TIDMVRP
Verona Pharma plc
("Verona Pharma" or the "Company")
Financial results for the year ended 31 December 2014
Significant funding underpins RPL554 progress
12 May 2015, Cardiff - Verona Pharma plc (AIM: VRP), the drug development
company focused on first-in-class medicines to treat respiratory diseases,
today announces its audited results for the twelve months ended 31 December
2014.
2014 OPERATIONAL HIGHLIGHTS
* Developed a novel commercial formulation for lead compound RPL554 (a
first-in-class, dual PDE3/PDE4 inhibitor with both bronchodilator and
anti-inflammatory activities)
* Began phase 1/2 clinical trial with the new formulation of RPL554,
initially in healthy subjects, to confirm safety and tolerability at high
drug doses. Second part of study, in COPD patients, to report later this
year
* Filed multiple patent applications on RPL554 to extend IP coverage
* Published data on RPL554 suggesting its potential as a treatment for
patients with cystic fibrosis. Obtained a Venture and Innovation Award from
the Cystic Fibrosis Trust, the first biotech company to have received such
an award
* Appointed Dr. David Ebsworth as Non-Executive Chairman and Mr. Biresh Roy
as Chief Financial Officer
2014 FINANCIAL HIGHLIGHTS
* Completed a placing in March 2014 raising gross proceeds of GBP14.0 million
* Loss after tax of GBP2.76 million (2013: GBP2.52 million) equivalent to 0.32
pence (2013: 0.74 pence) per ordinary share
* Net cash outflows from operating activities during the year of GBP3.83m
(2013: GBP2.34m), with cash and cash equivalents as at 31 December 2014 of GBP
9.97m (2013: GBP0.60m)
POST PERIOD HIGHLIGHTS
* In its on-going clinical trial, RPL554 demonstrated excellent tolerability
at the highest dose studied, a 16 times higher dose than the previously
used bronchodilator dose. Interim pharmacokinetic data with new formulation
also suggests suitability for dosing twice daily
* Appointed Dr. Kenneth Newman as Chief Medical Officer
Jan-Anders Karlsson, Chief Executive Officer of Verona Pharma, commented:
"During the period, Verona Pharma completed a GBP14 million fundraising, the
development of a novel nebulised formulation of RPL554 suitable for commercial
deployment and initiated a phase 1/2 clinical trial using this new formulation.
Interim data from healthy volunteers, published post period, demonstrated that
this RPL554 formulation has excellent tolerability at the highest dose studied,
which was a 16 times higher dose than the previously used bronchodilator dose
and also suggests the drug could be dosed twice daily. We await results from
the second part of trial later this year in COPD patients. The Company has also
made valuable progress in broadening the potential indications for RPL554 to
include cystic fibrosis.
"Important appointments made during the year to broaden the management team and
Board mean that we now have a team in place with deep respiratory development
expertise to exploit fully the potential of RPL554. Our initial focus is on
specific patient groups that are currently under-treated and for which there is
limited competition. We remain confident that with multiple potential
applications, each representing an attractive commercial opportunity, RPL554
has the potential to generate significant value for shareholders."
-Ends-
For further information please contact:
Verona Pharma plc Tel: +44 (0) 20 3283 4200
Jan-Anders Karlsson, Chief Executive
Officer
N+1 Singer Tel: +44 (0)20 7496 3000
Aubrey Powell / Jen Boorer
FTI Consulting Tel: +44 (0)20 3727 1000
Julia Phillips / Simon Conway
Notes to Editors
About Verona Pharma plc
Verona Pharma plc is a UK-based clinical stage biopharmaceutical company
focused on the development of innovative prescription medicines to treat
respiratory diseases with significant unmet medical needs, such as chronic
obstructive pulmonary disease (COPD), asthma and cystic fibrosis.
Verona Pharma's lead drug, RPL554, is a first-in-class drug currently in phase
II trials as a nebulised treatment for acute exacerbations of COPD in the
hospital setting. The drug is a dual phosphodiesterase (PDE) 3/4 inhibitor and
therefore has both bronchodilator and anti-inflammatory effects, which are
essential to the improvement of patients with COPD and asthma.
Verona Pharma is also building a broader portfolio of RPL554-containing
products to maximise its benefit to patients and its value. This includes the
very significant markets for COPD and asthma maintenance therapy. The Company
is also exploring the potential of the drug in different diseases, such as
cystic fibrosis, where it is in pre-clinical testing and has recently received
a Venture and Innovation Award from the Cystic Fibrosis Trust.
About Chronic Obstructive Pulmonary Disease (COPD)
Sixty-five million people worldwide suffer from moderate to severe COPD and the
World Health Organisation (WHO) expects COPD to be the 3rd leading cause of
death globally by 2020. It is the only major chronic disease with increasing
mortality. Currently available drugs are aimed at long-term maintenance
therapy, with the market dominated by large pharma. Despite the wide
availability of these therapies, COPD patients suffer acute periods of
worsening symptoms (exacerbations), which cause, in the US alone, some 1.5
million A&E visits, 726,000 hospitalisations and 120,000 deaths per annum.
Bronchodilating therapy is considered to be the standard of care, and agents
can be administered via handheld devices such as metered dose inhaler (MDI),
dry powder inhaler (DPI) and by nebulisers. The nebulised bronchodilator market
was worth about $1 billion in 2014 in the US.1 RPL554 is being developed by
Verona Pharma as an add-on therapy to the "Standard of Care" with the
objectives of providing rapid and pronounced improvement in lung function,
reduced symptoms and both shortened duration of hospital stays and reduced
re-admission rates 30 days after discharge from hospital. Studies to date on
RPL554 have demonstrated that it has a strongly differentiated 3-way mode of
action, being: (1) bronchodilation (the relaxation of smooth muscle in the
airway); (2) anti-inflammatory effects on cells and (3) ion channel activation
in epithelial cells, with increased mucociliary clearance of the airway.
1 IMS Consulting Group market research 2014
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S JOINT STATEMENT
INTRODUCTION
Verona Pharma is a biopharmaceutical company developing high value,
first-in-class drugs for patients with chronic, debilitating respiratory
diseases that are not well treated by existing medicines. The Company continued
to implement its strategy to accelerate shareholder value creation, by focusing
its resources on its lead programme RPL554, an innovative inhaled, dual
phosphodiesterase (PDE) 3 and 4 inhibitor, as a nebulised treatment for
patients in hospital with acute exacerbation of Chronic Obstructive Pulmonary
Disease (COPD) to facilitate and speed up recovery and reduce the risk of early
recurrence of symptoms after discharge from hospital. Many of these patients
become hospitalised as a result of an acute worsening of their disease that
cannot be prevented or treated by their current medications and they are
therefore in need of more intensive care and treatment. RPL554's unique and
very attractive properties, being both an effective bronchodilator and
anti-inflammatory agent in the same compound, should be very beneficial to
these patients. RPL554's unique combination of properties could also translate
into activity in other respiratory disorders. The Company is currently
exploring the potential of the drug in cystic fibrosis, where it is in
pre-clinical testing. Cystic fibrosis is a genetic disease with a shortened
lifespan in need of new and effective treatments. In addition, RPL554 could be
beneficial as a chronic maintenance treatment for patients with COPD, although
such development is long and costly and would therefore require a partnership.
