Verona Pharma plc (AIM: VRP) (Nasdaq: VRNA) (“Verona Pharma” or the
“Company”), a clinical-stage biopharmaceutical company focused on
developing and commercializing innovative therapies for respiratory
diseases, announces financial results for the three months ended
March 31, 2020, and provides a corporate update.
OUTLOOK AND STRATEGY
Verona Pharma aims to improve health and quality
of life for the millions of people affected by chronic respiratory
diseases. The Company's first-in-class development candidate,
ensifentrine, has the potential to provide relief for patients
suffering from respiratory conditions such as chronic obstructive
pulmonary disease ("COPD"), cystic fibrosis ("CF") and asthma.
Ensifentrine is a novel, investigational inhaled
therapy that has been shown to act as both a bronchodilator and an
anti-inflammatory agent in one compound. Initially, the Company is
advancing the development of nebulized ensifentrine for the
maintenance treatment of COPD in moderate to severe patients.
The Company's key objectives include:
- Completing an End-of-Phase 2 meeting with the U.S. Food and
Drug Administration ("FDA") in the second quarter of 2020 to
receive guidance on the design of the Phase 3 program with
nebulized ensifentrine;
- Securing sufficient capital to fund the Phase 3 program for
nebulized ensifentrine; and
- Initiating the Phase 3 program with nebulized ensifentrine in
moderate to severe COPD patients.
RECENT CORPORATE DEVELOPMENTS
Clinical
- In January 2020, the Company reported positive top-line data
from a Phase 2b clinical study with nebulized ensifentrine added on
to tiotropium (Spiriva®), a long acting anti-muscarinic (“LAMA”)
bronchodilator in symptomatic patients with moderate to severe
COPD. The study met the primary endpoint at all doses and also met
clinically relevant secondary endpoints. The Company believes these
data support dose selection for Phase 3 clinical trials. The study
was accepted as a late-breaking abstract at the 2020 American
Thoracic Society International Conference.
- In March 2020, the Company reported positive efficacy and
safety data with a single dose of the pressurized metered-dose
inhaler ("pMDI") formulation of ensifentrine in a Phase 2 clinical
trial in patients with moderate to severe COPD. With these results
and those observed in previous Phase 2 clinical trials,
ensifentrine has demonstrated statistically significant and
clinically meaningful improvements in lung function in COPD
patients when delivered via any of the three widely used inhaled
modes: nebulizer, DPI and pMDI.
- Results from the single dose part of the study (Part A)
demonstrated a statistically significant and clinically meaningful
increase in lung function as measured by ("FEV1")1 compared to
placebo.
- Positive data support initiation of the second, multiple dose,
part of the study (Part B), which will evaluate the pMDI
formulation in this patient population over 7 days of twice-daily
treatment. Verona Pharma has postponed the initiation of Part B due
to concerns regarding the safety of trial subjects, caregivers and
medical staff during the novel coronavirus (COVID-19) pandemic. As
a result the Company does not expect to announce results from Part
B of this trial in 2020. The Company will continue to monitor this
evolving situation and will provide an updated timeline for the
initiation of Part B at a later date.
- Also during the first quarter of 2020, the Company requested an
End-of-Phase 2 meeting with the FDA. As a result of the COVID-19
pandemic, the FDA has advised that it will provide a written
response to the Company on its End-of-Phase 2 package, rather than
holding a meeting. The Company is expecting to receive this
response during the second quarter of 2020.
- Based on the positive Phase 2 data and subject to receiving the
FDA's response to the End-of-Phase 2 package, the Company plans to
seek the necessary funding and initiate the Phase 3 clinical
program.
- Additionally, in February 2020, the Company published its Phase
2b clinical results with nebulized ensifentrine as a monotherapy
for maintenance treatment of COPD in the peer reviewed journal,
Respiratory Research. The 403-patient trial, which was reported in
March 2018, met its primary endpoint demonstrating that
ensifentrine produced clinically and statistically significant
improvements in lung function at all doses. In addition, clinically
relevant secondary endpoints were met including significant
progressive improvements in COPD symptoms.
Management
- In February 2020, the Company appointed Dr. David Zaccardelli
as President and Chief Executive Officer and as an executive
director. Mark Hahn, was appointed as Chief Financial Officer in
March.
FINANCIAL HIGHLIGHTS
- Net cash, cash equivalents and short-term investments at
March 31, 2020 amounted to £20.8 million (December 31,
2019: £30.8 million). In April 2020 the Company received a fiscal
2019 tax credit of £7.3 million in cash.
- For the three months ended March 31, 2020, the Company reported
operating loss of £11.2 million (three months ended March 31, 2019:
£7.8 million) and reported loss after tax of £9.6 million (three
months ended March 31, 2019: £5.4 million).
- The increase in operating costs was predominantly due to
increased general and administrative expenses, which were driven
primarily by costs relating to executive changes and costs
associated with the closure of our New York office and relocation
of our US base of operations to North Carolina. Included in net
profit and partly offsetting the rise in operating loss is a fall
in the net amount of finance income and expense of £0.7
million.
- Reported loss per share was 9.1 pence for the three months
ended March 31, 2020 (three months ended March 31, 2019: 5.1
pence).
- Net cash used in operating activities for the three months
ended March 31, 2020 was £10.1 million (three months ended March
31, 2019: £9.9 million).
"We continue to execute on the clinical
development plan for ensifentrine in COPD for both nebulizer and
handheld inhaler formulations. We recently reported significant
improvements in lung function and a continued favorable safety
profile demonstrated by the single dose Phase 2 results with the
pMDI formulation of ensifentrine," said David Zaccardelli, Pharm.
D., President and Chief Executive Officer. "With these results and
those observed in previous Phase 2 clinical trials, ensifentrine
has demonstrated statistically significant and clinically
meaningful improvements in lung function in COPD patients when
delivered via any of the three widely used inhaled modes:
nebulizer, DPI and pMDI. In addition to positive effects of
ensifentrine on lung function, we are very encouraged by the
promising data on COPD symptoms and quality of life seen in Phase 2
studies."
"We look forward to the FDA's response to our
End-of-Phase 2 package, which is expected in the second quarter of
2020. Currently, the initiation of a Phase 3 program for
ensifentrine for the treatment of COPD is anticipated later this
year, subject to securing additional funding. We continue to
monitor the situation caused by the COVID-19 pandemic and its
potential impact on our operational and financing goals and will
provide an update as and when further information becomes
available."
COVID-19 IMPACT AND BUSINESS CONTINUITY
To help protect the health and safety of the
patients, caregivers and healthcare professionals involved in its
ongoing clinical trials of ensifentrine, as well as its employees
and independent contractors, in response to the COVID-19 pandemic,
Verona Pharma has implemented a number of precautionary clinical
and operational measures to ensure consistent and appropriate
clinical trial conduct. The Company continues to review the effect
of the COVID-19 pandemic on its operations, ongoing and planned
clinical trials and the potential disruption to financial
markets.
