAL401 and VAL201 have received several
major patent grants and the IP portfolio
now covers all major areas worldwide.
In my report for the year ended
31 December 2016, I informed
our shareholders that we were
making important strides in
growing our internal R&D
capabilities, such that we remain
at the forefront of personalised
and precision medicine.
I am pleased to report that our research,
understanding and ambition to find more
effective solutions to the treatment of cancer
have moved on further since then. The
integration of our in-house team with an
advisory board of oncologists and clinical
nurse specialists has been providing valuable
insight into how we can more rapidly bring
safe, efficacious, therapeutic and palliative
medicines to cancer patients to meet hitherto
unmet needs.
In 2017, we saw consistent progress made
with our first therapeutic. VAL201 continued
to demonstrate high safety and tolerability,
as well as preliminary therapeutic activity
throughout the clinical study, culminating in
receiving approval from the UK Medicines and
Healthcare Products Regulatory Agency and
the Research Ethics Committee to substantially
raise the dosing level in patients with locally
advanced or metastatic prostate cancer in
order to reach therapeutic levels and reduce
disease progression. This is a testament to the
appetite for new drugs devoid of the serious side
effects reported with current prostate cancer
treatments, in particular complete and general
androgen hormone deprivation. We look forward
to reporting on the clinical trial as it progresses
throughout this current year.
In parallel, we continued to advance the
reformulation of VAL201 into VAL301 for the
treatment of Endometriosis, a painful and
debilitating gynaecological condition with high
unmet clinical needs. We have established from
our pre-clinical studies that VAL201’s specific
mode of action also has the potential to provide
a potent therapeutic effect to manage the
symptoms of this disorder more safely than
current treatments, which are widely known to
cause a large number of side effects including
loss of bone density and/or infertility. Going
forward, the Company’s focus is to complete
laboratory tests before progressing VAL301
to clinical trials.
A particularly noteworthy achievement by
the Company in the reporting period was the
successful completion of the VAL401 Phase ll
clinical study in patients with late stage non-
small cell lung cancer, the most common form
of lung cancer. The data analysed by Ariana,
a leading digital health Company, focused on
developing advanced therapeutic decision
ValiRx plc Annual Report and Accounts 2017 03
support systems, has advocated the therapeutic
potential for VAL401 as a single therapy in
treating this cancer. Ariana has also advocated
the compound’s therapeutic and palliative
potential when combined with both traditional
chemotherapies and immune-oncology
treatments. Palliative stage patients could
expect to see improvements in symptoms
with the added benefit of improved survival
prospects. The encouraging 60% overall
response rate provides a strong foundation for
the next stage of clinical testing. The measure
of immune competency of the treated patients
was also a pleasingly unexpected addition to the
results. In sum, we are very excited to see such
a good response rate for a condition with huge
unmet medical need.
Furthermore, these results came hot on the
heels of ValiRx receiving notification that a
further method-of-treatment patent has been
granted by the US Patent Office covering the
use of VAL201 in the treatment of prostate
cancer. VAL201 now has five patents families
in its portfolio, four of which have been fully
granted and with one allowed. VAL201’s patent
protection now extends across territories that
include US, Japan, Australia, Europe and the UK,
providing coverage in the world’s major markets.
Another important breakthrough during the
year was the development of an optimised,
commercially viable second generation of the
VAL101molecule derived from our proprietary
GeneICE platform, which has been shown
in earlier studies to shut down rebellious
genes causing cancer and potentially some
neurological disorders. We can now take
VAL101 in to late pre-clinical studies in
preparation of the compound’s entry
into the clinic.
Our financial results show the total
comprehensive loss for the year ended 31
December 2017 was £3,019,684, a decrease of
36.40% on the previous year (2016: £4,748,003)
and a loss per share from continuing operations
of 1.90p (2016: Loss 8.54p). This marked reduction
in our loss was attributable to a decrease in
clinical trial expenditure as the manufacturing
costs for both of the investigational medicinal
products, VAL201 and VAL401, that were incurred
for their respective trials, were borne during 2016.
In December 2017, we announced the final
conversion of the CLN Agreement with Yorkville
– thus resulting in no further obligations existing
with Yorkville. Simultaneously, we raised £1.0m
of gross proceeds through the issue of 23,529,412
new ordinary shares at a price of 4.25 pence
per share for advancing the clinical trial of
VAL201 and for the pre-clinical progress of
other programmes. As at year-end, the Group
had cash and cash equivalents of £701,41
(2016: £560,763).
In conclusion, I believe the Group has seen
substantive and encouraging developments
across its portfolio during the period to
December 2017. The progress of our core
clinical products, VAL201 and VAL401 has been
substantial and both have reached significant
value inflection points. The current momentum
and exciting trajectory of both compounds offer
potential investors an investable proposition and
an attractive offering to joint venture partners.
I would like to take this opportunity to express
my sincere gratitude to all shareholders, fellow
Directors, and every member of the Group for
the trust and support accorded to the Board
in positioning ValiRx among the frontrunners in
the fields of personalised and precision medicine.
Oliver de Giorgio-Miller
Chairman
5 April 2018
How we manage our company
The Board
At 31 December 2017, the board consisted of three executive and
two non-executive directors, who are well respected within their
field. The Board sets the overall direction and strategy of the Group,
reviews scientific, operational and financial performance, and advises
on management appointments. All key operational and investment
decisions are subject to Board approval, with the Company Secretary
being responsible for ensuring that Board procedures are followed
and applicable rules and regulations are complied with. The Non-
Executive Chairman is responsible for overseeing the running of the
Board, ensuring that no individual or group dominates the Board’s
decision-making and ensuring the Non-Executive Directors are properly
briefed on matters. The Chief Executive Officer has the responsibility for
implementing the strategy of the Board and managing the day to day
business activities of the Group.
All of the Directors are subject to election by shareholders at the first
Annual General Meeting (’AGM’) after their appointment to the Board
and to re-election by shareholders at least once every three years.
I believe the Group has
seen meaningful and
encouraging developments
across its portfolio during
the period to December
2017. The progress of our
core clinical products,
VAL201 and VAL401 has
been substantial and both
have reached significant
value inflection points.
The current momentum
and exciting trajectory of
both compounds offer
potential investors an
investable proposition
and an attractive offering
to joint venture partners.”
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 04
Strategic Report
HOW WE CREATE VALUE
ValiRx is a clinical stage biotechnology company
with a focus in cancer and which has three
classes of drugs in development with a clear
goal to address unmet needs.
Our strategy
We focus on the treatment of cancer and associated Biomarkers,
specialising in epigenomic and genetic analysis. We will achieve our
goals through early detection of disease and therapeutic intervention.
Our Business Model
The Company’s business strategy is to license or acquire technologies
and early stage therapeutic compounds with solid scientific proofs
of concept. The Company develops these programmes and takes
them through pre-clinical and then the clinical phases, at which
stage, pharmaceutical companies historically look to acquire such
programmes and take them through their last clinical trial phases
and to market approval.
The pharmaceutical industry is actively looking to fill pipelines and
increase its market penetration with novel and innovative drugs
and therapeutics, which increasingly originate from specialised
biotechnology companies. The directors believe that the Company’s
development programmes are well placed to meet some of the industry
interest in those areas in which the Company operates. The Company’s
programmes are developed to meet clear unmet medical need in large
and growing markets and ValiRx’s management is actively in dialogue
with key players within the Bio/Pharmaceutical industry.
Vision
Our vision is to make a
structural change in science.
Aim
Our aim is to engineer a
scientific breakthrough in
human health and wellbeing.
How we will achieve
We will achieve these goals through early detection
of disease and therapeutic intervention.
1
Reduce risk in
new product
development
through rigorous
clinical and
commercial due
diligence.
2
Select drug
candidates and
technologies with
evidence-based
potential to
address unmet
market needs.
3
Maximise returns
to shareholders
by adding value at
the earlier stages
where value
increases per
investment unit
are the greatest.
1
1
Develop the potential and
Commercialise VAL201,
the prostate cancer drug
This drug offers a novel and exciting approach for
targeted cancer therapy and is currently in a Phase I/II
Clinical Trial in subjects with hormone resistant prostate
cancer. The compound selectively halts tumour growth by
specifically preventing the proliferation of cancerous cells,
hence tumour growth is suppressed and metastases are
significantly reduced.
Development of VAL301
The Company continues with the development of VAL301,
which is the proposed reformulation of VAL201 for a new
indication, Endometriosis. This is a gynaecological condition,
characterised by endometrial-like tissue found outside of
the uterine cavity. Endometriosis is a chronic and debilitating
condition and it represents one of the major causes of
female infertility. Pre-clinical data suggests that VAL301 will
provide protection from the oestrogenic effects on uterine
tissue, whilst maintaining bone density and fertility.
Realise the value and Commercialise
VAL 401, the lung cancer drug
The VAL401molecule is a re-formulation of a generic drug
in an oral form, which has shown pronounced anti-cancer
properties in pre-clinical testing. Due to the safety profile
of the active drug, VAL401 was able to accelerate directly
into a Phase II efficacy trial. During the reporting period, the
Company saw the successful completion of the clinical study
in patients with late stage non-small cell lung cancer, the
most common form of lung cancer.
Continue promising testing
in VAL101
ValiRx’s proprietary GeneICE technology enables selective
silencing of overzealous, rebellious or inappropriate activity
by specific genes, which contribute to many disease states
including cancers and inflammatory conditions, Alzheimer’s
and auto-immune diseases. The specially designed molecule
mimics natural mechanisms, with one part of the molecule
identifying and targeting the rebellious gene and the other
part silencing it.
ValiRx plc Annual Report and Accounts 2017 05
What we’ve achieved in 2017
The group has seen meaningful and encouraging developments across its
portfolio during the period to December 2017 and the progress of our core
clinical products, VAL201 and VAL401 has been substantial and both have
reached significant value inflection points.
Read more on p. 06 to 07
Our risk management
ValiRx is a clinical stage biotechnology company
and in common with other companies operating
in this field, is subject to a number of risks and
uncertainties. The principal risks and uncertainties
are indicated below.
Read more on p. 16 to 17
• The VAL201 clinical trials to date have shown
a very good safety and tolerability profile as
well as preliminary efficacy. Based on these
results the Company obtained MHRA and REC
approval to substantially expand the trial and
to raise the dosing level in patients, in order to
accelerate the trials’ ability to reach therapeutic
levels and to reduce disease progression.
• The Company is developing a pipeline of future
clinical drugs so as to ensure the maintenance
and continuity of future value creation.
Currently, the pre-clinical portfolio consists of
VAL301, which is targeting endometriosis and
VAL101, which is targeted at blocking those
genes, which contribute to cancerous growth.
• During 2017, the progress of our core clinical
products and patent portfolios have been
substantial and all have reached significant
value inflection points. Given the current
trends within the industry, the Company is in
an optimum position for having meaningful
discussions regarding future partnering and
collaborative deals.
• VAL301 is currently in mid-stage pre-clinical
development as a non-invasive, effective
treatment for the non-cancerous, but hugely
debilitating gynaecological condition,
Endometriosis.
• Earlier pre-clinical work on VAL201 has
highlighted the compound’s potential to
protect uterine tissue from the oestrogenic
effects that give rise to Endometriosis, with
minimal impact on bone density or fertility,
which are major drawbacks frequently
encountered with the current commonly
used drugs for this condition.
• The Group’s focus now is to complete the
pre-clinical package so that the Company
obtains the necessary regulatory approvals
to enter VAL301 in a clinical trial in 2018.
• The production of positive trial data
showed that the VAL401 treatment had a
measurable improvement on patient quality
of life, in addition to a positive impact on the
disease and an extension in the overall survival
of patients.
• The GeneICE “rebellious gene” technology
continues to show good progress in the
pre-clinical phase.
• The compound has been designed against a
gene expressing Bcl-2 protein, which has been
implicated and associated with various cancers.
• Pre-clinical work is currently being
conducted with our partners, DKFZ,
Heidelberg and Pharmatest in Finland
and the compound continues to be
tested to decide the most promising
cancer types for further development.
Industry risk
Competition risk
Intellectual property risk
Financial risk
Intellectual property risk
Return on investment
Competition risk
Clinical and regulatory risk
Intellectual property risk
Financial risk
Intellectual property risk
Return on investment
1
2
5
3
5
6
2
4
5
3
5
6
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
06
ValiRx plc Annual Report and Accounts 2017
Strategic Report
OUR PRODUCTS
ValiRx was formed in 2006 – here is a brief look at the contribution ValiRx
has made to the compounds’ and technology’s development pathways.
Discovery
Compounds
Screening &
Selection
Compound
Selection
Manufacture
l
y
g
o
o
n
h
c
e
T
s
d
n
u
o
p
m
o
C
VAL101
(GeneICE, VAL101)
VAL201
1
VAL301
1
VAL401
Late 2006
Development of VAL101 within ValiRx
Early 2014
ValiRx starts to develop VAL301
Late 2011
ValiRx takes control of the development of VAL201
Annual Report and Accounts 2017
ValiRx plc
07
Strategic Report
Governance
Financial Statements
I
II
III
√
Pre-clinical
Phase I
Phase II
Phase III
Approval
2013
Development of VAL401 under ValiRx umbrella
08
Strategic Report
MARKETPLACE
We focus on the treatment
of cancer and associated
Biomarkers, specialising in
epigenomic and genetic analysis.