RPL554 provides an opportunity to treat patients with respiratory diseases that
are not optimally treated with currently available drugs. The Board believes
there is no other compound which demonstrates RPL554's unique mechanism of
action, or any other novel type of bronchodilator currently in clinical
development. The market for nebulized bronchodilators in the US is about $1
billion providing a commercially very attractive opportunity. Additionally, the
cystic fibrosis market and the market for maintenance treatment of COPD
patients are both very large and provide significant upside sales potential for
RPL554.
In March 2014, Verona Pharma competed a GBP14.0 million fundraising. These funds
are being used to complete the RPL554 phase 2a development programme.
During 2014, the Company completed the development and manufacture of clinical
trial materials for the Company's new formulation of RPL554 for use in a
nebuliser. The first phase 1/2 clinical trial with the new formulation of
RPL554 started in December 2014 at MEU, Manchester, UK. The study expects to
enrol and complete by 2H 2015 and an interim report on the excellent
tolerability of the new inhaled formulation has already been published. Based
on these very positive data, the Board has decided to accelerate the
development programme, as announced on 3 March 2015. During the period,
scientific data on the bronchodilator effects of RPL554 in COPD and asthma were
presented at the American Thoracic Society's annual conference in San Diego in
May, and at the European Respiratory Society meeting in Munich in September.
Most importantly, the fund raising has also allowed Verona Pharma to strengthen
its senior management team with a new CFO, Mr. Biresh Roy, from September 2014,
a new Chairman of the Board, Dr. David Ebsworth, from December 2014, and a CMO,
Dr. Kenneth Newman from January 2015.
In September, Verona Pharma published very promising pre-clinical data in a
model of cystic fibrosis demonstrating that RPL554 activates the ion channel
that is dysfunctional in cystic fibrosis patients and responsible for their
respiratory symptoms. A Venture and Innovation Award was obtained from the
Cystic Fibrosis Trust, UK, to continue these studies, making Verona Pharma the
first biotech company to receive such a grant. The new data in cystic fibrosis
was presented in Atlanta, US, in October, further enhancing the profile of
RPL554.
Additionally, the Company filed a number of patent applications on RPL554 to
further strengthen the patent portfolio and extend the patent life of the
compound.
RPL554
RPL554 is a novel inhaled dual PDE3/PDE4 inhibitor that was selected for
clinical development following pre-clinical studies that demonstrated both
potent bronchodilator and anti-inflammatory properties. RPL554 is currently
being developed as a very promising first-in-class treatment for patients with
chronic respiratory diseases such as COPD and potentially cystic fibrosis.
Future studies may also reveal a role in the treatment of asthmatics.
With the original proof-of-concept formulation, RPL554 successfully completed a
number of early phase 1 and 2 clinical studies in over 100 subjects. To date,
RPL554 has been administered to more than 150 human subjects. These single and
multiple dose studies suggest that RPL554, when inhaled across a range of
doses, is an effective bronchodilator in patients with COPD or asthma and is an
excellent candidate for further development as a new class of bronchodilator.
The Company is strongly encouraged by recent data showing a synergistic effect
between RPL554 and anti-muscarinic drugs (an important drug class currently
used in the treatment of patients with COPD) on human airway smooth muscle
suggesting that RPL554 could be both a stand-alone treatment as well as a very
attractive combination partner to existing treatments for COPD. RPL554 was well
tolerated in these studies.
Importantly for the future commercialisation of RPL554 as a novel inhaled
treatment for patients with COPD, the effect of RPL554 in a human model of
COPD-like inflammation was examined after 6 days of treatment with the original
formulation of the compound before being challenged on the last day by an
irritant agent that provokes a COPD-like inflammatory response in their
airways. RPL554 significantly reduced the number of neutrophils (an
inflammatory cell type recognised for its central role in COPD, cystic fibrosis
and severe asthma) in the sputum. There was a highly significant reduction in
the numbers of inflammatory cells, with no clinically significant adverse
events reported. These data indicate that RPL554 has anti-inflammatory
properties, most likely due to inhibition of PDE4 (or perhaps the combined
inhibition of PDE3 and 4), and it is believed that this adds to the direct
bronchodilator effect of the drug and contributes to the improvement of
symptoms of COPD.
A novel formulation of RPL554 has been developed for use in a nebuliser for the
further clinical development of the compound. The manufacture of this new
formulation is scalable and shows stability suitable for commercialisation. The
first phase 1/2 clinical trial with the new formulation of RPL554 started in
December 2014 at MEU, Manchester, UK. The study expects to enrol and complete
by 2H 2015. An interim report on the first part of the study comprising 50
healthy subjects having received single doses by inhalation was recently
completed. The new formulation was very well tolerated having been given at a
dose 16 times higher than the previously used bronchodilator dose. In the
single dose phase of the trial, the maximum tolerated dose was not reached. The
absorption of the inhaled drug from the lung was slower than from the original
formulation producing a more attractive profile most likely suitable for twice
daily dosing.
A series of experiments were conducted in cells obtained from the airways of
cystic fibrosis patients to demonstrate that RPL554 is an activator of CFTR
(Cystic Fibrosis Transmembrane Conductance Regulator), the ion channel that is
dysfunctional and causes the respiratory problems in patients with cystic
fibrosis. These data were presented at the North America Cystic Fibrosis
conference in Atlanta, US, in October 2014. This work continues with the
support of a Venture and Innovation Award from the UK Cystic Fibrosis Trust,
the first to be granted to a biotech company by the Trust. Cystic fibrosis is a
rare, orphan disease, and therefore provides a very attractive development and
market opportunity for the Company.
Further work was performed to extend and prolong patent protection of RPL554
through new patent filings and scientific abstracts were published during the
year to increase the awareness of RPL554 in the medical and pharmaceutical
communities.
VRP700
An earlier exploratory clinical trial of VRP700 at the University of Florence,
Italy, showed a very strong positive response in a small group of patients with
various forms of severe lung disease. Subsequently, a follow-on study in
patients with interstitial pulmonary fibrosis (IPF) was undertaken at the
University of Manchester, UK. However, in contrast to the first exploratory
study, in this randomised, double-blind, placebo-controlled clinical study with
inhaled VRP700, there was no effect of VRP700 on coughing. Based on these two
single dose anti-cough studies, it is possible that longer and more frequent
treatment with VRP700 would be required for consistent activity, or that it
could be more effective in other types of lung diseases with chronic cough,
such as lung cancer. The project is not being further developed internally and
VRP700 is available for licensing.
NAIPs
No further work was undertaken in this project pending a review of data
obtained to date.