Ongoing and Planned Clinical Trials of Ensifentrine and
Interactions with Regulators
Verona Pharma's ongoing clinical trial
evaluating the pMDI formulation of ensifentrine in patients with
moderate to severe COPD has met previously disclosed timelines for
reporting data from the single-dose portion (Part A), and the
Company previously reported that it anticipated reporting results
from the multiple-dose portion (Part B) in the second half of 2020.
In March 2020, the Company announced it has postponed the
initiation of Part B due to concerns regarding the safety of trial
subjects, caregivers and medical staff during the COVID-19
pandemic. As a result the Company does not expect to announce
results from Part B of this trial in 2020. The Company will
continue to monitor this evolving situation and will provide an
updated timeline for the start of Part B at a later date.
Verona Pharma is expecting to receive in the
second quarter of 2020 a response from the FDA to its End-of-Phase
2 package. The Company anticipates that this response will inform
the design of the planned Phase 3 program with nebulized
ensifentrine.
Verona Pharma has previously reported that it
anticipates initiating the Phase 3 program in the third quarter of
2020. The Company is continuing its preparations to initiate the
Phase 3 program as soon as possible following a response from the
FDA to its End-of-Phase 2 package, which supports proceeding with
Phase 3 and subject to securing sufficient capital to fund the
program and the status of the COVID-19 pandemic at that time. The
Company is investigating the potential impact of the COVID-19
pandemic on the program, including the planned design, cost and
timelines and is evaluating potential mitigations including
pre-enrollment COVID-19 screening among others. The Company plans
to provide an update on these details as and when further
information is available.
Verona Pharma is investigating whether the
COVID-19 pandemic may cause disruption of clinical supply of
ensifentrine for the ongoing trial of the pMDI formulation or
planned Phase 3 clinical trials of the nebulized formulation. The
Company’s contract manufacturers have indicated that they have
appropriate plans and procedures in place to ensure uninterrupted
future supply of clinical ensifentrine, subject to potential
limitations on their operations and on the supply chain due to the
COVID-19 pandemic. The Company is continuing to monitor this
situation and will provide an update if it becomes aware of any
disruption caused by the pandemic to the clinical supply of
ensifentrine for ongoing and planned clinical trials.
Corporate Operations and Financial Impact
Verona Pharma has also implemented measures to
help keep the Company’s employees, families, and local communities
healthy and safe. All employees are working remotely and all
business travel has been restricted.
The COVID-19 pandemic has caused significant
disruption to the financial markets. Verona Pharma has previously
indicated that a key 2020 goal is to raise significant additional
funding to initiate and complete the Phase 3 program. The Company
is continuing to evaluate available sources of capital, however,
the cost and other terms of such capital have become more onerous
as a result of the impacts of the COVID-19 pandemic on the
financial markets. There is no guarantee that the Company will be
successful in securing additional financing on acceptable terms or
within its planned timeframe, or at all, and should it be unable to
raise sufficient additional funds it will be required to defer the
initiation of Phase 3 clinical trials and other development
activities, until such funding can be obtained.
COVID-19 risk factor
Verona Pharma has assessed the potential impact
on its business of the COVID-19 pandemic and will be updating its
risk factor disclosures on a Report on Form 6-K to be filed with
the SEC on or about April 30, 2020. The Company is continuing to
review the effect of the COVID-19 pandemic on its operations,
ongoing and planned clinical trials and the potential disruption to
financial markets.
1FEV1 Forced Expiratory Volume in one second, a
standard measure of lung function
Conference Call and Webcast Information
Verona Pharma will host an investment community
conference call at 9:00 a.m. EDT / 2:00 p.m. BST on Thursday,
April 30, 2020 to discuss the Q1 2020 financial results and the
corporate update.
Analysts and investors may participate by
dialing one of the following numbers and reference conference ID:
2667888:
- 866-940-4574 for callers in the United States
- 0800 028 8438 for callers in the United Kingdom
- 0800 181 5287 for callers in Germany
A live webcast will be available on the Events
and Presentations link on the Investors page of the Company's
website, www.veronapharma.com, and an audio replay will be
available there for 30 days. An electronic copy of the Q1 2020
results release will also be made available today on the Company’s
website. This press release does not constitute an offer to sell or
the solicitation of an offer to buy any of the Company’s
securities, and shall not constitute an offer, solicitation or sale
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of that jurisdiction.
This press release contains inside information
for the purposes of Article 7 Regulation (EU) No. 596/2014.
About Verona Pharma plc
Verona Pharma is a clinical-stage
biopharmaceutical company focused on developing and commercializing
innovative therapies for the treatment of respiratory diseases with
significant unmet medical needs. If successfully developed and
approved, Verona Pharma’s product candidate, ensifentrine, has the
potential to be the first therapy for the treatment of respiratory
diseases that combines bronchodilator and anti-inflammatory
activities in one compound. Verona Pharma is currently in Phase 2
development with three formulations of ensifentrine for the
treatment of COPD: nebulized, dry powder inhaler and pressurized
metered-dose inhaler. Ensifentrine also has potential applications
in cystic fibrosis, asthma and other respiratory diseases. For more
information, please visit www.veronapharma.com.
Forward Looking Statements
This press release, operational review, outlook
and financial review contain forward-looking statements. All
statements contained in this press release, operational review,
outlook and financial review that do not relate to matters of
historical fact should be considered forward-looking statements,
including, but not limited to, statements regarding the development
and potential of ensifentrine, the initiation, progress and timing
of clinical trials, our expectations surrounding clinical trial
results and responses from the FDA, the market opportunity for
various formulations of ensifentrine, including estimates of the
market size for COPD, the impact of the novel coronavirus COVID-19
pandemic on our business and operations and the Company’s future
financial results, the sufficiency of our cash and cash
equivalents, and our expectations surrounding additional
funding.
These forward-looking statements are based on
management's current expectations. These statements are neither
promises nor guarantees, but involve known and unknown risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from our expectations expressed or implied by the forward-looking
statements, including, but not limited to, the following: our
limited operating history; our need for additional funding to
complete development and commercialization of ensifentrine, which
may not be available and which may force us to delay, reduce or
eliminate our development or commercialization efforts; the
reliance of our business on the success of ensifentrine, our only
product candidate under development; economic, political,
regulatory and other risks involved with international operations;
the lengthy and expensive process of clinical drug development,
which has an uncertain outcome; serious adverse, undesirable or
unacceptable side effects associated with ensifentrine, which could
adversely affect our ability to develop or commercialize
ensifentrine; potential delays in enrolling patients, which could
adversely affect our research and development efforts; we may not
be successful in developing ensifentrine for multiple indications;
our ability to obtain approval for and commercialize ensifentrine
in multiple major pharmaceutical markets; misconduct or other
improper activities by our employees, consultants, principal
investigators, and third-party service providers; the loss of any
key personnel and our ability to recruit replacement personnel, as
well as the impact of our management team transition; material
differences between our “top-line” data and final data; our
reliance on third parties, including clinical investigators,
manufacturers and suppliers, and the risks related to these
parties’ ability to successfully develop and commercialize
ensifentrine; lawsuits related to patents covering ensifentrine and
the potential for our patents to be found invalid or unenforceable;
the impact of the novel coronavirus COVID-19 pandemic on our
operations, the continuity of our business and general economic
conditions; and our vulnerability to natural disasters, global
economic factors and other unexpected events, including health
epidemics or pandemics like COVID-19.
