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Making a Difference
Annual Report and Accounts 2018
ValiRx plc
VAL201
VAL301
VAL101
VAL401
ValiRx plc Annual Report and Accounts 2018
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, today announces its final results for the year ended
31 December 2018.
The Group operates through the following
companies: It currently has two clinical products:
one in Phase I/II and the other has completed its
Phase II clinical trial. The Group’s business model
focuses on out-licensing drug candidates after early
proof-of-principle and efficacy trials.
ValiRx
ValiSeek
Phase l/II
Pre-Clinical
Optimisation
Phase II
VAL201
VAL301
VAL101
(GenelCE, VAL 101)
VAL401
ValiRx
ValiRx is the therapeutics
division, with three
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.
See
p.12
See
p.
12
See
12
p.
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.
Strategic Report Operational Highlights
• VAL201’s Phase l/ll Clinical Trial to treat prostate cancer has established that VAL201 is
safe and well tolerated at doses up to 4mg/kg, and has seen early evidence of the drug’s
potential activity in prostate cancer. At the current stage of the trial, ValiRx is establishing
the maximum tolerated dose of VAL201, based on the safety and tolerability data that
it continues to collate since the MHRA approved the protocol amendment. This is a
dose-ranging study, which on trial conclusion, ValiRx will either out-license the VAL201
asset to a major pharmaceutical company or will proceed to a pivotal Phase llb study.
• Post period, ValiSeek has reported that it has agreed Letters of Intent with one
European and one US partner, about the further advancement of VAL401 into the
next proposed clinical trial, on a co-financing basis and that ValiSeek will seek external
financing towards the next trial (announced 26 March 2019).
• VAL301 is in late pre-clinical phase initially for the treatment of the gynaecological
condition, endometriosis. Key attributes of VAL301 are that unlike current treatments
for this condition, pre-clinical studies suggest it does not compromise bone density
or fertility. In the period, VAL301 received a US patent grant and post period, patent
allowances covering China and the Russian Federation, providing protection for the
compound in three of the most populous nations in the World.
• Positive results for the VAL101 compound showing it to be effective in inducing
apoptosis (programmed cell death) in cancer cell models. The results suggest that
VAL101 has significant apoptotic effect on cancer cells. The compound is an optimized,
commercially viable, 2nd generation development of the VAL101 molecule.
• The period saw further strengthening of ValiRx’s VAL201 patent portfolio with grants
in the US & Europe and ValiSeek’s VAL401 patent allowance in New Zealand.
Financial Highlights
• Placings during the period of £3.6m (2017: £3.072m)) applied to continue the
advancement of the clinical trial of VAL201, the pre-clinical progress of VAL101
& VAL301 and the broadening of the Company’s IP portfolio.
• Total comprehensive loss for the year of £4,298,822 (2017: £3,019,684).
• Loss per share from continuing operations of 0.94p (2017: Loss 1.90p).
• Cash and cash equivalents as at 31 December 2018 of £372,872 (2017: £701,410),
reflecting additional API and IMP (drug) required to meet dose-escalation study
requirement, based on anticipated patient recruitment dosed at 16mg/kg,
as opposed to 4mg/kg in 2017.
• Loss before income taxation of £4,829,138 (2017: £3,553,982).
01
View more on our website
www.valirx.com
Strategic Report Highlights 01Chairman’s Statement 02How We Create Value 04Our Products 06Marketplace 08Licensing Collaborations 10New NHS Strategy 11Therapeutics 12Chief Executive’s Report 14Risks and Uncertainties 16Governance Board of Directors 20Corporate Governance 22 QCA Principles 28Report of the Directors 38Statement of Directors’ Responsibilities 40Report of the Independent Auditors 41Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income 44Consolidated Statement of Financial Position 45Company Statement of Financial Position 46Consolidated Statement of Changes in Equity 47Company Statement of Changes in Equity 48Consolidated Statement of Cash Flows 49Notes to the Consolidated Statement of Cash Flows 50Notes to the Consolidated Financial Statements 51Company Information IBCValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 02
CHAIRMAN’S STATEMENT
“2018 has seen tangible and very
satisfactory progress. The Company’s
clinical trials continue to deliver strong
progress in their scientific pursuit of
developing new therapeutic medicines
for the treatment of cancer. ValiRx’s
clinical products, VAL201 and VAL401,
have both reached pivotal milestones
on their development pathways and
the Company’s pre-clinical pipeline is
fast approaching human trials.”
Oliver de Giorgio-Miller
Chairman
New technologies and tools
continue to revolutionise
our understanding of cancer
in the development of
personalised and ‘precision’
drugs and I was delighted
to see just after the period’s
end, the NHS’s Long-Term
Plan being announced.
Given the risk-averse funding climate in the
reporting period, we sustained momentum in
terms of adding value to our assets by advancing
VAL201 in the UCLH prostate cancer clinical trial
and progressing the pre-clinical advancements
VAL101 and VAL301 compounds to bring these
closer to Phase I ready stage. We are also pleased
to report post period, that ValiSeek has secured a
robust solution and strategy for the advancement
of VAL401 and that it has agreed Letters of Intent
with two partners to progress VAL401 into its next
proposed clinical trial.
New technologies and tools continue to
revolutionise our understanding of cancer in
the development of personalised and ‘precision’
drugs and I was delighted to see just after the
period’s end, the NHS’s Long-Term Plan being
announced, with the Government now actively
discussing and championing, in all but name,
our therapeutic and diagnostic approaches.
As a company specialising in the development
of precision medicines to treat cancer, ValiRx
has seen its management invited to present
various aspects of their scientific work and
share knowledge and experience on both the
domestic and international stage. Scientific
papers have been given at important peptide
and oncology conferences in both Hangzhou,
China and Munich, Germany and the Company
has also seen management invited to attend
a Life Science reception of industry experts at
the House of Lords and to contribute to the
debate on issues relating to the UK’s Life
Sciences Industrial Strategy, as they pertain
now and into the future.
We have established that VAL201 is safe and well
tolerated at doses up to 4mg/kg and have seen
very early evidence of the drug’s potential activity
in prostate cancer. At the current stage of the trial,
we are establishing the maximum tolerated dose
of VAL201, based on the safety and tolerability
data that we continue to collate since the MHRA
approved protocol amendment which permits
intra-patient dose escalation (up to 16mg/
kg), and the potential for a change in the dose
administration schedule, upon review by the
Cohort Review Committee. This is for the Cohort
Review Committee to consider at this stage of
the trial, to achieve the primary study objective,
estimating the maximum tolerated dose.
The above will be conducted as part of the
current dose-ranging study protocol. Going
forward, ValiRx will either out-license the VAL201
asset to a major pharmaceutical company or
proceed to a pivotal Phase ll study.
Alongside the progress seen with the VAL201
compound, our work continues on reformulating
VAL201 into VAL301 to treat endometriosis,
a painful and debilitating gynaecological
condition with high unmet clinical need and
we anticipate taking this forward in 2019 to
make it Phase I ready.
Post period, ValiSeek, the Company’s joint venture
company with Tangent Reprofiling Limited
(a SEEK Group company), announced in March
2019 that it had agreed Letters of Intent with one
European and one US partner, about the further
advancement of VAL401 into its next proposed
clinical trial, on a co-financing basis with ValiSeek
seeking external financing towards the next trial.
ValiRx plc Annual Report and Accounts 2018Strategic Report 03
This is excellent news and an exciting prospect
and courtesy of ValiRx’s 55.5 per cent majority
equity ownership of ValiSeek, the Company
looks forward to benefiting from all commercial
returns, according to its shareholding, as per the
ValiSeek Joint Venture agreement, announced
on 8 April 2014.
Finally, the Company was pleased to report
positive VAL101 results (April 2018) and progress
with the compound, which has been shown to
be effective in inducing apoptosis (programmed
cell death) in cancer cell models. The results
suggest that VAL101 has significant apoptic effect
on cancer cells. The VAL101 compound has been
designed against a gene expressing Bcl-2 protein,
which has been implicated and associated with
various cancers.
The studies involved a wide range of technical
and scientific methodologies demonstrating
the enhanced effect of the VAL101 compound
on the prevention of cancer growth at cellular
biochemical and genomic levels. This excellent
outcome follows on from ValiRx’s earlier
September 2017 update, which highlighted the
successful optimisation of the VAL101 molecule,
which will now be the compound taken forward
towards clinical trials.
Accordingly, ValiRx is progressing this programme
towards the clinic in a full partnership with its
commercial and academic collaborators in Finland,
Germany and Denmark. The Company is adding
commercial partners in the US and China in order to
support manufacturing and clinical development.
Our financial results show the total comprehensive
loss attributable to the Parent Company for the
year ended 31 December 2018 of £4,298,822 (2017:
£3,019,684) and a loss per share of 0.94p (2017:
Loss 1.90p).
2018 has seen tangible and very satisfactory
progress. The Company’s clinical trials continue to
deliver strong progress in their scientific pursuit
of developing new therapeutic medicines for
the treatment of cancer. ValiRx’s clinical products,
VAL201 and VAL401, have both reached pivotal
milestones on their development pathways and the
Company’s pre-clinical pipeline is fast approaching
human trials.
May I thank all shareholders for their on-going
support, and fellow Directors and members of
the Group for their loyalty and endeavour in
positioning ValiRx at the forefront of developing
new enhanced therapeutics and I look forward
keenly to patients and our supportive shareholders
alike deriving the full benefit from our efforts.
Oliver de Giorgio-Miller
Chairman
28 May 2019
?
Did you know?
Find out more on our website:
www.valirx.com
Chairman
Oliver de Giorgio-Miller
Chief Executive Officer
Dr Satu Vainikka
ValiRx Board of directors
Oliver de Giorgio-Miller
Dr Satu Vainikka
Dr George Morris
Gerry Desler
Kevin Alexander
Audit Committee
Gerry Desler
Nomination
Committee
Dr George Morris
Remuneration
Committee
Dr Satu Vainikka
Our Governance
QCA Principles
The Company is listed on the Alternative
Investment Market ('AIM') of the London Stock
Exchange and is subject to the continuing
requirements of the AIM Rules. The Board
believes in the importance of corporate
governance and is aware of its responsibility
for overall corporate governance, and for
supervising the general affairs and business
of the Company and its subsidiaries. It is
committed to developing and applying high
standards of corporate governance.
As such, the Board seeks to apply the QCA
Code, revised in April 2018 as devised by the
Quoted Companies Alliance. For full details
go to our website at www.valirx.com/aim-
rule-26/corporate-governance/.
The Quoted Companies Alliance is the
independent membership organisation that
champions the interests of small to mid-size
quoted companies. The QCA Code takes key
elements of good governance and applies
them in a manner which is workable for the
different needs of growing companies.
Read more on pgs. 28 to 37
A Developing Market"More licensing deals from Big Pharma will produce valuable health solutions going forward and these companies are positioning themselves for growth by diversifying to increase their market share in particular therapeutic areas." (Source: GlobalData Healthcare, 2017)$18.4bnUSD projected value of prostate cancer market by 2025$2.0bnUSD projected market value that endometriosis is expected to surpass by 2025ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 04
HOW WE CREATE VALUE
ValiRx is a clinical stage biotechnology
company with a focus in cancer and which
has four 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.
Our Values
All at ValiRx play a role in achieving our corporate and strategic
mission. Supporting and underpinning our efforts are a number of
core values. These have been developed by the employees of ValiRx.
They describe our vision, our aims and how we will achieve our
objectives. These are our values and together, we continue to strive to
engineer a breakthrough into human health and wellbeing.
Vision
Our vision is to make a
structural change in science.
Aim
Our aim is to engineer a
scientific breakthrough in
human health and well-being.
How we will achieve
We will achieve these goals through early detection
of disease and therapeutic intervention.
1
2
3
Reduce risk in
new product
development
through rigorous
clinical and
commercial due
diligence.
Select drug
candidates and
technologies
with evidence-
based potential
to address unmet
market needs.
Maximise returns
to shareholders by
adding value at
the earlier stages
where value
increases per
investment unit
are the greatest.
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 VAL401 molecule is a re-formulation of a generic drug in an
oral form, which had 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. In late 2017, ValiSeek saw the successful completion of
its Phase II clinical study in patients with late stage non-small
cell lung cancer, the most common form of lung cancer. Data
from this completed trial indicated a palliative effect and an
improvement of quality of life in the patients treated, in addition
to an indication of improved overall survival compared to case-
matched control patients. ValiSeek continues its discussions with
potential partners for starting the next clinical trial.
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 2018Strategic Report 05
What We’ve Achieved in 2018
The Company has seen a year of strong progress and ValiRx is pleased to
report that its therapeutic compounds have all made substantive steps
forward towards addressing unmet needs on their respective oncological
pathways and in so doing, to develop therapeutics that can substantially
improve human health and well-being.
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.
See pgs. 16 to 19
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 current fifth
cohort has now received the escalated dose, and
this marks the point at which VAL201 entered the
concluding stages of its Phase l/ll clinical trial.
• After reaching a conclusion based upon
analysis of the results from this dose-ranging
study, the Company will then decide whether
to seek a partner or licencing agreement with
a pharma company or proceed to a proprietary
pivotal Phase IIb/III study. The results from the
trial and analysis of the data is anticipated to
start in the current year, following which a
full analysis of the results and findings will be
published. The board is currently evaluating the
optimum strategies for adding value during the
study and commercialising the compound.
1 Industry risk
2 Competition risk
5 Intellectual property risk
• VAL301 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 uterine tissue from the oestrogenic
effects that give rise to Endometriosis, with
minimal impact on bone density or fertility,
• VAL401 completed its first clinical trial in Q3
2017, as an oral treatment of late stage non-
small cell lung adenocarcinoma in a pilot Phase
II Clinical Study in Tbilisi, Georgia. Data from
the completed Phase II clinical trial indicated
a palliative effect and an improvement of
quality of life in the patients treated, in addition
to an indication of improved overall survival
compared to case-matched control patients
and ValiSeek is in receipt of confirmation of
acceptance of its Clinical Study Report.
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 into a clinical trial.
3 Financial risk
5 Intellectual property risk
6 Return on investment
• ValiSeek has recently agreed Letters of Intent
with one European and one US partner, about
the further advancement of VAL401 into its
next proposed clinical trial, on a co-financing
basis, with ValiSeek seeking external financing
towards the next trial.
Competition risk
Clinical and regulatory risk
Intellectual property risk
2
4
5
• 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.
Financial risk
Intellectual property risk
Return on investment
3
5
6
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 06
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.
Technology
VAL101
(GeneICE)
√
√
10. Approval
• ValiRx’s proprietary GeneICE technology platform
enables selective gene targeting and silencing and
its lead compound, VAL101, targets the Bcl-2 gene,
which is associated with several cancers.
• VAL101 has shown Bcl-2 binding and gene down
regulation, thereby restoring cancer cell death
(apoptosis).
• VAL101 is in pre-clinical development with partners:
Toxicology discussions have started
•
• GMP manufacturing methods are being finalised
with partners
The Clinical regulatory package is in development
•
2018
The compound is an optimised, commercially
viable, 2nd generation development of the
VAL101 molecule.
2014
The GeneICE Programme received two
consecutive Eurostars grants based upon
scientific and commercial assessments.
2013
ValiRx awarded a second Eurostars grant
worth €1.6m.
2010
ValiRx awarded a first Eurostars grant
worth €1.2m.
2006
Licensed from Imperial College London.
III
9. Phase III
II
8. Phase II
I
7. Phase I
6. Pre-clinical
5. Manufacture
4. Compound
Selection
3. Screening
& Selection
2. Optimisation
Method
1. Discovery
√
II
Compounds
VAL401
• VAL401 is a reformulation of risperidone, which has
a well-established safety record derived from decades
of clinical use in the treatment of psychosis. The
reformulation enables anti-cancer activity and this is
the subject of multiple granted patents in the US and
other territories.