FINANCIALS
The loss from operations for the year ended 31 December 2014 was GBP2.76m (2013:
GBP2.52m). Research and development expenditure amounted to GBP2.63m (2013: GBP1.66m)
and reflected an increase in expenditures on the RPL554 programme by GBP1.17m to
GBP2.27m (2013: GBP1.10m) offset by a reduction in expenditure on the VRP700
programme by GBP0.19m to GBP0.36m (2013: GBP0.55m). The increase in expenditure on
the RPL554 programme was primarily due to an acceleration of the development of
the new nebulised formulation programme made possible by the March 2014
fundraising. The decrease in expenditure on the VRP700 programme was the result
of the programme being placed on hold following the results of the clinical
trials disclosed in June.
Administrative expenses for the year were GBP1.16m (2013: GBP1.16m).
On 24 March 2014 the Company announced that it had raised GBP14.0 million in
gross proceeds from a placing, subscription and open offer. These funds will be
used primarily to support the development of RPL554 in severe COPD as well as
corporate and general administrative expenditures.
As at 31 December 2014, the Company had approximately GBP9.97 million in cash and
cash equivalents.
MANAGEMENT AND STAFF
In September 2014, the Company appointed Biresh Roy as Chief Financial Officer
and member of the Board of Directors. Mr Roy has a strong track record in
financing international M&A deals and company turnarounds, mainly in the
biotech sector. Mr Roy has advised a number of venture capital and private
equity firms, and acted as Chief Financial Officer for several biotech and
medical device companies, including Enigma Diagnostics, Xytis, Morphochem and
Santhera. Prior to this, Mr Roy was a management consultant at AT Kearney and
PWC, leading international assignments in the pharmaceutical sector. Mr Roy
qualified as a Chartered Accountant with Price Waterhouse.
In December 2014, the Company appointed Dr. David Ebsworth as Chairman of the
Board. Dr. Ebsworth has experience as a Board Chairman, as a Chief Executive
Officer and as Chairman or member of remuneration and audit committees in
international public and private pharma, biotech and venture capital companies.
Previously, Dr Ebsworth served as CEO of Vifor Pharma, based in Zürich, the
Specialty Pharma division of Galenica AG Group. Dr Ebsworth was also named as
CEO of Galenica AG in 2011. He continues as advisor to the CEO of Vifor Pharma
and Galenica Santé. Prior to that, Dr Ebsworth worked with Bayer for over 19
years, heading the Canadian, North American and global pharmaceutical business.
He also served as CEO of Oxford Glycosciences.
In January 2015, the Company appointed Dr Kenneth Newman as Chief Medical
Officer. Dr. Newman is an experienced pharmaceutical and biotechnology industry
executive with extensive experience in clinical development, particularly for
the treatment of respiratory disease. Prior to joining Verona Pharma, Dr.
Newman was Chief Development Officer at Mesoblast Inc. Previously, Dr. Newman
held the positions of Chief Medical Officer at Acton Pharmaceuticals, VP,
Medical Affairs at Boehringer Ingelheim and several positions at Forest
Laboratories (now Activis). Dr. Newman began his professional career at the
National Jewish Medical and Research Center, Denver, Colorado.
These appointments will be invaluable as the Company seeks to grow and develop
the full potential of RPL554 in respiratory disease to create significant
shareholder value.
OUTLOOK
Verona Pharma is focused on implementing the strategy of creating a
biopharmaceutical company focused on the development of high value,
first-in-class drugs for chronic, debilitating specialist-treated respiratory
diseases. The initial focus of the lead pipeline drug, RPL554, is to develop a
nebulised treatment for hospitalised patients with acute exacerbations of COPD
to provide immediate relief and, when used for an additional 30 days after
discharge from hospital, reduce the rate of recurrence of COPD symptoms and
subsequent re-admittance to hospital. RPL554's three-fold mechanisms of action,
bronchodilation, anti-inflammatory and CFTR activation, means that the drug
ultimately has the potential to benefit wider groups of patients with
respiratory disorders not optimally treated with existing drugs, such as those
with cystic fibrosis, and in the longer term potentially asthma. The compound
could be used either alone or in combination with existing medicines. RPL554
could become a particularly attractive combination partner to currently used
anti-muscarinic drugs, the mainstay treatment for COPD patients, as the Company
has demonstrated a synergistic effect when these two drugs are used in
combination.
The funds raised in March 2014 will enable Verona Pharma to accelerate the
development programme for RPL554 over the next 12 to 18 months in a series of
clinical phase 1 and 2 studies with the new formulation that has shown
attractive properties. Complemented with pre-clinical activities these studies
should position the drug as ready for phase 2b in 2016. Importantly,
strengthening of the IP coverage around RPL554 has provided longer patent
protection and adds very significant value to the programme.
The Board believes that RPL554, with its unique bronchodilator,
anti-inflammatory and CFTR activator properties, is capable of addressing
specific patient groups that are currently under-treated and for which there is
limited competition in the form of new types of bronchodilator drugs, and
therefore presents a very attractive commercial opportunity for generating
significant value for shareholders.
The Board also recognises that an experienced and resourceful commercial
partner could bring significant value to the development of RPL554 for chronic
maintenance treatment in COPD and potentially other respiratory diseases and
therefore continues to be involved in business development discussions around
the RPL554 programme. However, the Company intends to partner its drug
candidates only when it can extract a commercially attractive return for the
Company and its shareholders.
The Company will continue to operate with a strong focus and financial
discipline, and remains very positive about its progress to date and the
opportunities for its lead drug development programme.
We would like to thank the staff and Board members for all their contributions
and shareholders for their continued support during a successful year.
Dr. David Ebsworth Dr. Jan-Anders Karlsson
Chairman Chief Executive Officer
11 May 2015 11 May 2015
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Year ended 31 Year ended 31
December 2014 December 2013
GBP GBP
Continuing operations
Revenue - -
Cost of sales - -
Gross profit - -
Research and development (2,634,848) (1,656,490)
Administration expenses (1,157,925) (1,160,294)
Operating loss 4 (3,792,773) (2,816,784)
Finance revenue 6 29,978 2,632
Loss before taxation (3,762,795) (2,814,152)
Taxation - credit 7 1,004,065 289,400
Loss for the year (2,758,730) (2,524,752)
Other comprehensive income - -
Total comprehensive loss for (2,758,730) (2,524,752)
the year
Loss per ordinary share - 2 (0.32)p (0.74)p
basic and diluted (pence)
The results shown above relate entirely to continuing operations and are
attributable to equity holders of the Company.