Principal activities
The principal activity of the Group continued
to be that of an oncology therapeutics and
companion diagnostics development company.
The Group has undertaken to develop a novel
and ground-breaking class of therapeutics across
a number of fields in oncology and currently
has a portfolio of clinical and pre-clinical stage
therapeutic projects. The Company listed on
the Alternative Investment Market (“AIM”)
of the London Stock Exchange in October 2006.
Strategy and Business Review
The Company’s business strategy is to license
or acquire technologies and early stage
therapeutic compounds with solid scientific
proofs of concept. The Company develops these
programmes and takes them through pre-clinical
and then the clinical phases, at which stage,
pharmaceutical companies historically look
to acquire such programmes and take them
through their last clinical trial phases and to
market approval.
The pharmaceutical industry is actively looking to
fill pipelines and increase its market penetration
with novel and innovative drugs and therapeutics,
which increasingly originate from specialised
biotechnology companies. The directors believe
that the Company’s development programmes
are well placed to meet some of the industry
interest in those areas in which the Company
operates. The Company’s programmes are
developed to meet clear unmet medical need
in large and growing markets and ValiRx’s
management is actively in dialogue with key
players within the Bio/Pharmaceutical industry.
ValiRx plc Annual Report and Accounts 2017 09
Prostate Cancer
Endometriosis
Lung Cancer
Prostate cancer is the most common
type of cancer in men, generally affecting
men over the age of 50. Around 34,000
men in the UK are diagnosed with
prostate cancer each year. This cancer
begins with an uncontrolled growth of
cells and develops slowly, sometimes
never causing a problem. However, most
cancers will spread, in which case,
the patient will need a treatment.
The global market for the prostate cancer
therapeutics market is increasing, driven
primarily by the growth in the hormone-
refractory prostate cancer therapeutics
markets. Hormone therapy using a
combination of hormone therapies
such as LHRH agonists and androgen
receptor antagonists is a prominent
treatment regime.1
1 in 8 men will get prostate
cancer in their lifetime.2
Endometriosis is a gynaecological
medical condition in which cells from
the lining of the uterus (endometrium)
appear and flourish outside the uterine
cavity, most commonly on the ovaries. The
uterine cavity is lined by endometrial cells,
which are under the influence of female
hormones. These endometrial-like cells in
areas outside the uterus (Endometriosis)
are influenced by hormonal changes and
respond in a way that is similar to the
cells found inside the uterus. Symptoms
often worsen with the menstrual cycle.
Endometriosis is excessively debilitating,
typically seen during the reproductive
years and represents one of the major
causes of female infertility.
It has been predicted that the global
Endometriosis market will reach $1.3
billion by 2017 and Endometriosis
remains a common health problem
among women, with an estimated
170m sufferers globally. This estimate
is widely considered to be an under
estimation of the true situation with
respect to this condition.
Whereas lung cancer in men peaked
in the late 1980’s, with a rate of over
50/100,000 men and falling by about a
third thereafter to about 36/100,000 men,
the rate in EU women has been growing
over the past two decades. Causative
factors of lung cancer include smoking,
responsible for more than 80% of cases.
NSCLC is defined as a cancer of the lung
which is not of the small cell carcinoma
type. The term “non-small cell lung
cancer” applies to the various types
of bronchogenic carcinomas (those
arising from the lining of the bronchi)
accounting for 80-85% of all lung
cancer cases.
The Non-small Cell Lung Cancer market is
growing - the Global market is projected
to increase from $5.1 billion in 2013 to
$7.9 billion in 2020 at a CAGR of 6.6%. This
represents about 1.1m cases estimated in
the eight largest markets.
120
More than 120 men in the UK are
diagnosed with prostate cancer a day.2
170m
80%
Endometriosis remains a common
health problem among women, with an
estimated 170m sufferers globally.
Causative factors of lung cancer include
smoking, responsible for more than
80% of cases.
$18.4bn
$2bn
77%
Global market for prostate cancer
therapeutics by 2025.
Endometriosis expected
to surpass $2 billion.
UK lung cancer patients are
diagnosed at stage III or IV.
VAL201
1
VAL301
1
VAL201
1
VAL401
1 https://www.pharmaceutical-technology.com/
features/feature125729/
2 https://prostatecanceruk.org/prostate-information/
about-prostate-cancer
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
10
Strategic Report
LICENSING COLLABORATIONS
Imperial Innovations, London
Cancer Research UK
University College London Hospital
Licensed technology since: 2006
(GeneICE)
Licensed technology since: 2010
(VAL201)
Out-sourced contractor to run clinical
trial since: 2015
Imperial Innovations Group plc
(“Innovations”) creates, builds and invests
in pioneering technology companies and
licensing opportunities developed from
outstanding scientific research focusing
on the ’Golden Triangle’, the geographical
region broadly bounded by London,
Cambridge and Oxford.
This area has an unrivalled cluster of
outstanding academic research and
technology businesses, and is home to
four of the world’s top 10 universities1,
as well as leading research institutions,
the cream of the UK’s science and
technology businesses and many of
its leading investors.
Innovations supports scientists and
entrepreneurs in the commercialisation
of their ideas, through the licensing of
intellectual property, by leading the
formation of new companies, by recruiting
high-calibre management teams and by
providing investment and encouraging
co-investment.
Cancer Research UK is a cancer research
and awareness charity in the United
Kingdom, formed on 4 February 2002
by the merger of The Cancer Research
Campaign and the Imperial Cancer
Research Fund. Its aim is to reduce the
number of deaths from cancer. As the
world’s largest independent cancer
research charity, it conducts research into
the prevention, diagnosis and treatment of
the disease. Research activities are carried
out in institutes, universities and hospitals
across the UK, both by the charity’s own
employees and by its grant-funded
researchers. It also provides information
about cancer and runs campaigns aimed
at raising awareness of the disease and
influencing public policy.
Cancer Research UK’s work is almost
entirely funded by the public. It raises
money through donations, legacies,
community fundraising, events, retail
and corporate partnerships. Over 40,000
people are regular volunteers.
On 18 July 2012 it was announced that
Cancer Research UK was to receive its
largest ever single donation of £10m from
an anonymous donor. The money will go
towards the £100m funding needed for the
Francis Crick Institute in London, the largest
biomedical research building in Europe.
University College London Hospitals
NHS Foundation Trust (UCLH) is one of
the most complex NHS trusts in the UK,
serving a large and diverse population. In
July 2004, UCLH was one of the first NHS
trusts to achieve Foundation Trust status.
It provides academically-led acute and
specialist services, to people from the local
area, throughout the United Kingdom and
overseas. UCLH is committed to delivering
top-quality patient care, excellent
education and world class research.
It has a turnover of £882m and
contracts with over 70 primary care trust
commissioning bodies to provide services.
It sees over 950,000 outpatients and
admits over 156,000 patients each year.
It works with the Royal Free and University
College Medical School, London South
Bank and City universities to offer high-
quality training and education.
GenelCE
VAL201
1
1 QS World University Rankings 2015/16
ValiRx plc Annual Report and Accounts 2017 11
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 12
ValiRx plc Annual Report and Accounts 2017
Strategic Report
THERAPEUTICS
Our portfolio
Two drug candidates in clinical stage
development. Others in pre-clinical.
VAL201
1
VAL301
1
Prostate Cancer
The Company’s leading anti-cancer therapeutic VAL201is
currently in clinical trials for the treatment of prostate cancer
and potentially other indications of hormone induced
cancers. The compound is targeted specifically at the Src
kinase SH3 domain to prevent the proliferation of cancer
cells, whilst leaving the other functions of androgen activity
intact, including fertility and bone development. Due to its
low toxicity profile, the compound may also have a potential
for preventative treatment.
The Phase I/II trial has been initiated and VAL201 has been
shown to be safe and well tolerated with preliminary signs
of anti-cancer efficacy at the doses tested. Following these
Endometriosis
Endometriosis is a gynaecological medical condition in which
cells from the lining of the uterus (endometrium) appear
and flourish outside the uterine cavity lined by endometrial
cells, which are under the influence of female hormones.
These endometrial-like cells in areas outside the uterus
(Endometriosis) are influenced by hormonal changes and
respond in a way that is similar to the cells found inside the
uterus and symptoms often worsen with the menstrual cycle.
The treatments chosen will depend on symptoms, age,
and lifestyle plans. VAL201 has been shown though to
reduce abnormal endometrial growth, whilst leaving other
hormone-induced activities working normally. ValiRx’s initial
in-vitro results show a reduction in endometrial lesion size
directly related to dose and two generations of offspring
produced by treated animals. This strongly suggests that
unlike current medications in use to treat the condition,
the peptide does not affect fertility.
good results, the VAL201 clinical trial received approval
from the UK Medicines and Healthcare Products Regulatory
Agency (“MHRA”) and the Research Ethics Committee
(“REC”) for the Company to expand the trial and substantially
increase the dose and dosing frequency being administered
to patients. This will allow the trial more flexibility and will
help the treatment to more speedily reach its full therapeutic
potential and to deliver a potential anti-cancer impact.
In pre-clinical trials, VAL201 also reduced the prostate
cancer model’s metastatic growth by up to 50%. This has
very important implications for prostate cancer therapeutic
treatment and it also offers a potential treatment for other
types of metastatic cancers.
The peptide VAL301 is a reformulation of VAL201
and is currently in pre-clinical development for the
non-invasive and better tolerated treatment of
Endometriosis. The Company’s focus now is to complete
laboratory tests before progressing VAL301 to clinical trials.
$2bn
Global and Endometriosis market is forecast to
surpass $2bn by 2023.
176m
Women are affected by Endometriosis globally.
Annual Report and Accounts 2017
ValiRx plc
13
Strategic Report
Governance
Financial Statements
VAL401
Lung cancer and Adenocarcinoma
VAL401 is the reformulation of generic drug Risperidone, into
an orally administered gelatin capsule. The re-formulation
allows the drug to access previously unexploited anti-cancer
activity and pre-clinical evidence suggested anti-cancer
activity against other adenocarcinoma types. The compound
in its new form specifically targets the energy-providing-
enzyme within the cell compartment. Since this enzyme is
only found in cancerous cells, the compound leaves normal
and healthy cells intact.
VAL101
(GeneICE, VAL101)
GeneICE
The GeneICE ”rebellious gene” technology continues to show
good progress in the pre-clinical phase – the programme
currently benefits from a second Eurostars grant for up to
£1.6m for the further development of this technology
platform.
GeneICE (Gene Inactivation by Chromatin Engineering) is a
novel proprietary gene silencing platform for the efficient
silencing of targeted genes. This technology is based on
natural mechanisms and has the potential to halt and reverse
tumour growth. GeneICE mimics a natural process in cells
to silence genes. The technology acts upstream of the gene
expression, potentially enabling a better inhibition compared
to existing therapeutics acting at the protein or post-
transcriptional levels.
VAL401 has successfully completed its Phase II clinical study
in patients with late stage non-small cell lung cancer, the
most common form of lung cancer. The trial has produced
positive data that shows that the VAL401 treatment has
had a measurable improvement on patient quality of Life,
in addition to a positive impact on the disease and an
extension in the overall survival of patients.
Based on these results, the design of the protocol for a
Phase III study is underway.
VAL101
VAL101 is a novel therapeutic based on the Company’s
proprietary GeneICE (Gene Inactivation by chromatin
engineering) platform. It acts to target and switch ”OFF”
the gene that expresses Bcl-2, a protein that is implicated
in about half of all carcinomas. Pre-clinical studies have
established VAL101’s efficacy in prostate, ovarian and
pancreatic cancers, and it may also have anti-tumour
activity against orphan oncologic indications. ValiRx’s
GeneICE technology enables the selective silencing or
the shutting down of particular rebellious genes, thereby
halting and reversing tumour growth.
Work to generate a commercially viable molecular
structure for VAL101 has been completed and pre-clinical
studies have shown that the compound reduces the Bcl-2
expression in cancer cells. As such, ValiRx will accelerate
VAL101’s late pre-clinical studies in preparation for the
compound’s entry into the clinic.
14
Strategic Report
CHIEF EXECUTIVE’S REPORT
The year ending in
December 2017 has been
of profound importance
to ValiRx. Not only did the
Company see its two clinical
compounds make exciting
strides forward through the
year, but it also saw those
advances culminate towards
the end of the period under
review.”
Dr Satu Vainikka
Founding Director & Chief Executive Officer
The year ending in December
2017 has been of profound
importance to ValiRx. Not only did
the Company see its two clinical
compounds make exciting strides
forward through the year, but it
also saw those advances culminate
towards the end of the period
under review.
The conclusion of VAL401’s Phase II lung cancer
clinical trial and the production of positive trial
data showed that the VAL401 treatment has a
measurable improvement on patient quality
of Life, in addition to a positive impact on the
disease and an extension in the overall survival
of patients.