• VAL401 completed its first clinical trial in Q3 2017,
as an oral treatment of late stage non-small cell lung
adenocarcinoma in a pilot Phase II Clinical Study in
Tbilisi, Georgia. The study measured the impact of
VAL401 treatment on measures of progression-free
survival, quality of life and overall survival of the
patients, as well as recording the pharmacokinetics,
drug metabolism, safety and tolerability of the VAL401
formulation in comparison to historical clinical records
for risperidone.
• Data from the completed Phase II clinical trial indicated
a palliative effect and an improvement
of quality of life in the patients treated, in addition
to an indication of improved overall survival
compared to case-matched control patients.
March 2019
Valiseek announced it had agreed Letters of Intent with
one European and one US partner, about the further
advancement of VAL401 into the next proposed clinical
trial, on a co-financing basis.
Mid 2016
ValiSeek receives Ethics Committee positive opinion
& approval.
Early 2014
ValiRx concludes risk sharing JV with Tangent
Reprofiling Limited to form ValiSeek to progress
the drug VAL401 through its remaining preclinical
development and towards Phase II trials for the
treatment of lung cancer and other oncology
indications.
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
United States
Europe
Japan
Japan
Australia
Patent number
US 9,919,023
EP 2139917
JP 5998161
JP 6456922
AU 2008228274
Date filed
14 March 2008
14 March 2008
14 March 2008
30 April 2014
14 March 2008
The table below provides details of patents in the VAL301 portfolio that have been either fully granted or allowed.
United States
China
Russia
United Kingdom
US 10,023,612
ZL 2012800657582
RU 2014122158
GB 2496135
1 November 2012
1 November 2012
1 November 2012
1 November 2011
Granted/Allowed
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Allowed
Granted
ValiRx plc Annual Report and Accounts 2018Strategic Report √
II
07
Strategic Report
Governance
Financial Statements
Compounds
VAL201
√
VAL301
• VAL301 is being developed for Endometriosis,
a painful and chronic gynaecological condition,
estimated to affect about 1 in 10 women of
reproductive age in the UK alone.
• Same active pharmaceutical ingredient as
VAL201, which has an excellent clinical safety
and tolerability profile.
In pre-clinical trials, the VAL301 treatment has
demonstrated reduced endometrial lesions by
up to 50%, whilst indicating that the treatment
should not affect bone density or exacerbate fertility,
which are problems associated with many current
medical treatments.
Early 2019
Russian Federation and China Patent Allowance.
July 2018
US Patent Grant.
• The Company’s leading anti-cancer therapeutic,
VAL201, is a peptide with a unique mechanism of
action, which was first developed by academics
partly with support from Cancer Research UK.
Currently VAL201 is in clinical trials for the treatment
of prostate cancer and potentially other indications
of hormone induced unregulated growth.
• Mode of action minimises the side effects associated
•
with many current therapies.
• Treatment is safe and well tolerated and preliminary
effectiveness seen throughout the trial.
• Has shown preliminary signs of activity
in prostate cancer.
2019
Dose escalation clinical trial ongoing with
UCLH. The analysis of samples is predicted
to start Q3/19 and the results from independent
third party analysis anticipated Q4/19.
Late 2017
MHRA approval for an extension and upgrade
of the trial enabling wider intra-patient dosing
variation to establish a maximum tolerated
dose and further the full anti-cancer impact
of VAL2011.
2011
ValiRx takes control of the development
of VAL201.
The table below provides details of patents in the VAL401 portfolio that have been either fully granted or allowed.
Country
Australia
Japan
New Zealand
New Zealand
United States
United States
United States
United States
United States
United States
Patent number
AU 2013322612
JP 6434410
NZ 706067
NZ 726050
US 9072743
US 9375433
US 9585887
US 9585890
US 9808462
US 10,111,877
Date filed
26 September 2013
26 September 2013
26 September 2013
11/05/2015
26 September 2013
08 May 2015
27 May 2015
31 May 2016
27 February 2017
27 February 2017
Date Granted/Allowed
14 September 2017
16 November 2018
01 November 2016
31 July 2018
07 June 2015
28 June 2016
07 March 2017
07 March 2017
07 November 2017
30 October 2018
ValiRx plcAnnual Report and Accounts 2018Strategic Report 08
MARKETPLACE
We focus on clinical stage cancer
therapeutic development, taking
proprietary & novel technology
for precision medicines towards
commercialisation and partnering.
Principal Activities
The principal activity of the Group continued
to be that of the development of oncology
therapeutics and companion diagnostics.
The Group has undertaken to develop a novel
and ground-breaking class of therapeutics across
a number of fields in oncology and has taken its
lead compound, VAL201, into Phase I/II clinical
trials. The Company is listed on the Alternative
Investment Market ("AIM") of the London Stock
Exchange in October 2006.
Strategy
The Group has a pipeline of other therapeutic
drugs, which are currently progressing towards
clinical trials. The product focus is in the targeted
analysis and treatment of cancer, but the
technologies can be applied to other fields as well,
such as neurology and inflammatory diseases.
It actively manages projects within its portfolio
as a trading company. The ValiRx business
model spreads the risks of life science technology
development by minimising financial exposure
and running a set of projects to defined
commercial endpoints. This maximises returns
to shareholders by adding value at the earlier
stages where value increases per investment
unit are the greatest.
The Group operates through the following
divisional companies:
1. ValiRx is the therapeutics division, with two
embedded technologies primarily directed at
the treatment of cancers.
2. ValiSeek is a joint venture between ValiRx and
Tangent Reprofiling Ltd to develop VAL401 in
lung cancer and potentially other indications.
Business Review
A review of the development and performance
of the Group, including important events,
progress during the year, and likely future
developments, can be found in the Chairman's
Statement and the Chief Executive's Report.
?
Did you know?
Find out more on our website:
www.valirx.com
ValiRx plc Annual Report and Accounts 2018Strategic Report
09
Prostate Cancer
VAL201
The Company's anti-cancer therapeutic
VAL201 is currently in clinical trials for the
treatment of prostate cancer and potentially
other indications of hormone induced
unregulated growth including endometriosis.
The Phase I/II trial is progressing well and
VAL201 has demonstrated consistently
high safety and tolerability, as well as early
signs of activity throughout the clinical trial.
Following the successful completion of the
stage one of clinical development, with no
serious drug related adverse events noted,
the UK Medicines and Healthcare Products
Regulatory Agency and Research Ethics
Committee have accepted the Company
and clinical team's request for an escalation
to the study. This approval allows for a
substantial increase in the dose of VAL201
being administered to patients, thereby
allowing treatment to more speedily reach
its full therapeutic potential and potential
anti-cancer impact. Further analysis will
be provided in due course following a
more comprehensive evaluation of the
data. Particular emphasis will be placed
on evaluating the pharmacokinetics,
pharmacodynamics and early assessment of
anti-tumour activity in response to VAL201,
using a variety of measurements.
VAL201 selectively prevents tumour
growth by specifically inhibiting the
proliferation of tumour cells. As a result,
tumour growth is suppressed, and
metastasis is significantly reduced. The
approach is a targeted therapeutic with
pre-clinical results that indicate that due to
the specific nature of this treatment, this
therapy is likely to be less toxic than many
other therapeutic options. The VAL201
target is also associated with other cancers
and there is significant potential for
VAL201 to be used as a treatment for other
hormone-induced cancers, such as breast
and ovarian cancers and as a treatment for
endometriosis.
1 in 8 men will get prostate
cancer in their lifetime1
$18.4bn
Global market for prostate cancer
therapeutics by 2025
Endometriosis
VAL201
VAL301
Lung Cancer
VAL401
Endometriosis is a gynaecological
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. The peptide VAL301 is a proposed
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.
170m
Endometriosis remains a common
health problem among women, with an
estimated 170m sufferers globally
$2bn
Endometriosis expected
to surpass $2 billion
VAL401 is the reformulation of anti-
psychotic drug Risperidone, that has
over 20 years of clinical use, into an orally
administered gelatine capsule. The re-
formulation allows the drug to access
previously unexploited anticancer activity
and pre-clinical evidence suggested anti-
cancer activity against adenocarcinoma
types. VAL401 has now completed its
Phase II clinical trial for the treatment of
non-small cell lung cancer and further to
the release of pharmacokinetic data from
the completed clinical trial, the Company
has announced positive formal data
pertaining to disease impact.
The results demonstrate that the VAL401
treatment has a positive impact on the
disease compared to those receiving no
treatment and that the VAL401 treatment
had a measurable improvement on patient
quality of life, in addition to an indication
of improved overall survival compared to
case-matched control patients. As such,
this data advocates for the potential of
VAL401 in treating very late stage cancer
patients in the palliative arena. It also
advocates the potential for VAL401,
in the as yet untested combinations
with, both traditional chemotherapies
and immune-oncology treatments.
77%
UK lung cancer patients are
diagnosed at stage III or IV
$12.2bn
Global market for non-small cell lung
cancer by 20252
1 https://prostatecanceruk.org/prostate-
information/about-prostate-cancer
2 Grand View Research Inc.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
10
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 QS World University Rankings 2015/16
ValiRx plc Annual Report and Accounts 2018Strategic Report 11
?
Did you know?
Find out more on our website:
www.valirx.com
NEW NHS STRATEGY
The new NHS plan is to improve the quality of patient care
and health outcomes. The NHS plan has been drawn up by
those who know the NHS best, including front line health
and care staff, patient groups and other experts.
ValiRx's stated ambition, for some time, has been the
personalisation of novel therapeutics and through genetic
mapping, to facilitate the early detection of cancers.
This ambition has long been at the forefront of much of
ValiRx's work in the oncology arena and it is excellent
news that the Government is now actively discussing and
championing these therapeutic and diagnostic approaches.
With ValiRx currently developing precision therapeutics for
hormone induced cancers, the Company is delighted to be
among the front runners contributing to this government
and NHS-led initiative.
ut of Tax Payers I n
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200Events have taken place across the UK2,500Submissions received from individual groups3.5mPeople have shown interest and shared their opinion55,000More lives saved a year is one of the aims the NHS Long Term Plan seeks to deliver, through the diagnosis of more cancers earlyValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
12
THERAPEUTICS
Our Portfolio
Two drug candidates in clinical stage development.
Others in pre-clinical.
Prostate Cancer
The Company’s leading anti-cancer therapeutic VAL201
is 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 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.
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.
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
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.
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 an indication of improved
overall survival compared to case-matched control patients.
Based on these results, the design of the protocol for
a Phase III study is underway.
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ValiRx plc Annual Report and Accounts 2018Strategic Report 13
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GeneICE
VAL101
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.
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. 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.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
14
CHIEF EXECUTIVE’S REPORT
VAL201
Excellent Safety and tolerability data together
with early efficacy data lead to enhancement of
the VAL201 Dose Escalation Clinical Study
VAL201 continues to perform well in its clinical
trials and has confirmed to date, that beyond
it being well tolerated and safe, preliminary
effectiveness has been shown throughout the
study. The compound had a major trial review
of its protocol at the end of 2017, which the
Medicines and Healthcare products Regulatory
Agency ("MHRA") subsequently approved. This
modification to the trial protocol has allowed the
Company to escalate or accelerate the dosing
regimen of the study, from 4mg to 16mg in
a couple of steps. This has seen a substantial
increase in the dose of VAL201 being administered
to patients and it will allow treatment to more
speedily reach its full therapeutic potential and
potential anti-cancer impact on patients.
In the intervening period since approval was
received to escalate the VAL201 dosing (18/12/17),
the Company has geared up the compound
supply chain to meet increased demand for the
drug, with further screening and recruiting of
patients who are eligible to enter the study. The
current fifth cohort has now received the escalated
dose, and this marks the point at which VAL201
entered the concluding stages of its Phase l/ll
clinical trial.
Src kinase & 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 however, 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.
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. We
have established from our pre-clinical studies that
VAL201’s specific mode of action has the potential
to provide a potent therapeutic effect to manage
the symptoms of this hormonally-induced
disorder, without side effects, including loss of
bone density and/or infertility.
In pre-clinical studies, VAL301 has been shown
to reduce endometrial lesions by up to 50% and
the compound is well placed as a potential
treatment. During the period, VAL301 received
a US patent grant for its use in endometriosis and
this was followed by patent allowances in Russia
and China, post period. Since patent portfolios
and trial results represent the main assets and
value drivers for small biotechnology companies,
VAL301’s substantial patent protection exists as a
validation of its technology.
The Company has seen a year
of strong progress and I am
pleased to report that our
therapeutic compounds have
all made substantive steps
forward towards addressing
unmet needs on their respective
oncological pathways and in so
doing, to develop therapeutics
that can substantially improve
human health and well-being.
The Company has seen a year of strong progress
and I am pleased to report that our therapeutic
compounds have all made substantive steps
forward towards addressing unmet needs on their
respective oncological pathways and in so doing,
to develop therapeutics that can substantially
improve human health and well-being.
VAL401
Completion of VAL401 Phase ll clinical study in
patients with late stage non-small cell lung cancer
The successful completion of the VAL401 Phase ll
clinical study in patients with late stage non-small
cell lung cancer was an important milestone to
reach and a vindication of ValiRx’s investment into
its subsidiary and joint venture, ValiSeek. With results
from the trial showing that palliative stage patients
could expect to see improvements in quality
of life, in addition to an indication of improved
overall survival compared to case-matched control
patients, the clinical trial achieved the objectives
and scientific breakthrough it had anticipated from
its pre-clinical studies. The encouraging 60% overall
response rate offers a strong foundation for a pivotal
Phase III clinical study, with the added measure of
immune competency of the treated patients further
bolstering the results.
Non-small cell lung cancer is the most common
form of cancer, with huge unmet medical needs.
The publication of a peer-reviewed article in
European Journal of Drug Metabolism and
Pharmacokinetics just after the period end,
having been subject to review and scrutiny by
independent experts, provides a welcome and
respected validation of our efforts to address this
condition. Advanced discussions continue with
potential partners regarding VAL401’s next clinical
trial with input being received into the study’s
design and towards first dosing.
ValiRx plc Annual Report and Accounts 2018Strategic Report 15
We continue to have the ambition of moving into
the clinic this year, dependant on funding and
regulatory clearance.
GeneICE/VAL101
The current VAL101 compound has been
designed against a gene expressing Bcl-2 protein,
which has been implicated and associated
with various cancers. It is now an optimised,
commercially viable second generation of the
molecule and is derived from our proprietary
GeneICE platform, a technology licensed from
Imperial College, which is called GeneICE (‘Gene
Inactivation by Chromatin Engineering’).
We were pleased to announce in April 2018, new
positive VAL101 results, which are shown to be
effective in inducing apoptosis (programmed
cell death) in cancer cell models. The results
show a superior apoptotic effect in comparison
to currently available reagents and the studies
involved a wide range of technical and scientific
methodologies demonstrating the enhanced
effect of the compound on the prevention
of cancer growth at cellular biochemical and
genomic levels. This is an excellent outcome and
positions our programme well as we progress the
technology towards the clinic in a full partnership
with commercial and academic collaborators in
Finland, Germany and Denmark.
Outlook
I am very pleased with the progress we have
seen across our drug portfolio during the period
under review and am truly excited by those new
technologies and tools that are revolutionising
our understanding of cancer, many of which
come from ValiRx itself. I look forward to patients
and shareholders alike benefiting from our on-
going efforts to develop new cancer treatments.