These and other important factors under the
caption “Risk Factors” in our Annual Report on Form 20-F filed with
the Securities and Exchange Commission (“SEC”)
on February 27, 2020, under the caption “Supplemental Risk
Factor Disclosures” in our Report on Form 6-K to be filed with the
SEC on or about April 30, 2020, and our other reports filed with
the SEC, could cause actual results to differ materially from
those indicated by the forward-looking statements made in this
press release, operational review, outlook and financial review.
Any such forward-looking statements represent management's
estimates as of the date of this press release and operational and
financial review. While we may elect to update such forward-looking
statements at some point in the future, we disclaim any obligation
to do so, even if subsequent events cause our views to change.
These forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date of
this press release, operational review, outlook and financial
review.
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO
596/2014
For further information please contact:
Verona Pharma
plc |
Tel: +44 (0)20 3283 4200 |
Victoria Stewart, Director of
Communications |
info@veronapharma.com |
|
|
N+1
Singer |
Tel: +44 (0)20 3283 4200 |
(Nominated Adviser and UK
Broker) |
|
Aubrey Powell / George Tzimas
/ Iqra Amin (Corporate Finance) |
|
Tom Salvesen (Corporate
Broking) |
|
|
|
Optimum Strategic
Communications |
Tel: +44 (0)20 950 9144 |
(European Media and Investor
Enquiries) |
verona@optimumcomms.com |
Mary Clark / Eva Haas / Hollie
Vile |
|
|
|
Argot
Partners |
Tel: +1 212-600-1902 |
(US Investor Enquiries) |
verona@argotpartners.com |
Stephanie Marks / Kimberly
Minarovich / Michael Barron |
|
|
|
OPERATIONAL REVIEW
Company overview
Verona Pharma is focused on the development of
our novel, late-stage candidate, ensifentrine, for the treatment of
unmet respiratory needs. This inhaled inhibitor of the enzymes
phosphodiesterase 3 and 4 ("PDE3" and "PDE4") is in Phase 2
clinical development with three formulations of ensifentrine for
the treatment of chronic obstructive pulmonary disease ("COPD"):
nebulized, dry powder inhaler ("DPI") and pressurized metered-dose
inhaler ("pMDI"). Ensifentrine has demonstrated significant and
clinically meaningful improvements in lung function in COPD
patients when delivered via any of these formulations. Ensifentrine
also has potential applications in cystic fibrosis, asthma and
other respiratory diseases.
Ensifentrine highlights:
- First-in-class dual bronchodilator and anti-inflammatory agent
in a single molecule
- Potentially the first novel class of bronchodilator in COPD in
over 40 years
- Potentially the only bronchodilator option as an add-on to
existing dual / triple therapy
COPD is a progressive respiratory disease
without a cure. It damages the airways and lungs, leading to
debilitating breathlessness, hospitalizations and death. COPD has a
major impact on everyday life. Patients struggle with basic
activities such as getting out of bed, showering and walking. COPD
affects approximately 384 million people worldwide. It is projected
to be the third leading cause of death globally by 2030, according
to the World Health Organization.
COPD patients are frequently treated with
bronchodilators, to relieve airway constriction and make it easier
to breathe, and with corticosteroids, to reduce lung inflammation.
Despite receiving maximum therapy, many patients, more than 1.2
million in the US alone, remain symptomatic and urgently need
additional treatment. We believe that ensifentrine can provide
significant benefits for these patients.
Initially, we are developing nebulized
ensifentrine for the maintenance treatment of moderate to severe
COPD patients. During the first quarter we made significant
clinical progress, reporting positive data from our second
four-week Phase 2b clinical trial with nebulized ensifentrine in
over 400 symptomatic COPD patients. In this trial, ensifentrine
demonstrated that it provides additional bronchodilation when given
in addition to tiotropium (Spiriva®), a long acting anti-muscarinic
antagonist ("LAMA") widely used for the treatment of COPD. Our
first 4-week Phase 2b clinical trial in over 400 COPD patients,
which was reported in March 2018, also demonstrated improvements in
bronchodilation and COPD symptoms with nebulized ensifentrine as
monotherapy.
Summary of Phase 2b clinical results in moderate
to severe COPD patients:
- Statistically significant and clinically meaningful
improvements in lung function
- Statistically significant improvements in symptoms and Quality
of Life measures
- Improvements as monotherapy or as an addition to background
therapy
- Well-tolerated in 15 clinical trials in over 1300 subjects
Also during the first quarter of 2020, we
requested an End-of-Phase 2 meeting with the FDA. The FDA has
advised that it will provide a written response to the Company
about its End-of Phase 2 package, rather than holding a meeting. We
expect to receive this response during the second quarter of 2020.
The U.S. regulatory pathway for the development of nebulized
treatments for COPD is well-established and nebulized therapies
currently attract a premium price in this substantial market.
Our DPI and pMDI formulations of ensifentrine
have also demonstrated positive efficacy and safety data in Phase 2
clinical trials in moderate to severe COPD. An estimated 5.5
million people in the US use inhaled delivery, or DPI formulations
delivered via handheld inhalers, for COPD maintenance treatment.
The availability of these formulations of ensifentrine, if
successfully developed and approved, creates new opportunities for
using ensifentrine with existing inhaled medications. US sales of
inhaled COPD maintenance medication were approximately $9 billion
in 2019.
Management update
Senior executive changes bring substantial
leadership, operational and clinical expertise.
In February 2020, Verona Pharma appointed Dr.
David Zaccardelli as President and Chief Executive Officer and
executive director.
In March 2020, Verona Pharma appointed Mark Hahn
as Chief Financial Officer.
FINANCIAL REVIEW
Financial review of the three month
period ended March 31, 2020
The operating loss for the three months ended
March 31, 2020, was £11.2 million (March 31, 2019: £7.8
million) and the loss after tax for the three months ended
March 31, 2020, was £9.6 million (March 31, 2019: £5.4
million).
Research and development costs
Research and development costs were £5.9 million
for the three months ended March 31, 2020, compared to £5.9
million for the three months ended March 31, 2019. In the
three months ended March 31, 2020, these costs included preparatory
costs for our planned Phase 3 program, the close down costs for the
Phase 2b study for nebulized ensifentrine added on to tiotropium
and related drug product manufacturing costs.
In the same period in 2019 this included the
cost for the Phase 2 trial using the dry powder inhaler
formulation, costs for the Phase 2b study for nebulized
ensifentrine added on to tiotropium and related drug product
manufacturing costs. In addition there were preparatory costs for
the dose-ranging Phase 2b study for ensifentrine added on to
tiotropium.