The period also saw ValiRx’s VAL201 compound
showing good safety, tolerability and early
efficacy in clinical trials. Following the good
results, VAL201’s Phase I/II prostate cancer clinical
trial received approval from the UK Medicines and
Healthcare Products Regulatory Agency (“MHRA”)
and the Research Ethics Committee (“REC”) for
the Company to expand and substantial increase
the dose being administered to patients. This will
allow treatment to more speedily reach its full
therapeutic potential and deliver its potential
anti-cancer impact.
The Company’s preclinical developments of
VAL301 and VAL101 are going ahead with
exciting and encouraging results.
During the year, the Company’s patent portfolio
has been greatly strengthened with patent grants
for VAL401 and VAL201 in major territories. This
expanding patent protection further supports
the Company’s business model and gives the
Company the basis for meaningful discussions
with potential future partners.
These advances are of real significance for
the Group and to patients, as ValiRx and its
compounds become more attractive to potential
partners and take a step forward towards
addressing unmet need.
VAL401
Lung cancer
VAL401 is a re-formulation of existing drug
Risperidone, into an orally administered gelatin
capsule, showing in pre-clinical testing, anti-cancer
properties in several oncological models. The
period under review has been a defining period
for VAL401’s clinical development and in Q4
2017, ValiSeek, the joint venture between ValiRx
and Tangent Reprofiling Limited, completed the
Phase II trial and released pharmacokinetic data.
Following analysis, ValiSeek announced positive
formal data on the VAL401 compound and of its
disease impact. The results clearly demonstrated
that the VAL401 treatment had a statistically
significant improvement on the overall survival of
patients with non-small cell lung cancer compared
to those receiving no treatment.
This excellent and very positive breakthrough
was boosted after the period end, when further
collected data showed that the VAL401 treatment
has also measurable improvement on patient’s
quality of life. Together, the results advocate the
potential for VAL401 in treating very late stage
cancer patients in the palliative arena. This data
also implies the potential for VAL401, in the as
yet untested combinations with, both traditional
chemotherapies and immune-oncology
treatments. Palliative stage patients could
expect to see an improvements in symptoms
with VAL401 treatment, together with improved
survival prospects. The results seen in this first
all-comer trial, provides a strong foundation for
VAL401’s next stage of clinical testing.
With the lung cancer market projected to be
valued at USD 7.9 billion in 2020 at a CAGR of
6.6%, the Company continues to be in discussion
with a number of large pharmaceutical
companies who are looking to fill their pipelines
in this important unmet medical therapeutic area.
VAL201
Excellent Safety and tolerability data together
with early efficacy data leads to enhancement of
the VAL201 Dose Escalation Clinical Study
During 2017, the VAL201 clinical trial has
demonstrated an excellent safety and tolerability
profile. In addition, the treatments of patients with
the compound showed early signs of efficacy
with relatively low doses. Based on these results
and in December 2017, ValiRx received MHRA
approval for the enhancement of its VAL201 dose
escalation and expansion clinical trial.
ValiRx plc Annual Report and Accounts 2017 15
complete the pre-clinical package and arrive at
the optimal formulation so that the Company
obtains the necessary regulatory approvals to
enter VAL301 into a clinical trial in 2018.
GeneICE
Our GeneICE "rebellious gene" editing
technology has shown continued good progress
in its late pre-clinical phase. With the programme
currently benefiting from a second Eurostars
grant totalling up to €2.6m, this programme has
been through scientific, medical and commercial
evaluation. Rebellious genes are the ones that
are working when/where they should not e.g.
in cancers, inflammatory conditions, Alzheimer’s
and autoimmune diseases. ValiRx’s proprietary
GeneICE technology enables the design of
compounds for selective binding and silencing
of these specific genes. The lead GeneICE
lead compound has been designed against a
gene expressing Bcl-2 protein, which has been
implicated and associated with various cancers.
Pre-clinical work during the period under
review has been conducted with our partners,
DKFZ, Heidelberg and Pharmatest in Finland,
to generate a commercially viable molecular
structure for VAL101. ValiRx was pleased to report
commercially viable efficient manufacturing
capabilities for the compounds and preliminary
results for the optimised second generation of
the VAL101molecule are demonstrating gene
silencing. As such, ValiRx intends to accelerate
VAL101’s late pre-clinical studies in preparation
for the compound’s entry into the clinic.
Outlook
With the extremely encouraging results from our
portfolio development programmes, I believe we
are in an excellent position to deliver benefits to
patients, as well as generate value for stakeholders.
I very much look forward to the future further
development of ValiRx and its therapeutic assets.
Dr Satu Vainikka
Founding Director & Chief Executive Officer
5 April 2018
This approval allows for a substantial increase
in the amount and frequency of VAL201 being
administered to patients, thereby allowing
treatment to more speedily reach its full
therapeutic potential and potential anti-cancer
impact. This represents a pivotal and substantial
breakthrough for the VAL201 prostate cancer
compound and the Company expects the
accelerated study to speed-up the human
development of the treatment, saving both time
and money.
Additional Clinical Trial Centres
To facilitate the enhancement of the VAL201 trial,
ValiRx will continue working with UCLH and also
with other oncology clinical sites to participate
in this latter part of the trial. Results from this
stage can be taken forward by the Company
or a partner into subsequent, larger, outcomes-
oriented clinical trials. These will establish
VAL201’s effects as an anti-cancer agent, on
overall survival and on the health-related quality
of life in patients with prostate cancer.
Prostate cancer
VAL201 is a potentially major breakthrough
therapeutic treatment of Advanced Prostate
Cancer due to its novel mechanism of action.
A number of studies have demonstrated that
Src kinase complete inhibition strongly reduces
prostate cancer growth but may have side effects.
VAL201 specifically targets the association of
androgen receptor with Src,SH3 domain, a signal
that is important in tumour cell proliferation
without suppressing other Src-AR induced
activities. This provides an advantage to current
therapies, which in addition to abolishing the
division signalling pathways, potentially also
inhibit the other Androgen Receptor (AR)
functions including metabolism.
The readout from the first part of the Phase l/ll
clinical trial - showed strong safety and tolerability,
in all trial subjects. Other measurements taken
were completely consistent and comparable
to the results seen in the pre-clinical studies.
Furthermore, the trial has also shown indications
of efficacy and disease stabilisation on imaging
and a reduction of PSA progression, in the
majority of patients. Importantly, the Pre-clinical
data has also shown tumour growth suppression
and significant reduction of metastatic growth.
The VAL201 target is also associated with
other cancers with significant potential to be
used as a treatment for other hormone-induced
cancers, such as breast and ovarian, pancreatic
and others and also for the non-cancerous, but
very debilitating condition, Endometriosis.
VAL301
Endometriosis
VAL301 is derived from our lead compound,
VAL201 and is currently in late-stage pre-
clinical development as a non-invasive,
effective treatment for the non-cancerous, but
hugely debilitating gynaecological condition,
Endometriosis. Earlier pre-clinical work on VAL201
has highlighted the compound’s potential to
protect women from Endometriosis, with a
minimal impact on bone density or fertility, which
are major drawbacks frequently encountered
with the current commonly used drugs and
therapies for this condition. Our focus now is to
Portfolio of Clinical Patent Families
The table below provides details of patents in the VAL 201 portfolio that have been either fully granted or allowed.
Country
Patent number
Date filed
Granted/Allowed
United States
US 14/575065
EP 08717866.1
14 March 2008
14 March 2008
JP 2009–553162
14 March 2008
Australia
AU 2008228274
14 March 2008
Europe
Japan
Granted
Allowed
Granted
Granted
United Kingdom GB 1118831.5
01 November 2011
Granted
There are patent applications currently pending in many other territories and covering various aspects of the programme.
The table below provides details of patents in the VAL401 portfolio that have been either fully granted or allowed.
Country
Patent number
Date filed
Date Granted/Allowed
United States
US 9072743
26 September 2013
07 June 2015
United States
US 9375433
United States
US 9585887
United States
US 9585890
08 May 2015
27 May 2015
31 May 2016
28 June 2016
07 March 2017
07 March 2017
United States
To be allocated shorty
27 February 2017
Allowed
Australia
AU 2013322612
26 September 2013
14 September 2017
New Zealand
NZ 706067
26 September 2013
01 November 2016
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 16
Strategic Report
RISKS AND UNCERTAINTIES
Our risk management
framework
The Board is responsible for the systems
of internal control and for reviewing their
effectiveness. The internal controls are
designed to manage rather than eliminate
risk and provide reasonable but not absolute
assurance against material misstatement
or loss. The Board reviews the effectiveness
of these systems annually by considering
the risks potentially affecting the Group.
o m m i t t ee
R
omplianc e C
NIT O
O
M
d C
n
a
k
s
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R
Continually
review our risk
management
strategy
IMPLEME N T
B
o
a
r
d
o
f
Directors
Risk Status Key
Risk increased
Risk unchanged
Risk decreased
Senio
r
m
a
n
a
g
e
M
I
T
I
G
A
T
E
m
e
n
t
t
e
a
m
I n ternal Audit
Risk
Description
Mitigation
Change
1
Industry risk
2
Competition risk
The success of the Group’s programmes depends upon
the quality of the design and the implementation of each
programme. The Group utilises a range of external scientific,
regulatory and clinical experts to help guide its development
programmes. The progress of the development programmes
therefore represents the best indicator of the Group’s
performance. Successful commercialisation of the Group’s
products is likely to depend on successful progress through
clinical studies, licensing and or partnering and registration.
Development of product candidates involves a lengthy and
complex process and products may not meet the necessary
requirements in terms of toxicity, efficacy or safety, or the
relevant regulators may not agree with the conclusions of the
Group’s research and may require further testing or withhold
approval altogether.
ValiRx has products in clinical trials and is dependent on
successfully advancing these lead candidates. They include
VAL201, to treat hormone induced cancers and abnormal
growth and VAL401, a re-purposed compound to treat
non-small cell lung cancer, through the Phase II Clinical Trial
pathway. The business model is to ensure future partnering
of these compounds with larger co-development partners.
3
Financial risk:
Cash flow
The Group has a history of operating losses which are
anticipated to continue until the Group is able to generate
sufficient revenues from its development programmes.
However, the Group may need to seek further capital
through equity or debt financings in the future and if
this is not successful, the financial condition of the Group
may be adversely affected.
The Group manages its clinical and regulatory
risk by working closely with its external expert
scientific, regulatory and clinical advisors
and, where appropriate, seeking advice from
regulatory authorities on the design of key
development plans for its pre-clinical and
clinical programmes.
Successful commercialisation of ValiRx’s
products is likely to depend on its successful
progress through clinical studies, licensing
and/or partnering and registration.
Competition that may lead to third parties
discovering or developing products earlier or
more successfully than ValiRx, may also impair
the Company’s ability to secure funding, to
advance its clinical trials and have a successful
relationship with a co-development partner.
As at 31 December 2017, the Group had
sufficient cash resources to finance its
operational activities until at least Q2 2018.
ValiRx plc Annual Report and Accounts 2017
17
Risk
Description
Mitigation
Change
4
Clinical and
regulatory risk
5
Intellectual
property risk
6
Return on
investment
7
Environmental
matters
Successful commercialisation of the Group’s products is likely
to depend on successful progress through clinical studies and
registration. Development of product candidates involves a
lengthy and complex process and products may not meet
the necessary requirements in terms of toxicity, efficacy or
safety, or the relevant regulators may not agree with the
conclusions of the Group’s research and may require further
testing or withhold approval altogether.
The Group’s success depends, in part, on its ability to obtain
and maintain protection for its intellectual and proprietary
information, so that it can stop others from making, using or
selling its inventions or proprietary rights. The Group’s patent
applications may not be granted and its existing patent rights
may be successfully challenged and revoked.
The drug development process is inherently risky and is
conducted over several years and consequently is costly.
Many drug candidates fail in development due to the clinical
and regulatory risks, and even in those circumstances where
drugs are sold, licensed or partnered prior to or subsequent to
potential or actual approval, sales levels can be disappointing
due to competition, healthcare regulation and/or intellectual
property challenges. As a result, the returns achieved may be
insufficient to cover the costs incurred.
The Group manages its clinical and regulatory
risk by working closely with its expert
regulatory advisors and, where appropriate,
seeking advice from bodies on clinical
and regulatory risk relevant to the Group’s
programmes and activities.
The Group invests in maintaining and
protecting this intellectual property to reduce
risks over the enforceability and validity
of the Group’s patents. The Group works
closely with its legal advisors and obtains
where necessary opinions on the intellectual
property landscape relevant to the Group’s
programmes and activities.
The Group looks to mitigate the development
and commercial risk by partnering drug
candidates for late-stage development and
commercialisation. By partnering in this way,
part of the risk profile is reduced and the cost
to the Company of programme development
is minimised.