Dr Satu Vainikka
Founding Director & Chief Executive Officer
28 May 2019
Developing VAL201
The Company’s leading anti-cancer therapeutic VAL201 is currently in clinical trials for the
treatment of prostate cancer and potentially other indications of hormone induced unregulated
growth including endometriosis. The Phase I/II trial has entered the concluding stages of it’s
study at University College London Hospital (“UCLH”) and this follows the company receiving
approval from the Medicines and Healthcare products Regulatory Agency (“MHRA”) to escalate
VAL201 dosing. The current cohort has already received the escalated dose and UCLH continues
to recruit suitable patients to complete the trial.
Progressing through the dose escalation and expansion stages, the study is then designed
to investigate further safety and tolerability aspects as well as efficacy. Particular emphasis
will be placed on evaluating the pharmacokinetics, pharmacodynamics and early assessment
of anti-tumour activity in response to VAL201, using a variety of measurements including
biomarkers, with biomarkers being key indicators in personalised medicine.
VAL201 selectively prevents tumour growth by specifically inhibiting the proliferation of tumour
cells. As a result, tumour growth is suppressed and metastasis is significantly reduced. The
approach is a targeted therapeutic with pre-clinical results that indicate that due to the specific
nature of this treatment, this therapy is likely to be less toxic than many other therapeutic
options. The VAL201 target is also associated with other cancers and there is significant potential
for VAL201 to be used as a treatment for other hormone-induced cancers, such as breast and
ovarian cancer, alongside endometriosis.
?
Did you know?
Find out more on our website:
www.valirx.com
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 16
RISKS AND UNCERTAINTIES
Our risk management
framework
ValiRx is a biopharmaceutical Group and, in
common with other companies operating
in this field, is subject to a number of risks
and uncertainties. The principal risks and
uncertainties identified by ValiRx for the
year ended 31 December 2018 are below.
omplianc e C
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review our risk
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strategy
IMPLEME N T
Risk Status Key
Risk increased
Risk unchanged
Risk decreased
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Directors
Risk
Description
Mitigation
Change
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.
1
Research and
development
The Group is at a relatively early stage of development
and may not be successful in its efforts to use and to build
a pipeline of product candidates and develop approved
or marketable products. 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 plc Annual Report and Accounts 2018Strategic Report
17
Risk
Description
Mitigation
Change
2
Commercial
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 Clinical Trial pathway.
The business model is to ensure future partnering of these
compounds with larger co-development partners.
Successful commercialisation of ValiRx’s
products is likely to depend on its successful
progress through clinical studies, licensing
and/or partnering and registration.
The Group’s competitors include major
multinational pharmaceutical companies,
biotechnology companies and research
institutions. Many of its competitors have
substantially greater financial, technical and
other resources, such as larger numbers of
research and development staff. 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.
3
Cash flow
4
Regulatory
The Group has a history of operating losses which are
anticipated to continue until the Group can 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.
As at 31 December 2018, the Group had
cash resources of £372,872 which the Group
considers sufficient to finance its operational
activities until at least Q2 2019. Since the
year end, the Group has raised through share
issues further funding of £0.926m.
The Group's operations are subject to laws, regulatory
approvals and certain governmental directives,
recommendations and guidelines relating to, amongst other
things, product health claims, occupational safety, laboratory
practice, the use and handling of hazardous materials,
prevention of illness and injury, environmental protection and
human clinical studies. There can be no assurance that future
legislation will not impose further government regulation,
which may adversely affect the business or financial condition
of the Group.
The Group manages its regulatory risk by
working closely with its expert regulatory
advisors and, where appropriate, seeking
advice from bodies on regulatory risk relevant
to the Group’s programmes and activities.
5
Intellectual
property
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 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
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 18
RISKS AND UNCERTAINTIES continued
Risk
Description
Mitigation
Change
6
Operational
7
Return on
investment
8
Environmental
matters
The Board continually monitors these risks
and uncertainties and takes corrective action
if considered necessary.
The Group's continuing development and future prospects
depend to a significant degree on the experience,
performance and continued service of its senior management
team, including the Directors. The Group has invested in its
management team at all levels. The Directors also believe
that the senior management team is appropriately structured
for the Group's size and is not overly dependent upon any
particular individual. The Group has entered into contractual
arrangements with these individuals with the aim of securing
the services of each of them. Retention of these individuals
or the identification of suitable replacements, however,
cannot be guaranteed. The loss of the services of any of the
Directors or other members of the senior management team
and the costs of recruiting replacements may have a material
adverse effect on the Group and its commercial and financial
performance and reduce the value of an investment in the
Ordinary Shares.
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 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. 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.
ValiRx plc Annual Report and Accounts 2018Strategic Report 19
Risk
Description
Mitigation
Change
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.
9
Clinical trials
Successful commercialisation of the Group’s products is
dependent on the successful progress through clinical studies
and registration. Development of product candidates involves
an expensive, 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.
Clinical trials could be delayed or prevented from completion
by a number of factors, including:
• delays or failures to raise additional funding;
•
results of future meetings with the MHRA, EMA, FDA and/
or other regulatory bodies;
• a limited number of, and competition for, suitable patients
with particular types of cancer for enrolment in our clinical
trials; delays or failures in obtaining regulatory approval to
commence a clinical trial;
• delays or failures in obtaining sufficient clinical materials;
• protocol amendments;
•
• the need to expand the clinical trial;
• unforeseen safety issues.
failure of patients to complete the clinical trial;
Additionally, the Group's clinical trials may be suspended
or terminated at any time by the MHRA, other regulatory
authorities, or by the Group itself. Any failure to complete, or
a significant delay in completing, clinical trials for the Group's
product candidates could harm the commercial prospects for
its product candidates, and therefore, its financial results.
Dr Satu Vainikka
Founding Director & Chief Executive Officer
28 May 2019
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 20
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
Gerry Desler
Founding Director &
Chief Financial Officer
Dr George Morris
Founding Director &
Chief Operating Officer
Dr Satu Vainikka
Founding Director &
Chief Executive Officer
Kevin Alexander
Non-executive Director
Committee Membership
Audit and Risk Committee
Nomination Committee
Remuneration Committee
ValiRx plc Annual Report and Accounts 2018Governance
21
Strategic Report
Governance
Financial Statements
Oliver de Giorgio-Miller
Chairman
Gerry Desler
Founding Director & Chief Financial Officer
Appointment:
Oliver joined the Board of ValiRx plc in May 2011.
Appointment:
Gerry joined the Board in May 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.
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.
• 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.
Dr George Morris
Founding Director & Chief Operating Officer
Appointment:
George joined the Board in October 2006.
Dr Satu Vainikka
Founding Director & Chief Executive Officer
Appointment:
Satu joined the Board in October 2006.
Experience and Accreditation:
• George has over 25 years’ experience in biological and medical research
Experience and Accreditation:
• Satu has many years’ experience of the biotechnology industry,
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.
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
• Prestigious “embo” fellowship for Postdoctoral research at Imperial
Cancer Research (now CRC).
Board of Directors
Kevin Alexander
Non-executive Director
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.
Chairman
Non Executive
Directors
Executive
Directors
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
22
CORPORATE GOVERNANCE
for the year ended 31 December 2018
The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and is subject to the continuing requirements of the AIM
Rules. The Board believes in the importance of corporate governance and is aware of its responsibility for overall corporate governance, and for supervising
the general affairs and business of the Company and its subsidiaries. It is committed to developing and applying high standards of corporate governance.
As such, the Board seeks to apply the QCA Code, revised in April 2018 as devised by the Quoted Companies Alliance. For full details go to our website at
www.valirx.com/aim-rule-26/corporate-governance/.
The Quoted Companies Alliance is the independent membership organisation that champions the interests of small to mid-size quoted companies.
The QCA Code takes key elements of good governance and applies them in a manner which is workable for the different needs of growing companies.
Our strategy and business model
ValiRx is a biopharmaceutical company focused on developing personalised, otherwise called precision medicines to bring more advanced therapeutic
options for the treatment of cancer.
For many years the Company has progressively exploited its proprietary epigenomic technology, which has led to the discovery of promising therapeutics
that may prove in clinical trials to treat, among other conditions, cancer safely and more effectively than currently used chemotherapeutics, which act
indiscriminately, attacking the whole body and causing irreparable damage to normal cellular processes.
ValiRx has four lead drug candidates at varying stages of development for multiple indications. The Company's business model focuses on out-licensing
therapeutic candidates early in the development process. By aiming for early-stage value creation, the company reduces costs considerably while increasing
the potential for realising value. The Group is already in licensing discussions with major players in the oncology field. ValiRx operates through the following
divisional companies:
ValiPharma: a biopharmaceutical company focused on developing personalised medicines to bring more advanced therapeutic options for the treatment of
cancer. Currently, ValiPharma is primarily focused on three drug candidates in clinical and late stage pre-clinical development for four indications – androgen
independent prostate cancer (VAL201), hormone refractory prostate cancer (VAL201), endometriosis (VAL301), and pancreatic cancer (VAL101);
ValiSeek: a joint venture company with Tangent Reprofiling Limited (a SEEK Group company), which was formed in 2014 and has progressed product VAL401
through pre-clinical development and into a Phase II clinical trial for the treatment of non-small cell lung cancer.
ValiRx’s therapeutics have each shown potential for meeting hitherto unmet clinical needs by existing treatments, have worldwide patent filings and agreed
commercial rights. They originate or derive from World class institutions, such as Cancer Research UK and Imperial College.
ValiRx plc Annual Report and Accounts 2018Governance 23
Board of Directors
During the year under review there were no changes to the composition of the Board as set out on page 16.
The Board currently consists of three Executive Directors and two Non-Executive Directors, including the Chairman, who collectively have the scientific,
financial, legal, and business experience necessary to advance the Company and apply corporate governance best practices. The Board is satisfied with its
composition and the balance between Executive and Non-Executive Directors.
A minimum of ten Board meetings are held each year at which it is expected that all Directors attend in addition to relevant Committee meetings,
General Meetings and the Annual General Meeting.
Where Directors are unable to attend meetings due to conflicts in their schedules, they will receive the papers scheduled for discussion in the relevant
meetings, giving them the opportunity to relay any comments to the Chairman in advance of the meeting. They may also attend the meeting by telephone.
Directors are required to leave the meeting where matters relating to them, or which may constitute a conflict of interest to them, are being discussed.
The following table shows the Directors' attendance at scheduled Board meetings, which they were eligible to attend in the 12-month period to
December 2018:
Director
K J Alexander
O De Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
Attendance at Board Meetings
11/11
11/11
11/11
9/11
10/11
Matters reserved for the Board
• Approval of the Group vision, values and overall governance framework;
• Approval of the Company's Annual Report and Accounts and Half Yearly Financial Statements;
• Approval of Group financial policy;
• Approval to enter into discussions with Biotech companies reference potential joint-partnering projects or licensing of Company's preclinical
and clinical assets;
• Approval of the Company's long-term finance plan and annual capital budget;
• Approval of any significant change in Group accounting policies or practices;
• Approval of all circulars, listing particulars, resolutions and corresponding documentation sent to shareholders;
• Establishing committees of the Board, approving their terms of reference (including membership and financial authority), reviewing their activities and,
where appropriate, ratifying their decisions;
• Approval of this schedule of Matters Reserved to the Board.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
24
CORPORATE GOVERNANCE continued
for the year ended 31 December 2018
The Board is responsible to the Company's shareholders with its main objective to increase the value of assets and long-term sustainability of the Company.
The Board reviews business opportunities and determines the risks and control framework. It also makes decisions on budgets, Group strategy and major
capital expenditure. The day-to day management of the business is delegated to the Executive Directors.
Board Committees
In addition to the Executive Committee, the Board has established a Remuneration Committee, an Audit and Risk Committee, and a Nomination and
Governance Committee, which also report into ValiRx's Board.
Executive Committee
The Executive Committee is in charge of the daily management of the Group and is mandated to prepare and plan the overall policies and strategies of the
Company for approval by the Board. It may approve intra-Group transactions, provided that they are consistent with the consolidated annual budget of the
Company, as well as specific transactions with third parties provided that the cost per transaction is within specified spending limits. It informs the Board at
its next meeting on each such transaction.
Prior to the beginning of each fiscal year, the Executive Committee submits to the Board those measures that it deems necessary to be taken in order
to meet the objectives of the Company and a consolidated budget for approval. This committee comprises:
Dr S Vainikka
Dr G S Morris
G Desler
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Audit and Risk Committee
The Audit and Risk Committee meets at least twice per annum and is responsible for assisting the Board in carrying out its oversight responsibilities in
relation to corporate policies, risk management, internal control, internal and external audit and financial and regulatory reporting practices. The Committee
has an oversight function, providing a link between the external auditors and the Board; it also determines the terms of engagement of the Company's
auditors. The current members of the Audit and Risk Committee are:
O De Giorgio-Miller
K J Alexander
Dr G S Morris
Non-Executive Chairman
Non-Executive Director
Chief Operating Officer
Remuneration Committee
The Remuneration Committee meets at least twice per annum to determine and agree with the Board the framework or broad policy for the remuneration
of executive directors of the Company and advises on the overall remuneration policies applied throughout the Company. The objective of this committee
is to attract, retain and motivate executives capable of delivering the Company's objectives. Agreed personal objectives and targets including financial and
non-financial metrics are set each year for the executive directors and other personnel and performance measured against these metrics. The committee is
made up of: Non-Executive Directors, namely:
O De Giorgio-Miller
K J Alexander
Non-Executive Chairman
Non-Executive Director
The Chief Executive Officer is consulted on remuneration packages and policy but does not attend discussions regarding her own package.
The Board determines the remuneration and terms and conditions of the appointment of Non-Executive Directors.
Nomination Committee
The Nomination Committee is a sub-committee of the whole Board responsible for the selection and proposal to the Board of suitable candidates for
appointment as Executive and Non-Executive Directors. The Committee may engage external search consultants to identify candidates for Board vacancies
before recommending a preferred candidate to the Board for consideration. The Committee comprises:
Dr S Vainikka
Dr G S Morris
G Desler
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
ValiRx plc Annual Report and Accounts 2018Governance
25
Independence of Directors
The Directors acknowledge the importance of the principles of the QCA Code which recommends that a company should have at least two independent
Non-Executive Directors.
The Board considers it has sufficient independence on the Board and, that all the Non-Executive Directors are of sufficient competence and calibre to
add strength and objectivity to the Board, and bring considerable experience in scientific, operational and financial development of biopharmaceutical
products and companies. Specifically, the Board has considered and determined that O de Giorgio-Miller and K J Alexander are independent in character and
judgement, whether or not they:
• Have been an employee of the Company or Group within the last five years;
• Have been an employee of the Company or Group within the last five years;
• Have, or have had within the last three years, a material business relationship with the Company either directly, or as a Director or senior employee
of a body that has such a relationship with the Company;
• Have received or receives additional remuneration from the Company apart from a Director's fee;
• Have close family ties with any of the Company's advisers, directors or senior employees;
• Holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
• Have served on the Board for more than nine years form the date of their first election;
• Have a close family tie with any of the Company's advisers, Directors or senior employees.
The Company Secretary maintains a register of outside interests and any potential conflicts of interest are reported to the Board. The Non-Executive Directors
have regular opportunities to meet without Executive Directors being present (including time after Board and Committee meetings).
Professional Development
Throughout their period in office, the Directors are continually updated on the Group's business, the competitive and regulatory environments in which it
operates, corporate social responsibility matters and other changes affecting the Group and the industry it operates in as whole by written briefings and
meetings with senior executives. Directors are also advised on appointment of their legal and other duties and obligations as a Director of an AIM-Listed
company both in writing and in face to face meetings with the Company Secretary and Nominated Adviser ("NOMAD").
All of the Directors are subject to election by shareholders at the first Annual General Meeting ('AGM') after their appointment to the Board. Non-Executive
Directors will continue to seek re-election at least once every three years.