General and administrative costs
General and administrative costs were £5.3
million for the three months ended March 31, 2020, compared to
£1.8 million for the three months ended March 31, 2019, an
increase of £3.5 million. The increase was primarily attributable
to a £2.7 million increase in costs relating to executive changes
and costs associated with the closure of our New York office and
relocation of our US base of operations to North Carolina. We
booked costs of £1.7 million relating to payments with respect to
contractual notice periods and other severance costs. There was a
£0.2 million impairment relating to the closure of the New York
office and an increase in the share based payment charge of £0.8
million for Restricted Stock Units issued to new executive officers
and accelerated charges relating to severance agreements. In
addition there was a £0.3 million increase in foreign exchange
charges relating to movements in the GBP/USD exchange rate.
Finally, recruitment costs, Directors and Officers liability
insurance and various other costs increased by an aggregate of
£0.5m.
Finance income and expense
Finance income was £0.4 million for the three
months ended March 31, 2020, and £1.9 million for the three
months ended March 31, 2019. The decrease in finance income
was primarily due to a smaller decrease in the fair value of the
warrant liability of £0.1 million during the three months ended
March 31, 2020 compared to a decrease of £1.6 million in the
warrant liability during the three months ended March 31, 2019.
Finance expense was £0.1 million for the
three months ended March 31, 2020, compared to £0.8 million
for the three months ended March 31, 2019. The decrease was
due to no foreign exchange loss on cash and short term investments
for the 2020 period compared to a £0.8 million loss for the three
months ended March 31, 2019.
Taxation
Taxation for the three months ended
March 31, 2020, amounted to a credit of £1.3 million compared
to a credit of £1.3 million for the three months ended
March 31, 2019. The credits are obtained at a rate of 14.5% of
230% of our qualifying research and development expenditure.
Similar expenditure on research and development has resulted in
approximately the same tax credit year on year.
Cash flows
Net cash used in operating activities increased
to £10.1 million for the three months ended March 31, 2020,
from £9.9 million for the three months ended March 31, 2019.
Operating costs in the three months ended March 31, 2020, were
higher than in the prior period but there was a similar cash
outflow due to the timing of supplier payments and a number of
accrued and non-cash severance costs in 2020.
Net cash generated from investing activities
predominantly reflects the net movement of cash being placed on
deposit for more than three months and such deposits maturing,
because deposits of more than three months are disclosed as short
term investments, separately from cash. The decrease in net
cash generated in investing activities to £7.2 million for the
three months ended March 31, 2020, from £9.0 million for the
three months ended March 31, 2019, was due to the net movement
of funds from short term investments to cash being less during the
three months ended March 31, 2020.
Cash, cash equivalents and short-term investments
Cash, cash equivalents and short-term
investments at March 31, 2020 decreased to £20.8 million from
£30.8 million at December 31, 2019 due to the utilization of
cash in the Company's ordinary operating activities.
The Group intends to initiate its Phase 3
program for the maintenance treatment of COPD once it believes it
has alignment with the U.S. Food and Drug Administration ("FDA") on
its planned design for the Phase 3 clinical program. The Group will
require significant additional funding to initiate and complete
this Phase 3 program and will need to secure the required capital
to fund the program. The Group intends to seek additional funding
through public or private financings, debt financing, collaboration
or licensing agreements and other arrangements. However, there is
no guarantee that the Group will be successful in securing
additional finance on acceptable terms, or at all, and should the
Group be unable to raise sufficient additional funds it will be
required to defer the initiation of Phase 3 clinical trials and
other development activities, until such funding can be
obtained. This could also force the Group to delay, reduce or
eliminate some or all of its research and development programs,
product portfolio expansion or commercialization efforts, or pursue
alternative development strategies that differ significantly from
its current strategy, which could have a material adverse effect on
the Group’s business, results of operations and financial
condition.
Additionally the ongoing COVID-19 pandemic could
impact the Group's ability to initiate its planned Phase 3
development program and could cause further disruption to capital
markets, either of which could adversely affect Group's ability to
raise the necessary capital.
Net assets
Net assets decreased to £25.8 million in the
three month period ended March 31, 2020, from £33.9 million at
December 31, 2019. This decrease was primarily due to the
operating activities of the Company.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL
POSITION
AS OF MARCH 31, 2020 AND DECEMBER 31, 2019
(UNAUDITED)
|
Notes |
|
As of March 31, 2020 |
|
As of December 31, 2019 |
|
|
|
£'000s |
|
£'000s |
ASSETS |
|
|
|
|
|
Non-current
assets: |
|
|
|
|
|
Goodwill |
|
|
441 |
|
|
441 |
|
Intangible assets |
|
|
2,772 |
|
|
2,757 |
|
Property, plant and
equipment |
|
|
42 |
|
|
43 |
|
Right-of-use assets |
9 |
|
1,210 |
|
|
971 |
|
Total non-current
assets |
|
|
4,465 |
|
|
4,212 |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Prepayments and other
receivables |
|
|
1,972 |
|
|
2,770 |
|
Current tax receivable |
|
|
8,667 |
|
|
7,396 |
|
Short term investments |
10 |
|
700 |
|
|
7,823 |
|
Cash and cash equivalents |
|
|
20,059 |
|
|
22,934 |
|
Total current
assets |
|
|
31,398 |
|
|
40,923 |
|
Total
assets |
|
|
35,863 |
|
|
45,135 |
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
Capital and reserves
attributable to equity holders: |
|
|
|
|
|
Share capital |
|
|
5,311 |
|
|
5,266 |
|
Share premium |
|
|
118,862 |
|
|
118,862 |
|
Share-based payment
reserve |
|
|
11,811 |
|
|
10,364 |
|
Accumulated loss |
|
|
(110,160 |
) |
|
(100,627 |
) |
Total
equity |
|
|
25,824 |
|
|
33,865 |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Derivative financial
instrument |
11 |
|
783 |
|
|
895 |
|
Lease liabilities |
|
|
623 |
|
|
460 |