The Board is committed to minimising the Group’s impact
on the environment and ensuring compliance with
environmental legislation. The Board considers that its
activities have a low environmental impact. The Group strives
to ensure that all emissions including the disposal of gaseous,
liquid and solid waste products are controlled in accordance
with applicable legislation and regulations. Disposal of
hazardous waste is handled by specialist agencies.
The Group recognises its responsibility
towards the environment and in the way it
conducts its business and it works closely
with all its expert scientific advisors to ensure
its compliance with environmental legislation
and to ensure that all emissions including the
disposal of gaseous, liquid and solid waste
products are controlled in accordance with
applicable legislation and regulations.
On behalf of the board
Oliver de Giorgio-Miller
Chairman
5 April 2018
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 18
ValiRx plc Annual Report and Accounts 2017
Governance
BOARD OF DIRECTORS
Our experienced Board of Directors comprises
six dedicated members who are all well respected
within their field.
Oliver de Giorgio-Miller
Chairman
Dr Satu Vainikka
Founding Director & Chief Executive Officer
Dr George Morris
Founding Director & Chief Operating Officer
Appointment: Oliver joined the Board
of ValiRx plc in May 2011.
Appointment: Satu joined the Board
in October 2006.
Appointment: George joined the Board
in October 2006.
Experience and Accreditation: Oliver has
a wealth of experience in the management
and commercial advancement of life science
companies. He has worked for over 30 years
with several global pharmaceutical and medical
device companies including Schering AG,
Hoffman la Roche, Intavent-Orthofix and Photo
Therapeutics, a Cancer Research UK company,
and he has extensive experience advising a
number of other early stage biopharmaceutical
and medical device companies.
Since 2002 Oliver has worked as a life
sciences analyst in the City, working alongside
corporate finance, investor relations and
sales teams on a wide range of transactions
including IPOs, secondary issues and M&As.
External Appointments: He is a director
and investment manager of an offshore
fund, Sarum Investment (SICAV) plc,
which is exclusively focused on the
oncology sector.
Experience and Accreditation: Satu has many
years’ experience of the biotechnology industry,
including extensive first hand experience
of equity financing, business management
and developing life science technology into
commercial enterprises. Prior to her current
role as CEO of ValiRx, she was a founder, director
and CEO of Cronos Therapeutics Limited.
In her past roles, Dr Vainikka has developed
and exited successful business models,
negotiated corporate and academic transactions
and raised funding for a number of companies.
Dr Satu Vainikka has gained the following
qualifications and awards:
• MBA at Imperial College Business
School 2000;
• PhD in signal transduction in oncology,
University of Helsinki 1996; and
• Prestigious “embo” fellowship for
Postdoctoral research at Imperial
Cancer Research (now CRC).
Experience and Accreditation: George has
over 25 years’ experience in biological and
medical research and financial services. In the
past he has worked for Guy’s Hospital Medical
School Department of Medicine, King’s College
and University College London. As a research
scientist, he is an author of numerous books
and articles on refereed papers, approximately
70 abstracts, short reports and posters, and
an inventor of multiple patents.
George was a founding member of the
expert advisory panel, the “Biotechnology
and Finance Forum”, set up jointly between
the European Commission and the European
Association of Securities Dealers. George
is involved in a number of conferences
and workshops with the EU research and
agricultural directorates and is an “expert”
to the Commission and has been invited
into several policy discussion groups.
George has worked with a variety of
commercial, governmental organisations
and financial institutions in the US,
Europe and Australia and many consultancy
projects covering various biotechnology
and financial activities.
External Appointments: He is regularly asked
to chair or participate in conferences in his areas
of experience, including acting as a “Venture
Academy” mentor.
Annual Report and Accounts 2017
ValiRx plc
19
Strategic Report
Governance
Financial Statements
Gerry Desler
Founding Director & Chief Financial Officer
Kevin Alexander
Non-executive Director
Appointment: Gerry joined the Board
in May 2006.
Appointment: Kevin joined the Board
in October 2006.
Experience and Accreditation: Kevin is a
qualified solicitor in England and an attorney in
New York and he was a partner at major law firms
in both London and the United States for over 25
years. Since leaving the law, he has been involved
in forming and managing various businesses,
both private and public. He has an MA in law
from Cambridge University.
Experience and Accreditation: Gerry is a
chartered accountant, who qualified in 1968
with a City firm, before becoming a partner
in 1970. Between 1985 to 1990 he was the
senior partner. During his time in the City,
he has specialised in consultancy work, much
of it involving funding and venture capital.
He was involved in one of the first joint
ventures in what was then the People’s
Republic of China in 1980.
External Appointments: Gerry is also the
finance director of Prospex Oil & Gas Plc,
an AIM listed company and is on the board
of a number of private companies.
20
REPORT OF THE DIRECTORS
for the year ended 31 December 2017
The Directors present their report and financial statements for the year ended 31 December 2017.
Dividends
No dividends will be distributed for the year ended 31 December 2017.
Research and development
The Group will continue its policy of investment in research and development. In accordance with International Financial Reporting Standards (IFRS), during
the year the Group expensed to the income statement £1,746,808 (2016: £2,375,354) on research and development. Further details on the Group’s research
and development are included in the Chief Executive’s Report on page 14.
Events since the end of the year
Information relating to events since the end of the year is given in the notes to the financial statements.
Directors
The directors shown below have held office during the whole of the period from 1 January 2017 to the date of this report.
K J Alexander
O De Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
S Makinen – resigned 30 May 2017
The market value of the Company’s shares at 31 December 2017 was 4.38p and the high and low share prices during the period were 7.63p and
0.93p respectively.
Financial risk management objectives and policies
Note 29 to the financial statements gives details of the Group’s objectives and policies for risk management of financial instruments.
Significant shareholders
As at 5 April 2018, so far as the Directors are aware, there are no parties who are directly or indirectly interested in 3% or more of the nominal value of the
Company’s share capital.
Directors’ insurance
The Directors and officers of the Company are insured against any claims against them for any wrongful act in their capacity as a Director, officer or employee
of the Group, subject to the terms and conditions of the policy.
Statement of directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and parent financial statements for each financial year. Under that law the Directors have elected
to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law) including FRS 102 “the Financial Reporting Standard applicable in the UK and Republic of Ireland”.
ValiRx plc Annual Report and Accounts 2017Governance 21
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and Parent Company and of the profit or loss of the group for that period. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing each of the
Group and Parent Company financial statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in the financial statements;
• for the Parent Company financial statements, state whether they have been prepared in accordance with applicable UK Accounting Standards, subject
to any material departure disclosed and explained in the Parent Company financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that the financial statements comply
with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published
on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the financial statements contained therein.
Statement as to disclosure of information to auditors
So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group’s auditors
are unaware, and each Director has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any
relevant audit information and to establish that the group’s auditors are aware of that information.
Auditors
The auditors, Adler Shine LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.
On behalf of the Board:
Mr G Desler
Director
5 April 2018
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 22
REPORT OF THE INDEPENDENT AUDITORS
to the members of ValiRx plc
Opinion
We have audited the financial statements of Valirx Plc (the ’Parent Company’) and its subsidiaries (the ’Group’) for the year ended 31 December 2017 on pages 26 to 54.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting
Standards (’IFRSs’) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102
“The Financial Reporting Standard applicable in the UK and Republic of Ireland”.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters that we are required to state to them in a Report of the Auditors and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2017 and of the Group’s loss for
the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice –
FRS 102; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We are independent of the Group and Parent
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw your attention to note 2 to the financial statements, which indicates that the company is reliant on future fund raisings to continue its activities as budgeted.
Should future fund raisings be unsuccessful this will impact to the group and company’s plans to develop its products. As stated in note 2, this condition indicates that
a material uncertainty exists that may cast significant doubt on the group and company’s ability to continue as a going concern. Our opinion is not modified in respect
of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
ValiRx plc Annual Report and Accounts 2017Governance 23
The key audit matters identified were:
Impairment of goodwill and intangibles
Area of focus
The Group has goodwill of £1.6m and intangible assets of £1.3m.
IAS 36 requires at least annual impairment assessments in relation to goodwill, indefinite-lived intangible assets and intangible assets that are not yet ready for use,
with more regular assessment should an impairment trigger be identified.
The determination of recoverable amount, being the higher of value-in-use and fair value less costs of disposal, requires judgement on the part of management in
identifying and then estimating the recoverable amount for the relevant CGUs.
Recoverable amounts are based on management’s view of future cash flow forecasts and external market conditions such as future pricing and the most appropriate
discount rate.
Management engaged an expert to assist them in performing an annual impairment assessment which included the assumptions and estimates around the success
of the future development and commercialisation of its products VAL 201, VAL101 and VAL 401. Changes in these assumptions might give rise to a change in the
carrying value of intangibles and goodwill.
How our audit addressed the area of focus
We obtained the report prepared by the expert and gained an understanding of the key assumptions and judgements underlying the assessment. We assessed
the appropriateness of the methodology applied and tested the mathematical accuracy of the models.
We obtained an understanding of the stage of product development and management’s expected timelines for product commercialisation, including updates
on the achievement of expected milestones.
We determined the judgement made by the Directors that no impairment was required and the disclosures made in the financial statements to be reasonable.
Going concern
Area of focus
Refer to Note 2 to the financial statements for the directors’ disclosures of related accounting policies, judgements and estimates. The directors have concluded they
have a reasonable expectation that the Group will have sufficient cash resources and cash inflows to continue its activities for not less than twelve months from the
date of approval of these financial statements and have therefore prepared these financial statements on a going concern basis.
The group has cash and cash equivalents of £701,410 at 31 December 2017 but consumed cash of £3,862,083 before receipt of research and development tax credits
of £636,738 and financing of £267,058.
Management produces a cash flow forecast based on the board plans.
The key judgment within the cash flow forecast that we particularly focused on are:
• The continued availability of funding.
• The likely recovery of €other receivables.
• Cash flows expected from research and development tax credits.
• Flexibility of development programme.
How our audit addressed the area of focus
We assessed the reasonableness and support for the judgments underpinning management’s forecast, as well as the sensitivity of projections to these judgements.
We reviewed managements financing plans.
We considered the reasonableness of the assumptions within management’s proposed cost reduction actions.
Our conclusion on management’s use of the going concern basis of accounting is included in the going concern section of the report above.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 24
REPORT OF THE INDEPENDENT AUDITORS continued
to the members of ValiRx plc
Valuation of warrants
Area of focus
The company granted warrants during the year to shareholders on a placing of ordinary shares and for services provided resulting in a charge of £158,765,
against share premium.
Management utilised a Black Scholes option pricing model to calculate the charge which required the use of assumptions and judgements.
How our audit addressed the area of focus.
We obtained a copy of the model used to calculate the share-based payments charge.
We reviewed the documentation in respect of the warrants. We gained an understanding of the key assumptions and judgements underlying the model. We assessed
the appropriateness of the methodology applied and tested the mathematical accuracy of the models.
We considered the charge provided in the financial statements of the group and company to be reasonable.
Our application of materiality
Materiality for the group and company was £115,000 (2016: £152,000) based on an average of 5% of adjusted loss before tax and 1% of net assets (2016: based on 5%
of adjusted loss before tax and 1% on net assets).
Loss before tax is the key metric, we believe, as it is most commonly used by the shareholders as a body in assessing the Group’s performance. In the case of Valirx, the
value of its goodwill and assets are also key as the group is still in the development stage. We therefore considered that materiality weighted on the loss for the year but
which also considered the net assets of the group to be reasonable.
Other information
The Directors are responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Directors,
but does not include the financial statements and our Auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.
ValiRx plc Annual Report and Accounts 2017Governance 25
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified
material misstatements in the Group Strategic Report or the Report of the Directors.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited
by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic alternative but to do so.
Our responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of the users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.
Christopher Taylor (Senior Statutory Auditor)
for and on behalf of Adler Shine LLP
Chartered Accountants & Statutory Auditor
Aston House
Cornwall Avenue
London
N3 1LF
5 April 2018
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
26
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2017
Continuing operations
Other operating income
Research and developments
Administrative expenses
Operating loss
Fair value loss on derivative financial assets
Finance income
Fair value gain on derivative liability
Finance costs
Loss before income tax
Income tax credit
Loss after income tax
Discontinued operations
Profit for the year from discontinued operations
Non-controlling interest
Total comprehensive loss for the year
Loss per share – basic and diluted
From continuing operations
From discontinued operations
The notes form part of these financial statements.