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
Notes 31 December 2014 31 December 2013
GBP GBP
ASSETS
Non-current assets
Plant and equipment 12 21,847 27,647
Intangible assets - patents 13 380,540 207,144
Goodwill 14 1,469,112 1,469,112
1,871,499 1,703,903
Current assets
Trade and other receivables 9 1,287,535 249,639
Cash and cash equivalents 10 9,969,759 603,791
11,257,294 853,430
Total assets 13,128,793 2,557,333
EQUITY AND LIABILITIES
Capital and reserves
attributable to
equity holders
Share capital 15 1,009,923 372,598
Share premium 26,650,098 14,184,412
Share-based payment reserve 677,946 640,579
Retained losses (15,733,487) (13,129,576)
Total equity 12,604,480 2,068,013
Current liabilities
Trade and other payables 11 524,313 489,320
Total liabilities 524,313 489,320
Total equity and liabilities 13,128,793 2,557,333
The financial statements were approved by the Board of Directors on 11 May 2015
and signed on its behalf by:
Dr. Jan-Anders Karlsson Biresh Roy
Chief Executive Chief Financial Officer
Company Number: 05375156
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
Notes 31 December 2014 31 December 2013
GBP GBP
ASSETS
Non-current assets
Plant and equipment 12 21,847 27,647
Intangible assets - patents 13 380,540 207,144
Goodwill 14 1,453,569 1,453,569
Investment 8 2 1
1,855,958 1,688,361
Current assets
Trade and other receivables 9 1,287,535 248,917
Cash and cash equivalents 10 9,968,483 602,503
11,256,018 851,420
Total assets 13,111,976 2,539,781
EQUITY AND LIABILITIES
Capital and reserves attributable
to
equity holders
Called up share capital 15 1,009,923 372,598
Share premium account 26,650,098 14,184,412
Share-based payment reserve 677,946 640,579
Retained losses (15,750,305) (13,147,128)
Total equity 12,587,662 2,050,461
Current liabilities
Trade and other payables 11 524,314 489,320
Total liabilities 524,314 489,320
Total equity and liabilities 13,111,976 2,539,781
The financial statements were approved by the Board of Directors on 11 May 2015
and approved on its behalf by:
Dr. Jan-Anders Karlsson Biresh Roy
Chief Executive Chief Financial Officer
Company Number: 05375156
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Year ended 31 Year ended 31
December 2014 December 2013
GBP GBP
Net cash outflow from operating 16 (3,833,926) (2,343,944)
activities
Cash inflow from taxation 293,263 289,400
Cash flow from investing activities
Interest received 24,178 2,642
Purchase of plant and equipment (4,882) (2,033)
Payment for patents (215,676) (105,587)
Net cash outflow from investing (196,380) (104,978)
activities
Cash flow from financing activities
Financing costs - -
Net proceeds from issue of shares 13,103,011 1,802,443
Net cash inflow from financing 13,103,011 1,802,443
activities
Net increase/(decrease) in cash and 9,365,968 (357,079)
cash equivalents
Cash and cash equivalents at the 603,791 960,870
beginning of the year
Cash and cash equivalents at the end 10 9,969,759 603,791
of the year
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Year ended 31 Year ended 31
December 2014 December 2013
GBP GBP
Net cash outflow from operating 16 (3,833,914) (2,332,329)
activities
Cash inflow from taxation 293,263 289,400
Cash flow from investing activities
Interest received 24,178 2,642
Purchase of plant and equipment (4,882) (2,033)
Payments for patents (215,676) (105,587)
Advance to subsidiary - (9,188)
Net cash outflow from investing (196,380) (114,166)
activities
Cash flow from financing activities
Financing cost - -
Net proceeds from issue of shares 13,103,011 1,802,443
Net cash inflow from financing 13,103,011 1,802,443
activities
Net increase/(decrease) in cash and 9,365,980 (354,652)
cash equivalents
Cash and cash equivalents at the 602,503 957,155
beginning of the year
Cash and cash equivalents at the end 10 9,968,483 602,503
of the year
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share Share Option Retained Total
capital premium reserve losses
GBP GBP GBP GBP GBP
Balance at 1 January 307,203 12,447,364 470,577 (10,621,672) 2,603,472
2013
Loss for the year - - - (2,524,752) (2,524,752)
Other comprehensive - - - - -
income
Total comprehensive - - - (2,524,752) (2,524,752)
loss for the year
Issue of shares 65,395 1,894,767 - - 1,960,162
Share issue costs - (157,719) - - (157,719)
Share-based payments - - 186,850 - 186,850
Transfer of previously - - (16,848) 16,848 -
expensed share based
payment
charge upon lapse of
options
Balance at 31 December 372,598 14,184,412 640,579 (13,129,576) 2,068,013
2013
Balance at 1 January 372,598 14,184,412 640,579 (13,129,576) 2,068,013
2014
Loss for the year - - - (2,758,730) (2,758,730)
Other comprehensive - - - - -
income
Total comprehensive - - - (2,758,730) (2,758,730)
loss for the year
Issue of shares 637,325 13,383,821 - - 14,021,146
Share issue costs - (918,135) - - (918,135)
Share-based payments - - 192,186 - 192,186
Transfer of previously - - (154,819) 154,819 -
expensed share based
payment
charge upon lapse of
options
Balance at 31 December 1,009,923 26,650,098 677,946 (15,733,487) 12,604,480
2014
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share Share Option Retained Total
capital premium reserve losses
GBP GBP GBP GBP GBP
Balance at 1 January 307,203 12,447,364 470,577 (10,641,741) 2,583,403
2013
Loss for the year - - - (2,522,235) (2,522,235)
Other comprehensive - - - - -
income
Total comprehensive - - - (2,522,235) (2,522,235)
loss for the year
Issue of shares 65,395 1,894,767 - - 1,960,162
Share issue costs - (157,719) - - (157,719)
Share-based payments - - 186,850 - 186,850
Transfer of previously - - (16,848) 16,848 -
expensed share based
payment
charge upon lapse of
options
Balance at 31 December 372,598 14,184,412 640,579 (13,147,128) 2,050,461
2013
Balance at 1 January 372,598 14,184,412 640,579 (13,147,128) 2,050,461
2014
Loss for the year - - - (2,757,996) (2,757,996)
Other comprehensive - - - - -
income
Total comprehensive - - - (2,757,996) (2,757,996)
loss for the year
Issue of shares 637,325 13,383,821 - - 14,021,146
Share issue costs - (918,135) - - (918,135)
Share-based payments - - 192,186 - 192,186
Transfer of previously - - (154,819) 154,819 -
expensed share based
payment
charge upon lapse of
options
Balance at 31 December 1,009,923 26,650,098 677,946 (15,750,305) 12,587,662
2014
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1. Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout the year, is set out below.
1.1 Basis of preparation
The financial statements have been prepared using the historical cost
convention. In addition, the financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRSs").
1.2 Going concern
During the year ended 31 December 2014 the Group made a loss of GBP2,758,730
(2013: a loss of GBP2,524,752). At the year-end date the Group had net assets of
GBP12,604,480 (2013: GBP2,068,013) of which GBP9,969,759 was cash and cash
equivalents. The operation of the Group is currently being financed from funds
that the Company raised from private and public share placings. On 24 March
2014 the Company announced that it had raised GBP14.0 million in gross proceeds
from a placing, subscription and open offer. These funds will be used primarily
to support the development of RPL554 in severe COPD as well as corporate and
general administrative expenditures.
The Group's capital management policy is to only raise sufficient funding to
finance the Group's near term research objectives. Upon completion of
objectives, or identification of new projects, the Directors will seek new
funding to finance the next stage of the research programme or the new
projects. The Directors believe that the Group has sufficient funds for it to
comply with its foreseeable commitments and, accordingly, are satisfied that
the going concern basis remains appropriate for the preparation of these
financial statements.
1.3 Basis of consolidation
These group financial statements include the accounts of Verona Pharma plc and
its wholly-owned subsidiaries Rhinopharma Limited and Verona Pharma Inc. The
purchase method of accounting is used to account for the acquisition of
Rhinopharma Limited.