|
Trade and other payables |
|
|
6,619 |
|
|
8,261 |
|
Total current
liabilities |
|
|
8,025 |
|
|
9,616 |
|
|
|
|
|
|
|
Non-current
liabilities: |
|
|
|
|
|
Assumed contingent
obligation |
12 |
|
1,156 |
|
|
1,103 |
|
Non-current Lease
Liability |
|
|
809 |
|
|
491 |
|
Deferred income |
|
|
49 |
|
|
60 |
|
Total non-current
liabilities |
|
|
2,014 |
|
|
1,654 |
|
Total equity and
liabilities |
|
|
35,863 |
|
|
45,135 |
|
The accompanying notes form an integral part of
these consolidated financial statements.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND
MARCH 31, 2019 (UNAUDITED)
|
Notes |
|
Three Months Ended March 31, 2020 |
|
Three Months Ended March 31, 2019 |
|
|
|
£'000s |
|
£'000s |
Research and development
costs |
|
|
(5,872 |
) |
|
(5,928 |
) |
General and administrative
costs |
|
|
(5,301 |
) |
|
(1,831 |
) |
Operating
loss |
|
|
(11,173 |
) |
|
(7,759 |
) |
Finance income |
6 |
|
391 |
|
|
1,860 |
|
Finance expense |
6 |
|
(52 |
) |
|
(820 |
) |
Loss before
taxation |
|
|
(10,834 |
) |
|
(6,719 |
) |
Taxation — credit |
7 |
|
1,261 |
|
|
1,313 |
|
Loss for the
period |
|
|
(9,573 |
) |
|
(5,406 |
) |
Other comprehensive
loss: |
|
|
|
|
|
Items that might be
subsequently reclassified to profit or loss |
|
|
|
|
|
Exchange differences on
translating foreign operations |
|
|
40 |
|
|
(13 |
) |
Total comprehensive
loss attributable to owners of the Company |
|
|
(9,533 |
) |
|
(5,419 |
) |
Loss per ordinary share —
basic and diluted (pence) |
8 |
|
(9.1 |
) |
|
(5.1 |
) |
The accompanying notes form an integral part of
these consolidated financial statements.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN
EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2019, AND
MARCH 31, 2020 (UNAUDITED)
|
Share Capital |
|
Share Premium |
|
Share-based Expenses |
|
Total Accumulated Losses |
|
Total Equity |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Balance at January 1, 2019 |
5,266 |
|
|
118,862 |
|
|
7,923 |
|
|
(68,633 |
) |
|
63,418 |
|
Impact of change in accounting
policy (1) |
— |
|
|
— |
|
|
— |
|
|
(20 |
) |
|
(20 |
) |
Adjusted Balance at
January 1, 2019 |
5,266 |
|
|
118,862 |
|
|
7,923 |
|
|
(68,653 |
) |
|
63,398 |
|
Loss for the period |
— |
|
|
— |
|
|
— |
|
|
(5,406 |
) |
|
(5,406 |
) |
Other comprehensive loss for
the period: |
|
|
|
|
|
|
|
|
|
Exchange differences on
translating foreign operations |
— |
|
|
— |
|
|
— |
|
|
(13 |
) |
|
(13 |
) |
Total comprehensive loss for
the period |
— |
|
|
— |
|
|
— |
|
|
(5,419 |
) |
|
(5,419 |
) |
Share-based payments |
— |
|
|
— |
|
|
620 |
|
|
— |
|
|
620 |
|
Balance at March 31,
2019 |
5,266 |
|
|
118,862 |
|
|
8,543 |
|
|
(74,072 |
) |
|
58,599 |
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
2020 |
5,266 |
|
|
118,862 |
|
|
10,364 |
|
|
(100,627 |
) |
|
33,865 |
|
Loss for the period |
— |
|
|
— |
|
|
— |
|
|
(9,573 |
) |
|
(9,573 |
) |
Other comprehensive loss for
the period: |
|
|
|
|
|
|
|
|
|
Exchange differences on
translating foreign operations |
— |
|
|
— |
|
|
— |
|
|
40 |
|
|
40 |
|
Total comprehensive loss for
the period |
— |
|
|
— |
|
|
— |
|
|
(9,533 |
) |
|
(9,533 |
) |
New share capital issued |
45 |
|
|
— |
|
|
— |
|
|
— |
|
|
45 |
|
Share-based payments |
— |
|
|
— |
|
|
1,447 |
|
|
— |
|
|
1,447 |
|
Balance at March 31,
2020 |
5,311 |
|
|
118,862 |
|
|
11,811 |
|
|
(110,160 |
) |
|
25,824 |
|
The currency translation reserve for
March 31, 2019, and March 31, 2020, is not considered
material and as such is not presented in a separate reserve but is
included in the total accumulated losses reserve.
(1) This relates to the adoption of IFRS 16. See
note 2.17 of the 20-F 2019.
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH
FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND
MARCH 31, 2019 (UNAUDITED)
|
Three Months Ended March 31, 2020 |
|
Three Months Ended March 31, 2019 |
|
£'000s |
|
£'000s |
Cash used in operating
activities: |
|
|
|
Loss before taxation |
(10,834 |
) |
|
(6,719 |
) |
Finance income |
(391 |
) |
|
(1,860 |
) |
Finance expense |
52 |
|
|
820 |
|
Share-based payment
charge |
1,447 |
|
|
620 |
|
Decrease in prepayments and
other receivables |
753 |
|
|
84 |
|
Decrease in trade and other
payables |
(1,553 |
) |
|
(2,899 |
) |
Depreciation of property,
plant and equipment and right of use assets |
122 |
|
|
78 |
|
Impairment of right of use
asset |
232 |
|
|
— |
|
Unrealized foreign exchange
losses / (gains) |
1 |
|
|
(11 |
) |
Amortization of intangible
assets |
30 |
|
|
24 |
|
Net cash used in
operating activities |
(10,141 |
) |
|
(9,863 |
) |
Cash flow from
investing activities: |
|
|
|
Interest received |
98 |
|
|
125 |
|
Purchase of plant and
equipment |
(4 |
) |
|
(2 |
) |
Payment for patents and
computer software |
(45 |
) |
|
(61 |
) |
Maturity of short term
investments |
7,148 |
|
|
8,972 |
|
Net cash generated in
investing activities |
7,197 |
|
|
9,034 |
|
Cash flow from
financing activities: |
|
|
|
Repayment of finance lease
liabilities |
(132 |
) |
|
(84 |
) |
Net cash used in
financing activities |
(132 |
) |
|
(84 |
) |
Net decrease in cash
and cash equivalents |
(3,076 |
) |
|
(913 |
) |
Cash and cash equivalents at
the beginning of the period |
22,934 |
|
|
19,784 |
|
Effect of exchange rates on
cash and cash equivalents |
201 |
|
|
(145 |
) |
Cash and cash
equivalents at the end of the period |
20,059 |
|
|
18,726 |
|
VERONA PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2020
1. General information
Verona Pharma plc (the "Company") and its
subsidiaries are a clinical-stage biopharmaceutical company focused
on developing and commercializing innovative therapeutics for the
treatment of respiratory diseases with significant unmet medical
needs.
The Company is a public limited company, which
is dual listed, with its ordinary shares listed on the AIM market
operated by the London Stock Exchange and its American Depositary
Shares (“ADSs”) on the Nasdaq Global Market. The Company is
incorporated and domiciled in the United Kingdom.
The address of the registered office is 1
Central Square, Cardiff, CF10 1FS, United Kingdom. The Company has
two subsidiaries, Verona Pharma Inc. and Rhinopharma Limited,
both of which are wholly owned.
2. Basis of accounting
The unaudited condensed consolidated interim
financial statements of Verona Pharma Plc and its
subsidiaries, Verona Pharma, Inc., and Rhinopharma Limited
("Rhinopharma") (together “the Group”), for the three months ended
March 31, 2020, do not include all the statements required for
full annual financial statements and should be read in conjunction
with the consolidated financial statements of the Group as of
December 31, 2019.