Notes
2017
£
2016
£
88,773
(1,746,808)
(1,467,268)
(3,125,303)
(23,446)
489
44,146
(449,868)
(3,553,982)
416,336
(2,375,354)
(1,794,284)
(4,169,638)
(1,619,187)
17
375,621
(338,188)
(5,751,375)
620,104
(3,137,646)
(5,131,271)
–
182,750
(3,137,646)
117,962
(4,948,521)
200,518
(3,019,684)
(4,748,003)
(1.90)p
N/A
(8.54)p
0.32p
17
6
21
6
7
8
11
10
ValiRx plc Annual Report and Accounts 2017Financial Statements
27
Notes
2017
£
2016
£
12
13
14
15
16
17
18
19
1,602,522
1,325,283
–
–
1,528,923
1,295,690
10,553
–
2,927,805
2,835,166
766,475
424,094
117,229
701,410
780,942
644,497
140,675
560,763
2,009,208
2,126,877
4,937,013
4,962,043
8,432,708
16,419,494
637,500
602,413
464,000
(23,378,744)
3,177,371
(24,744)
8,165,650
12,998,102
637,500
602,413
331,453
(20,385,278)
2,349,840
19,619
3,152,627
2,369,459
20
21
21
1,394,266
390,120
–
1,254,139
1,294,299
44,146
1,784,386
2,592,584
4,937,013
4,962,043
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2017
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Tax receivable
Derivative financial assets
Cash and cash equivalents
Total assets
EQUITY
Shareholders’ equity
Called up share capital
Share premium
Merger reserve
Reverse acquisition reserve
Share option reserve
Retained earnings
Non-controlling interests
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative liabilities
Total liabilities
Total equity and liabilities
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 5 April 2018 and were signed on its behalf by:
Mr G Desler
Director
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
28
COMPANY STATEMENT OF FINANCIAL POSITION
31 December 2017
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Tax receivable
Derivative financial assets
Cash and cash equivalents
Total assets
EQUITY
Shareholders’ equity
Called up share capital
Share premium
Merger reserve
Share option reserve
Retained earnings
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative liabilities
Total liabilities
Total equity and liabilities
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors on 5 April 2018 and were signed on its behalf by:
Mr G Desler
Director
Notes
2017
£
2016
£
13
14
15
16
17
18
19
140,000
–
3,617,834
160,000
10,553
3,452,442
3,757,834
3,622,995
2,720,591
372,851
117,229
685,884
2,256,063
574,812
140,675
552,529
3,896,555
3,524,079
7,654,389
7,147,074
8,432,708
16,419,494
637,500
464,000
(20,218,087)
8,165,650
12,998,102
637,500
331,453
(17,564,532)
5,735,615
4,568,173
20
21
21
1,528,654
390,120
–
1,240,456
1,294,299
44,146
1,918,774
2,578,901
7,654,389
7,147,074
ValiRx plc Annual Report and Accounts 2017Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
29
Balance at 1 January 2016
Changes in equity
Loss for the year
On acquisition of subsidiary
Issue of shares
Costs of shares issued
Movement in year
Share
capital
£
Share
premium
£
Merger
reserve
£
Notes
Reverse
acquisition
reserve
£
Share
option
reserve
£
Non-
controlling
interest
£
Retained
earnings
£
Total
£
8,120,736 10,526,862
637,500
602,413
203,519
79,069 (15,637,275)
4,532,824
–
–
44,914
–
–
–
–
3,060,507
(589,267)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
127,934
(200,518)
141,068
–
–
–
(4,748,003)
–
–
–
–
(4,948,521)
141,068
3,105,421
(589,267)
127,934
Balance at 31 December 2016
8,165,650 12,998,102
637,500
602,413
331,453
19,619 (20,385,278)
2,369,459
Changes in equity
Loss for the year
On acquisition of subsidiary
Issue of shares
Costs of shares issued
Lapse of share options
Movement in year
19
–
–
267,058
–
–
–
–
–
3,866,468
(445,076)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(26,218)
158,765
(117,962)
73,599
–
–
–
–
(3,019,684)
–
–
–
26,218
–
(3,137,646)
73,599
4,133,526
(445,076)
–
158,765
Balance at 31 December 2017
8,432,708 16,419,494
637,500
602,413
464,000
(24,744) (23,378,744) 3,152,627
The notes form part of these financial statements.
Merger reserve
The merger reserve of £637,500 exists as a result of the acquisition of ValiRx Bioinnovation Limited. The merger reserve represents the difference between
the nominal value of the share capital issued by the Company and the fair value of ValiRx Bioinnovation at 3 October 2006, the date of acquisition.
Reverse acquisition reserve
The reverse acquisition reserve exists as a result of the method of accounting for the acquisition of ValiRx Bioinnovation Limited and Valipharma Limited.
The notes form part of these financial statements.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
30
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Balance at 1 January 2016
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Movement in year
Notes
Share
capital
£
Share
premium
£
Merger
reserve
£
Share
option
reserve
£
Retained
earnings
£
Total
£
8,120,736
10,526,862
637,500
203,519
(12,949,330)
6,539,287
–
44,914
–
–
–
3,060,507
(589,267)
–
–
–
–
–
–
–
–
127,934
(4,615,202)
–
–
–
(4,615,202)
3,105,421
(589,267)
127,934
Balance at 31 December 2016
8,165,650
12,998,102
637,500
331,453
(17,564,532)
4,568,173
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Lapse of share options
Movement in year
19
–
267,058
–
–
–
–
3,866,468
(445,076)
–
–
–
–
–
–
–
–
–
–
(26,218)
158,765
(2,679,773)
–
–
26,218
–
(2,679,773)
4,133,526
(445,076)
–
158,765
Balance at 31 December 2017
8,432,708
16,419,464
637,500
464,000
(20,218,087)
5,735,615
The notes form part of these financial statements.
Share capital
Represents the nominal value of the issued share capital.
Share premium account
Represents amounts received in excess of the nominal value on the issue of share capital less any costs associated with the issue of shares.
Merger reserve
Represents the difference between the nominal value of the share capital issued by the Company and the fair value of ValiRx Bioinnovations at the date
of acquisition.
Share option reserve
Represents the fair value of the share-based payment, determined at the grant date, and expensed over the vesting period.
Retained earnings
Represents accumulated comprehensive income for the year and prior periods.
The notes form part of these financial statements.
ValiRx plc Annual Report and Accounts 2017Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
Cash flows from operating activities
Cash outflow from operations
Interest paid
Tax credit received
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of goodwill
Purchase of intangible fixed assets
Sale of subsidiary undertaking
Sale of tangible fixed assets
Non-controlling interests
Interest received
Net cash from investing activities
Cash flows from financing activities
New convertible loan notes
Repayment of convertable loan notes
Costs of convertible loan notes
Share issue
Costs of shares issued
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The notes form part of these financial statements.
31
Notes
1
2017
£
2016
£
(2,952,275)
(35,897)
636,739
(4,233,412)
(338,188)
375,926
(2,351,433)
(4,195,674)
(73,599)
(206,727)
–
–
73,599
489
(206,238)
263,704
(347,481)
–
3,068,406
(286,311)
(141,066)
(245,559)
857,136
3,470
141,068
17
615,066
2,993,113
–
(190,846)
1,695,906
(589,267)
2,698,318
3,908,906
140,647
560,763
701,410
2
2
328,298
232,465
560,763
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
32
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
1 Reconciliation of operating loss to cash generated from operations
Operating loss
Depreciation of property, plant and equipment
Amortisation of intangible assets
Decrease in inventory
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Other non-cash movements
Share option charge
Net cash outflow from operations
2017
£
(3,125,303)
10,553
177,134
–
14,467
54,038
(83,164)
–
2016
£
(4,169,638)
10,560
92,275
11,733
(1,071,548)
787,726
(22,454)
127,934
(2,952,275)
(4,233,412)
2 Cash and cash equivalents
The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:
Year ended 31 December 2017
Cash and cash equivalents
Year ended 31 December 2016
Cash and cash equivalents
The notes form part of these financial statements.
31 December
2017
£
1 January
2017
£
701,410
560,763
31 December
2016
£
560,763
1 January
2016
£
232,465
ValiRx plc Annual Report and Accounts 2017Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017
33
1 Statutory information
Valirx Plc is a company incorporated in the United Kingdom under the Companies Act 1985, which is listed on the AIM market of the London Stock Exchange
Plc. The address of its registered office is 16 Upper Woburn Place, London W1H 0BS.
The registered number of the Company is 03916791.
The presentation currency of the financial statements is the Pound Sterling (£).
2 Accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(’IFRSs’), International Financial Reporting Interpretations Committee (’IFRIC’) interpretations and the Companies Act 2006 applicable to companies reporting
under IFRS.
The Group financial statements have been prepared under the historical cost convention or fair value where appropriate.
Going concern
The current economic environment is challenging and the Group has reported an operating loss for the year. These losses will continue in the current
accounting year to 31 December 2018.
The company carries out regular fund-raising exercises in order that it can provide the necessary working capital for the Group. Further funds will be
required to finance the Group’s work programme.
The Board expects to continue to raise additional funding as and when required to cover the Group’s development, primarily from the issue of further shares.
Since the year-end, the Company has raised £1m, before expenses.
Should future fund raisings be lower than anticipated the Directors will reduce expenditure on the Group’s research and development programme.
Although the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for
the foreseeable future the successful completion of future fund raisings constitutes a material uncertainty that may cast doubt about the Company’s ability
to continue as a going concern. The financial statements do not contain the adjustments that would result if the Company was unable to continue as a
going concern.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries (“the Group”). Subsidiaries include all entities over
which the Group has the power to govern financial and operating policies. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control
commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
On 3 October 2006, ValiRx Bioinnovation Limited (’Bioinnovation’) acquired 60.28% of the issued share capital of ValiPharma Limited (’ValiPharma’) in
exchange for shares in Bioinnovation. Concurrently, the Company, (“ValiRx”), acquired the entire issued share capital of Bioinnovation in a share for share
transaction. As a result of these transactions, the former shareholders of ValiPharma became the majority shareholders in ValiRx. Accordingly, the substance
of the transaction was that ValiPharma acquired ValiRx in a reverse acquisition. Under IFRS 3 “Business Combinations”, the acquisition of ValiPharma has been
accounted for as a reverse acquisition.
In May 2008, the Company acquired the remaining 39.72% of the issued share capital of ValiPharma, which is now wholly owned by the Group. This
acquisition was accounted for using the acquisition method of accounting.
In November 2013 Valiseek Limited was formed to enable the Company to enter into a joint venture agreement. The Company has a 55.5% holding in the
issued share capital of Valiseek.
Goodwill
Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets
and contingent liabilities acquired. Identifiable assets are those which can be sold separately or which arise from legal rights regardless of whether those
rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested annually, or when trigger
events occur, for impairment and is carried at cost less accumulated impairment losses.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
2 Accounting policies continued
Other intangible assets
Acquired licences, trademarks and patents are capitalised at cost and are amortised on a straight-line basis over their useful life. Patents are amortised
over 16 years and licences over 16-20 years.
Impairment of assets
The carrying value of property, plant and equipment and intangibles is reviewed for impairment when events or changes in circumstances indicate the
carrying value may be impaired. An impairment loss is recognised in the income statement for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation.
Depreciation is provided at the following rates per annum to write off the cost of property, plant and equipment, less estimated residual value, on a
straight-line basis from the date on which they are brought into use:
Plant and machinery
Computer equipment
33% per annum straight line
33% per annum straight line
Financial assets
The Company classifies its financial assets in the following categories:
• financial assets at fair value through profit or loss;
• loans and receivables;
• held-to-maturity investments; and
• available-for-sale financial assets.
Management determines the classification of its investments at initial recognition.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The principal financial
assets of the Company are loans and receivables, which arise principally through the provision of goods and services to customers (e.g. trade receivables)
but also incorporate other types of contractual monetary assets. They are included in current assets, except for maturities greater than twelve months after
the balance sheet date. These are classified as non-current assets.
The Group’s loans and receivables are recognised and carried at the lower of their original amount less an allowance for any doubtful amounts. An allowance
is made when collection of the full amount is no longer considered possible.
The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity of three months or less. The Company
considers overdrafts (repayable on demand) to be an integral part of its cash management activities and these are included in cash and cash equivalents
for the purposes of the cash flow statement.
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently carried at fair value
with the changes in fair value recognised in the Income Statement.
Financial liabilities
The Group does not have any financial liabilities that would be classified as fair value through the profit or loss. Therefore, all financial liabilities are classified
as other financial liabilities as follows.
The Group’s trade and other payables are recognised at their original amount.
Convertible debt
The convertible loan is designated as “at fair value through profit or loss” and so is presented on the Statement of Financial Position at fair value with all gains
and losses, including the write-off of transaction costs, recognised in the Statement of Comprehensive Income. The debt component of the convertible
loan is recognised as a liability in the Statement of Financial Position net of transaction costs. The conversion option has been recognised as an embedded
derivative and has been valued at inception and the balance sheet date using a Black-Scholes Method. The interest charge in respect of the coupon rate on
the loan has been recognised within the underlying component of net financing costs on an accruals basis. Refer to Note 17 for further details.
ValiRx plc Annual Report and Accounts 2017Financial Statements
35
2 Accounting policies continued
Taxation
The taxation charge represents the sum of current tax and deferred tax.
The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance
sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the Group financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet
date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is
also dealt with in equity.
Research and development
Research expenditure is recognised as an expense and is charged to the income statement in the year in which it is incurred.
Development expenditure is recognised as an expense in the same way unless it meets the recognition criteria of IAS 38 “Intangible Assets”. Regulatory and
other uncertainties generally mean that such criteria are not met. Where, however, the recognition criteria are met, intangible assets are capitalised and
amortised over their useful economic lives from product launch.