The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. Goodwill arising
on acquisitions is capitalised and subject to an impairment review, both
annually and when there are indications that the carrying value may not be
recoverable.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated.
Rhinopharma Limited and Verona Pharma Inc. adopt the same accounting policies
as the Company.
1.4 Foreign currency translation
Items included in the Group's financial statements are measured using the
currency of the primary economic environment in which the Group operates ("the
functional currency"). The financial statements are presented in pounds
sterling ("GBP"), which is the functional and presentational currency of the
Company and the presentational currency of the Group.
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the original transactions. Non-monetary items
measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
The assets and liabilities of foreign operations are translated into sterling
at the rate of exchange ruling at the balance sheet date. Income and expenses
are translated at weighted average exchange rates for the period. The resulting
exchange differences are recognised in other comprehensive income.
1.5 Cash and cash equivalents
The Company considers all highly liquid investments, with a maturity of 90 days
or less to be cash equivalents, carried at the lower of cost or market value.
1.6 Deferred Taxation
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 financial statements. Deferred tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the
balance sheet date and expected to apply when the related deferred tax is
realised or the deferred liability is settled.
Deferred tax assets are recognised to the extent that it is probable that the
future taxable profit will be available against which the temporary differences
can be utilised.
1.7 Research and development costs
Research costs are charged as an expense in the period in which they are
incurred. Development costs are charged as an expense in the period incurred
unless the Company believes a development project meets generally accepted
accounting criteria for capitalisation and amortisation. At 31 December 2014 no
development costs have been capitalised.
1.8 Plant and equipment
Plant and equipment are recorded at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis over the expected useful
lives as follows:
Computer hardware 3 years
Computer software 2 years
Office furniture and 5 years
equipment
1.9 Intangible assets
Patent costs associated with the preparation, filing, and obtaining of patents
are capitalised and amortised on a straight-line basis over the estimated
useful lives of the patents of ten years.
1.10 Impairment of intellectual properties
The carrying value of patents and goodwill do not necessarily reflect present
or future values and the ultimate amount recoverable will be dependent upon the
successful development and commercialisation of products based on these
intellectual properties. Management reviews the intellectual properties for
impairment whenever events or changes in circumstances indicate that full
recoverability is questionable, and such review is performed on at least an
annual basis. Management measures any potential impairment by comparing the
carrying value to the discounted amounts of expected future cash flows.
1.11 Share based payments
The Company made share-based payments to certain directors and advisers by way
of issue of share options. The fair value of these payments is calculated by
the Company using the Black-Scholes option pricing model. The expense is
recognised on a straight line basis over the period from the date of award to
the date of vesting, based on the Company's best estimate of shares that will
eventually vest.
1.12 Critical accounting judgements and estimates
The preparation of financial statements in conformity with International
Financial Reporting Standards requires the use of accounting estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual results
ultimately may differ from those estimates. IFRSs also require management to
exercise its judgement in the process of applying the Group's accounting
policies.
The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements are as
follows:
(a) Impairment of intangible assets
Determining whether an intangible asset is impaired requires an estimation of
whether there are any indications that its carrying value is not recoverable.
At each reporting date, the Company reviews the carrying value of its tangible
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset's fair value less costs to sell and
value in use, is compared to the asset's carrying value. Any excess of the
asset's carrying value over its recoverable amount is expensed to the income
statement.
(b) Valuation of goodwill
Management values goodwill after taking into account the results of research
efforts and estimated future sales and costs. If the assumed factors vary from
actual occurrence, this will impact on the amount of the asset that should be
carried in the statement of financial position. Further details of the Group's
assessment of the carrying value of goodwill are disclosed in note 14.
(c) Share based payments
The Group records charges for share based payments. For option based share
based payments management estimate certain factors used in the option pricing
model, including volatility, vesting date of options and number of options
likely to vest. If these estimates vary from actual occurrence, this will
impact on the value of the equity carried in the reserves. Further details of
the Group's estimation of share based payments are disclosed in note 18.
1.13 New standards and interpretations
The following new standards and amendments are mandatory for the first time for
financial periods commencing on or after 1 January 2014:
IFRS 10 - Consolidated Financial Statements
The standard sets out the requirements for the preparation and presentation of
consolidated financial statements, requiring the Company to consolidate
entities that it controls. Transitional guidance applies.
IFRS 11 - Joint Arrangements
The standard sets out the accounting by entities that jointly control an
arrangement. Joint control involves the contractual agreed sharing of control
and arrangements subject to joint control are classified as either a joint
venture (representing a share of net assets and equity accounted) or a joint
operation (representing rights to assets and obligations for liabilities,
accounted for accordingly). Transitional guidance applies.
IFRS 12 - Disclosure of Interests in Other Entities
This is a consolidated disclosure standard requiring a wide range of
disclosures about an entity's interests in subsidiaries, joint arrangements,
associates and unconsolidated 'structured entities'. Disclosures are presented
as a series of objectives, with detailed guidance on satisfying those
objectives. Transitional guidance applies.
IAS 27 - Separate Financial Statements (2011)
The standard outlines the accounting and disclosure requirements for 'separate
financial statements', which are financial statements prepared by a parent, or
an investor in a joint venture or associate, where those investments are
accounted for either at cost or in accordance with IAS 39 Financial
Instruments: Recognition and Measurement or IFRS 9 Financial Instruments. The
standard also outlines the accounting requirements for dividends and contains
numerous disclosure requirements.
IAS 28 - Investments in Associates and Joint Ventures (2011)
The standard outlines how to apply, with certain limited exceptions, the equity
method to investments in associates and joint ventures.
Amendments to IAS 32 - Offsetting financial assets and financial liabilities
The amendments to the standard apply to presentation in order to clarify
certain aspects because of the diversity in the application of the requirements
on offsetting.
Amendments to IAS 36 - Recoverable amount disclosures for non-financial assets
The amendments remove the requirement to disclose the recoverable amount when a
cash generating unit (CGU) contains goodwill or indefinite life intangible
assets where there has been no impairment. Where an impairment loss has been
recognised or reversed, disclosure of the recoverable amount or how fair value
less costs of disposal have been measured is required.
1.14..New standards and interpretations not applied during the year
During the year the IASB and IFRIC have issued new standards, amendments and
interpretations with an effective date in the EU after the date of these
financial statements. Of these, only the following are expected to be relevant
to the Group:
Standard Subject Effective from
IFRS 9 Financial Instruments 1 January 2018
IFRS 15 Revenue from Contracts with 1 January 2017
Customers
Annual Improvements to IFRSs (2010 - 2012) 1 July 2014
Annual Improvements to IFRSs (2011 - 2013) 1 July 2014
Annual Improvements to IFRSs (2012 - 2014) 1 January 2016
2. Earnings per share
Basic loss per share of 0.32p (2013: loss of 0.74p) for the Group is calculated
by dividing the loss for the period by the weighted average number of ordinary
shares in issue of 866,743,656 (2013: 341,564,623).