The current Board members are individuals with extensive industry-specific experience as well as professionals that bring to the Board the skill sets required
to meet its strategic, operational and compliance objectives. Their suitability as Directors has therefore been determined largely on the basis of their ability
to deliver outcomes in accordance with the company's short and longer-term objectives and thus add value to shareholders.
Board effectiveness and performance evaluation
ValiRx considers that assessments of the performance of the Board, the Board committees, the Chairman, the Chief Executive, the Company Secretary and
each of the individual Non-Executive Directors are pivotal to good corporate governance, bringing significant benefits and performance improvements
on three levels: organisational; board and individual member level. Establishing an effective process for board evaluation sends a positive signal to the
organisation that board members are committed to acting professionally.
Performance assessments are conducted annually across the board, applying a matrix of key areas of focus to identify collective and individual strengths
and weaknesses within the Company for continuous improvement.
Board Composition:
• Appropriate ratio between Executive and Independent Directors;
• Awareness of social, professional and legal responsibilities at individual, company and community level; ability to identify independence conflicts;
applies sound professional judgement; identifies when external counsel should be sought; upholds Board confidentiality; respectful in every situation.
• Effective in working within defined corporate communications policies; makes constructive and precise contribution to the Board both verbally
and in written form;
• Negotiation skills to engender stakeholder support for implementing Board decisions; and
• Experienced with the mechanisms, controls and channels to deliver effective governance and manage risks.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
26
CORPORATE GOVERNANCE continued
for the year ended 31 December 2018
Effectiveness of the Board of Directors in:
• Monitoring financial performance against agreed financial objectives;
• Monitoring the implementation of the strategy approved by the Board;
• Appointing, removing and monitoring the performance of the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer
and Company Secretary;
• Ensuring appropriate succession planning for Board members and senior management via the Nomination and Governance Committee;
• Approving and monitoring financial and other reporting;
• Approving and monitoring major capital expenditure, capital management, funding, acquisitions and divestments;
• Overseeing risk management, control, accountability and compliance systems;
• Setting standards of behaviour to enhance the reputation of the Company in the market and the community;
• Ensuring proper organisation and management so as to achieve conformity goals across all aspects of the business;
• Setting appropriate delegated powers between CEO and Board of Directors;
• Ensuring quality and continuity of relations with the Group CEO, members of Committees, managers and heads of control functions: and
• Setting clear strategy for the Company reflecting goals short to mid-long term.
Attributes of the Chairman to:
• Promote and oversee the highest standards of corporate governance within the Board and the Company;
• Lead the Board and discussions on all proposals put forward by the Executive team;
• Set an agenda for the Board focused on strategic matters, forward looking and evaluates current business;
• Maintain a proper process to ensure compliance with Board policy on matters reserved to the Board for consideration;
• Ensure that Board members receive accurate, timely and clear information to enable them to monitor performance, make sound decisions and give
appropriate advice to promote the success of the Company;
• Manage Board meetings so that sufficient time is allowed for the discussion of complex or contentious issues and that all members' contributions are
encouraged and valued;
• Chair serve on or attend Committees of the Board;
• Maintain an effective and balanced team, initiate change and, supported by the Nomination Committee, plan non-executive director succession;
• Encourage active engagement by all members of the Board.
• Create the environment for overall Board and individual director effectiveness including promotion of an appropriate induction programme for
new directors, creating the opportunity for maintenance of the relevant skills and knowledge required to fulfil the director role on the Board and its
committees and ensuring the Board undertakes an annual evaluation of its own performance, that of its committees and that of individual directors,
including the Chairman; and
• Take the lead in identifying and meeting the development needs of individual directors and to address the development needs of the Board as a whole
with a view to enhancing its overall effectiveness as a team.
Implementing the strategic objectives set by the Board;
Effectiveness of Executive Management in:
•
• Operating within the risk parameters set by the Board;
• Operational and business management of the Company;
• Managing the Company's reputation and operating performance in accordance parameters set by the Board;
• The day-to-day running of the Company;
• Providing the Board with accurate, timely and clear information to enable the Board to perform its responsibilities;
•
• Approving capital expenditure (except acquisitions) within delegated authority levels.
Interfacing with shareholders and stakeholders, Nomad and Broker; and
Structure and competency of Committees to:
• Advise the Board on the suitability of external auditors and critical accounting policies for financial reports, in particular YE audited accounts, and the
Company's risk management and internal control systems;
• Provide independent and transparent pay arrangements linked to achievements over a given period; and
• Lead the Board appointment and succession planning process considering the requirements of the Company.
ValiRx plc Annual Report and Accounts 2018Governance
27
Risk management
An important aspect of risk management is to put in place and consistently work according to unambiguous Standard Operating Procedures (SOPs). A SOP
is a compulsory instruction to carry out a series of operations correctly and always in the same manner, avoiding deviations or non-conformances to ensure
that the integrity of scientific investigations and drug manufacture are consistently maintained.
ValiRx operates an internal Quality Management System (QMS) comprising 14 SOPs to comply with the most stringent quality standards expected of a drug
development company. Furthermore, the Company regularly audits its suppliers to ensure the manufacturing process, quality process, and also the drug's
shipment process all conform to the standard required.
Corporate Social Responsibility
The Board recognises the growing awareness of social, environmental and ethical matters and it endeavours to take into account the interest of the Group's
stakeholders, including its investors, employees, suppliers and business partners, when operating the business.
Employment
The Group endeavours to appoint employees with appropriate skills, knowledge and experience for the roles they undertake and thereafter to develop and
incentivise staff. The Board recognises its legal responsibility to ensure the wellbeing, safety and welfare of its employees and maintain a safe and healthy
working environment for them and for its visitors.
Relations with shareholders
The Board attaches considerable importance to providing shareholders with clear and transparent information on the Group's activities, strategy, and
financial position. Details of all shareholder communications are provided on the Group's website, www.valirx.com.
The Board ensures that the Group's strategic plans have been carefully reviewed in terms of their ability to deliver long-term shareholder value. Fully
audited Annual Reports are published, and Interim Results statements notified via Regulatory Information Service announcements. All financial reports and
statements are available on the Company's website.
Private shareholders constitute the main body of investors in ValiRx. As such, the Board regards the annual general meeting as the principal opportunity for
shareholders to meet and discuss the Group's business with the Directors. There is an open question and answer session during which shareholders may ask
questions both about the resolutions being proposed and the business in general. Shareholders vote on each resolution, by way of a poll. For each resolution
we announce the number of votes received for, against and withheld and subsequently publish them on our website.
The Directors are also available after the meeting for an informal discussion with shareholders. Moreover, the Company's contact details are provided on the
website: info@valirx.com and https://valirx.wpengine.com/contact-us/contact/ should shareholders wish to communicate with the Board.
The Directors actively seek to build a mutual understanding of objectives with institutional shareholders. The Chair and CEO make presentations to
institutional shareholders and analysts immediately following the release of the full-year and half-year results. We communicate with institutional investors
frequently through a combination of formal meetings, roadshows and informal briefings with management.
The majority of meetings with shareholders and potential investors are arranged by the Company's broker. Following meetings, the broker provides feedback
to the board from all fund managers met, from which sentiments, expectations and intentions may be gleaned.
In addition, we review analysts' notes to achieve a wide understanding of investors' views.
The Board believes that the Group has a strong governance culture, and this has been reinforced by the adoption of the QCA Code and recognition of
the ten broad principles of corporate governance set out in the QCA Code, which the Board continually considers in a manner appropriate for a company
of its size.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 28
QCA PRINCIPLES
Principle
How Company complies
1
Establish a strategy and business
model which promote long-term
value for shareholders
2
Seek to understand and meet
shareholder needs and expectations
ValiRx is a biopharmaceutical company focused on developing personalised, otherwise called
precision medicines to bring more advanced therapeutic options for the treatment of cancer.
For many years the Company has progressively exploited its proprietary epigenomic technology,
which has led to the discovery of promising therapeutics that may prove in clinical trials
to treat, among other conditions, cancer safely and more effectively than currently used
chemotherapeutics, which act indiscriminately, attacking the whole body and causing irreparable
damage to normal cellular processes.
ValiRx has four lead drug candidates at varying stages of development for multiple indications.
The Company’s business model focuses on out-licensing therapeutic candidates early in the
development process. By aiming for early-stage value creation, the company reduces costs
considerably while increasing the potential for realising value. The Group is already in licensing
discussions with major players in the oncology field. ValiRx operates through the following
divisional companies:
ValiPharma: a biopharmaceutical company focused on developing personalised medicines to bring
more advanced therapeutic options for the treatment of cancer. Currently, ValiPharma is primarily
focused on three drug candidates in clinical and late stage pre-clinical development for four
indications – androgen independent prostate cancer (VAL201), hormone refractory prostate cancer
(VAL201), endometriosis (VAL301), and pancreatic cancer (VAL101);
ValiSeek: a joint venture company with Tangent Reprofiling Limited (a SEEK group company), which
was formed in 2014 and has progressed product VAL401 through pre-clinical development and
into a Phase II clinical trial for the treatment of non-small cell lung cancer; and
ValiRx (Finland): ValiFinn’s specialist competency lies in epigenomics, a rapidly advancing field that
enables pairing a prognostic and/or predictive biomarker with a targeted drug. This is a key part of
personalised medicine, particularly in cancer patients.
ValiRx’s therapeutics have each shown potential for meeting hitherto unmet clinical needs by
existing treatments, have worldwide patent filings and agreed commercial rights. They originate or
derive from Word class institutions, such as Cancer Research UK and Imperial College.
The Board is accountable to shareholders and other stakeholders and is ultimately responsible for
the implementation of sound corporate governance practices throughout the Group. Our Board
of Directors is committed to ensuring that the Group adheres to high standards of corporate
governance in the conduct of its business.
The Board attaches considerable importance to providing shareholders with clear and transparent
information on the Group's activities, strategy, and financial position. Details of all shareholder
communications are provided on the Group's website.
Private shareholders constitute the main body of investors in ValiRx. As such, the Board regards
the annual general meeting as the principal opportunity for shareholders to meet and discuss
the Group’s business with the Directors. There is an open question and answer session during
which shareholders may ask questions both about the resolutions being proposed and the
business in general. The Directors are also available after the meeting for an informal
discussion with shareholders. Moreover, the Company’s contact details are provided on the
website: info@valirx.com and www.valirx.com/contact-us/contact/ should shareholders wish
to communicate with the Board. Announcements on the Group’s half and full-year results
presenting all shareholders with an assessment of the Group’s position and prospects are found
on www.valirx.com/investor-relations/annual-reports/. Shareholders vote on each resolution,
by way of a poll. For each resolution we announce the number of votes received for, against
and withheld and subsequently publish them on our website.
The directors actively seek to build a mutual understanding of objectives with institutional
shareholders. The Chair and CEO make presentations to institutional shareholders and analysts
immediately following the release of the full-year and half-year results. We communicate with
institutional investors frequently through a combination of formal meetings, roadshows and
informal briefings with management.
The majority of meetings with shareholders and potential investors are arranged by the Company’s
broker. Following meetings, the broker provides feedback to the board from all fund managers met,
from which sentiments, expectations and intentions may be gleaned.
In addition, we review analysts’ notes to achieve a wide understanding of investors’ views.
ValiRx plc Annual Report and Accounts 2018Governance 29
Strategic Report
Governance
Financial Statements
Principle
How Company complies
3
Take into account wider stakeholder
and social responsibilities and their
implications for long-term success
The Board recognises its prime responsibility under UK corporate law is to promote the success of
the Company for the benefit of its members as a whole. The Board also understands that it has a
responsibility towards employees, partners, customers, suppliers, and the patients who ultimately
benefit from its research and drug development programmes. Our corporate social responsibility
approach continues to meet these expectations. The Board also understands that it has a
responsibility to take into account, where practicable, the social, environmental and economic
impact of its approach.
Responsibility for the Company’s corporate activities lies with the Senior Management Team
(“SMT”) who set the Group’s strategic approach and develop key policies. The Company engages
with stakeholders through a number of channels, which include shareholder communications via
the Regulatory News service (“RNS”), the Company’s website and its Annual Report & Accounts,
results presentations and the Annual General Meeting and via interviews in the broadcast media
and attendance at investor shows around the country.
Corporate communication and shareholder engagement through these channels not only gives
shareholders a deeper insight into and understanding of the Company’s activities and of its
development, but it also invites feedback, either face-to-face at such meetings or via email, on how
the Company can improve its communications with stakeholders to better support their needs.
By so doing, such engagement enables the SMT to more effectively work with stakeholders in the
future to their mutual advantage. The Board receives formal feedback from the SMT on a quarterly
basis on the nature of interaction with the stakeholders they meet during each period.
The SMT is comprised of the Chief Executive Officer, Chief Operating Officer, and the Chief Financial
Officer who take leading roles in key strategic areas such as Gender, HR, and Environmental
Management. The SMT is also responsible for ensuring global compliance with key internal and
external policies including:
•
•
•
•
•
Anti-human trafficking and slavery policy
Diversity policy
Anti-corruption and bribery policy
Whistleblowing policy
UK modern slavery act.
4
Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
An important aspect of risk management is to put in place and consistently work according to
unambiguous Standard Operating Procedures (SOPs). A SOP is a compulsory instruction to carry
out s series of operations correctly and always in the same manner, avoiding deviations or non-
conformances to ensure that the integrity of scientific investigations and drug manufacture are
consistently maintained.
ValiRx operates an internal Quality Management System (QMS) comprising 14 SOPs to comply with
the most stringent quality standards expected of a drug development company. Furthermore, the
Company regularly audits its suppliers to ensure the manufacturing process, quality process, and
also the drug’s shipment process all conform to the standard required.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 30
QCA PRINCIPLES continued
Principle
How Company complies
4 CONT.
Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
SOP
001
002
003
004
005
006
TITLE
DESCRIPTION
Quality Management
SOP describes the QMS, its structure and maintenance
at ValiRx.
ValiRx Organisation and
Training
SOP describes the organisation of ValiRx as a company,
and the internal training programme.
Clinical Project
Management
Document Review and
Approval
Document Management,
Filing and Archiving
Selection and
Management of Vendors/
Consultants
007
Contracts
008
Investigational Medicinal
Product Management
009
Investigator’s Brochure
010
Safety Reporting
011
Clinical Trial Transparency
SOP describes the general process by which
ValiRx manages and coordinates the development
programme for an Investigational Medicinal Product
(IMP).
SOP describes the general process by which ValiRx
reviews and approves essential documents in support
of product development activities.
SOP describes the general process by which ValiRx Plc
manages, files and archives essential documents in
support of product development activities.
SOP describes the process followed at ValiRx to
identify, select and manage external service providers.
SOP describes the process followed at ValiRx to ensure
appropriate contracts and agreements are in place
with vendors or consultants, and that these are put in
place in a timely manner.
SOP describes the general process for ValiRx to
establish that a chain of custody is maintained
and documented for the supply of Investigational
Product for a clinical trial from release from the
manufacturer site, shipment, delivery and receipt at an
investigational site, accountability, and then for return
or destruction of used/unused product.
SOP describes the process for ValiRx to prepare and
maintain an Investigator’s Brochure, including review
process.
SOP describes the responsibilities for reporting of
safety information from clinical trials to Competent
Authorities, Ethics Committees, Investigators and
other parties as appropriate.
SOP describes the process for ValiRx to follow when
registering clinical trials and posting trial results in
order to fulfil requirements.
012
013
014
Medical Monitoring of
Clinical Trials
SOP describes the role of the Medical Monitor (MM)
in maintaining and documenting safety oversight and
pharmacovigilance during clinical trials.
Risk Management,
Issue Escalation and
Management of Corrective
and Preventative Actions
(CAPA)
SOP describes the processes implemented by ValiRx to
manage risk, escalate issues and ensure Corrective and
Preventative Actions (CAPA) are in place for all clinical
studies where ValiRx is the Sponsor.