Foreign currencies
Transactions in currencies other than Sterling, the presentational and functional currency of the Company, are recorded at the rates of exchange prevailing
on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the income statement for the
period, except for exchange differences on non-monetary assets and liabilities, which are recognised directly in equity, where the changes in fair value are
recognised directly in equity.
On consolidation, the assets and liabilities of the Group’s overseas entities (none of which has the currency of a hyper-inflationary economy) are translated
at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange
differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income
or as expenses in the period in which the operation is disposed of.
Share capital
Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Company’s ordinary and deferred shares are classified as equity instruments.
Pension contributions
The Group operates a defined contribution pension scheme. Contributions payable to the Group’s pension scheme are charged to the Income Statement
in the period to which they relate.
Government grants
Grants are credited to deferred revenue. Grants towards capital expenditure are released to the Income Statement over the expected useful life of the assets.
Grants towards revenue expenditure are released to the Income Statement as the related expenditure is incurred.
Share-based payments
IFRS 2 “Share-based Payments” requires that an expense for equity instruments granted is recognised in the financial statements based on their fair values
at the date of the grant. This expense, which is in relation to employee share options, is recognised over the vesting period of the scheme. The fair value of
employee services is determined by reference to the fair value of the awarded grant calculated using the Black Scholes model.
At the year-end date, the Group revises its estimate of the number of share incentives that are expected to vest. The impact of the revisions of original
estimates, if any, is recognised in the Statement of Comprehensive Income, with a corresponding adjustment to equity, over the remaining vesting period.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
2 Accounting policies continued
New standards and interpretations
As at the date of approval of these financial statements, the following standards were in issue but not yet effective. These standards have not been adopted
early by the Company as they are not expected to have a material impact on the financial statements other than requiring additional disclosure or alternative
presentation.
Effective date
(period) beginning
on or after
IFRS 1
IFRS 2
IFRS 3, IFRS 11, IAS 12, IAS 23 Amendments resulting from Annual Improvements 2015-2017 Cycle
IFRS 4
IFRS 9
Amendments resulting from Annual Improvements 2014-2016 Cycle (removing short-term exemptions)
Amendments – Classification and measurement of share-based payments transactions
01/01/2018
01/01/2018
01/01/2019
01/01/2018
Amendment – applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts”
Financial instruments – incorporating requirements for classification and measurement,
01/01/2018
impairment, general hedge accounting and de-recognition.
01/01/2019
Amendment – Prepayment features with negative compensation
01/01/2018
Amendments – Sale or contribution of assets between an investor and its associate or joint venture
01/01/2018
Revenue from contracts with customers, and the related clarifications
01/01/2019
Leases – recognition, measurement, presentation and disclosure
01/01/2021
Insurance contracts
Amendment – Plan Amendment, Curtailment or Settlement
01/01/2019
Amendments resulting from Annual Improvements 2014-2016 Cycle (clarifying certain fair value measurements) 01/01/2018
01/01/2019
Amendment – Long term interests in Associates and Joint Ventures
01/01/2018
Amendment – Transfers of investment property
IFRS 9
IFRS 10/ IAS 28
IFRS 15
IFRS 16
IFRS 17
IAS 19
IAS 28
IAS 28
IAS 40
The International Financial Reporting Interpretations Committee has also issued interpretations which the Company does not consider will have a significant
impact on the financial statements.
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although
these estimates are based on management’s best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised. The material areas in which estimates and judgements are applied as follows:
Goodwill impairment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Directors to
estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value.
Share-based payments
The estimates of share-based payments costs require that management selects an appropriate valuation model and makes decisions on various inputs into
the model, including the volatility of its own share price, the probable life of the options before exercise, and behavioural consideration of employees.
Deferred tax assets
Deferred taxation is provided for using the liability method. Deferred tax assets are recognised in respect of tax losses where the Directors believe that it is
probable that future profits will be relieved by the benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by reviewing
budgets and medium-term plans for each taxable entity within the Group. If the actual profits earned by the Group’s taxable entities differ from the budgets
and forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the Statement of Financial Position cannot be measured based on quoted
prices in active markets, their fair value is measured using valuation techniques including the Black-Scholes model. The inputs to these models are taken
from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include
considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value
of financial instruments. See Note 21 for further disclosures.
ValiRx plc Annual Report and Accounts 2017Financial Statements
37
4 Turnover and loss on ordinary activities before taxation
The Directors are of the opinion that under IAS 14 – “Segmental Information” the Group operated in two primary business segments in 2016, being drug
development and the sale of self-test drug kits. However, in 2017, it only operated in drug development. The secondary segment is geographic. The Group’s
geographical segments are determined by location of operations. The Group’s revenues and net assets by both primary and secondary business segments
are shown below.
The information below in 2016 relating to Diagnostics and Europe all relate to discontinued operations.
Class of business
Revenue
Diagnostics
Loss before taxation
Drug development
Diagnostics (2016: profit)
Net assets
Drug development
Diagnostics
Geographical market
Revenue
Europe
Loss before taxation
UK
Europe (2016: profit)
Net assets
UK
Europe
5 Employees and directors
The average monthly number of employees, including Directors, during the year was:
Number of employees
Directors
Staff
Employment costs
Wages and salaries
Social security costs
Other pension costs
Costs of share option scheme
2017
£
2016
£
–
101,461
3,553,982
–
5,751,375
(182,750)
3,553,982
5,568,624
3,152,627
–
3,152,627
2,369,459
–
2,369,459
2017
£
2016
£
–
101,461
3,553,982
–
5,751,375
(182,750)
3,553,982
5,568,624
3,152,627
–
3,152,627
2,369,459
–
2,369,459
2017
Number
2016
Number
6
6
12
2017
£
780,447
77,799
22,129
–
880,375
6
6
12
2016
£
832,281
81,709
29,038
127,934
1,070,962
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
6 Net finance costs
Finance income
Deposit account interest
Other interest receivable
Finance costs
Interest payable
Interest on overdue tax
On convertible loan notes
7 Loss before income tax
The loss before income tax is stated after charging:
Other operating leases
Depreciation – owned assets
Patents amortisation
Brands and licences amortisation
Auditors remuneration
Foreign exchange differences
8 Income tax
Domestic current year tax
Tax credits on research and development – current year
Tax credits on research and development – prior years
Current tax credit
Factors affecting the tax charge for the year
Loss before income tax
2017
£
10
479
489
–
1,460
448,408
449,868
2017
£
134,397
10,553
149,935
27,199
36,064
5,240
2016
£
17
–
17
399
–
337,789
338,188
2016
£
138,586
10,560
105,456
5,000
28,270
28,258
2017
£
2016
£
(424,094)
7,758
(416,336)
(644,497)
24,393
(620,104)
(3,553,982)
(5,568,625)
Loss before income tax multiplied by effective rate of UK corporation tax of 19.25% (2016: 20%)
(684,142)
(1,113,725)
Effects of
Non-deductible expenses
Capital allowances for the year in deficit of depreciation and amortisation
Tax losses not utilised
Profit on disposal of subsidiary undertaking
Research and development expenditure
Adjustment to prior years
Other tax adjustments
Current tax charge
(2,069)
5,836
435,714
–
(179,433)
7,758
–
267,806
(416,336)
277,573
3,060
583,642
(108,360)
(286,687)
24,393
–
493,621
(620,104)
No corporation tax arises on the results for the year ended 31 December 2017 due to the losses incurred for tax purposes.
The deferred tax asset, arising from tax losses of £15.4 million (2016: £13.5 million) carried forward, has not been recognised but would become recoverable
against future trading profits, subject to agreement with HM Revenue and Customs.
ValiRx plc Annual Report and Accounts 2017Financial Statements
39
9 Loss of Parent Company
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the Parent Company is not presented as part of these
financial statements. The Parent Company’s loss for the financial year was £2,679,773 (2016: £4,615,202).
10 Loss per ordinary share
The earnings and number of shares used in the calculation of loss per ordinary share are set out below:
Continuing operations
Loss for the financial period from continuing operations
Non-controlling interest
Discontinued operations
Profit for the period from discontinued operations
Basic
Weighted average number of shares
Loss per share – continuing operations
Earnings per share – discontinued operations
2017
2016
(3,137,646)
117,962
(5,131,271)
200,518
(3,019,684)
(4,930,753)
–
182,750
151,071,019
(1.90p)
N/A
57,743,223
(8.54p)
0.32p
The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share.
The outstanding share options and share warrants (note 26) would have the effect of reducing the loss per share and would therefore not be dilutive under
IAS 33 “Earnings per Share”.
11 Discontinued operations
On 31 October 2016, the Company sold its subsidiary, ValiRx (Finland) OY (“Valifinn”) for a cash consideration of €800,000, according to a payment schedule,
whilst retaining a licence to use the TRAC Technology in its therapeutic development.
Valifinn was therefore classified as discontinued operations and its results for the period to disposal are presented as follows. There are no figures for 2017.
Revenue
Cost of sales
Gross (loss)/profit
Expenses
Operating loss
Finance costs
Loss before taxation from discontinued operations
Profit arising on the disposal of the subsidiary
Profit for the period from discontinued operations
2016
£
101,461
(152,271)
(50,810)
(307,772)
(358,582)
(465)
(359,047)
541,797
182,750
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
11 Discontinued operations continued
The net assets disposed of in relation to Valifinn were as follows:
Assets
Intangible assets
Property plant and equipment
Inventory
Debtors
Cash and short term deposits
Liabilities
Creditors
Net assets of Valifinn at date of sale
Goodwill arising on acquisition of Valifinn
Group net assets of Valifinn at date of sale
Sales proceeds (€800,000)
Group profit on disposal of Valifinn
The net cash flows incurred by Valifinn are as follows:
Operating
Financing
Capital expenditure
12 Goodwill
Group
Cost
At 1 January 2016
Additions
Disposals
At 1 January 2017
Additions
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
2016
£
141,158
1,026
32,217
65,303
7,452
247,156
(85,417)
161,739
10,750
172, 489
714,286
541,797
2016
£
6,662
(465)
(122)
6,075
£
1,398,607
141,066
(10,750)
1,528,923
73,599
1,602,522
1,602,522
1,528,923
The goodwill arising on the acquisitions of ValiRx Bioinnovation Limited, ValiPharma Limited, and Valiseek Limited is not being amortised but will be
reviewed on an annual basis for impairment, or more frequently if there are indications that goodwill might be impaired. The impairment review comprises
a comparison of the carrying amount of the goodwill with its recoverable amount (the higher of fair value less costs to sell and value in use). Valirx Plc has
used the value in use method, applying a 15% discount rate.
Goodwill per cash generating unit:
Valipharma Limited
ValiRx Bioinnovation Limited
Valimedix Limited
Valiseek Limited
Sensitivity analysis is not required as a reasonably possible change in assumptions would not result in an impairment.
£
772,229
394,613
–
435,680
ValiRx plc Annual Report and Accounts 2017Financial Statements
41
Patents
£
1,274,738
41,223
245,559
(231,187)
1,330,333
206,727
Brands and
licences
£
375,000
–
–
–
375,000
–
Total
£
1,649,738
41,223
245,559
(231,187)
1,705,333
206,727
1,537,060
375,000
1,912,060
308,107
10,764
105,456
(86,559)
337,768
149,935
66,875
–
5,000
–
71,875
27,199
374,982
10,764
110,456
(86,559)
409,643
177,134
487,703
99,074
586,777
1,049,357
275,926
1,325,283
992,565
303,125
1,295,690
Brands and
licences
£
200,000
35,000
5,000
40,000
20,000
60,000
140,000
160,000
13 Intangible assets
Group
Cost
At 1 January 2016
Exchange differences
Additions
Disposals
At 31 December 2016
Additions
At 31 December 2017
Amortisation
At 1 January 2016
Exchange differences
Amortisation for year
Disposals
At 31 December 2016
Amortisation for year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Company
Cost
At 1 January 2016 and 31 December 2016 and 2017
Amortisation
At 1 January 2016
Amortisation for year
At 31 December 2016
Amortisation for year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
14 Property, plant and equipment
Group
Cost
At 1 January 2016
Exchange differences
Disposals
At 31 December 2016 and 2017
Depreciation
At 1 January 2016
Exchange differences
Disposals
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Company
Cost
At 1 January 2016, and 31 December 2016 and 2017
Depreciation
At 1 January 2016
Charge for year
At 31 December 2016
Charge for the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Plant and
machinery
£
37,525
517
(2,877)
35,165
15,348
312
(1,851)
10,803
24,612
10,553
35,165
–
10,553
Computer
equipment
£
31,670
10,557
10,560
21,117
10,553
31,670
–
10,553
ValiRx plc Annual Report and Accounts 2017Financial Statements
15 Investments
Group
Cost
At 1 January 2017 and 31 December 2017
Provisions
At 1 January 2017 and 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
43
Unlisted
investments
£
1,333,770
1,333,770
–
–
The Group and the Company owns 5.5% (2016: 5.5%) (on a fully diluted basis) of the issued share capital of Morphogenesis Inc., a company incorporated in
USA. Morphogenesis Inc. is a private company in which ValiRx Plc holds a minority interest.