The 2019 accounts, on which the Company’s
auditors delivered an unqualified audit report, have been delivered
to the Registrar of Companies.
These unaudited condensed interim financial
statements were authorized for issue by the Company’s board of
directors (the “Directors”) on April 30, 2020. There have been no
changes to the accounting policies as contained in the annual
consolidated financial statements as of and for the year ended
December 31, 2019, which have been prepared in accordance with
international financial reporting standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
The Group’s activities and results are not
exposed to any seasonality. The Group operates as a single
operating and reportable segment.
Going concern
The Group has incurred recurring losses since
inception, including net losses of £31.9 million, £19.9 million and
£20.5 million for the years ended December 31, 2019, 2018 and
2017, respectively. In addition, as of March 31, 2020, the Group
had an accumulated loss of £110.2 million. The Group expects to
continue to generate operating losses for the foreseeable future.
As of the issuance date of these condensed consolidated interim
financial statements, the Group expects that its cash and cash
equivalents, would be sufficient to fund its operating expenses and
capital expenditure requirements for at least 12 months from the
issuance date of these condensed consolidated interim financial
statements. Accordingly, the consolidated financial statements have
been prepared on a basis that assumes the Group will continue as a
going concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the ordinary course
of business.
The Group intends to initiate its Phase 3
program for the maintenance treatment of COPD once it believes it
has alignment with the U.S. Food and Drug Administration ("FDA") on
its planned design for the Phase 3 clinical program. The Group will
require significant additional funding to initiate and complete
this Phase 3 program and will need to secure the required capital
to fund the program. The Group intends to seek additional funding
through public or private financings, debt financing, collaboration
or licensing agreements and other arrangements. However, there is
no guarantee that the Group will be successful in securing
additional finance on acceptable terms, or at all, and should the
Group be unable to raise sufficient additional funds it will be
required to defer the initiation of Phase 3 clinical trials and
other development activities, until such funding can be
obtained. This could also force the Group to delay, reduce or
eliminate some or all of its research and development programs,
product portfolio expansion or commercialization efforts, or pursue
alternative development strategies that differ significantly from
its current strategy, which could have a material adverse effect on
the Group’s business, results of operations and financial
condition.
Additionally the ongoing COVID-19 pandemic could
impact the Group's ability to initiate its planned Phase 3
development program and could cause further disruption to capital
markets, either of which could adversely affect the Group's ability
to raise the necessary capital.
The Group is monitoring the effect of the
COVID-19 pandemic and reviewing the possible impact on its
operations, planned clinical trials and the potential disruption to
financial markets in the near and the long term. Management has
determined that this currently does not affect the going concern
assumption under which the condensed consolidated interim financial
statements are prepared.
Impairment of intangible assets, goodwill and
non-financial assets
The Group is constantly reviewing the effect of
the COVID-19 pandemic on its operations, ongoing and planned
clinical trials and the potential disruption to financial markets.
Management has determined that the current effect on the Group does
not require an impairment of intangible assets or goodwill as the
Company's market value still supports the value of the assets.
However, management will continue to monitor the situation.
Dividend
The Directors do not recommend the payment of a
dividend for the three months ended March 31, 2020, (three
months ended March 31, 2019: £nil and the year ended
December 31, 2019: £nil).
3. Segmental reporting
The Group’s activities are covered by one
operating and reporting segment: Drug Development. There have been
no changes to management’s assessment of the operating and
reporting segment of the Group during the period.
All non-current assets are based in the United
Kingdom apart from a right-of-use asset relating to property a
lease in the United States.
4. Financial Instruments
The Group’s activities expose it to a variety of
financial risks: market risk (including foreign currency risk);
cash flow and fair value interest rate risk; and credit risk and
liquidity risk. The condensed consolidated interim financial
statements do not include all financial risk management information
and disclosures required in the annual financial statements, and
they should be read in conjunction with the Group’s annual
financial statements for the year ended December 31, 2019.
5. Critical estimates and
judgments
The preparation of condensed consolidated
interim financial statements require management to make judgments,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from those estimates.
In preparing these condensed consolidated
interim financial statements, the significant judgments made by
management in applying the Group’s accounting policies and the key
sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the year ended
December 31, 2019, with the exception of development of the
COVID-19 pandemic.
We have assessed whether the COVID-19 pandemic
has any impact on the key estimates and judgments previously
reported in respect of the derivative financial instruments and the
assumed contingent obligation and concluded that there is no
impact.
6. Finance income and expense
|
Three months ended March 31, 2020 |
|
Three months ended March 31, 2019 |
Finance
income: |
£'000s |
|
£'000s |
Interest received on cash balances |
53 |
|
|
250 |
|
Foreign exchange gain on
translating foreign currency denominated bank balances |
226 |
|
|
— |
|
Fair value adjustment on
derivative financial instruments (note 11) |
112 |
|
|
1,610 |
|
Total finance income |
391 |
|
|
1,860 |
|
|
Three months ended March 31, 2020 |
|
Three months ended March 31, 2019 |
Finance
expense: |
£'000s |
|
£'000s |
Interest on discounted lease liability |
20 |
|
|
9 |
|
Foreign exchange loss on
translating foreign currency denominated balances |
— |
|
|
783 |
|
Unwinding of discount factor
related to the assumed contingent arrangement (note 12) |
32 |
|
|
28 |
|
Total finance expense |
52 |
|
|
820 |
|
7. Taxation
The tax credit for the three months ended March
31, 2020, amounts to £1.3 million, and consists of the estimated
research and development tax credit receivable on qualifying
expenditure incurred during the three months ended March 31, 2020
for an amount of £1.3 million less a tax expense of £40 thousand
related to the US operations (three months ended March 31, 2019:
£1.3 million tax credit, comprising £1.3 million for research and
development tax credit, less £3 thousand expense for tax on US
operations).
8. Loss per share calculation
The basic loss per share of 9.1p (March 31,
2019: 5.1p) for the three months ended March 31, 2020 is calculated
by dividing the loss for the three months ended March 31, 2020, by
the weighted average number of ordinary shares in issue of
105,453,364 during the three months ended March 31, 2020
(March 31, 2019: 105,326,637). Since the Group has reported a
net loss, diluted loss per ordinary share is equal to basic loss
per ordinary share.
Each ADS represents 8 shares of the Company, so
the loss per ADS is any period is equal to 8 times the loss per
share.
9. Right-of-use assets
ln the three months to March 31, 2020, a new
lease was signed in North Carolina and a liability and
corresponding right-of-use ("ROU") asset of £575 thousand was
recognized. The lease terminates on April 30, 2024.
As at December 31, 2019, the Group had a ROU
asset relating to office space in New York. In the three months to
March 31, 2020, the New York office was closed and the ROU asset
was subject to an impairment review and its net book value of £232
thousand was subsequently expensed to the income statement. The
Group retains a liability of £224 thousand relating to this
asset.
10. Short term investments
Short term investments as at March 31,
2020, amounted to a total of £0.7 million (December 31, 2019:
£7.8 million) and consisted of fixed term deposits.