Management of Non-
compliance and Serious
breaches
SOP describes the procedures for identifying,
documenting and reporting non-compliance,
misconduct and serious breaches of the trial protocol
and associated approved documents, and the
principles of Good Clinical Practice (GCP), SOPs and all
applicable regulatory requirements.
ValiRx plc Annual Report and Accounts 2018Governance 31
Principle
How Company complies
5
Maintain the board as a well-functioning,
balanced team led by the chair
Board Composition
The Board currently consists of three Executive Directors and two Non-Executive Directors,
including the Chairman, who collectively scientific, financial, legal, and business experience
necessary to advance the Company and apply corporate governance best practices. The Board is
satisfied with its composition and the balance between Executive and Non-Executive Directors.
These are:
Oliver de Giorgio-Miller (Senior Independent Non-Executive Chairman)
Dr Satu Vainikka (Chief Executive Officer)
Dr George Morris (Chief Operating Officer)
Gerry Desler (Executive Chief Financial Officer)
Kevin Alexander (Independent Non-Executive Director)
Role of the Chairman
The core functions of the Chairman include, inter alia:
• Setting the ethical tone for the ValiRx Board and the Company;
• Providing overall leadership to the Board;
• Formulating (with the CEO and Company Secretary) the yearly work plan for the Board against
agreed objectives, and playing an active part in setting the agenda for board meetings;
• Presiding over board meetings and ensuring that time in meetings is used productively;
• Managing conflicts of interest;
• Acting as the link between the Board and Management and particularly between the Board and
the CEO;
• Ensuring that complete, timely, relevant, accurate, honest and accessible information is placed
before the Board to enable Directors to reach an informed decision;
• Monitoring how the Board works together and how individual Directors perform and interact
at meetings;
• Ensuring that good relations are maintained with the Company’s major shareholders and its
strategic stakeholders, and presiding over shareholders’ meetings;
• Upholding rigorous standards of preparation for meetings, and
• Ensuring that decisions by the board are executed.
Further responsibilities of the Chairman are to identify and participate in selecting Board members
(via the Nomination and Governance Committee), and overseeing a formal succession plan for the
Board, CEO and certain senior management appointments such as the Chief Operating Officer and
Chief Financial Officer. The Chairman also ensures that all Directors are appropriately made aware
of their responsibilities through a tailored induction programme, and that a formal programme
of continuing professional education is adopted at Board level. Also, the Chairman ensures that
Directors play a full and constructive role in the affairs of the Company and take a lead role in the
process for removing non-performing or unsuitable Directors from the Board.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 32
QCA PRINCIPLES continued
Principle
CONT.
5
Maintain the board as a well-functioning,
balanced team led by the chair
How Company complies
Role of the CEO
• Leads and manages the day-to-day running of the Group’s business in accordance with the
business plans and within the budgets approved by the Board;
• Leads the management to ensure effective working relationships with the Chairman and
the Board by meeting or communicating with the Chairman on a regular basis to review key
developments, issues, opportunities and concerns;
• Develops and proposes the Group’s strategies and policies for the Board’s consideration;
•
Implements, with the support of the management team, the strategies and policies as approved
by the Board and its committees in pursuit of the Group’s objectives;
• Maintains regular dialogue with the Chairman on important and strategic issues facing the
Group, and ensures bringing these issues to the Board’s attention;
• Ensures that the management gives appropriate priority to providing reports to the Board which
contain relevant, accurate, timely and clear information necessary for the Board to fulfil its duties;
• Ensures that the Board, especially the Chairman, is alerted to forthcoming complex, contentious
or sensitive issues affecting the Group;
• Leads the communication programme with stakeholders including shareholders; and
• Conducts the affairs of the Group in accordance with the practices and procedures adopted by
the Board and promotes the highest standards of integrity, probity and corporate governance
within the Group.
Role of the Non-Executive Directors
As members of the Board, all Non-Executive directors have key accountabilities, which include the
following:
• Provision of entrepreneurial leadership of the Company within a framework of prudent and
effective controls, which enable risk to be assessed and managed;
• Setting the Company's strategic aims, ensure that the necessary financial and human resources
are in place for the Company to meet its objectives, and review management performance;
• Setting the Company's values and standards and ensure that its obligations to shareholders are
understood and met; and
• Constructively challenge and help develop strategy, participate actively in the decision-making
process of the Board, and scrutinise the performance of management in meeting agreed goals
and objectives.
Independence
As recommended in the UK Corporate Governance Code, the Board will identify in the annual
report each Non-Executive Director it considers to be independent. The Board will determine
whether the Director is independent in character and judgement and whether there are
relationships or circumstances which are likely to affect, or could appear to affect, the Director's
judgement. The Board will state its reasons if it determines that a Director is independent
notwithstanding the existence of relationships or circumstances which are relevant to its
determination, including if the Director:
• Has been an employee of the Company or group within the last five years;
• Has, or has had within the last three years, a material business relationship with the Company
either directly, or as a Director or senior employee of a body that has such a relationship with the
Company;
• Has received or receives additional remuneration from the Company apart from a Director's fee;
• Has close family ties with any of the Company's advisers, directors or senior employees;
• Holds cross-directorships or has significant links with other directors through involvement in
other companies or bodies; or
• Has served on the Board for more than nine years form the date of their first election;
• Has a close family tie with any of the Company's advisers, Directors or senior employees.
Role of the Board committees
The Board has established three committees: remuneration, audit and risk and
nomination and governance. All of these committees have terms of reference,
which set out clearly their role, stating whether it is to take decisions or make
recommendations to the Board of Directors. These are available on the Company’s
website (www.valirx.com/investor-relations/corporate-governance).
ValiRx plc Annual Report and Accounts 2018Governance 33
Principle
How Company complies
6
Ensure that between them the directors
have the necessary up-to-date experience,
skills and capabilities
7
Evaluate board performance based on
clear and relevant objectives, see king
continuous improvement
Biographical details of the Directors can be found on www.valirx.com/about-us/board-directors
ValiRx seeks to recruit the best candidates at Board level and considers candidates on merit and
against objective criteria and with due regard for the benefits of diversity on the Board (including
gender), taking care that appointees have the necessary experience and time available to allocate
to the position. Each Director appointed by the Board is subject to election by the shareholders
at the first AGM after their appointment. Following advice from the Nomination and Governance
Committee, the Board has concluded that each Director is qualified for election or re-election.
The current Board members are individuals with extensive industry-specific experience as well as
professionals that bring to the Board the skill sets required to meet its strategic, operational and
compliance objectives. Their suitability as Directors has therefore been determined largely on the
basis of their ability to deliver outcomes in accordance with the company’s short and longer-term
objectives and thus add value to shareholders.
ValiRx considers that assessments of the performance of the Board, the Board committees, the
Chairman, the Chief Executive, the Company Secretary and each of the individual Non-Executive
Directors are pivotal to good corporate governance, bringing significant benefits and performance
improvements on three levels: organisational; board and individual member level. Establishing
an effective process for board evaluation sends a positive signal to the organisation that board
members are committed to acting professionally.
Performance assessments are conducted annually across the board, applying a matrix of key areas
of focus to identify collective and individual strengths and weaknesses within the Company for
continuous improvement.
Board Composition
• Appropriate ratio between Executive and Independent Directors;
• Awareness of social, professional and legal responsibilities at individual, company and
community level; ability to identify independence conflicts; applies sound professional
judgement; identifies when external counsel should be sought; upholds Board confidentiality;
respectful in every situation;
• Effective in working within defined corporate communications policies; makes constructive and
precise contribution to the Board both verbally and in written form;
• Negotiation skills to engender stakeholder support for implementing Board decisions; and
• Experienced with the mechanisms, controls and channels to deliver effective governance and
manage risks.
Effectiveness of the Board of Directors in:
• Monitoring financial performance against agreed financial objectives;
• Monitoring the implementation of the strategy approved by the Board;
• Appointing, removing and monitoring the performance of the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Company Secretary;
• Ensuring appropriate succession planning for Board members and senior management via the
Nomination and Governance Committee;
• Approving and monitoring financial and other reporting;
• Approving and monitoring major capital expenditure, capital management, funding, acquisitions
and divestments;
• Overseeing risk management, control, accountability and compliance systems;
• Setting standards of behaviour to enhance the reputation of the Company in the market and the
community;
• Ensuring proper organisation and management so as to achieve conformity goals across all
aspects of the business;
• Setting appropriate delegated powers between CEO and Board of Directors;
• Ensuring quality and continuity of relations with the Group CEO, members of Committees,
managers and heads of control functions; and
• Setting clear strategy for the Company reflecting goals short to mid to long-term.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 34
QCA PRINCIPLES continued
Principle
How Company complies
CONT.
7
Evaluate board performance based on
clear and relevant objectives, see king
continuous improvement
Attributes of the Chairman to:
• Promote and oversee the highest standards of corporate governance within the Board
and the Company;
• Lead the Board and discussions on all proposals put forward by the Executive team;
• Set an agenda for the Board focused on strategic matters, forward looking and evaluates
current business;
• Maintain a proper process to ensure compliance with Board policy on matters reserved
to the Board for consideration;
• Ensure that Board members receive accurate, timely and clear information to enable them
to monitor performance, make sound decisions and give appropriate advice to promote the
success of the Company;
• Manage Board meetings so that sufficient time is allowed for the discussion of complex or
contentious issues and that all members' contributions are encouraged and valued;
• Chair, serve on or attend Committees of the Board;
• Maintain an effective and balanced team, initiate change and, supported by the Nomination
Committee, plan non-executive director succession;
• Encourage active engagement by all members of the Board;
• Create the environment for overall Board and individual director effectiveness including
promotion of an appropriate induction programme for new directors, creating the opportunity
for maintenance of the relevant skills and knowledge required to fulfil the director role on the
Board and its committees and ensuring the Board undertakes an annual evaluation of its own
performance, that of its committees and that of individual directors, including the Chairman; and
• Take the lead in identifying and meeting the development needs of individual directors and to
address the development needs of the Board as a whole with a view to enhancing its overall
effectiveness as a team.
Effectiveness of Executive Management in:
Implementing the strategic objectives set by the Board;
•
• Operating within the risk parameters set by the Board;
• Operational and business management of the Company;
• Managing the Company’s reputation and operating performance in accordance parameters set
by the Board;
• The day-to-day running of the Company;
• Providing the Board with accurate, timely and clear information to enable the Board to perform
its responsibilities;
Interfacing with shareholders and stakeholders, Nomad and Broker; and
•
• Approving capital expenditure (except acquisitions) within delegated authority levels.
Structure and competency of Committees to:
• Advise the Board on the suitability of external auditors and critical accounting policies for
financial reports, in particular YE audited accounts, and the Company’s risk management and
internal control systems;
• Provide independent and transparent pay arrangements linked to achievements over a given
period; and
• Lead the Board appointment and succession planning process considering the requirements
of the Company.
ValiRx plc Annual Report and Accounts 2018Governance 35
Principle
How Company complies
8
Promote a corporate culture that is
based on ethical values and behaviours
9
Maintain governance structures and processes
that are fit for purpose and support good
decision-making by the board
10
Communicate how the company is
governed and is performing by maintaining
a dialogue with shareholders and other
relevant stakeholders
The Board understands the importance of setting the right culture for a biotechnology oncology-
focused company specialising in developing novel treatments for cancer that will provide a
breakthrough into human health and wellbeing through the early detection of cancer and its
therapeutic intervention. Moreover, it ensures that the Company’s strategies and requirements
for excellence and good governance are instilled into the culture of our business. The Executive
Directors and the Chairman interface regularly with all personnel within ValiRx. In this way we
encourage them to take responsibility for advancing their projects within parameters and controls
set by the Board. This approach creates a culture that motivates and enables our personnel to
develop and express their talents and skills. Moreover, in the performance of its duties the Board
listens to the views of key stakeholders, including scientists, clinicians, regulators and suppliers and
is mindful of the potential impacts of decisions it makes.
The Company has established a Scientific Advisory Board (SAB), which includes clinicians
with relevant experience in the treatment of cancer. The SAB provides a means of identifying
emerging issues for patients and health care providers in the treatment of cancer that can
be brought to the attention of the Board. Details of the membership of our SAB are on
www.valirx.com/about-us/scientific-advisory-board/
The Chairman, with the support of the Executive Management and Committees, is ultimately
responsible for establishing and maintaining good standards of governance. This can be achieved
by creating conditions that enhance overall Board’s and individual Directors’ effectiveness in order
that all key issues are addressed and sound decisions are taken in a timely manner.
Other responsibilities of the Chairman include:
• Promoting effective relationships and open communication, and creates an environment that
allows constructive debates and challenges, both inside and outside the boardroom, between
Non-executive Directors and the management;
• Ensuring that the Board as a whole plays a full and constructive part in the development and
determination of the Group’s strategies and policies, and that Board decisions taken are in the
Group’s best interests and fairly reflect Board’s consensus;
• Setting, in consultation with the Chief Executive and Company Secretary, the Board meeting
schedule and agenda to take full account of the important issues facing the Group and the
concerns of all Directors, and ensures that adequate time is available for thorough discussion
of critical and strategic issues;
• Ensuring that the strategies and policies agreed by the Board are effectively implemented by the
Chief Executive and the management; and
• Ensuring that there is effective communication with shareholders, and that each Director
develops and maintains an understanding of the stakeholders’ views.
The Board recognises the importance of sound corporate governance.
The Board is satisfied with its composition. The Non-Executive Directors bring a wide range of skills and
experience to the Company, as well as independent judgment on strategy, risk and performance.
The independence of each Non-Executive Director is assessed at least annually, and both are
considered to be independent at the date of this report.
Attendance at Board meetings
A minimum of ten Board meetings are held each year at which it is expected that all Directors attend in
addition to relevant Committee meetings, General Meetings and the Annual General Meeting.
Where Directors are unable to attend meetings due to conflicts in their schedules, they will receive
the papers scheduled for discussion in the relevant meetings, giving them the opportunity to relay
any comments to the Chairman in advance of the meeting. Directors are required to leave the
meeting where matters relating to them, or which may constitute a conflict of interest to them,
are being discussed.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 36
QCA PRINCIPLES continued
Principle
How Company complies
10 CONT.
Communicate how the company is
governed and is performing by maintaining
a dialogue with shareholders and other
relevant stakeholders
The following table shows the Directors’ attendance at scheduled Board meetings, which they were
eligible to attend in the 12 month period to September 2018:
Director
Oliver de Giorgio-Miller
Dr Satu Vainikka
Dr George Morris
Gerry Desler
Kevin Alexander
Attendance at Board meetings
11/11
10/11
9/11
11/11
11/11
Matters reserved for the Board
• Approval of the Group vision, values and overall governance framework;
• Approval of the Company's Annual Report and Accounts and Half Yearly Financial Statements;
• Approval of Group financial policy;
• Approval to enter into discussions with Biotech companies reference potential joint-partnering
projects or licensing of Company’s preclinical and clinical assets;
• Approval of the Company's long-term finance plan and annual capital budget;
• Approval of any significant change in Group accounting policies or practices;
• Approval of all circulars, listing particulars, resolutions and corresponding documentation sent to
shareholders;
• Establishing committees of the Board, approving their terms of reference (including membership
and financial authority), reviewing their activities and, where appropriate, ratifying their decisions;
• Approval of this schedule of Matters Reserved to the Board.
The Board is responsible to the Company’s shareholders with its main objective to increase
the value of assets and long-term sustainability of the Company. The Board reviews business
opportunities and determines the risks and control framework. It also makes decisions on budgets,
Group strategy and major capital expenditure. The day-to day management of the business is
delegated to the Executive Directors.