Company
Cost
At 1 January 2017
Additions
At 31 December 2017
Provisions
At 1 January 2017 and 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Shares
in group
undertakings
£
Unlisted
investments
£
Totals
£
3,452,442
165,392
1,333,770
–
4,786,212
165,392
3,617,834
1,333,770
4,951,604
–
1,333,770
1,333,770
3,617,834
3,452,442
–
–
3,617,834
3,452,442
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
15 Investments continued
Company
The Company’s investments at the Statement of Financial Position date in the share capital of companies include the following:
Subsidiaries
ValiRx Bioinnovation Limited
Registered: England & Wales
Nature of business: Intermediate holding company
Class of shares:
Ordinary shares
Valipharma Limited
Registered: England & Wales
Nature of business: Therapeutic research & development
Class of shares:
Ordinary shares
60.28% is owned by ValiRx Bioinnovation Limited and 39.72% by the Company.
Valisrc Limited (formerly Valimedix Limited)
Registered: England & Wales
Nature of business: Dormant
Class of shares:
Ordinary shares
Valiseek Limited
Registered: England & Wales
Nature of business: Therapeutic research & development
Class of shares:
Ordinary shares
16 Trade and other receivables
Current
Amounts owed by group undertakings
Other debtors
Rent deposit
VAT
Called up share capital not paid
Prepayments and accrued income
%
holding
100.00
%
holding
100.00
%
holding
100.00
%
holding
55.50
2016
£
1,500,610
547,034
22,289
134,482
–
51,648
2,256,063
Group
2017
£
–
637,945
26,590
55,041
73
46,826
766,475
2016
£
–
549,254
22,289
150,746
73
58,580
780,942
Company
2017
£
1,961,472
630,744
26,590
54,959
–
46,826
2,720,591
In the Directors’ opinion, the carrying amount of receivables is considered a reasonable approximation of fair value.
ValiRx plc Annual Report and Accounts 2017Financial Statements
45
17 Derivative financial assets
Group
2017
£
2016
£
Company
2017
£
2016
£
Derivative financial assets
117,229
140,675
117,229
140,675
In September 2015, the Company issued 8,161,637 new shares of 0.1p per share at a price of 30.018p per share to YA Global Master SPV Ltd (“Yorkville”) with
a notional value of £2.45 million. On subscription, the Company received £1.45m less costs of £167,500.
At the same time, the Company entered into an equity swap agreement with Yorkville for 6,430,872 of these shares with a notional price of 15.55p per
share i.e. £1m. Yorkville have hedged the consideration they pay for shares in the Company against the performance of the Company’s share price over
a 12-month period.
All 8,161,637 shares were allotted with full rights on the date of the transaction.
At each swap settlement, the Company will receive greater or lower consideration calculated on pro-rata basis depending on whether the applicable Market
Price for the previous month was greater or less than the Benchmark Price (34.21p per share).
As the amount of the consideration receivable by the Company from Yorkville will vary subject to the change in the Company’s share price and will be
settled in the future, the receivable has been treated as a derivative financial asset and has been designated at fair value through profit or loss.
The fair value of the derivative financial assets has been determined by reference to the Company’s share price and has been estimated as follows:
Value of derivative financial assets at 1 January 2016
Consideration paid
Loss on revaluation of derivative financial assets
Value of derivative financial assets at 31 December 2016
Loss on revaluation of derivative financial assets
Value of derivative financial assets at 31 December 2017
Notional number
of shares
outstanding
6,430,872
(3,751,342)
–
2,679,530
–
Share price
22.75p
–
–
5.25p
–
4.38p
2,679,530
Fair value
£
1,463,023
296,839
(1,619,187)
140,675
(23,446)
117,229
Both parties to the Swap Agreement agreed to defer the remaining 5 settlements under the Agreement.
18 Cash and cash equivalents
Bank accounts
Group
2017
£
2016
£
Company
2017
£
2016
£
701,410
560,763
685,884
552,529
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
19 Called up share capital
Allotted, called up and fully paid
Ordinary shares of 0.1p each
Deferred shares of 0.5p each
Deferred shares of 0.9p each
Deferred shares of 12.4p each
2017
Number
2016
Number
2017
£
2016
£
350,310,449
58,378,365
157,945,030
30,177,214
83,253,312
58,378,365
157,945,030
30,177,214
350,311
2,918,918
1,421,505
3,741,974
8,432,708
83,253
2,918,918
1,421,505
3,741,974
8,165,650
In December 2016, Yorkville elected to convert US$150,000 of its Convertible Loan Notes (“CLNs”) (plus accrued interest of US$15,840) into 2,393,788 ordinary
shares at a conversion price of 5.625p per share. The shares were admitted to AIM in January 2017.
In March 2017, the Company raised £1.16 million, before expenses, through the placing of 46,509,015 new ordinary shares at a price of 2.5 pence per share.
The net proceeds of the placing were to be used for the clinical development of VAL401; the dose expansion of the VAL201 trial in a multi-centre study;
supporting the opening of additional trial centres to aid recruitment and completion of the clinical trials for VAL401 and VAL201, and for general working
capital purposes and business development.
In March 2017, certain directors of the Company subscribed £30,000 through the issue of 1,200,000 new ordinary shares at a price of 2.5 pence per share.
In June 2017, Yorkville elected to convert US$250,000 of its CLN (plus accrued interest of US$22,724) into 10,453,630 ordinary shares at a conversion price
of 2.0292p per share.
In August 2017, Yorkville elected to convert US$250,000 of its CLN (plus accrued interest of US$5,241) into 10,149,193 ordinary shares at a conversion price
of 1.9171p per share.
In September 2017, the Company raised £0.5 million, before expenses, through the issue of 50,000,000 new ordinary shares at a price of 1p per share.
The funds were to be used for advancing the clinical dose escalation of VAL201 and for further progressing the late pre-clinical development of GeneICE
and general working capital purposes.
In November 2017, Yorkville elected to convert US$40,105 of its CLN (plus accrued interest of US$920) from Tranche 1 and US$10,000 of its CLN
(plus accrued interest of US$101,892) from Tranche 2 into 12,446,476 ordinary shares at a conversion price of 0.9271p per share.
In December 2017, the Company raised £1.0 million, before expenses, through the placing of 80,000,000 new ordinary shares at a price of 1.25 pence
per share. The funds were to be used for advancing the clinical trial of VAL201 and for the preclinical progress of other programmes.
In December 2017, Yorkville elected to convert US$696,203 of its CLN (plus accrued interest of US$10,531) from Tranche 2 into 47,765,035 ordinary shares
at an agreed conversion price of 1.25p per share.
In December 2017, the Company received notifications of the exercise of warrants over 3,000,000 ordinary shares at an exercise price of 1p and over
1,000,000 ordinary shares at an exercise price of 5p in the Company, providing the Company with gross proceeds of £80,000.
In December 2017, the Company received notification of the exercise of warrants over 740,000 ordinary shares at an exercise price of 5p in the Company,
providing the Company with gross proceeds of £37,000.
In December 2017, the Company received notification of the exercise of warrants over 400,000 ordinary shares at an exercise price of 5p in the Company,
providing the Company with gross proceeds of £20,000.
In December 2017, the Company received notification of the exercise of warrants over 1,000,000 ordinary shares at an exercise price of 5p in the Company,
providing the Company with gross proceeds of £50,000.
The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to receive any dividend or other distribution and have
limited rights to participate in any return of capital on a winding-up or liquidation of the Company.
ValiRx plc Annual Report and Accounts 2017Financial Statements
47
20 Trade and other payables
Current:
Trade creditors
Amounts owed to group undertakings
Social security and other taxes
Other creditors
Accruals and deferred income
Directors’ current accounts
Group
2017
£
1,210,675
–
72,764
18,450
51,347
41,030
2016
£
1,126,820
–
58,835
–
68,484
–
Company
2017
£
1,062,605
300,670
61,899
18,450
44,000
41,030
2016
£
821,098
300,670
53,204
–
65,484
–
1,394,266
1,254,139
1,528,654
1,240,456
In the Directors’ opinion, the carrying amount of payable is considered a reasonable approximation of fair value.
21 Financial liabilities – borrowings
Current:
Convertible loan notes
Derivative financial liability
Group
2017
£
2016
£
Company
2017
£
2016
£
390,120
–
390,120
1,294,299
44,146
1,338,445
390,120
–
390,120
1,294,299
44,146
1,338,445
Yorkville Convertible Loan Notes
On 1 September 2016, the Company entered into an agreement with YA Global Master SPV Ltd (“Yorkville”) in which it has agreed to subscribe for
Convertible Loan Notes (“Notes”) with an aggregate principal amount of up to US$3.75 million in 3 Tranches of up to US$1.25 million each. The Notes are
unlisted, unsecured and convertible with a twelve month maturity date from the date of drawdown. Interest is accrued at 9% per annum and payable upon
conversion, or maturity, of the Notes in United States dollars or in Ordinary Shares in the Company at Yorkville’s discretion.
Conversion terms
On 1 September 2016 and 1 December 2016, the Company issued the first two Tranches totalling US $2.50 million of Notes, before expenses.
In the 30 day period from 1 September 2016, the outstanding Notes could be converted at a price representing 130% of the closing price as of
1 September 2016.
Thereafter, Yorkville may elect to convert varying amounts of the Notes at the lower of (1) 130% of the closing price as of 2 September 2016 and (2) a price
represented by 95% of the average of the 5 daily Volumes Weighted Average Price (“VWAP”) of Yorkville’s choosing from the 15 daily VWAPs immediately
preceding the date of the conversion notice from Yorkville.
Repayment
During the reporting period, the Company issued 83,708,122 (2016: 6,575,254) fully paid Ordinary Shares following receipt of conversion notices for the
exercise of conversion rights in respect of US$1,553,339 (including accrued interest) of the Notes. Repayments of US$82,135, other than by conversion to
ordinary shares also occurred.
US$400,000 of Tranche 3 was drawn-down in August 2017, and was fully repaid by early October 2017 by bank transfers. Interest of £34,466 was charged
to the Income Statement in respect of this Tranche. The total interest charged to the Statement of Comprehensive Income for the year for all three Tranches
was £448,408 (note 6).
Following the repayment of Tranche 3 in October 2017, both parties agreed that Tranche 3 would close, with no further drawdown being possible.
On 27 December 2017, Yorkville elected to convert all remaining US$520,000 of its CLN (plus accrued interest of US$1,666.85) from Tranche 2 into 25,222,857
ordinary shares at a conversion price of 1.5429p per share. These shares were to be admitted to AIM on 3 January 2018. As the shares were not issued by the
year end, the amount of the conversion, US$521,666.85, is the balance carried on the Statement of Financial Position.
Following this conversion, all amounts in respect of the CLNs will have been repaid.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
21 Financial liabilities – borrowings continued
Yorkville Convertible Loan Notes continued
Repayment continued
The Notes have been recognised as a liability, net of transaction costs in accordance with IAS 32 – Financial Instruments as the instrument provides an
obligation to the Company to either settle the liability via a cash payment or via the issue of a variable number of shares. As the liability is denominated
in US Dollars, it has been converted at the year-end exchange rate and the profit or loss arising from the conversion is recognised in the Statement of
Comprehensive Income. The conversion option represents an embedded derivative, and has been valued at inception and the year-end date using the
Black-Scholes Method, full details of which are set out below.
Issue date
Date of maturity
Year end share price
Expected volatility
Expected dividend yield
Risk-free interest rate
Fair value
Issue date
Repayment date
Value brought forward
Value on issue of notes
Total transaction costs
Derivative financial liability on issue
Interest expense
Interest accrued
Conversion of notes to ordinary share
Repayment of loan notes
Exchange difference at year end rate
Issue date
Repayment date
Derivative financial liability
Balance brought forward
Derivative financial liability on issue
(Loss)/profit on revaluation
Tranche 1
Tranche 2
2017
2016
Issue date
Year end
01/09/2016
01/03/2017
01/12/2016
01/12/2017
N/A
N/A
N/A
N/A
N/A
5.25p
18%
0%
–0.09%
0.15p
Yorkville Notes
01/09/2016
01/03/2017
01/12/2016
01/12/2017
£
£
486,295
–
–
–
486,295
122,288
(7,178)
(535,865)
(43,964)
(21,576)
–
808,004
–
–
–
808,004
291,683
(78,911)
(529,255)
(18,313)
(83,088)
390,120
Yorkville Notes
01/09/2016
01/03/2017
01/12/2016
01/12/2017
N/A
N/A
N/A
N/A
N/A
2017
£
5.25p
18%
0%
–0.09%
0.15p
2016
£
1,294,299
–
–
–
1,294,299
413,971
(86,089)
(1,065,120)
(62,277)
(104,664)
–
1,993,113
(190,846)
(419,768)
1,382,499
337,789
(29,484)
(394,515)
–
(1,990)
390,120
1,294,299
2017
£
2016
£
16,533
–
(16,533)
–
27,613
–
(27,613)
–
44,146
–
(44,146)
–
–
419,767
(375,621)
44,146
ValiRx plc Annual Report and Accounts 2017Financial Statements
49
22. Other financial commitments
At 31 December 2017, the company was committed to making the following payments under non-cancellable operating leases in the year to
31 December 2018:
Operating leases which expire:
Within one year
1-2 years
Land and buildings
2017
£
133,087
110,906
2016
£
43,765
–
23 Related party disclosures
During the year the Director, G Desler, provided the Company and its subsidiaries with bookkeeping services totalling £18,450 (2016: £18,000).