11. Derivative financial
instrument
On July 29, 2016, the Company issued 31,115,926
units to new and existing investors at the placing price of £1.4365
per unit. Each unit comprises one ordinary share and one
warrant.
The warrant holders can opt for a cashless
exercise of their warrants, whereby they can choose to exchange the
warrants held for a reduced number of warrants exercisable at nil
consideration. The reduced number of warrants is calculated based
on a formula considering the share price and the exercise price of
the warrants. The warrants are therefore classified as a derivative
financial liability, since their exercise could result in a
variable number of shares to be issued.
The warrants entitled the investors to subscribe
for, in aggregate, a maximum of 12,401,262 shares. The
warrants can be exercised until May 2, 2022.
At December 31, 2019, and March 31,
2020, warrants over 12,401,262 shares were in effect.
|
At March 31, 2020 |
|
At December 31, 2019 |
Shares available to be issued
under warrants |
12,401,262 |
|
|
12,401,262 |
|
Exercise price |
£ |
1.7238 |
|
|
£ |
1.7238 |
|
Risk-free interest rate |
0.10 |
% |
|
0.54 |
% |
Time to expiry |
2.09 years |
|
|
2.34 years |
|
Annualized volatility |
76.32 |
% |
|
65.56 |
% |
Dividend rate |
0.00 |
% |
|
0.00 |
% |
As at March 31, 2020, the Group updated the
underlying assumptions and calculated a fair value of these
warrants of £0.8 million.
The variance for the three months ended March
31, 2020, was £0.1 million (three months ended March 31, 2019: £1.6
million) and is recorded as finance income in the Consolidated
Statement of Comprehensive Income.
|
Derivativefinancialinstrument |
|
Derivativefinancialinstrument |
|
2020 |
|
2019 |
|
£'000s |
|
£'000s |
At January 1, |
895 |
|
|
2,492 |
|
Fair value adjustments
recognized in profit or loss |
(112 |
) |
|
(1,610 |
) |
At March
31, |
783 |
|
|
882 |
|
For the amount recognized as at March 31,
2020, the effect if volatility were to deviate up or down is
presented in the following table.
|
Volatility(up / down10 %
pts) |
|
£'000s |
Variable up |
1,100 |
Base case, reported fair
value |
783 |
Variable down |
500 |
12. Assumed contingent obligation related to the
business combination
The value of the assumed contingent obligation
as of March 31, 2020, amounted to £1,156 thousand
(December 31, 2019: £1,103 thousand). The increase in value of
the assumed contingent obligation during the three months ended
March 31, 2020, amounted to £53 thousand (three months ended
March 31, 2019: £22 thousand).
The assumed contingent liability is measured at
the expected value of the milestone payment and royalty payments.
This expected value is based on estimated future royalties payable,
derived from sales forecasts, and an assessment of the probability
of success using standard market probabilities for respiratory drug
development. The risk-weighted value of the assumed contingent
arrangement is discounted back to its net present value applying an
effective interest rate of 12%.
The assumed contingent liability is accounted
for as a liability and its value is measured at amortized cost
using the effective interest rate method, and is re-measured for
changes in estimated cash flows or when the probability of success
changes. Re-measurements relating to changes in estimated cash
flows and probabilities of success are recognized in the IP R&D
asset it relates to. The unwind of the discount is recognized in
finance expense. In 2019 and the three months ended March 31, 2020,
there were no events that triggered remeasurement. Should the Group
determine that it has moved from its Phase 2 to Phase 3 stage of
development then the value of the liability could increase by
between £15 million and £30 million; the increase in
the value of the liability will give rise to an approximately
equivalent increase in the value of the IP R&D asset it relates
to.
|
2020 |
|
2019 |
|
£'000s |
|
£'000s |
At
January 1, |
1,103 |
|
|
996 |
|
Impact of changes in foreign
exchange rates |
21 |
|
|
(6 |
) |
Unwinding of discount factor |
32 |
|
|
28 |
|
At March
31, |
1,156 |
|
|
1,018 |
|
There is no material difference between the fair
value and carrying value of the financial liability.
For the amount recognized as at March 31,
2020, of £1,156 thousand, the effect if underlying assumptions were
to deviate up or down is presented in the following table (assuming
the probability of success does not change):
|
Revenue(up / down10 %
pts) |
|
Foreign Exchange (up / down 1% pt) |
|
£'000s |
|
£'000s |
Variable up |
1,191 |
|
1,152 |
Base case, reported fair
value |
1,156 |
|
1,156 |
Variable down |
1,121 |
|
1,159 |
13. Share option scheme
During the three months ended March 31, 2020 the
Company granted 1,605,000 share options and forfeited 1,628,799
share options (in the three months ended March 31, 2019, the
Company granted no share options nor forfeited any share options).
The forfeitures were part of the severance agreements relating to
executive changes.
During the three months ended March 31,
2020 the Company granted 8,442,049 Restricted Stock Units (“RSUs”)
(three months ended March 31, 2019, the Company granted no
RSUs).
The movement in the number of the Company’s
share options is set out below:
|
Weightedaverageexerciseprice |
|
2020 |
|
Weightedaverageexerciseprice |
|
2019 |
|
£ |
|
|
|
£ |
|
|
Outstanding at January 1 |
1.15 |
|
|
14,179,196 |
|
|
1.53 |
|
|
8,752,114 |
|
Granted during the period |
0.55 |
|
|
1,605,000 |
|
|
— |
|
|
— |
|
Forfeited during the period |
1.02 |
|
|
(1,628,799 |
) |
|
— |
|
|
— |
|
Outstanding options at March
31 |
1.10 |
|
|
14,155,397 |
|
|
1.53 |
|
|
8,752,114 |
|
The movement in the number of the Company’s RSUs is set out
below:
|
2020 |
|
2019 |
|
|
|
|
Outstanding at January 1 |
1,602,969 |
|
|
862,473 |
|
Granted during the period |
8,442,049 |
|
|
— |
|
Expired during the period |
(44,846 |
) |
|
— |
|
Exercised during the period |
(887,080 |
) |
|
— |
|
Outstanding RSUs at March 31 |
9,113,092 |
|
|
862,473 |
|
1,069,184 of the RSUs issued related to an
element of annual base salary and 7,372,865 related to additional
equity grants for Dr. Zaccardelli and Mr. Hahn (see note 14). Using
the Black-Scholes valuation model the fair value of each RSUs
relating to annual base salary was £0.55 and the fair value of each
RSU relating to the additional grants was estimated at £0.525 as at
31 March, 2020.
The share‑based payment expense for the three
months ended March 31, 2020, was £1,447 thousand (three months
ended March 31, 2019: £620 thousand).
14. Related party transactions
The Directors and Officers have authority and
responsibility for planning, directing and controlling the
activities of the Company and they therefore comprise key
management personnel as defined by IAS 24 ("Related Party
Disclosures").
During the three months ended March 31, 2020,
Dr. Jan-Anders Karlsson, the Company’s former CEO, and Piers
Morgan, the Company’s former CFO, resigned and were replaced by Dr.