The Board meets monthly with agendas, Committee papers and other appropriate information
distributed prior to each meeting to allow the Board to meet its duties. Effective procedures are
in place to deal with conflicts of interest. The Board knows other interests and commitments of
Directors and any changes to their commitments are reported.
In addition to the Executive Committee, the Board has established a Remuneration Committee, an
Audit and Risk Committee, and a Nomination and Governance Committee, which also report into
ValiRx's Board.
The Executive Committee is in charge of the daily management of the Group and is mandated to
prepare and plan the overall policies and strategies of the Company for approval by the Board. It
may approve intra-group transactions, provided that they are consistent with the consolidated
annual budget of the Company, as well as specific transactions with third parties provided that the
cost per transaction is within specified spending limits. It informs the Board at its next meeting on
each such transaction.
Prior to the beginning of each fiscal year, the Executive Committee submits to the Board those
measures that it deems necessary to be taken in order to meet the objectives of the Company and
a consolidated budget for approval. This committee comprises:
Dr Satu Vainikka (Chief Executive Officer)
Dr George Morris (Chief Operating Officer)
Gerry Desler (Executive Chief Financial Officer)
ValiRx plc Annual Report and Accounts 2018Governance
37
Principle
How Company complies
10 CONT.
Communicate how the company is
governed and is performing by maintaining
a dialogue with shareholders and other
relevant stakeholders
The Audit and Risk Committee meets at least twice per annum and is responsible for assisting
the Board in carrying out its oversight responsibilities in relation to corporate policies, risk
management, internal control, internal and external audit and financial and regulatory reporting
practices. The Committee has an oversight function, providing a link between the external auditors
and the Board; it also determines the terms of engagement of the Company’s auditors. The current
members of the Audit and Risk Committee are:
Oliver de Giorgio-Miller (Chairman)
Dr George Morris (Chief Operating Officer)
Kevin Alexander (Non-Executive Director)
The Remuneration Committee meets at least twice per annum to determine and agree with the
Board the framework or broad policy for the remuneration of executive directors of the Company
and advises on the overall remuneration policies applied throughout the Company. The objective
of this committee is to attract, retain and motivate executives capable of delivering the Company’s
objectives. Agreed personal objectives and targets including financial and non-financial metrics are
set each year for the executive directors and other personnel and performance measured against
these metrics. The committee is made up of: Non-Executive Directors, namely:
Oliver de Giorgio-Miller (Non-Executive Chairman)
Kevin Alexander (Non-Executive Director)
The Chief Executive Officer is consulted on remuneration packages and policy but does not attend
discussions regarding her own package. The Board determines the remuneration and terms and
conditions of the appointment of Non-Executive Directors.
The Nomination Committee is a sub-committee of the whole Board responsible for the selection
and proposal to the Board of suitable candidates for appointment as Executive and Non-Executive
Directors The Committee may engage external search consultants to identify candidates for Board
vacancies before recommending a preferred candidate to the Board for consideration.
The Committee comprises:
Oliver de Giorgio-Miller (Non-Executive Chairman)
Kevin Alexander (Non-Executive Director)
Gerry Desler (Executive Chief Financial Officer)
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 38
REPORT OF THE DIRECTORS
for the year ended 31 December 2018
The Directors present their report and financial statements for the year ended 31 December 2018.
Dividends
No dividends will be distributed for the year ended 31 December 2018.
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 £1,698,791 (2017: £1,746,808) on research and development. Further details on the Group’s research
and development are included in the Chief Executive’s Report on page 14.
Future developments
Details of future developments can be found in the Strategic Report on pages 6 to 10.
Events since the end of the year
Information relating to events since the end of the year is given in the note 23 to the financial statements.
Directors
The Directors shown below have held office during the whole of the period from 1 January 2018 to the date of this report.
K J Alexander
O De Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
Directors’ shareholdings
The Directors of the Company held the following beneficial interests in the ordinary shares of the Company:
K J Alexander
O De Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
2018
No. of shares
2017
No. of shares
104,278
1,392,888
1,875,208
1,821,620
1,958,242
104,278
59,555
541,875
588,287
624,909
Directors’ share options
The Directors of the Company held share options granted under the Company share option scheme, as indicated below. No share options were exercised
during the year. Full details of the share options held are disclosed in note 26 to the financial statements.
K J Alexander
O De Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
2018
No. of shares
2017
No. of shares
3,045,000
3,305,000
3,592,960
3,722,000
4,319,000
545,000
555,000
592,960
597,000
694,000
Company share price
The market value of the Company’s shares at 31 December 2018 was 0.83p and the high and low share prices during the period were 4.98p and
0.75p respectively.
ValiRx plc Annual Report and Accounts 2018Governance
39
Financial risk management objectives and policies
Note 27 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 2019, so far as the Directors are aware, Nicholas Slater held 3.78% 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 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:
Dr S Vainikka
Director
28 May 2019
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 40
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
for the year ended 31 December 2018
The Directors are responsible for preparing the Strategic Report, Directors’ Report, Corporate Governance Statement 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. The Directors are required by the AIM Rules
of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted
by the European Union (EU) and have elected under company law to prepare the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
The Group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the Group;
the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving
a true and fair view are references to their achieving a fair presentation.
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. 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 EU, 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 UK GAAP, 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 the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
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. 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.
ValiRx plc Annual Report and Accounts 2018Governance REPORT OF THE INDEPENDENT AUDITORS
to the Members of ValiRx Plc
41
We have audited the financial statements of ValiRx Plc (the ’Parent Company’) and its subsidiaries (the ’Group’) for the year ended 31 December 2018
on pages 47 to 73. 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.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2018 and of the
Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice – 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 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or
the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
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 £1.6m.
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 that the disclosures made in the financial statements
to be reasonable.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 42
REPORT OF THE INDEPENDENT AUDITORS continued
to the Members of ValiRx Plc
Going concern
Area of focus
Refer to Note of the financial statements for the directors’ disclosures of related accounting policies, judgements and estimates. The directors have concluded
that 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 had cash and cash equivalents of £372,872 at 31 December 2018 but consumed cash of £4,101,734 before receipt of research and development
tax credits of £424,197 and financing of £3,349,000. Since the year end, the Company has raised £1.5m through the placing of new ordinary shares.
Management produces a cash flow forecast based on the board plans.
The key judgements within the cash flow forecast that we particularly focused on were:
•
•
•
•
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, should future fund raisings be lower
than anticipated.
Our conclusion on management’s use of the going concern basis of accounting is included in the going concern section of the report above.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit procedures
and to evaluate the effects of misstatements, both individually and on the financial statements as a whole. During planning we determined a magnitude of
uncorrected misstatements that we judge would be material for the financial statements as a whole (FSM). During planning FSM was calculated as £129,500,
which was updated during the course of our audit to £135,800 based on an average of 5% of adjusted loss before tax and 19% of net assets. We agreed with
the Audit Committee that we would report to them all unadjusted differences in excess of £6,790, as well as differences below those thresholds that, in our
view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The audit was scoped to ensure that the audit team obtained sufficient and appropriate audit evidence in relation to significant operations of the Group
during the year ended 31 December 2018. This included the performance of full statutory audits on each of the subsidiary undertakings. As part of our
planning we assessed the risk of material misstatement including those that required significant auditor consideration at the component and Group level.
Procedures were designed and performed to address the risk identified and for the most significant assessed risks of material misstatement, the procedures
performed are outlined above in the key audit matters section of this report.
Other information
The directors are responsible for the other information. The other information comprises the information in the Annual Report but does not include
the financial statements and our Report of the Auditors thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
ValiRx plc Annual Report and Accounts 2018Governance
43
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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the 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, or returns adequate for our audit have not been received from branches not visited by us; or
• the 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 set out on page 43, 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 necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the 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 to cease operations, or have no realistic alternative but to do so.
Auditors’ 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 a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.
Use of our report
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 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.
Christopher Taylor (Senior Statutory Auditor)
for and on behalf of Adler Shine LLP
Chartered Accountants & Statutory Auditor
Aston House
Cornwall Avenue
London N3 1LF
28 May 2019
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 44
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2018
Continuing operations
Other operating income
Research and development
Administrative expenses
Operating loss
Fair value loss on derivative financial assets
Finance income
Fair value gain on derivative liability
Provision for bad debt
Finance costs
Loss before income tax
Income tax credit
Loss after income tax
Non-controlling interest
Total comprehensive loss for the year
Loss per share – basic and diluted
Notes
2018
£
2017
£
–
(1,698,791)
(2,166,798)
(3,865,589)
(442,229)
–
–
(506,755)
(14,565)
(4,829,138)
461,296
(4,367,842)
69,020
88,773
(1,746,808)
(1,467,268)
(3,125,303)
(23,446)
489
44,146
–
(449,868)
(3,553,982)
416,336
(3,137,646)
117,962
16
6
12
6
7
8
(4,298,822)
(3,019,684)
10
(0.94)p
(1.90)p
Financial StatementsValiRx plc Annual Report and Accounts 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2018
45
Consolidated Statement of Financial Position
31 December 2018
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
Total liabilities
Total equity and liabilities
Notes
2018
£
2017
£
11
12
13
14
15
16
17
18
1,602,522
1,623,950
–
–
3,226,472
174,089
461,193
–
372,872
1,008,154
4,234,626
1,602,522
1,325,283
–
–
2,927,805
766,475
424,094
117,229
701,410
2,009,208
4,937,013
8,680,694
19,779,905
637,500
602,413
885,963
(27,461,771)
3,124,704
(93,764)
8,432,708
16,419,494
637,500
602,413
464,000
(23,378,744)
3,177,371
(24,744)
3,030,940
3,152,627
19
20
889,987
313,699
1,203,686
1,394,266
390,120
1,784,386
4,234,626
4,937,013
The financial statements were approved by the Board of Directors on 28 May 2019 and were signed on its behalf by:
Mr G Desler
Director
Registered number: 03916791
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
46
COMPANY STATEMENT OF FINANCIAL POSITION
31 December 2018
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
Total liabilities
Total equity and liabilities
The financial statements were approved by the Board of Directors on 28 May 2019 and were signed on its behalf by:
Mr G Desler
Director
Registered number: 03916791
Notes
2018
£
2017
£
12
13
14
15
16
17
18
19
20
120,000
–
3,617,834
3,737,834
2,788,478
421,700
–
372,190
3,582,368
7,320,202
140,000
–
3,617,834
3,757,834
2,720,591
372,851
117,229
685,884
3,896,555
7,654,389
8,680,694
19,779,905
637,500
885,963
(24,111,988)
8,432,708
16,419,494
637,500
464,000
(20,218,087)
5,872,074
5,735,615
1,134,429
313,699
1,448,128
7,320,202
1,528,654
390,120
1,918,774
7,654,389
Financial StatementsValiRx plc Annual Report and Accounts 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2018
47
Balance at 1 January 2017
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
Share
capital
£
Share
premium
£
Merger
reserve
£
Notes
Reverse
acquisition
reserve
£
Share
option
reserve
£
Non-
controlling
interest
£
Retained
earnings
£
Total
£
8,165,650 12,998,102
637,500
602,413
331,453
19,619 (20,385,278)
2,369,459
–
–
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
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Lapse of share options and warrants
Movement in year
18
–
247,986
–
–
–
–
3,861,177
(500,766)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(215,795)
637,758
(69,020)
–
–
–
–
(4,298,822)
–
–
215,795
–
(4,367,842)
4,109,163
(500,766)
–
637,758
Balance at 31 December 2018
8,680,694 19,779,905
637,500
602,413
885,963
(93,764) (27,461,771) 3,030,940
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.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
48
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2018
Balance at 1 January 2017
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Lapse of share options
Movement in year
Notes
Share
capital
£
Share
premium
£
Merger
reserve
£
Share
option
reserve
£
Retained
earnings
£
Total
£
8,165,650
12,998,102
637,500
331,453
(17,564,532)
4,568,173
–
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
16,419,494
637,500
464,000
(20,218,087)
5,735,615
Changes in equity
Loss for the year
Issue of shares
Costs of shares issued
Lapse of share options and warrants
Movement in year
18
–
247,986
–
–
–
–
3,861,177
(500,766)
–
–
–
–
–
–
–
–
–
–
(215,795)
637,758
(4,109,696)
–
–
215,795
–
(4,109,696)
4,109,163
(500,766)
–
637,758
Balance at 31 December 2018
8,680,694
19,779,905
637,500
885,963
(24,111,988)
5,872,074
Share capital
The nominal value of the issued share capital.
Share premium account
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
The difference between the nominal value of the share capital issued by the Company and the fair value of ValiRx Bioinnovation at the date of acquisition.
Share option reserve
The fair value of the share-based payment, determined at the grant date, and expensed over the vesting period.
Retained earnings
Accumulated comprehensive income for the year and prior periods.
Financial StatementsValiRx plc Annual Report and Accounts 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2018
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
Non-controlling interests
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
New convertible loan notes
Repayment of convertible loan notes
Share issue
Costs of shares issued
Net cash inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
49
Notes
1
2018
£
2017
£
(3,776,840)
(866)
424,197
(2,952,275)
(35,897)
636,739
(3,353,509)
(2,351,433)
–
(324,028)
–
–
(324,028)
–
(25,000)
3,720,000
(346,001)
(73,599)
(206,727)
73,599
489
(206,238)
263,704
(347,481)
3,068,406
(286,311)
3,348,999
2,698,318
(328,538)
701,410
372,872
2
2
140,647
560,763
701,410
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
50
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2018
1 Reconciliation of operating loss to cash generated from operations
Operating loss
Depreciation of property, plant and equipment
Amortisation of intangible assets
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Other non-cash movements
Share option charge
Net cash outflow from operations
2018
£
2017
£
(3,865,589)
–
142,988
(31,996)
(504,279)
(957)
482,993
(3,125,303)
10,553
177,134
14,467
54,038
(83,164)
–
(3,776,840)
(2,952,275)
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 2018
Cash and cash equivalents
Year ended 31 December 2017
Cash and cash equivalents
31 December
2018
£
1 January
2018
£
372,872
701,410
31 December
2017
£
1 January
2017
£
701,410
560,763
Financial StatementsValiRx plc Annual Report and Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2018
51
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 Woburn Place, London W1H 0BS.
The registered number of the Company is 03916791.
The principal activity of the Group is the development of oncology therapeutics and companion diagnostics.
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
As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled “Guidance on the Going
Concern Basis of Accounting and Reporting on Solvency Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”.
The Group and Parent Company are subject to a number of risks similar to those of other development stage pharmaceutical companies. These risks
include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing
and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain
events which include obtaining adequate financing to fulfil the Group’s commercial and development activities and generating a level of revenue adequate
to support the Group’s cost structure.
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 2019.
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. As detailed in note 23, since the year end, the Group has raised £0.5m before expenses through the issue of
83,333,333 new ordinary shares and the Company has entered into a Subscription Agreement whereby the “Eu ropean High Growth Opportunities SF” will
subscribe for 213,000,000 shares raising a total of £1.278m before expenses and the Investor will provide up to £6m of working capital by way of Convertible
Funds. 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.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial
statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions
that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Group together with known receivables and available
facilities will provide sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date of approval of these financial
statements; they have therefore prepared the financial statements on a going concern basis.
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 August 2011, the Company acquired for a nominal amount, the outstanding equity of a Finnish non-trading company – ValiRx Finland OY (“ValiFinn”)
– that it had jointly established with local partners in 2008. As a result of the acquisition, ValiFinn became a wholly owned subsidiary of the Company.
In October 2016, the Company sold the whole of its shareholding in ValiFinn.
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.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
2 Accounting policies continued
Basis of consolidation continued
The assets and liabilities of the Group’s foreign operations are expressed in pounds sterling using exchange rates prevailing at the balance sheet date.