Diluted loss per share for the current period has not been presented since the
Company's share options are anti-dilutive.
3. Segmental information
The Group has determined that its operating segments be reported on a product
pipeline basis as this best reflects the Group's activity cycle. Operating
segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating
decision-maker has been identified as the Board of Directors.
The Group's product pipeline is dedicated to the research, discovery and
development of new therapeutic drugs for the treatment of acute and chronic
respiratory diseases. During 2014 there were three products: RPL554, VRP700 and
NAIPs. RPL554 and VRP700 having reached the clinical stage, with RPL554 having
successfully completed phase 1 and 2 trials. VRP 700 having completed two phase
2 trials. NAIPs were in the basic research phase.
Segment information by operating segment is as follows:
Clinical Clinical Basic Basic
research research
2014 2013 2014 2013
GBP GBP GBP GBP
Income statement
information
Research and (2,634,848) (1,648,083) - (8,407)
development
Amortisation of patent (38,046) (19,951) (4,233) (3,772)
Segment loss (2,672,894) (1,668,034) (4,233) (12,179)
Assets information
Patent 356,244 187,379 24,296 19,765
Goodwill 1,469,112 1,469,112 - -
Segment assets 1,825,356 1,656,491 24,296 19,765
2014 2013
GBP GBP
Reconciliation of segment result
Loss per reportable segment - Clinical (2,672,894) (1,668,034)
Loss per segment - Basic research (4,233) (12,179)
Total loss for reportable segments (2,677,127) (1,680,213)
Amortisation of non-segment assets (10,683) (13,870)
Unallocated administration expense (1,104,963) (1,122,701)
Group operating loss (3,792,773) (2,816,784)
At the end of the financial year, the Group was still in the early development
stage and therefore had no turnover in either 2013 or 2014.
Reconciliation of segment assets
Assets per reportable segment - Clinical 1,825,356 1,656,491
Assets per reportable segment - Basic research 24,296 19,765
Total assets for reportable segments 1,849,652 1,676,256
Unallocated non-current assets 21,847 27,647
Unallocated current assets 11,257,294 853,430
Group total assets 13,128,793 2,557,333
Segment information by geographical segment for 2014 is as follows:
Geographical segment (Group) United North America Total
Kingdom
GBP GBP GBP
Research and development (2,634,848) - (2,634,848)
Administration expenses (1,157,191) (734) (1,157,925)
Finance revenue 29,978 - 29,978
Loss before taxation (3,762,061) (734) (3,762,795)
Tangible assets 21,847 - 21,847
Intangible assets 380,540 - 380,540
Trade and other receivables 1,287,535 1 1,287,536
Cash and cash equivalents 9,968,483 1,276 9,969,759
Goodwill 1,469,112 - 1,469,112
Trade and other payables (524,314) - (514,314)
Net assets 12,603,203 1,277 12,604,480
Segment information by geographical segment for 2013 is as follows:
Geographical segment (Group) United North America Total
Kingdom
GBP GBP GBP
Research and development (1,656,490) - (1,656,490)
Administration expenses (1,148,589) (11,705) (1,160,294)
Finance revenue 2,632 - 2,632
Loss before taxation (2,802,447) (11,705) (2,814,152)
Tangible assets 27,647 - 27,647
Intangible assets 207,144 - 207,144
Trade and other receivables 248,917 722 249,639
Cash and cash equivalents 602,503 1,288 603,791
Goodwill 1,469,112 - 1,469,112
Trade and other payables (489,320) - (489,320)
Net assets 2,066,003 2,010 2,068,013
4. Operating loss 2014 2013
GBP GBP
Group
This is stated after charging/(crediting):
Foreign exchange loss 1,571 4,746
Profit on disposal of fixed assets - (3,632)
Research and development costs 2,634,848 1,656,490
Share-based payments 192,186 186,850
Auditors' remuneration for audit services
- Group and Company audit 22,750 18,750
Auditors' remuneration for non audit services
- Taxation consultancy 2,500 3,250
Total auditors' remuneration 25,250 22,000
5. Employee costs 2014 2013
GBP GBP
Group
Wages and salaries 254,935 147,296
Social security costs 28,582 9,854
283,517 157,150
Remuneration of Directors is separately disclosed in the Report on Directors'
remuneration.
2014 2013
Number Number
Group
The average number of employees 11 10
including directors during the year was:
6. Finance revenue 2014 2013
GBP GBP
Group
Bank interest 29,978 2,631
7. Taxation 2014 2013
GBP GBP
Analysis of tax credit for the year
Current tax:
UK corporation tax at 21.5% (2013: (641,652) -
23.25%)
Prior year adjustment (362,413) (289,400)
Current tax credit (1,004,065) (289,400)
Factors affecting the tax charge for the
year
Loss on ordinary activities before (3,762,795) (2,814,152)
taxation
Multiplied by standard rate of
corporation
tax of 21.5% (2013: 23.25%) (809,001) (654,290)
Effects of:
Non deductible expenses 2,194 46,430
Research & Development Incentive (201,938) -
Timing differences not recognised 38,026 3,225
Tax losses carried forward 329,067 604,635
Prior year adjustment (362,413) (289,400)
Current tax credit (1,004,065) (289,400)
The current year tax credit represents the research and development tax credit
receivable on qualifying expenditure incurred during the year, GBP641,652,
coupled with a prior year adjustment of GBP362,413.
Factors that may affect future tax charges
At the year-end date, the Group has unused United Kingdom tax losses available
for offset against suitable future profits in the United Kingdom. A deferred
tax asset has not been recognised in respect of such losses due to uncertainty
of future profit streams. The contingent deferred tax asset at 20% (2013: 20%)
is estimated to be GBP2,464,229 (2013: GBP2,748,000).
8. Subsidiary entities
The Company currently has two wholly owned subsidiaries, Rhinopharma Limited
and Verona Pharma Inc. Rhinopharma Limited is incorporated under the laws of
the Province of British Columbia, Canada. Rhinopharma Limited was a drug
discovery and development company focused on developing proprietary drugs to
treat allergic rhinitis and other respiratory diseases prior to its acquisition
by the Company on 18 September 2006.
Verona Pharma Inc. was incorporated on the 12 December 2014 under the laws of
the State of Delaware, USA.