David Zaccardelli as CEO and President, and Mark Hahn as CFO.
Dr. Jan-Anders Karlsson's severance agreement
included severance pay equal to £479,160, a cash bonus of £40,000,
a payment as compensation of termination of employment of £100,000
and base salary in lieu of notice of £363,000. Other benefits
included continued medical and life insurance and continued pension
contributions.
Piers Morgan's severance agreement included
severance pay equal to £123,930 as payment in lieu of notice, a
cash bonus of £82,620, ex gratia compensation of £30,000 and
£40,000 additional compensation for termination of employment.
Pursuant to the terms of his employment
agreement Dr. Zaccardelli is entitled to receive an annual base
salary of $750,000, payable $250,000 in cash and $500,000 in
restricted stock units, and a target annual bonus opportunity of
50% of his annual base salary. Dr. Zaccardelli is also entitled to
receive an award of restricted stock units, equal to 4% of the
Company's outstanding ordinary shares, and an additional award of
restricted stock units if the Company raises additional equity
capital during fiscal year 2020, which is intended to result in
Dr. Zaccardelli’s equity awards (other than the portion of his
base salary payable in restricted stock units) being equal to 4% of
the Company's outstanding ordinary shares on the applicable date of
issuance.
Pursuant to the terms of his employment
agreement Mr. Hahn is entitled to receive an annual base salary of
$500,000, payable $250,000 in cash and $250,000 in restricted stock
units, and a target annual bonus opportunity of 50% of his annual
base salary. Mr. Hahn is also entitled to receive an initial award
of restricted stock units, equal to 3% of the Company's outstanding
ordinary shares and an award of restricted stock units equal to 1%
of the Company's outstanding ordinary share after six months of
employment. He will also be entitled to an additional award of
restricted stock units if the Company raises additional equity
capital during fiscal year 2020, which is intended to result in Mr.
Hahn’s equity awards (other than the portion of his base salary
payable in restricted stock units) being equal to 4% of the
Company's outstanding ordinary shares on the applicable date of
issuance.
Convenience translation
The Company maintains its books and records in
pounds sterling and prepares its financial statements in accordance
with IFRS, as issued by the IASB. It reports its results in pounds
sterling. For the convenience of the reader the Company has
translated pound sterling amounts in the tables below as of
March 31, 2020, and for the three months ended March 31, 2020,
into US dollars at the noon buying rate of the Federal Reserve Bank
of New York on March 31, 2020, which was £1.00 to $1.2454.
These translations should not be considered representations that
any such amounts have been, could have been or could be converted
into US dollars at that or any other exchange rate as of that or
any other date.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL
POSITION AS AT MARCH 31, 2020 AND DECEMBER 31, 2019
(UNAUDITED)
|
As of March 31, 2020 |
|
As of March 31, 2020 |
|
As of December 31, 2019 |
|
£'000s |
|
$'000s |
|
£'000s |
ASSETS |
|
|
|
|
|
Non-current
assets: |
|
|
|
|
|
Goodwill |
441 |
|
|
550 |
|
|
441 |
|
Intangible assets |
2,772 |
|
|
3,452 |
|
|
2,757 |
|
Property, plant and
equipment |
42 |
|
|
52 |
|
|
43 |
|
Right-of-use assets |
1,210 |
|
|
1,507 |
|
|
971 |
|
Total non-current
assets |
4,465 |
|
|
5,561 |
|
|
4,212 |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Prepayments and other
receivables |
1,972 |
|
|
2,456 |
|
|
2,770 |
|
Current tax receivable |
8,667 |
|
|
10,794 |
|
|
7,396 |
|
Short term investments |
700 |
|
|
872 |
|
|
7,823 |
|
Cash and cash equivalents |
20,059 |
|
|
24,981 |
|
|
22,934 |
|
Total current
assets |
31,398 |
|
|
39,103 |
|
|
40,923 |
|
Total
assets |
35,863 |
|
|
44,664 |
|
|
45,135 |
|
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
Capital and reserves
attributable to equity holders: |
|
|
|
|
|
Share capital |
5,311 |
|
|
6,614 |
|
|
5,266 |
|
Share premium |
118,862 |
|
|
148,031 |
|
|
118,862 |
|
Share-based payment
reserve |
11,811 |
|
|
14,709 |
|
|
10,364 |
|
Accumulated loss |
(110,160 |
) |
|
(137,193 |
) |
|
(100,627 |
) |
Total
equity |
25,824 |
|
|
32,161 |
|
|
33,865 |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Derivative financial
instrument |
783 |
|
|
975 |
|
|
895 |
|
Lease liabilities |
623 |
|
|
776 |
|
|
460 |
|
Trade and other payables |
6,619 |
|
|
8,243 |
|
|
8,261 |
|
Total current
liabilities |
8,025 |
|
|
9,994 |
|
|
9,616 |
|
|
|
|
|
|
|
Non-current
liabilities: |
|
|
|
|
|
Assumed contingent
obligation |
1,156 |
|
|
1,440 |
|
|
1,103 |
|
Non-current Lease
Liability |
809 |
|
|
1,008 |
|
|
491 |
|
Deferred income |
49 |
|
|
61 |
|
|
60 |
|
Total non-current
liabilities |
2,014 |
|
|
2,509 |
|
|
1,654 |
|
Total equity and
liabilities |
35,863 |
|
|
44,664 |
|
|
45,135 |
|
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2020
AND MARCH 31, 2019 (UNAUDITED)
|
Three months ended March 31, 2020 |
|
Three months ended March 31, 2020 |
|
Three months ended March 31, 2019 |
|
£'000s |
|
$'000s |
|
£'000s |
Research and development costs |
(5,872 |
) |
|
(7,313 |
) |
|
(5,928 |
) |
General and administrative
costs |
(5,301 |
) |
|
(6,602 |
) |
|
(1,831 |
) |
Operating
loss |
(11,173 |
) |
|
(13,915 |
) |
|
(7,759 |
) |
Finance income |
391 |
|
|
487 |
|
|
1,860 |
|
Finance expense |
(52 |
) |
|
(65 |
) |
|
(820 |
) |
Loss before
taxation |
(10,834 |
) |
|
(13,493 |
) |
|
(6,719 |
) |
Taxation — credit |
1,261 |
|
|
1,570 |
|
|
1,313 |
|
Loss for the
period |
(9,573 |
) |
|
(11,923 |
) |
|
(5,406 |
) |
Other comprehensive
loss: |
|
|
|
|
|
Items that might be
subsequently reclassified to profit or loss |
|
|
|
|
|
Exchange differences on
translating foreign operations |
40 |
|
|
50 |
|
|
(13 |
) |
Total comprehensive
loss attributable to owners of the Company |
(9,533 |
) |
|
(11,873 |
) |
|
(5,419 |
) |
Loss per ordinary share —
basic and diluted (pence / cents) |
(9.1 |
) |
|
(11.3 |
) |
|
(5.1 |
) |
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