Income and expense items are translated at the average exchange rate for the period. Material exchange differences arising are classified as equity.
The translation differences are recognised in the period in which the foreign operation is disposed of. Intra-Group transactions, profits and balances are
eliminated in full on consolidation.
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.
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 non-current assets
At each reporting date, the Directors review the carrying amounts of property, plant and equipment assets, goodwill and other intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent
from other assets, the Directors estimate the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher
of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the
recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
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.
Financial StatementsValiRx plc Annual Report and Accounts 2018
53
2 Accounting policies continued
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 18 for further details.
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
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
All on-going development expenditure is currently expensed in the period in which it is incurred. Due to the regulatory and other uncertainties inherent
in the development of the Group’s programmes, the criteria for development costs to be recognised as an asset, as prescribed by IAS 38, ‘Intangible assets’,
are not met until the product has been submitted for regulatory approval, such approval has been received and it is probable that future economic benefits
will flow to the Group. The Group does not currently have any such internal development costs that qualify for capitalisation as intangible assets.
Development costs are capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria being
as follows:
it can be demonstrated that the asset will generate probable future economic benefits;
• technical feasibility of the completed intangible asset has been established;
•
• adequate technical, financial and other resources are available to complete the development;
• the expenditure attributable to the intangible asset can be reliably measured; and
• the Group has the ability and intention to use or sell the asset.
Expenses for research and development include associated wages and salaries, material costs, depreciation on non-current assets and directly attributable
overheads.
All research and development costs, whether funded by third parties under licence and development agreements or not, are included within operating
expenses and classified as such.
Foreign currencies
Items included in the Financial Statements are measured using the currency of the primary economic environment in which the Company and its
subsidiaries operate (the functional currency) which is UK sterling (£). The Financial Statements are accordingly presented in UK sterling.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or at an average
rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of
Comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
2 Accounting policies continued
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group’s
ordinary and deferred shares are classified as equity instruments.
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.
When options expire or are cancelled, a corresponding credit is recognised.
New standards and interpretations
As at the date of approval of these financial statements, the following standards were in issue but no 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.
IFRS 3, IFRS 11
IAS 12, IAS 23
IFRS 3
IFRS 9
IFRS 16
IFRS 17
IAS 1 and IAS 8
IAS 19
IAS 28
Amendments resulting from Annual Improvements 2015-2017 Cycle
Amendments – Definition of a Business
Amendment – Prepayment features with negative compensation
Leases – recognition, measurement, presentation and disclosure
Insurance contracts
Amendments – Definition of Material
Amendment – Plan Amendment, Curtailment or Settlement
Amendment – Long-term interests in Associates and Joint Ventures
Effective date
(period beginning on
or after)
01/01/2019
01/01/2020
01/01/2019
01/01/2019
01/01/2019
01/01/2020
01/01/2019
01/01/2019
IFRS 16 has not yet been applied. The impact on the accounts at December 2018 was not material as the Group’s operating leases expire on 31 October 2019.
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.
A significant element of judgement is therefore involved in the calculation of the charge.
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 16 for further disclosures.
Financial StatementsValiRx plc Annual Report and Accounts 2018
55
4 Revenue
Segmental information
The Directors believe under IFRS 8 – “Operating Segment” there are no identifiable business segments that are subject to risks and returns different to the
core business of drug development. The information reported to the Directors, for the purposes of resource allocation and assessment of performance is
based wholly on the overall activities of the Group. Therefore, the Directors have determined that there is only one reportable segment under IFRS 8.
5 Employees and directors
Number of employees:
The average monthly number of employees, including Directors, during the year was:
2018
Number
2017
Number
Directors
Staff
Employment costs
Wages and salaries
Social security costs
Other pension costs
Costs of share option scheme
Details of Directors’ remuneration can be found in note 26.
6 Net finance costs
Finance income
Deposit account interest
Other interest receivable
Finance costs
Interest on overdue tax
On convertible loan notes
Deferral fees on equity swap (note 20)
7 Loss before income tax
The loss before income tax is stated after charging/(crediting):
Hire of plant and machinery
Other operating leases
Depreciation – owned assets
Patents amortisation
Brands and licences amortisation
Auditors remuneration
Foreign exchange differences
Bad debt write off
Fair value loss of derivative financial assets
5
6
12
2018
£
909,127
90,719
39,327
482,993
1,522,672
2018
£
–
–
–
866
–
13,699
14,565
2018
£
109
138,514
–
115,788
27,200
31,000
3,869
506,755
442,229
6
6
12
2017
£
780,447
77,799
22,129
–
880,375
2017
£
10
479
489
1,460
448,408
–
449,868
2017
£
–
134,397
10,553
149,935
27,199
36,064
5,240
–
23,446
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
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
2018
£
2017
£
(461,193)
(103)
(461,296)
(424,094)
7,758
(416,336)
(4,829,138)
(3,553,982)
Loss before income tax multiplied by effective rate of UK corporation tax of 19.00% (2017: 19.25%)
(917,536)
(684,142)
Effects of
Non-deductible expenses
Capital allowances for the year in deficit of depreciation and amortisation
Tax losses not utilised
Research and development expenditure
Adjustment to prior years
Current tax charge
273,629
3,763
377,395
(198,444)
(103)
456,240
(461,296)
(2,069)
5,836
435,714
(179,433)
7,758
267,806
(416,336)
No corporation tax arises on the results for the year ended 31 December 2018 due to the losses incurred for tax purposes.
The deferred tax asset, arising from tax losses of £18.6m (2017: £16.6m) carried forward, has not been recognised but would become recoverable against
future trading profits, subject to agreement with HM Revenue and Customs.
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 £4,109,696 (2017: £2,679,773).
Financial StatementsValiRx plc Annual Report and Accounts 2018
10 Loss per ordinary share
The earnings and number of shares used in the calculation of loss per ordinary share are set out below:
Loss for the financial period
Non-controlling interest
Loss attributable to owners of the Parent Company
Basic
Weighted average number of shares
Loss per share
57
2018
£
2017
£
(4,367,842)
69,020
(3,137,646)
117,962
(4,298,822)
(3,019,684)
458,715,753
(0.94p)
151,071,019
(1.90p)
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 25) would have the effect of reducing the loss per share and would therefore not be dilutive under
IAS 33 ‘Earnings per Share’.
Following the issue of 83,333,333 ordinary shares of 0.1p each in February 2019, and 71,000,000 in April 2019, the number of allotted ordinary shares of 0.1p
each in issue was 752,629,382.
11 Goodwill
Group
Cost
At 1 January 2017 and 2018 and 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
£
1,602,522
1,602,522
1,602,522
The goodwill arising on the acquisitions of ValiRx Bioinnovation Limited, ValiPharma Limited, Valisrc Limited and ValiSeek Limited is not being amortised but
is 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
Valisrc Limited
ValiSeek Limited
Sensitivity analysis is not required as a reasonably possible change in assumptions would not result in an impairment.
£
772,230
394,613
–
435,679
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
12 Intangible assets
Group
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Amortisation
At 1 January 2017
Amortisation for year
At 31 December 2017
Amortisation for year
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Patents
£
1,330,333
206,727
1,537,060
441,655
Brands and
licences
£
375,000
–
375,000
–
Total
£
1,705,333
206,727
1,912,060
441,655
1,978,715
375,000
2,353,715
337,768
149,935
487,703
115,788
71,875
27,199
99,074
27,200
409,643
177,134
586,777
142,988
603,491
126,274
729,765
1,375,224
248,726
1,623,950
1,049,357
275,926
1,325,283
In July 2016, the Company sold its subsidiary, ValiRx (Finland) OY, (which owns the TRAC Technology) to Sovicell Science for Life GmbH for €800,000. TRAC is
a cancer diagnosis technology. At the same time, the Company retained the licence to use TRAC in its development of therapeutic candidates. Sovicell paid
€202,000 in total towards the consideration. However, the balance of the consideration of €598,000, plus late payment fees of €100,000 remained unpaid.
As a consequence, Sovicell has now forfeited the assets it acquired, and the Group has capitalised £117,627 as additions to intangible fixed assets (“Sovicell
assets”) and the Group and the Company have impaired the balance of the debt of £506,755, which has been expensed to the Statement of Profit or Loss.
The Sovicell assets have been included at valuation which was prepared by an external valuer.
Company
Cost
At 1 January 2017 and 2018
At 31 December 2018
Amortisation
At 1 January 2017
Amortisation for year
At 31 December 2017
Amortisation for year
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Brands and
licences
£
200,000
200,000
40,000
20,000
60,000
20,000
80,000
120,000
140,000
Financial StatementsValiRx plc Annual Report and Accounts 2018
13 Property, plant and equipment
Group
Cost
At 1 January 2017 and 2018
Disposals
At 31 December 2018
Depreciation
At 1 January 2017
Charge for the year
At 31 December 2017
Eliminated on disposal
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Company
Cost
At 1 January 2017 and 2018
At 31 December 2018
Depreciation
At 1 January 2017
Charge for the year
At 31 December 2017 and 2018
Net book value
At 31 December 2018
At 31 December 2017
14 Investments
Group
Cost
At 1 January 2018 and 31 December 2018
Provisions
At 1 January 2018 and 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
59
Plant and
machinery
£
35,165
(3,495)
31,670
24,612
10,553
35,165
(3,495)
31,670
–
–
Plant and
machinery
£
31,670
31,670
21,117
10,553
31,670
–
–
Unlisted
investments
£
1,333,770
1,333,770
–
–
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
14 Investments continued
The Group and the Company owns 5.5% (2017: 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 2018 and 31 December 2018
Provisions
At 1 January 2018 and 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Shares
in Group
undertakings
£
Unlisted
investments
£
Total
£
3,617,834
1,333,770
4,951,604
–
1,333,770
1,333,770
3,617,834
3,617,834
–
–
3,617,834
3,617,834
The Group or 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 office: England & Wales
Nature of business: Intermediate holding company
Class of shares:
Ordinary shares
ValiPharma Limited
Registered office: 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
Registered office: England & Wales
Nature of business: Dormant
Class of shares:
Ordinary shares
ValiSeek Limited
Registered office: England & Wales
Nature of business: Therapeutic research & development
Class of shares:
Ordinary shares
%
holding
100.00
%
holding
100.00
%
holding
100.00
%
holding
55.50
Financial StatementsValiRx plc Annual Report and Accounts 2018
61
15 Trade and other receivables
Current
Amounts owed by Group undertakings
Other debtors (note 12)
Rent deposit
VAT
Called up share capital not paid
Prepayments and accrued income
Group
2018
£
–
15,281
25,926
77,814
73
54,995
174,089
2017
£
–
637,945
26,590
55,041
73
46,826
766,475
Company
2018
£
2,609,278
13,059
25,926
85,398
–
54,817
2,788,478
2017
£
1,961,472
630,744
26,590
54,959
–
46,826
2,720,591
In the Directors’ opinion, the carrying amounts of receivables is considered a reasonable approximation of fair value.
16 Derivative financial assets
Derivative financial assets
Group
2018
£
–
2017
£
117,229
Company
2018
£
–
2017
£
117,229
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 2017
Loss on revaluation of derivative financial assets
Value of derivative financial assets at 31 December 2017
Loss on revaluation of derivative financial assets on termination
Transfer to Equity Swaps loan
Value of derivative financial assets at 31 December 2018
Notional number
of shares
outstanding
Share price
5.25p
2,679,530
4.38p
2,679,530
(2,679,530)
–
Fair value
£
140,675
(23,446)
117,229
(442,229)
325,000
–
In April 2018, the agreed value that the Company owed Yorkville under the Swap Agreement was £418,275. Following negotiations, in September 2018,
the Swap Agreement was terminated, and an amount of £325,000 was agreed in full and final settlement of the outstanding debt. This was converted
into a Loan (note 20).
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
17 Cash and cash equivalents
Bank accounts
18 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
Group
2018
£
2017
£
Company
2018
£
2017
£
372,872
701,410
372,190
685,884
2018
Number
2017
Number
2018
£
2017
£
598,296,049
58,378,365
157,945.030
30,177,214
350,310,448
58,378,365
157,945,030
30,177,214
598,297
2,918,918
1,421,505
3,741,974
8,680,694
350,311
2,918,918
1,421,505
3,741,974
8,432,708
In December 2017, Yorkville elected to convert US$520,000 of its Convertible Loan Notes (“CLNs”) (plus accrued interest of US$1,667) into 25,222,857 ordinary
shares at a conversion price of 1.54295p per share. The shares were admitted to AIM in January 2018.
In December 2017, the Company raised £1 million, before expenses, through the issue of 23,529,412 new ordinary shares at a price of 4.25 pence per share.
The funds were to be used for advancing the clinical trial of VAL201 and for the preclinical progress of other programmes. The shares were admitted to AIM
in January 2018.
In January 2018, the Company received notifications of the exercise of warrants over 8,000,000 ordinary shares at an exercise price of 1.25p per share and
over 400,000 ordinary shares at an exercise price of 5p per share in the Company, providing the Company with gross proceeds of £120,000.
In May 2018, the Company raised £0.95 million, before expenses, through the issue of 47,500,000 new ordinary shares at a price of 2.0 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 September 2018, the Company raised £1.15 million, before expenses, through the issue of 76,666,666 new ordinary shares at a price of 1.50 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 2018, the Company raised £0.50 million, before expenses, through the issue of 66,666,666 new ordinary shares at a price of 0.75 pence
per share. The funds were to be used for advancing the clinical trial of VAL201 and for the preclinical progress of other programmes.
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.
19 Trade and other payables
Current
Trade creditors
Amounts owed to Group undertakings
Social security and other taxes
Other creditors
Wages and salaries
Accruals and deferred income
Directors’ current accounts
Group
2018
£
772,244
–
71,742
–
10,001
36,000
–
889,987
2017
£
1,210,675
–
72,764
18,450
–
51,347
41,030
Company
2018
£
724,876
300,670
68,882
–
10,001
30,000
–
1,394,266
1,134,429
2017
£
1,062,605
300,670
61,899
18,450
–
44,000
41,030
1,528,654
In the Directors’ opinion, the carrying amount of payable is considered a reasonable approximation of fair value.
Financial StatementsValiRx plc Annual Report and Accounts 2018
63
20 Financial liabilities – borrowings
Current:
Convertible loan notes
Equity swap loan
Group
2018
£
2017
£
Company
2018
£
–
313,699
313,699
390,120
–
390,120
–
313,699
313,699
2017
£
390,120
–
390,120
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 25,222,857 (2017: 83,708,122) fully paid Ordinary Shares following receipt of conversion notices for
the exercise of conversion rights in respect of US$521,667 (2017: US$1,553,339) (including accrued interest) of the Notes. Repayments of US$ nil (2017:
US$82,135), other than by conversion to ordinary shares also occurred.
Issue date
Repayment date
Value brought forward
Value on issue of notes
Total transaction costs
Derivative financial liability on issue
Interest expense (note 6)
Interest accrued
Conversion of notes to ordinary shares
Repayment of loan notes
Exchange difference
2018
2017
01/12/2016
01/12/2017
01/12/2016
01/12/2017
£
£
390,120
–
–
–
390,120
–
–
(389,163)
–
(957)
1,294,299
–
–
–
1,294,299
413,971
(86,089)
(1,065,120)
(62,277)
(104,664)
–
390,120
Swap settlement (note 16)
In September 2018, Yorkville and the Company agreed a final settlement in respect of the Swap Agreement and entered into a deed to terminate that
agreement. At the time, the Company owed Yorkville £418,275 under the Agreement.
It was agreed that the Company would pay Yorkville £325,000 plus any deferral fees in full and final settlement by quarterly instalments, the last of which
is to be paid on 1 May 2020. At the Company’s discretion, it may settle a quarterly instalment by issuing Ordinary Shares in the Company to Yorkville, based
on the share price at the time of repayment.