He also provided the Company with various loans totalling £202,624 of which £41,030 was outstanding at the year end. This was repaid in January 2018.
During the year the Director O de Giorgio – Miller invoiced the Company £49,500 (2016: £64,609) for research and development work.
At the year end, the amounts owed to Directors were as follows:
G Desler
O de Giorgio-Miller
G Morris
S Vainikka
K Alexander
2017
£
41,030
–
–
–
–
2016
£
–
–
–
–
–
24 Events after the reporting period
On 2 January 2018, the Company issued 23,529,412 new ordinary shares at 4.25p per share, raising £1m before expenses. The Company also agreed to
grant placees a total of 11,764,706 warrants to subscribe for shares at an exercise price of 8 pence at a ratio of one warrant per two Placing Shares issued.
The warrants may be exercised at any time in the period expiring on the first anniversary of the date of Admission of the Placing Shares.
The Company agreed to grant Beaufort Securities Limited. a warrant to subscribe for 1,882,353 shares at an exercise price of 4.25 pence per share. The
warrants may be exercised at any time in the period expiring on the third anniversary of the date of Admission of the Placing Shares.
On 3 January 2018, the Company, received notifications of the exercise of warrants over 8,000,000 ordinary shares at an exercise price of 1.25p and over
400,000 ordinary shares at an exercise price of 5p in the Company, providing the Company with gross proceeds of £120,000.
On 1 March 2018, the Company awarded options to directors and key management. The options may be exercised at a price of 4 pence per share at any time
up until 7 February 2028.
Name of Director
Oliver deGiorgio-Miller
Dr Satu Vainikka
Dr George Morris
Gerry Desler
Kevin Alexander
Others
Total
25 Ultimate controlling party
The Directors consider that there is no ultimate controlling party.
Number of
Options
Total Number
Existing Options
Award
of Options
555,000
694,000
597,000
592,960
545,000
429,000
2,750,000
3,625,000
3,125,000
3,000,000
2,500,000
2,300,000
3,305,000
4,319,000
3,722,000
3,592,960
3,045,000
2,729,000
3,412,960
17,300,000
20,712,960
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
26 Share-based payment transactions
At 31 December 2017, outstanding awards to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the rules of the
ValiRx share option schemes, were as follows:
Brought and carried forward
Brought forward
Lapsed
Carried forward
Weighted
average
remaining
contractual life
(years)
2016
3,793,400
7.53
Weighted
average
remaining
contractual life
(years)
7.53
–
6.50
2017
3,793,400
(332,440)
3,460,960
Weighted
average
exercise
price
(pence)
51.74
Weighted
average
exercise
price
(pence)
51.74
60.00
50.98
All options were exercisable at the year end. No options were exercised during the year. 332,440 options lapsed during the year.
The following share-based payment arrangements were in existence at the year end.
Options
1. Granted 17 September 2009
2. Granted 8 July 2011
3. Granted 19 January 2014
4. Granted 21 October 2014
5. Granted 26 June 2015
Number
Expiry date
20,400
292,000
1,000,000
1,032,000
1,116,560
17/09/2019
08/07/2021
19/01/2024
21/10/2024
26/06/2025
Exercise
price
125.00p
93.75p
43.13p
45.00p
51.00p
Fair value
at grant date
90.00p
12.50p
5.00p
3.75p
4.04p
The fair value of the remaining share options has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value
of the share options outstanding during the year are as follows:
Options
1. Granted 17 September 2009
2. Granted 8 July 2011
3. Granted 19 January 2014
4. Granted 21 October 2014
5. Granted 26 June 2015
Grant date
share price
262.50p
80.00p
43.13p
45.00p
50.50p
Exercise
price
125.00p
93.75p
43.13p
45.00p
51.00p
Expected
volatility
40.00%
52.00%
17.00%
17.00%
16.00%
Expected
option life
(years)
Risk-free
interest rate
4.00
3.00
3.00
3.00
3.00
2.50%
1.24%
0.99%
1.00%
0.38%
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices.
All of the above options are equity settled and the charge for the year is £nil (2016: £nil).
ValiRx plc Annual Report and Accounts 2017Financial Statements
51
26 Share-based payment transactions continued
Warrants
At 31 December 2017, outstanding warrants to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the warrant
instruments issued by ValiRx, were as follows:
Brought forward
Granted
Carried forward
Brought forward
Granted
Exercised
Carried forward
Weighted
average
remaining
contractual life
(years)
–
–
2.96
Weighted
average
remaining
contractual life
(years)
2.96
–
–
2.34
2016
–
36,970,996
36,970,996
2017
36,970,996
54,209,015
(6,140,000)
85,040,011
Weighted
average
exercise
price
(pence)
–
8.84
8.84
Weighted
average
exercise
price
(pence)
8.84
4.45
3.05
6.46
All warrants were exercisable at the year end.
3,140,000 warrants granted on 15 March 2017 and 3,000,000 granted on 25 September 2017 were exercised at 5p and 1p per share respectively during
the year.
The following warrants were in existence at the year end.
Warrants
1. Granted 7 April 2016
2. Granted 22 April 2016
3. Granted 12 July 2016
4. Granted 16 September 2016
5. Granted 16 September 2016
6. Granted 15 March 2017
7. Granted 14 December 2017
Number
Expiry date
Exercise
price
Fair value
at grant date
4,926,741
1,710,922
8,333,333
2,000,000
20,000,000
43,369,015
4,700,000
31/03/2021
31/03/2021
12/07/2021
16/09/2021
16/09/2021
15/03/2019
14/12/2020
9.00p
9.00p
9.00p
6.00p
9.00p
5.00p
1.25p
0.92p
0.67p
0.36p
0.78p
0.13p
0.36p
3.14p
The fair value of the remaining warrants has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value of the
share options outstanding during the year are as follows:
Warrants
1. Granted 7 April 2017
2. Granted 22 April 2016
3. Granted 12 July 2016
4. Granted 16 September 2016
5. Granted 16 September 2016
6. Granted 15 March 2017
7. Granted 14 December 2017
Grant date
share price
9.30p
8.60p
7.60p
6.50p
6.50p
2.50p
4.40p
Exercise
price
9.00p
9.00p
9.00p
6.00p
9.00p
5.00p
1.25p
Expected
volatility
17.00%
17.00%
18.00%
18.00%
18.00%
N/A
158.19%
Expected
option life
(years)
Risk-free
interest rate
3.00
3.00
3.00
3.00
2.00
N/A
3.00
0.48%
0.62%
0.23%
0.14%
0.14%
N/A
0.52%
The warrants granted on 15 March 2017 fall outside the scope of IFRS and as such no charge is made.
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over
a 3 year period to grant date.
With the exception of the warrants granted on 15 March 2017, all of the warrants are equity settled and the charge for the year is £158,765 (2016: £127,935).
As the warrants relating to the charge were all in consideration of shares issued during the year, it has been taken directly to equity and charged against the
share premium as costs in respect of the issue of shares.
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
28 Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Group, and are all
Directors of the Company.
Salaries and other short-term employee benefits
Salaries and other short-term employee benefits – research & development
Post-employment benefits
S Vainikka
G Morris
K Alexander
G Desler
O de Giorgio-Miller
S Makinen (resigned 30/05/2017)
2017
£
280,008
209,250
13,881
503,139
2017
£
192,240
155,982
26,125
82,115
36,000
10,677
503,139
2016
£
253,136
209,250
24,038
486,424
2016
£
176,377
143,309
30,000
65,600
41,000
30,138
486,424
Salary,
bonus
and fees
£
185,780
144,525
26,125
82,115
36,000
10,677
485,222
Benefits
in kind
£
1,329
2,707
–
–
–
–
4,036
Post-
employment
benefits
£
5,131
8,750
–
–
–
–
13,881
The number of Directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 2 (2016: 2).
ValiRx plc Annual Report and Accounts 2017Financial Statements
53
28 Key management personnel compensation
The Directors interests in share options as at 31 December 2017 are as follows:
Director
S Vainikka
S Vainikka
S Vainikka
S Vainikka
S Vainikka
G Morris
G Morris
G Morris
G Morris
G Morris
K Alexander
K Alexander
K Alexander
K Alexander
K Alexander
G Desler
G Desler
G Desler
G Desler
G Desler
O de Giorgio-Miller
O de Giorgio-Miller
O de Giorgio-Miller
O de Giorgio-Miller
Options at
31 December
2017
8,000
80,000
192,000
192,000
222,000
6,000
48,000
176,000
176,000
191,000
3,200
48,000
160,000
160,000
173,800
3,200
48,000
176,000
176,000
189,760
24,000
160,000
160,000
211,000
Exercise
price
125.00p
93.75p
43.125p
45.00p
51.00p
125.00p
93.75p
43.125p
45.00p
51.00p
125.00p
93.75p
43.125p
45.00p
51.00p
125.00p
93.75p
43.125p
45.00p
51.00p
93.75p
43.125p
45.00p
51.00p
Date of
grant
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
08.07.11
19.01.14
21.10.14
26.06.15
First date
of exercise
Final date
of exercise
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
08.07.11
19.01.14
21.10.14
26.06.15
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
08.07.21
19.01.24
21.10.24
25.06.15
29 Financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises are as follows:
• derivative financial assets;
• trade and other receivables;
• cash and cash equivalents; and
• trade and other payables.
The main purpose of these financial instruments is to finance the Group’s operations. The fair value measurement of the derivative financial assets is as follows:
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
At 31 December 2017
At 31 December 2016
Fair value measurement
Level 1
£
–
–
Level 2
£
117,229
140,675
Level 3
£
–
–
ValiRx plcAnnual Report and Accounts 2017Strategic ReportGovernanceFinancial Statements
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2017
29 Financial instruments continued
A summary of the financial instruments held by category is provided below:
Financial assets
£
Loans and receivables
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total loans and receivables
Total financial assets
Financial liabilities
Trade and other payables
2017
£
2016
766,475
117,229
701,410
1,585,114
1,585,114
722,362
140,675
560,763
1,432,800
1,432,800
2017
£
2016
£
1,711,622
2,533,749
The Directors consider that the carrying value for each class of financial asset and liability, approximates to their fair value.
Financial risk management
The Group’s activities expose it to a variety of risks, including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group
manages these risks through an effective risk management programme and, through this programme, the Board seeks to minimise potential adverse
effects on the Group’s financial performance.
The Board provides written objectives, policies and procedures with regards to managing currency and interest risk exposures, liquidity and credit risk
including guidance on the use of certain derivative and non-derivative financial instruments.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The Group’s credit risk is primarily attributable to its receivables and its cash deposits. It is Group policy to assess the credit risk of new customers
before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international
credit-rating agencies.
Liquidity risk and interest rate risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. The Board regularly receives cash flow projections for a minimum period of twelve months, together with information
regarding cash balances monthly.
The Group is principally funded by equity and invests in short-term deposits, having access to these funds at short notice. The Group’s policy throughout
the period has been to minimise interest rate risk by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit.
All cash deposits attract a floating rate of interest. The benchmark rate for determining interest receivable and floating rate assets is linked to the UK base rate.
Foreign currency risk
The Group has an entity which operates in Europe and is therefore exposed to foreign exchange risk arising from currency exposure to the Euro, the
functional currency of that subsidiary. The overseas subsidiary operates a separate bank account that is used solely for that subsidiary, thus managing
the currency in that country. The Group’s net assets arising from the overseas subsidiary are exposed to currency risk resulting in gains or losses on
retranslation into Sterling. Given the levels of materiality, the Group does not hedge its net investments in overseas operations as the cost of doing
so is disproportionate to the exposure.
ValiRx plc Annual Report and Accounts 2017Financial Statements
COMPANY INFORMATION
Annual Report and Accounts 2017 ValiRx plc
Directors
Oliver de Giorgio-Miller
Dr Satu Vainikka
Dr George Morris
Gerry Desler
Kevin Alexander
Secretary
Kevin Alexander
Company number
03916791
Registered office
3rd floor
16 Upper Woburn Place
London
WC1H 0BS
Auditors
Adler Shine LLP
Chartered Accountants
and Statutory Auditor
Aston House
Cornwall Avenue
London
N3 1LF
Bankers
Royal Bank of Scotland Plc
St Ann Street
Manchester
M50 2SS
Solicitors
DAC Beachcroft LLP,
100 Fetter Lane,
London
EC4A 1BN
ValiRx plc
3rd Floor
16 Upper Woburn Place
London
WC1H 0BS