9. Trade and other receivables 2014 2013
GBP GBP
Group
Other receivables 922,934 107,235
Deferred financing costs - -
Prepayments and accrued income 364,601 142,404
1,287,535 249,639
Company
Other receivables 922,934 107,235
Deferred financing costs - -
Prepayments and accrued income 364,601 141,682
1,287,535 248,917
10. Cash and cash equivalents 2014 2013
GBP GBP
Group
Cash at bank and in hand 9,969,759 603,791
Cash equivalents - -
9,969,759 603,791
Company
Cash at bank and in hand 9,968,483 602,503
Cash equivalents - -
9,968,483 602,503
11. Trade and other payables 2014 2013
GBP GBP
Group
Trade payables 366,626 329,757
Other payables 31,493 18,800
Accruals 126,194 140,763
524,313 489,320
Company
Trade payables 366,626 329,757
Other payables 31,494 18,800
Accruals 126,194 140,763
524,314 489,320
12. Plant and equipment
Group and Company Computer Computer Office Total
hardware software equipment
GBP GBP GBP GBP
Cost
At 1 January 2013 42,114 23,684 36,461 102,259
Additions in 2013 2,033 - - 2,033
Disposals in 2013 (7,477) - - (7,477)
At 31 December 2013 36,670 23,684 36,461 96,815
Depreciation
At 1 January 2013 39,972 16,693 6,110 62,775
Charge for 2013 1,750 5,039 7,081 13,870
Disposals in 2013 (7,477) - - (7,477)
At 31 December 2013 34,245 21,732 13,191 69,168
Net book value
At 31 December 2013 2,425 1,952 23,270 27,647
Net book value
At 31 December 2012 2,142 6,991 30,351 39,484
Cost
At 1 January 2014 36,670 23,684 36,461 96,815
Additions in 2014 4,632 250 - 4,882
Disposals in 2014 - - - -
At 31 December 2014 41,302 23,934 36,461 101,697
Depreciation
At 1 January 2014 34,245 21,732 13,191 69,168
Charge for 2014 1,645 2,014 7,023 10,682
Disposals in 2014 - - - -
At 31 December 2014 35,890 23,746 20,214 79,850
Net book value
At 31 December 2014 5,412 188 16,247 21,847
Net book value
At 31 December 2013 2,425 1,952 23,270 27,647
13. Intangible assets
Group and Company Patents
GBP
Cost
At 1 January 2013 194,306
Additions in 2013 105,587
At 31 December 2013 299,893
Amortisation
At 1January 2013 69,026
Charge for 2013 23,723
Impairment during 2013 -
At 31 December 2013 92,749
Net book value
At 31 December 2013 207,144
Net book value
At 31 December 2012 125,280
Cost
At 1 January 2014 299,893
Additions in 2014 215,676
At 31 December 2014 515,569
Amortisation
At 1 January 2014 92,749
Charge for 2014 42,280
Impairment during 2014 -
At 31 December 2014 135,029
Net book value
At 31 December 2014 380,540
Net book value
At 31 December 2013 207,144
14. Goodwill 2014 2013
GBP GBP
Group
Goodwill 1,469,112 1,469,112
Company
Goodwill 1,453,569 1,453,569
Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired in connection with the acquisition of Rhinopharma Limited
in September 2006. Goodwill is capitalised and allocated to appropriate
research projects, in Verona's case RPL554. They are deemed to have indefinite
useful life and so are not amortised. Annual impairment test of the research
projects (`RPs') is performed by comparing the expected recoverable amount of
the RPs to the carrying amount of the RPs.
The recoverable amount of the RPs is based on value in use calculations. The
use of this method requires the estimation of risk-adjusted future cash flows
discounted using suitable pre-tax discount rate, and a pre-tax discount rate of
10% has been used. The key assumptions on which the cash flow projections were
based include market size, market penetration, pre-tax discount rate,
probability, estimated revenue and royalties. Sources of information for these
key assumptions have been determined by using a combination of external market
information, industry forecasts and management's expectations of future events
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates.
Management has performed sensitivity analysis on the key assumptions including
reducing the estimated revenue and probability by 50%. However, the changes
would not cause the carrying amount to exceed their recoverable amount. Hence,
the Company concluded that no impairment was required as at 31 December 2014.
15. Called up share capital
The movements in the share capital are summarised below:
Number of
shares GBP
Authorised:
10,000,000,000 Ordinary shares of 0.1p 10,000,000,000 10,000,000
each
Allotted, called up and fully paid:
Ordinary shares as at 1 January 2013 307,204,395 307,203
Ordinary shares issued from share 65,394,255 65,395
placement
As at 31 December 2013 372,598,650 372,598
Ordinary shares issued from share 298,750,000 298,750
placement
Ordinary shares issued from share 292,000,000 292,000
subscription
Ordinary shares issued from share open 46,574,831 46,575
offer
As at 31 December 2014 1,009,923,481 1,009,923
The following issues of new shares took place during the year ended 31 December
2014:
On the 24 March 2014 the Company raised GBP14.0 million in gross proceeds from a
placing, subscription and open offer on 24 March 2014. 637,324,831 new Ordinary
shares of 0.1p each in the Company were issued fully paid for 2.2 pence per
share.
16. Net cash outflow from operating activities
2014 2013
GBP GBP
Group
Operating loss (3,792,773) (2,816,784)
Cost of issuing share options 192,186 186,850
Increase in trade and other (321,294) (41,598)
receivables
Increase in trade and other payables 34,993 289,995
Depreciation of plant and equipment 10,682 13,870
Amortisation of intangible assets 42,280 23,723
Net cash outflow from operating activities (3,833,926) (2,343,944)
Company
Operating loss (3,792,039) (2,814,267)
Cost of issuing share options 192,186 186,850
Increase in trade and other (322,016) (41,902)
receivables
Increase in trade and other payables 34,993 290,209
Provision for amounts advanced to - 9,188
subsidiary
Depreciation of plant and equipment 10,682 13,870
Amortisation of intangible assets 42,280 23,723
Net cash outflow from operating activities (3,833,914) (2,332,329)
17. Related parties transactions
The Company was charged GBP49,500 (2013: GBP27,000) by Gryon Consulting Limited, a
company of which Prof. Clive Page is a Director. At the year end, the Company
owed GBPNil (2013: GBPNil) to this related party.
The Company was charged GBP204,267 by Arthurian Life Sciences Limited, a company
of which Prof. Trevor Jones is a Director. At the year end, the Company owed GBP
23,040 to this related party (2013: GBPNil). Arthurian Life Sciences Limited acts
as General Partner for the Wales Life Sciences Investment Fund, which itself is
a substantial shareholder in the Company.
The Company was charged GBP154,524 by Simbec-Orion, a company of which Prof.
Trevor Jones is a Director. At the year end, the Company owed GBPNil to this
related party (2013: GBPNil).
18. Share-based payments charge
Included within administration expenses is a charge of GBP192,187 (2013: GBP
186,850) for issuing share options. The share based payment charge represents
the current year's allocation of the expense for relevant share options between
2012 and 2014. All options issued prior to 2012 are fully expensed. The Company
grants share options under an unapproved share option plan (the 'Unapproved
Plan') and under tax efficient Enterprise Management Incentive arrangements
(the 'EMI Plan'). Under the Unapproved Plan, options are granted to employees,
directors and consultants to acquire shares at a price to be determined by the
Board. In general, options are granted at a premium to the share price at the
date of grant, vest over three years and are exercisable during a period ending
ten years after the date of grant. Options are also issued to advisors under
the Unapproved Plan: such options generally vest immediately and are
exercisable between one and two years after grant. Under the EMI Plan, options
are granted to employees and directors who are contracted to work at least 25
hours a week for the Company or for at least 75% of their working time. The
options granted under the EMI Plan will be exercisable at a price and in
accordance with a vesting schedule determined by the Board at the time of grant
and will have an exercise period of 10 years from the date of grant.