Due to the deferral of the first instalment, the parties agreed a deferral whereby further late payment fees were due by the Company to Yorkville.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
20 Financial liabilities – borrowings continued
Swap settlement (note 16) continued
Agreed full and final settlement
Repayment
Deferral fee
Balance at 31 December
2018
£
325,000
(25,000)
13,699
313,699
2017
£
–
–
–
–
Except for £90,000 which is due for repayment in 2020, the balance should be settled within 2019.
21 Other financial commitments
At 31 December 2018, the company was committed to making the following payments under non-cancellable operating leases in the year to
31 December 2019:
Operating leases which expire:
Within one year
1-2 years
22 Related party disclosures
Land and buildings
2018
£
2017
£
110,906
–
133,087
110,906
During the year the Director, G Desler, provided the Company and its subsidiaries with bookkeeping services totalling £19,219 (2017: £18,450).
During the year the Director O de Giorgio-Miller invoiced the Company £49,500 (2017: £49,500) 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
2018
£
8,036
5,579
–
–
–
2017
£
41,030
–
–
–
–
23 Events after the reporting period
In February 2019, the Company raised £0.5 million of gross proceeds through the issue of 83,333,333 new ordinary shares at a price of 0.6 pence per ordinary
share (“Placing Shares”) with new and existing investors. The net proceeds of the Placing were to be used to further expand the scope of the clinical trial of
VAL201 to treat prostate cancer and to thereby advance the programme. The funds will also be used to progress the development of the pre-clinical VAL301
and VAL101 programmes and towards clinical trials.
The funds were raised through the Company’s broker, Novum Securities Limited (“Novum”). As part of their fee arrangement, the Company agreed to issue
Novum with a warrant over 8,333,333 ordinary shares in the Company, which can be exercised at a price of 0.6 pence per share at any time until the third
anniversary of the issue of the warrant.
Subscription Agreement
In April 2019, the Company entered into a Subscription Agreement (“the Agreement”) with European High Growth Opportunities SF (the “Investor”). The terms
of the Agreement stipulate that the Investor will provide the Company with access to further funding by means of convertible funds with attached warrants
(the “Convertible Funds”). The Agreement states that the Subscription is split into three equal tranches of 71,000,000 shares (the “Subscription Shares”), at a
subscription price of 0.6 pence per share, raising gross proceeds of £426,000 per tranche. This represents a total of 213,000,000 shares with gross proceeds of
£1,278,000. The Subscription Shares will, when issued, rank pari passu in all respects with the existing ordinary shares of the Company.
The expected timetable for admission for each of the tranches is as follows:
Tranche 1 – on or around 1 May 2019;
Tranche 2 – on or around 21 May 2019; and
Tranche 3 – on or around 14 June 2019.
An aggregate structuring fee totalling £278,000 is payable to the Investor by ValiRx in three equal instalments of £92,666.66 following each of the tranches
(“Structuring Fee”), relating both to the Subscription and also the Convertible Funds (as detailed on page 51).
Financial StatementsValiRx plc Annual Report and Accounts 2018
65
23 Events after the reporting period continued
Convertible Funds
Under the Agreement the Investor shall provide to the Company additional financing by way of Convertible Funds, subject to signature by both parties to
definitive documentation by 21 June 2019. Should definitive documentation not be signed by 21 June 2019, ValiRx shall be required to pay the investor a
break fee totalling £150,000 (the “Break Fee”) plus an additional amount in the event the Company’s share price declines in the period to the date the Break
Fee crystallises. This additional amount is to be calculated by multiplying the stock performance of the Company (expressed as a percentage) by £1,000,000.
Terms of Convertible Funds
Under the terms of the Agreement, the Investor has committed convertible funds of up to £6,000,000 (“Total Commitment”) with a 0% coupon. The first
tranche of £500,000 will then be followed by 22 additional tranches of £250,000. The Company may request to suspend the automatic disbursement of these
tranches, but covenants to drawdown up to a maximum of eight tranches on demand of the Investor.
A “make whole amount” provision shall apply to the first tranche of the Convertible Funds such that the subscription price for the £500,000 tranche shall be
reduced in the event that the Company’s share price declines in the period to the issuance of the first tranche. This is to be calculated by multiplying the
stock performance of the Company (expressed as a percentage) by £1,000,000.
The Convertible Funds may be converted into shares in the Company twelve months from issuance at a price equal to 95% of the lowest closing bid price in
the 15 days immediately preceding the issuance of a conversion notice by the Investor.
Warrants
The Investor shall have the option to purchase an amount of the Company’s shares equivalent to 25% of the Total Commitment during a period of five years.
The exercise price is to be calculated as 120% of the lower of either the lowest closing bid price in the 15 days immediately preceding the date of the signing
of the letter of intent or immediately preceding the request to issue the first tranche.
Additionally, the Investor shall have the option to purchase an amount of the Company’s shares equivalent to 15% of the value of each tranche of
Convertible Funds during a period of five years. The exercise price is to be calculated as 120% of the lowest closing bid price in the 15 days immediately
preceding the issuance of a new tranche.
IP assets of FIT Biotech OY
In April 2019, ValiRx entered into an agreement to acquire from the administrator of FIT Bio, the IP assets of FIT Bio for a consideration of €5,000.
FIT Bio, a Finnish biotech company, was involved in the development of gene delivery technology for a number of indications positioning its technology as
an alternative to biologics, such as vaccines, antibodies and protein-based drugs. FIT Bio’s principle technology – its Gene Transport Unit platform – had seen
an initial product enter into clinical trials.
ABO had previously provided finance to FIT Bio – having entered into a financing agreement with FIT Bio in December 2017. Following the termination of
this financing agreement FIT Bio was placed into bankruptcy proceedings. ValiRx has acquired the IP assets from the appointed administrator of FIT Bio.
Joint Venture Agreement
In conjunction with the acquisition of FIT Bio’s Intellectual Property assets, ValiRx has signed a Letter of Intent (“LOI”) with ABO, an EHGO entity with which
the Company entered into a subscription agreement. The agreement is to establish a genetic therapeutic and diagnostic-based joint venture (“JV”), for the
further development of FIT Bio’s IP assets with the objective to assemble and progress a portfolio of genetic-based technologies.
It is envisaged that ValiRx will provide the scientific, technological and clinical development expertise to the JV, whilst ABO will focus on financing the entity
and progressing commercial activities. It is also envisaged that ValiRx will add its GeneICE technology, along with the Company’s gene silencing compound,
VAL101, into the JV portfolio to sit alongside the IP assets of FIT Bio, as the Company believes the portfolio technologies are complementary to each other.
The combined portfolio is well positioned to address the large medical and scientific needs for future precision genetic editing, with all the anticipated
technologies in the JV being applicable to many indications, in oncology, inflammation, infectious diseases and neurological conditions.
The formation of the JV is subject to further due diligence following the conclusion of scientific and financial analysis. ValiRx and ABO have agreed that
discussions and future negotiation are to be conducted on an exclusive basis.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
24 Ultimate controlling party
The Directors consider that there is no ultimate controlling party.
25 Share-based payment transactions
At 31 December 2018 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:
2017
Brought forward
Lapsed during year
Carried forward
2018
Brought forward
Granted during the year
Lapsed during year
Carried forward
All options were exercisable at the year end. No options were exercised during the year.
Weighted
average
remaining
contractual life
(years)
6.50
Weighted
average
remaining
contractual life
(years)
8.52
Number
of shares
3,793,400
(332,440)
3,460,960
Number
of shares
3,460,960
17,300,000
(48,000)
20,712,960
Weighted
average
exercise
price
(pence)
51.74
60.00
50.98
Weighted
average
exercise
price
(pence)
50.98
4.00
43.13
11.76
Financial StatementsValiRx plc Annual Report and Accounts 2018
67
25 Share-based payment transactions continued
The following share-based payment arrangements were in existence during the current and prior years.
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
6. Granted 9 February 2018
Number
Expiry date
20,400
292,000
952,000
1,032,000
1,116,560
17,300,000
17/09/2019
08/07/2021
19/01/2024
21/10/2024
26/06/2025
09/02/2028
Exercise
price
Fair value
at grant date
125.00p
93.75p
43.13p
45.00p
51.00p
4.00p
90.00p
12.50p
5.00p
3.75p
4.04p
2.79p
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
6. Granted 9 February 2018
Grant date
share price
262.50p
80.00p
43.13p
45.00p
50.50p
4.00p
Exercise
price
125.00p
93.75p
43.13p
45.00p
51.00p
4.00p
Expected
volatility
40.00%
52.00%
17.00%
17.00%
16.00%
196.00%
Expected
option life
(years)
Risk-free
interest rate
4.00
3.00
3.00
3.00
3.00
3.00
2.50%
1.24%
0.99%
1.00%
0.38%
0.88%
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. All the above options are equity settled.
All the share options are equity settled and the charge for the year is £482,993 (2017: £nil).
Warrants
At 31 December 2018 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.
2017
Brought forward
Granted
Exercised
Carried forward
2018
Brought forward
Granted
Exercised
Carried forward
Weighted
average
remaining
contractual life
(years)
2.96
2.34
Weighted
average
remaining
contractual life
(years)
2.34
Number
of shares
36,970,996
54,209,015
(6,140,000)
85,040,011
Number
of shares
85,040,011
25,413,725
(8,400,000)
102,053,736
1.30
Weighted
average
exercise
price
(pence)
8.84
4.45
3.05
6.46
Weighted
average
exercise
price
(pence)
6.46
4.55
1.43
6.40
3,300,000 warrants granted on 1 January 2018, 4,700,000 granted on 14 December 2017 and 400,000 warrants granted on 15 March 2017 were exercised
at 1.25p, 1.25p and 5p per share respectively during the year.
All warrants were exercisable at the year end.
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
25 Share-based payment transactions continued
Warrants continued
The following warrants were in existence during the current and prior year.
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 2 January 2018
8. Granted 2 January 2018
9. Granted 14 May 2018
10. Granted 31 December 2018
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
42,969,015
11,764,706
1,882,353
1,800,000
6,666,666
31/03/2021
31/03/2021
12/07/2021
16/09/2021
16/09/2021
15/03/2019
02/01/2019
02/01/2021
14/05/2021
31/12/2021
9.00p
9.00p
9.00p
6.00p
9.00p
5.00p
8.00p
4.25p
2.50p
0.75p
0.92p
0.67p
0.36p
0.78p
0.13p
N/A
N/A
1.95p.
1.40p
0.40p
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 2 January 2018
8. Granted 2 January 2018
9. Granted 14 May 2018
10. Granted 31 December 2018
Grant date
share price
9.30p
8.60p
7.60p
6.50p
6.50p
2.50p
4.13p
4.13p
2.90p
0.80p
Exercise
price
9.00p
9.00p
9.00p
6.00p
9.00p
5.00p
8.00p
4.25p
2.50p
0.75p
Expected
volatility
17.00%
17.00%
18.00%
18.00%
18.00%
N/A
N/A
112.00%
107.60%
105.60%
Expected
option life
(years)
Risk-free
interest rate
3.00
3.00
3.00
3.00
2.00
N/A
N/A
3.00
3.00
3.00
0.48%
0.62%
0.23%
0.14%
0.14%
N/A
N/A
0.60%
0.83%
0.78%
The warrants granted on 15 March 2017 and those granted on 2 January 2018 (6 and 7 above) 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.
Except for the warrants granted on 15 March 2017 and 2 January 2018 (6 and 7 above), all the warrants are equity settled and the charge for the year is
£154,765 (2017: £158,765). As the warrants relating to the charge were all in consideration of shares issued during the year, the charge has been taken
directly to equity and charged against the share premium as costs in respect of the issue of shares.
26 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
2018
£
343,431
209,250
32,541
585,222
2017
£
280,008
209,250
13,881
503,139
Financial StatementsValiRx plc Annual Report and Accounts 2018
26 Key management personnel compensation continued
S Vainikka
G Morris
K Alexander
G Desler
O de Giorgio-Miller
S Makinen (resigned 30/05/2017)
Details of fees paid are shown in note 22 above.
Salary
£
154,073
124,025
25,625
52,890
36,000
–
392,613
Bonus
£
40,143
35,573
22,343
27,676
29,625
–
155,360
Benefits
in kind
£
1,550
3,158
–
–
–
–
4,708
Post-
employment
benefits
£
17,806
14,735
–
–
–
–
32,541
2018
£
213,572
177,491
47,968
80,566
65,625
–
585,222
The number of Directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 2 (2017: 2).
The Directors interests in share options as at 31 December 2018 are as follows:
K Alexander
K Alexander
K Alexander
K Alexander
K Alexander
K Alexander
O de Giorgio-Miller
O de Giorgio-Miller
O de Giorgio-Miller
O de Giorgio-Miller
O de Giorgio-Miller
G Desler
G Desler
G Desler
G Desler
G Desler
G Desler
G Morris
G Morris
G Morris
G Morris
G Morris
G Morris
S Vainikka
S Vainikka
S Vainikka
S Vainikka
S Vainikka
S Vainikka
Options at
31 December
2018
3,200
48,000
160,000
160,000
173,800
2,500,000
3,045,000
24,000
160,000
160,000
211,000
2,750,000
3,305,000
3,200
48,000
176,000
176,000
189,760
3,000,000
3,592,960
6,000
48,000
176,000
176,000
191,000
3,125,000
3,722,000
8,000
80,000
192,000
192,000
222,000
3,625,000
4,319,000
Exercise
price
125.00p
93.75p
43.125p
45.00p
51.00p
4.00p
93.75p
43.125p
45.00p
51.00p
4.00p
125.00p
93.75p
43.125p
45.00p
51.00p
4.00p
125.00p
93.75p
43.125p
45.00p
51.00p
4.00p
125.00p
93.75p
43.125p
45.00p
51.00p
4.00p
Date of
grant
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.09
08.07.11
19.01.14
21.10.14
26.06.15
07.02.28
First date
of exercise
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
17.09.13
08.07.11
19.01.14
21.10.14
26.06.15
07.02.18
69
2017
£
192,240
155,982
26,125
82,115
36,000
10,677
503,139
Final date
of exercise
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
07.02.28
08.07.21
19.01.24
21.10.24
25.06.15
07.02.28
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
07.02.28
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
07.02.28
17.09.19
08.07.21
19.01.24
21.10.24
25.06.15
07.02.28
ValiRx plcAnnual Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 31 December 2018
27 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:
At 31 December 2018
At 31 December 2017
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
Fair value measurement
Level 1
£
–
–
Level 2
£
–
117,229
Level 3
£
–
–
2018
£
2017
£
174,089
–
372,872
546,961
546,961
2018
£
766,475
117,229
701,410
1,585,114
1,585,114
2017
£
1,131,944
1,711,622
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’s exposure to foreign currency risk is limited; as most of its invoicing and payments are denominated in Sterling. Accordingly, no sensitivity
analysis is presented in this area as it is considered immaterial.
Financial StatementsValiRx plc Annual Report and Accounts 2018
Annual Report and Accounts 2018 ValiRx plc
COMPANY INFORMATION
Directors
K J Alexander
O de Giorgio-Miller
G Desler
Dr G S Morris
Dr S Vainikka
Secretary
K J Alexander
Registered office
16 Upper Woburn Place
London
WC1H 0BS
Registered number
03916791 (England and Wales)
Auditors
Adler Shine LLP
Chartered Accountants and Statutory Auditor
Aston House
Cornwall Avenue
London
N3 1LF
Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
West Midlands
B62 8HD
Design and Production
www.carrkamasa.co.uk
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ValiRx plc
3rd Floor
16 Upper Woburn Place
London
WC1H 0BS
+44 (0)203 0084416
info@valirx.com
www.valirx.com