The Company granted 9,500,000 (2013: 2,500,000) share options under the EMI
Plan and 15,500,000 (2013: 18,655,717) share options under the Unapproved Plan
during the current year with total fair values estimated using the
Black-Scholes option-pricing model of GBP240,163 (2013: GBP352,616). The cost is
amortised over the vesting period of the options on a straight-line basis and GBP
84,670 is included in the charge to administration expenses noted above. The
following assumptions were used for the Black-Scholes valuation of share
options granted in 2014, 2013, and 2012.
EMI Plan Unapproved Plan
Issued in 2014 Issued in 2014
Year/Type Employees Employees Advisors
Options granted 9,500,000 5,500,000 10,000,000
Risk-free interest 2.46-2.53% 2.53% 1.71%
rate
Expected life of 10 years 10 years 4 years
options
Annualised 70.6-78.9% 70.6% 89.5%
volatility
Dividend rate 0.00% 0.00% 0.00%
EMI Plan Unapproved Plan
Issued in 2013 Issued in 2013
Year/Type Employees Employees Advisors
Options granted 2,500,000 13,000,000 5,655,717
Risk-free interest 2.0-2.8% 1.7-2.3% 0.4-0.5%
rate
Expected life of 10 years 10 years 2 -3years
options
Annualised 53.3-72.4% 80.0-81.9% 70.5-122.1%
volatility
Dividend rate 0.00% 0.00% 0.00%
EMI Plan Unapproved Plan
Issued in 2012 Issued in 2012
Year/Type Employees Employees Consultants
Options granted 5,000,000 300,000 300,000
Risk-free interest 0.97% 0.97% 0.97%
rate
Expected life of 10 years 10 years 5 years
options
Annualised 75.56% 82.36% 82.36%
volatility
Dividend rate 0.00% 0.00% 0.00%
The Company had the following share options movements in the year:
Number of options
Year Exercise At 1 Options Options Options At 31 Expiry
of price January granted exercised lapsed December date
issue (pence) 2014 2014
2006 5 10,000,000 - - - 10,000,000 18
September
2016*
2009 4 200,000 - - (200,000) - 8 January
2014
2009 17.5 1,000,000 - - (1,000,000) - 11
September
2014
2010 9 800,000 - - (300,000) 500,000 15 June
2015
2012 5 - - - - - 7
December
2013**
2012 5-15 5,000,000 - - - 5,000,000 1 June
2022***
2012 5 600,000 - - (600,000) - 23
October
2022
2013 4.8 5,000,000 - - - 5,000,000 31
January
2016**
2013 4 655,717 - - - 655,717 31
January
2015**
2013 4 5,000,000 - - - 5,000,000 15 April
2023
2013 4 1,000,000 - - - 1,000,000 1 June
2023***
2013 4 8,000,000 - - - 8,000,000 29 July
2023
2013 4 500,000 - - (500,000) - 21 August
2023***
2013 4 1,000,000 - - (1,000,000) - 1
September
2023***
2014 3.5 - 5,500,000 - - 5,500,000 15 May
2024
2014 3.5 - 3,500,000 - - 3,500,000 15 May
2024***
2014 2.2 - 6,000,000 - - 6,000,000 26
September
2024***
2014 2.2-3.5 - 10,000,000 - - 10,000,000 6 August
2018
Total 38,755,717 25,000,000 - (3,600,000) 60,155,717
*10,000,000 directors' options with expiry date on 18 September 2011 were
extended for five years to 18 September 2016.
**options granted to agents upon closing of a Placing or financing facility.
***options granted under the EMI Plan.
Outstanding and exercisable share options by Plans at 31 December 2014
Plan Outstanding Exercisable WAEP (pence)
Unapproved 44,655,717 30,489,054 4.0
EMI 15,500,000 3,666,669 4.9
Total 60,155,717 34,155,723 4.2
The weighted average exercise price (WAEP) of options at the year-end is as
follows:
Number of Weighted average
options exercise price
(pence)
As at 1 January 2013 19,600,604 6.9
Options granted in 2013:
Employees and consultants 2,500,000 4.0
Directors 13,000,000 4.0
Placing agent 5,655,717 4.7
Options lapsed in the year (2,000,604) 4.0
As at 31 December 2013 38,755,717 5.5
Options granted in 2014:
Employees 3,500,000 3.5
Directors 11,500,000 2.8
Advisor 10,000,000 2.6
Options lapsed in the year (3,600,000) 8.3
As at 31 December 2014 60,155,717 4.2
Exercisable at 31 December 2014 34,155,723 4.6
19. Loss of the parent company
The Parent has taken advantage of the exemption permitted by Section 408 of the
Companies Act 2006 not to present an income statement for the year. The Parent
Company's loss for the year was GBP2,757,996 (2013: loss of GBP2,522,235), which
has been included in the Group's income statement.
20. Control
The Company is not under the control of any individual or group of connected
parties.
21. Financial commitments
As at 31 December 2014 the Group and Company were committed to making the
following payments under non-cancellable operating leases in the year to 31
December 2014.
Land and Buildings
2014 2013
Operating leases which expire: GBP GBP
Within one year 151,248 22,640
22. Financial instruments
(a) Fair values
The carrying amounts of cash and cash equivalents, short-term investments,
receivables, and accounts payable and accrued liabilities, approximate to fair
value due to their short-term nature.
b. Credit risk
Credit risk reflects the risk that the Group may be unable to recover
contractual receivables. The Group is still in the development stage;
therefore, no policies are required at this time to mitigate this risk.
c. Currency risk
Foreign currency risk reflects the risk that the Group's net assets will be
negatively impacted due to fluctuations in exchange rates. The Group has not
entered into foreign exchange contracts to hedge against gains or losses from
foreign exchange fluctuations. At 31 December 2014, cash and cash equivalents
include EUR8,520 and CAD$2,304, and accounts payable and accrued liabilities
include balances of EUR84,979, US$13,967 and SEK24,000.
d. Financial risk management
The Directors recognise that this is an area in which they may need to develop
specific policies should the Group become exposed to further financial risks as
the business develops.
e. Management of capital
The Group considers capital to be its equity reserves. At the current stage of
the Group's life cycle the Group's objective in managing its capital is to
ensure funds raised meet the research and operating requirements until the next
development stage of the Group's suite of projects.
The Group ensures it is meeting its objectives by reviewing its Key Performance
Indicators ("KPIs") to ensure its research activities are progressing in line
with expectations, controlling costs and placing unused funds on deposit to
conserve resources and increase returns on surplus cash held.
f. Interest rate risk
At 31 December 2014, the Group had cash deposits of GBP9,969,759 (2013: GBP
603,791). The Group's exposure to interest rate risk, which is the risk that a
financial instrument's value will fluctuate as a result of changes in market
interest rates on classes of financial assets and financial liabilities, was as
follows:
Financial Asset Floating Fixed Floating Fixed
interest rate interest rate
2014 Interest rate 2013 interest rate
2014 2013
GBP GBP GBP GBP
Cash deposits 101,508 9,868,251 603,791 -
23. Subsequent events
There were no material events post balance sheet date that management are aware
of that would give rise to a contingent liability.
END
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